Every person seeks to improve. It’s a natural and healthy feeling that most humans have when they get involved in an endeavor they believe in. Teams are in a constant state of action followed by evaluation. It is the way that we human beings find value and value in what we choose to do.
And because the auto dealership industry is one of the most measured (think baseball statistics), every action is tabulated, evaluated, pondered, deliberated, calibrated, and then regurgitated back into the workforce (dealership staff). ) with the battle cry “Get this right”. time or otherwise!”
Of course, that never happens at your Dealership… I’m talking about the “other guy.”
What do you think about tweaking and refining the process to say “7 Measurable and Improvable Fixed Key Performance Indicators”? Would it be something that would interest you?
Ok, here they are.
RO Count, HPRO, Labor Gross Margin, Parts Gross Margin, EFL, Total Gross Profit Margin, Total Net Profit Margin.
If you need an explanation… you may be reading the wrong article.
So, you want to improve, right? What is the standard and what should I do?
The RO count at many dealerships is often left up to the “customer gods.” In other words, when people don’t come to Service Drive, often the Service Manager or Director of Service will say something like “This is like this every __________” or “It’s the economy down here” or some other equally interesting and totally wrong. .
CUSTOMER has his vehicle REPAIRED SOMEWHERE, just not at his Dealer. Your job is to figure out what you need to do to start the process. If you have not prepared an action plan that includes an ongoing Marketing Plan, then you should do so.
Let me leave you with this thought. A 10% drop in RO count over a two year period is a 1/5 drop in RO count. No business can stay in business by losing 1/5 of its Customers every two years.
HPRO is another measurable that can be improved. Let me ask you this. In the last year, has any of your Service Advisors increased their average HPRO by more than 2 or 3 tenths? Why not?
It seems that we hire people who can advise but cannot sell. Hey, I can ask Lucy to give me a tip for 5 cents. What I need is a consultant who can sell because that’s what I hired him for!
If your Advisors have not improved by at least a couple of tenths, you will need an ongoing Training and Accountability System.
Parts and labor gross margins are measurable and fully controllable with one action step.
Eliminate unauthorized discounts! And hold the Parts Consultant/Accountant fully and completely responsible.
EFL (Effective Labor Rate) is another measurable that Consultants have directly under their Control. The key is to have maintenance labor rates that are reasonable and the use of labor times/charges that reflect the complexity of the work being performed.
Again, using unauthorized discounts will greatly affect your EFL.
So at the end of the month, after you close all the books, you have a number called Total Gross Profit. And this measurable is the end results of all the other measurables working together and after you have paid your technicians to do the work. And you want more.
So my friend, you need more RO Count, more HPRO, more labor and parts sales with a corresponding decrease in unauthorized discounts and the correct labor rate charged.
Sounds pretty simple, right?
Ultimately, you want higher net profit realization. Well, this is where you can sharpen your pencil and look at the expenses. Are all your expenses in line with the industry standard? Are you spending too much on Policy Adjustment and not enough on Marketing Expenses?
These “7 Measurable and Improvable Fixed Key Performance Indicators” are a great place to start to improve the profitability of your fixed operations.