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Lee Harkins' Thoughts
In our business, Customer Retention must be our ultimate goal! Your competition has been successful in stripping away at your business. These independent service providers are fighting for every customer they get! Your fight must include focusing on making your operation “different” than before! Remember, they disqualified your operation because of the way you were. Not changing anything and then thinking they will return is a poor strategy.
M5™ can help you and your dealership develop tactical methods to advance your business. Call us for suggestions! It would be our pleasure to help.
Thank you,
Lee Harkins
President and CEO
M5™ Management Services, Inc.
leeharkins@m5ms.com
Please be sure to share your reply to the survey questions listed below. After supplying your response, notice how your operation compares to the others.
Also note, the questions will change from time to time, so be sure to check back!
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Charlie Waters Joins M5™ Management Services, Inc.!
We at M5™ Management Services, Inc. are proud to introduce our newest member to the M5 team, Charlie Waters!
Charlie began his automotive career as a Technician in a Ford dealership in 1973. After 4 years, he became a Service Advisor and after another 4 years was promoted to Service Manager. He served in the Service Manager role for 6 years before being promoted to Parts & Service Director.
Charlie served as Parts & Service Director for a total of 17 years, 12 years at the original dealership which became one of the largest Ford dealerships in Florida. He spent 5 more combined years at two other dealerships.
During his dealership tenure, Charlie served on the Ford Service Manager’s Advisory Committee, and was highly recognized for his accomplishments in business growth and customer satisfaction.
From 2003 until 2006, Charlie decided to learn more about the independent auto repair world, so he bought and operated a Goodyear Service Center.
Charlie has also spent over 3 years as a Consultant/Trainer working in all brand dealerships ranging in size from 6-60 Technicians. Charlie brings a high level of expertise and enthusiasm to the M5™ Team.
On weekends, Charlie spends his time at home in Jacksonville, Fl, with his wife Chris, their daughter Maezie, and their dog Nugget. On vacations, they enjoy visiting the Florida Keys.
Welcome to the team Charlie, from all of us! Lee, Susan, Dave, Rick, Jim, Jack, Bruce, Mark, and Tim!
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M5™ Wishes Rick Yanac a very Happy Birthday!!!
by: Tim Harkins
We at the M5™ team would like to wish Rick Yanac a happy birthday today (03/16/11). If you would like to wish Rick a happy birthday yourself you can connect with him below:
Email:
rickyanac@m5ms.com
Telephone:
(714) 396-4629
Facebook:
http://www.facebook.com/profile.php?id=1465179418
We also had a bit of fun with Rick's image on JibJab.com and made him this eCard. Click the picture or here to view it.
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Labor Pricing Policy - SWAG or Science?
by: Charlie Waters
Is your labor rate truly structured to get the results desired? Or is your labor rate a SWAG (Scientific Wild A** Guess)? Unfortunately, most dealerships are the latter.
When selling new vehicles, most sales managers understand that there are product lines that will not permit the gross profit that the dealership desires, while other vehicle lines allow higher gross margins. These product lines are usually referred to as cars and trucks! In order to achieve the desired results, the sales manager must predict the sales mix and manage gross accordingly. The service department is no different. Maintenance is our cars and repair is our trucks. So in order to accomplish a true calculation of your effective labor rate you must understand all of the elements:
- How is your maintenance pricing? Is it competitive? Is it under-priced or over-priced?
- What is your maintenance effective rate?
- How is your competitive repair pricing? (Brake jobs, tire changes, etc.)
- What is your competitive effective rate?
- How much of your total work is maintenance? Competitive repair? Repair?
- What is your weighted cost-of-sale? (tech cost times percent of total production)
Until you thoroughly understand and determine all of these elements, your effective rate and gross will be a scientific guess at best.
First of all, get your advisors to call (from their cell phones) other dealerships, independents and mass-merchandisers to compare prices. This gives you a base-line for about where you need to be in competitiveness. It also gives your advisors an opportunity to hear the selling skills of their competition.
Some dealerships will offer a $9.95 oil and filter special to drive traffic and it usually will. The question I ask is “How good was that additional business and what did it do to your overall effective rate?” Many times, the $9.95 oil change drives a lot of bargain hunters that are not likely to become loyal or profitable customers. What about a $16.95 oil and filter change? Maybe that will drive “good’ business, customers who are looking for good service at a reasonable price.
Are you using prehistoric labor times for competitive services? Your technicians probably shouldn’t hit a “home-run” on a $99.95 brake job! This could kill your effective rate.
The point with all of this is you must consider the overall effective rate picture as you are planning your strategy. Your maintenance menu and competitive items must have parts and labor pricing that is calculated fairly for both departments. Let’s start with parts. Parts department should use weighted-cost-average for filters, etc. Here is an example:
- Dealership averages selling 80 part #1 oil filters per month which cost $4.40 each
- Dealership averages selling 50 part #2 oil filters per month which cost $4.65 each
- Dealership averages selling 35 part #3 oil filters per month which cost $5.05 each
- Dealership averages selling 20 part #4 oil filters per month which cost $5.50 each
Here’s the calculation:
- 80 X $4.40 = $352.00
- 50 X $4.65 = $232.50
- 35 X $5.05 = $176.75
- 20 X $5.50 = $110.00
- 185 (total filters) divided into $871.25 (total cost) = $4.71 weighted average cost*
*This is the amount that should be used to calculate mark-up for oil & filter services
This same calculation can be done to determine technician weighted-cost-average. This will help you in determining what your overall effective rate needs to be to accomplish your overall gross-profit percentage objective. Then once you have determined your overall work mix (maintenance/competitive/repair) and their appropriate effective rates, you can determine what your repair effective rate should be. Now what repair effective rate do you need to accomplish an overall effective rate of $75.00 per hour?
The answer is $123.33. Did you calculate it right? How do you get there? There are a lot of questions that need answers. The key is balance of all the factors: Cost-of-Sale; Maintenance Effective Rate; Competitive Effective Rate and Repair Effective Rate.
Once you have determined all of these factors, it is extremely important that you establish a written Pricing Policy. This assures that everyone understands and adheres to your pricing structure. All the preparation in the world won’t help if your people don’t use it!
If you’d like more information on calculating a labor pricing policy, please feel free to contact any of us at M5™ Management Services, Inc.
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Skid Marks
Skid Marks is an ongoing article series that shares the lighter side of working in a service department. All the stories are true. Brand names and real names have been removed.
Several years ago, it was the typical Friday 5 o’clock rush. Five or six customers were waiting at the cashier to pick up their vehicles; the porters were pulling these vehicles into the service lane so that the customers could leave, without further delay, after completing their paperwork.
As fate would have it, two of the vehicles were red Escorts. The first owner completed her transaction, climbed into a red Escort and took off. Several minutes later the second of the Escort owners climbed into the remaining car, fumbled around for a few minutes, then got out complaining that her car wouldn’t start. The advisor climbed into the car, depressed the clutch, turned the key and the car started right up. The customer exclaimed “Wait a minute; my car had an automatic transmission!”
Sure enough, the first customer had taken the wrong car. When we called her, she said: “I was so impressed with the way the car drove, I didn’t realize why.” She brought the car right back.
If you have a funny story that you'd like to share with your peers in the industry please send them to newsletter@m5ms.com and we will include them in a future Skid Marks article. Please remember that we will remove ALL brand names and real names.
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