Rule #1 In Beating a RecessionOct 18, 2022
RULE #1 for car dealers in beating a recession is maximizing Technician production and optimizing service stall value!
- Two (2) calculations that will not only help you fortify and defend your dealership against a looming recession or economic downturn, but moreover they will help you increase profitability in any market...
- Technician Production Value &Stall Optimization Value
These calculations have more to do with overall dealership profitability than perhaps any other, because they have the power to profitably influence, as well as to be influenced, by every other department during both good times and bad. This is true, because of the fact that Technicians are to the most productive people in any dealership. Period.
If you cannot answer these two questions off the top of your head, then I fully believe this article can help you see the opportunity you have to gain even more control over the profitability of your dealership, crush a recession and prosper in any economy!
- How many Technicians do you currently employ and what is the value of each Technician with respect to Service and Parts departmental revenue and gross profit production?
- How many service stalls do you currently have and what is the value of each stall with respect to Service and Parts departmental revenue and gross profit production?
An average automotive Technician producing 35 FRH weekly will yield approximately $300K in annual GP factoring in a $150 ELR, Parts-Labor Ratio of 1:1 and a 55% Gross Percent of Sales. It will also impact how and how much we recruit personnel, market to our clients and conquest clients, as well as our ability to execute and process client opportunities every day. The more we can produce at scale with efficiency and capacity, the better impact we can have on the client experience, CSI and retention. This is important to consider when we are looking at how and how much we compensate Technicians, Advisors and Managers in fixed operations.
- Flat rate hours (FRH) are the levers we can pull over and over and over again to create revenue and profits without having to sell one more vehicle, construct another facility or buy another franchise.
Each stall in your Service Department has immense value when optimized for max throughput. For each stall you have, you can accommodate multiple 8-HR shifts. This requires imagination, commitment and execution, but the rewards are massive. A typical stall represents the potential for 10-12 FRH production daily. Extrapolate that out for an annualized impact using and eight-hour shift at 125% stall efficiency and factor in a $150 ELR, Parts-Labor Ratio of 1:1, and a 55% Gross Percent of Sales and each stall represents more than $500K per year. Now multiply that by the number of working stalls and you begin to see how multiple shifts, even when partially staffed, can exponentially increase profitability.
Depending on your appetite for scale, increasing the number of techs or shifts and being creative with processes, pre-loads, support scheduling and staffing can yield mind-blowing results in profitability. It also opens you up to more clients and top tech and advisor talent in the marketplace who are in search of non-traditional service scheduling due to career, lifestyle or income needs. When properly planned and executed, adding shop capacity is the single most effective and also the fastest way to increase throughput and explode dealership profits!
For subscribers and consistent readers of my content, you already know RULE #1 for recruiting top talent in any market, for any position and at any moment in time is a true commitment to recruiting with 24/7/365 campaigns. That can be dauting, but it is the single most powerful strategy for the acquisition of TOP TALENT...without any doubt whatsoever. That said RULE #1 for recession-proofing your dealership and maximizing profitability is to recruit more TOP TECH TALENT, so that you increase capacity, throughput and revenue.
- This one decision has the power to give you the most controllable and productive profit center in your dealership operations once you develop your strategic and tactical game plan and then execute!
So, it makes sense to not only know these two KPIs for your operation and use them to scale your business rooftop by rooftop, but moreover to effectively map your plans to facilitate these two profit drivers such as:
- Recruiting and developing Technicians
- Dynamically marketing your fixed operations to clients
- Examine, refine and reengineer processes from dispatching and work distribution to appointment scheduling to parts procurement and in-shop delivery to Techs.
The ability to leverage increased capacity in the form of faster, more efficient and more convenient service experiences for clients is perhaps, outside of performing repairs and maintenance right the first time, the most attractive feature of the dealership visit that we can offer the market. Improved client-facing processes that can help to improve both their experience and also Technician productivity range from a more efficient and effective write-up to Tech video recommendations.
The very smartest Dealers, GMs and Fixed Ops Managers that we work with also compound this strategy with intelligent investment in tooling, technology and process re-engineering to drive Technician and stall optimization achieve BIG RESULTS! Never underestimate the value of providing your team with resources they want and need to deliver maximum results for your business. One of the keys to attracting TOP TECHS is a demonstrated commitment to tooling and equipment.
Want a free, easy-to-use PDF to calculate your Tech & Stall potential...Click here!
What do you do plan to do, or already are doing, differently to make your dealership recession-proof? Leave a comment below!
Sandy Cerami is a nationally-recognized Business Development Expert and Speaker. He is the creator of THE 7PILLARS OF KILLER BUSINESS DEVELOPMENT, the most relatable and successful B2c and B2B selling strategy in business today. He speaks, teaches and writes about topics ranging from Dealership Operations, Personal Branding and Business Development to Recruiting Top Talent, Organizational Culture and Leadership. For more information or to contact Sandy to speak at your next event or on-site with your team click here!