Editor’s Note: The following posting is one in a series of four articles provided by ADP Lightspeed on how RV dealers can increase cash flow in their different departments. This installment, written by Hal Ethington, focuses on service. Along with the articles the company is having webinars, which cover the information in the articles and show how they can be implemented. Here is a link to the next one, which is scheduled for Tuesday: https://www2.gotomeeting.com/register/703312875.
Service managers, this one’s for you. The owner and the GM both think that service can’t make money. You know it can, you think you have but you just don’t know where it is. Here are some places to look:
Completed operations. This is your inventory of finished operations. You roll it out the door, park it in the lot call the customer and then…? Do you know what happens? Do you know if the money ever came in? In a shop I looked at recently I found 1,300 RO’s open and unpaid in the system. One thousand three hundred! I looked for the units, and found 98. In other words, over 1,200 RO’s with no unit to be found, and never paid. Total revenue involved? About $300,000.
Further study found that about 1/3 of these missing units were customer pay, 1/3 were internal and 1/3 were warranty. For the customer pay, we found most were actually in-house warranty where the customer was not required to pay. Most should have been charged back to the original tech, but nobody ever got around to it, and the second tech was compensated at the dealership’s expense. Bad. And finally there was a substantial group that were simple theft (customer got the keys and drove away). Poor control over the delivery process had cost this shop $70,000.
The 400 uncashiered internal RO’s were a different problem. Much of it was installation of accessories to units that were sold to customers, so the parts and labor were never added to the deal – but the parts and labor went to the customer! A loss of revenue to the shop of about $100,000.
And the final group, the warranty piece. $80,000 in stale warranty that had lapsed because nobody ever got around to filing the claim. Unit was returned to the customer at no charge, but the warranty was never filed, and never collected.
So why did this loss of $300,000 happen? Mostly because of poor controls. You, the service manager, must be constantly checking to see that you get paid for every piece of work you do. And that fork-lift time for the sales department? Bill it.
So you can start by cleaning up your inventories. Yes, inventories, plural. You have quite a few. Let’s take a look at some others.
First, the obvious. Tech Time. It is an inventory of hours. Track those available hours, and make sure you are getting saleable hours out of each available hour. Become familiar with efficiency and productivity. Know who is efficient (saleable hours produced / actual hours logged in on the jobs), and productivity (actual hours in the jobs / available hours in the store). Efficiency tells you how well your tech can do the work, and productivity tells you how much of the day they are actually turning wrenches. A slow tech, little training and few tools, is costing you money and using up your customers. A super tech, who works fast but is a rag-flipper half the time, is again, taking up space. Measure output, and re-train or cull low performers.
Now, on the other end, getting customers in the door: Pre-paid maintenance. Get the service-work pipeline full and flowing by selling pre-paid maintenance up front. People love it, and they love the perks they get when they come in to use it. Check your state laws, and if you can do it, get on it. Don’t know how? Ask around. Join a 20-group. Ask your buds in another state. It works.
Sell Hours. One quarter hour more per RO means about $50,000 more per year in revenue. Do the 360 walk-a-round. There is always another quarter hour if you just look for it.
Little things: Shop supplies. Ask the tech for the empty can of WD-40 before giving out a new one. Keep fasteners, clips and hardware where you can see who is dipping in. Watch bulk oil. Move to quarts if you can, charge the whole quart and give the customer the covered can with the leftovers. If your state allows, charge shop supplies on the RO. Get a list of those common supplies and post it by the check-out station. Tell you cashier to point to it when asked about the charge (the average dealership gets about $20,000 per year for shop supplies). Never Never Never allow techs to pull their own parts. Go through the parts guys and get it on paper – always. Keep the shop clean and give customers a view of it. Let the techs know that they are always in the spotlight, and they are one of the store’s most valuable assets. They will love it. So will your customers.
Most Important Thing for today is: Always watch for cash. Create the things that create cash (get units in, do work, get units out), convert your inventories into cash (quickly deliver finished operations to customers), and collect cash (perfect warranties, no PO errors).
Do this. Look for cash. It is lying all around you. Turn your shop into a cash cow. It can be done.