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How to Maximize Profit in Your Service Department

According to NADA statistics from 2014 service and parts sales reached $91billion!

The average dealership net profit for service and parts per month was upwards of $270,000 while new and used-car sales combined net profit per month did not even reach $150,000!

What is this telling you? First of all, you should be reading NADA's data. Secondly, you need to evaluate your service department.

Doing an evaluation of your service department will tell you who is working for you and who is just taking a pay check. There are some who want to be there, who have the drive and who are worth keeping. Then there are the ones who are diamonds in the rough but have simply lost their drive, which could be in part your fault. Lastly, there are the ones who just don't care and never will.

Take the time to evaluate your advisors regularly and weed out the advisors that are not in your best interest. The good thing about automotive is that once you are trained, it pretty much carries over. It is well worth your time to put together a service team that is winning.

Motivate Your Service Advisors

Your service and parts department could be the difference between getting by and leading the race. It makes since to have a pay plan in place that will motivate your service writers to do more. Having a salary plus commission on individual sales is a baseline to start with and will make your service advisors feel secure about coming to work every day. I see so many stressed out advisors that just look like they need a vacation, why not take some of the stress off of them so that they can focus on the customer? Then you can add in bonuses and spiffs to keep them producing.

Have a CSI Bonus in Place

Bonuses are also great incentive to motivate your team. A CSI bonus for achieving your manufacturers standard or higher is something that I think every dealership should have, as achieving a dealership of excellence award gains incentives for you from the manufacturer. In addition, having good CSI is just good business.

Have a bonus in place for selling extended warranties to customers. This encourages teamwork between sales and service.

Another great bonus is for setting up a trade-in evaluation that results in a new car purchase. If the advisor knows that the car is 10 years old and they are coming in for their 100,000 mile service, why not try and convert that into a new car purchase?

Create Teamwork Between Your Sales and Service Departments.

It is also important to keep a great working relationship with your sales and service team. For some reason there seems to be a great divide there. Build your service team up and remind your sales representatives that the service department is where the majority of your dealerships profit comes from. Hold monthly meetings with the dealership as a whole and call out the top producers.

Go over overall sales and how close you were to reaching your goal for both sales and service and give your projections for the next month. By holding a meeting together, you are letting them know that it is not just one or the other, it is both. It also puts in perspective just how much of an impact service has on your overall profit. This would also be a great bonus opportunity for your top producers.

Even something small like a $100 gift card says a lot. Appreciation goes along way. There doesn't always have to be a dollar sign attached to it.

Have Monthly Spiffs to Generate More Sales

Spiffs are a great way to target a specific item that is not doing so hot. Focusing on a specific spiff each month will remind your service advisors to focus on adding one additional item that they might not normally think of, like adding a detail or auto body repair for that scratch on the bumper.

The choice is really up to you, you can have a set rotating schedule for each month to ensure that all of your big ticket services are being touched, or you can choose based on what is low in sales.

Set a Maintenance Rate for Your Technicians

This is one of the biggest tips that I can give to any service department. A maintenance rate is a SET rate that applies to each maintenance service. For example an oil change should have a set rate for the technician, not a varying rate based on the technicians pay. If you are only making $19.95 for an oil change, why would you want to pay a technician $25 to do it? You can still have a high pay rate for your technicians, it would just apply to anything other than maintenance. For all of the simple, low profit services, have a set maintenance rate in place to ensure that you are actually making a profit on the most common services that you provide.

These services are simple and anyone can do them, regardless of how long they have been a technician. This will also encourage those technicians taking 45 minutes on an oil change to turn over more vehicles in the shop so that they are able to collect more hours.

Motivate your service advisors through a competitive pay rate and promote sales through monthly spiffs. Then add a maintenance rate for the technicians and you will actually be retaining all the profit that your service writers will be generating.

There is an old saying, "you get what you pay for". I can guarantee you that the amount of profit that your service department will generate based on these motivational changes will far out way the money invested in your team.

Leave your comments below on ways that you are motivating your team.


See you at the top!

Ashley Weidner

Just Write Marketing Inc.

Views: 233

Tags: Advisors, CSI, Profit, Service, automotive, bonus, communication, efficiency, labor, leadership, More…management, productive, rate, relationships, teamwor, technicians


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