You Can’t Expense Your Way to Profits Forever.
by: Jim Richter
The last article ended with, “You can’t expense your way to profits”, but the more I thought about it the more I believe the statement is not right, to a point; that point being, like most business actions that start out to be beneficial when used appropriately, they become a bigger problem when used excessively.
Sports teams often employ what is known as a ‘Prevent Defense’ in the hope of holding off a hard charging opponent near the end of the game. If you’re a sports fan you know that the ‘Prevent Defense’ mode often times becomes the ‘Prevent Win’ mode. Most dealers became successful by being aggressive, marketing and merchandising to gain business share and fighting to keep every foothold gained with customer service. It is totally out of character for them to hunker down and let competitors take business away from them, yet that is exactly what happens as stores cut back on staff, inventories, and support. Instead of protecting what they have worked so hard to accomplish they are gradually giving it back through a painful process of constant reductions in support to their customers.
Hello, is anybody home?
Usually the first ‘cut’ is non-productive staff; people who don’t seem to have a direct link to selling. While this may seem logical at first it places additional burdens on the productive staff since they have to pick up their duties. The examples that come to mind most often are telephone and internet contacts. When a Counter person has to choose between the technicians in front of them, the phone ringing beside them, and the internet warning flashing on the screen in front of them, someone is not going to get any attention.
- If it’s the technician you lose valuable shop productivity on the highest GP% sale type.
- If it’s the phone that customer will probably call the next store rather than leave a voicemail message which they now doubt will be returned.
- If it’s the internet you have a little time to respond, maybe 10 minutes or so, before that lead also becomes cold and moves onto another source.
Which of these scenarios could be handled by a less technically capable resource? Taking the call and the message and either researching the answer or getting the ‘productive’ person to respond when they can. One of the most common causes of lost shop productivity is the parts counter, and expecting the counter person to handle all sales opportunities will cost you business. The cost of having support staff for the counter people is usually more than covered by the additional business they enable.
How do I know I’m staffed properly?
The first indicators that you are understaffed will probably come from your best customers; the technicians. Attending the regular Shop Meeting will often times alert you to a disturbing trend of declining service at the shop counter. The second indicator will usually come from your regular wholesale customers who may joke initially about being put on “Parts Hold”, or having the phone ring into voicemail. The problem here is that some damage has already been done, so here’s another way to monitor the situation.
If there’s one constant in this business it’s that we pay our bills with Gross Profits, not Sales. Therefore I suggest to you that the best indicators are those GP dollar levels that tell you when you are under, or over staffed.
I took a call from a Parts & Service Manager of a small Ford store in Philadelphia recently. He felt he was hurting himself by having only one full time parts person for 8 techs. This person not only ran the counter, he also did the Orders, Receipts, Stocking, Returns, and Retail Counter sales. He hadn’t had a day off in almost 3 years and was talking of quitting, but dealership management felt they could not afford to have a person doing the non-sales work in the bins. When I asked the P&S Manager how much Gross Profits were in parts on an average month, and then to look at the trend over the last 6 months, he clearly saw the decline as his one-man-band was winding down. When we talked about the GP$$ production rate it was so high that I probably could have justified 2 additional people, especially since the service department was holding people off due to their inability to get work through the shop quickly. Where I would expect to see about $15K GP$$ per person he was over $40K which is doable for a short time, but not over an extended period.
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