Dear Service Director: It’s summertime, and I know you are busy. In fact, if you’re the typical dealership manager, your day begins before 7 a.m. and won’t end for another 12+ hours. This time of year, it’s head-down, nose-to-the-grindstone, get it done, bang it out, hard work. That’s why I’m writing – in the hopes that you’ll take a moment to read and understand the big picture
of the state of the automotive industry.

A few weeks ago, Automotive News ran a front-page article quoting NADA that said dealer operations are losing money. Now there’s a headline that got my attention. Let that sink in… losing money. Wow. I want to give you some key takeaways from the 2018 NADA Data report cited in the article, but first let me bottom-line the most important item: A vibrant fixed ops department is vital to dealership profitability (and possibly survival).

That means that you, my friend, are the most important person in your store. Now is your moment to shine and make 2019 your best year ever!

More on an action plan later in the article; for now, here is a snapshot of the automotive industry:

• Last year operating profit for the average dealership was actually a loss (a negative number)
• Net profit was positive, but almost all the money came from OEM incentives
• Fewer new vehicles will be sold in 2019 than 2018
• Profit margins are shrinking
• Floor plan expenses are going up
• Almost all other expenses are going up, too

To recap, it’s getting harder than ever to make a buck selling cars, and there appears to be no relief in sight.

Please note, these are all struggles in the front end of the dealership – in variable operations. So, where’s the money going to come from? Fixed operations!

Honestly, for you as a service director, this isn’t really breaking news. In fact, it’s just more affirmation of what you’ve known all along: Fixed Ops is the backbone of the dealership! You have always been the main profit center of the dealership. You know it; it just takes a little economic downturn for everyone else in the dealership and the industry to realize it, too.

So now that the dealer, general manager, and comptroller are all looking to you for sustainable profits, here are some action points that will help:

Don’t get too focused on cutting expenses. That’s what the bean-counters always push for because they don’t know any other way to increase profits. Good things aren’t cheap and cheap things aren’t good. Look at your trusted strategic partners (please don’t call them vendors). Quality, service, training, and marketing support trump cheap price every time.

I know a dealer group that switched suppliers because a competitor had a cheaper price. A year later they had experienced a 30% loss in gross. They wised up and embraced a more expensive product with a robust training and support team – and the first year gross went up 400%. Cheap things aren’t good and good things – oops, I already said that.

Don’t reduce your training budget. To clarify, there are two types of training investments: Money and time. Don’t reduce either. I’ve actually seen service managers cancel a training luncheon on technician efficiency because the techs were too busy! Brother!

Your best training is sales training. The technician must understand their role in inspecting vehicles is critical to equip the advisers with the information they need to sell what the tech recommends.

My most recent MPI audit at a dealership on the east coast showed less than 50% of the inspections were actually completed. Of those, only 18% of the customers were sold additional needed maintenance and repair. So, for every 100 cars seen on the drive, only 50 are inspected in the shop, and only nine bought anything. This crew needs some sales training! Either that or the service director needs to take the weak advisers out to lunch… and get theirs to-go!

Inform your customers that you work on everything. Any make, any model, any mileage, any year. Everybody has a “second car”, so if they’ll bring it, you’ll service it. And don’t forget about your used car buyers. Are you retaining them in your service department? I mean honestly, do you really know?

Here’s an idea: Run a report to capture the VIN numbers of all used cars sold in 2017. Then see how many of those vehicles returned to your service department, generating a customer-pay RO, in 2018. Lastly, see how many have returned in 2019.

Brace yourself, because the numbers will likely surprise you. My guess is they’ll be around 20%. I did an analysis on a mid-sized, domestic dealership and found the retention numbers to be well under 20%.

Every dealership has a sales-to-service hand off process, but most have inconsistent execution, and it gets really inconsistent for off-make used cars (for example, a CJDR dealership selling a Hyundai Sonata). Do you have a program in place that intentionally targets used car buyers? This is your lowest of the low handing fruit. Run the numbers and see how effective your used-to-service strategy is working. If you’re dissatisfied let me know, I have a couple of ideas. My email address is cpolston@bglsi.com.

Sell your way to success. Offer 100% of tech-recommended services to 100% of your customers 100% of the time. My friend TJ LaPoint, general manager of a three-dealership group, calls that the 300% rule. By the way, TJ gets it; he has a weekly service sales meeting with his fixed ops team in his office.

TJ’s service management team and his fixed ops employees know the boss is looking at the numbers, and therefore, they are too! There’s a word for what TJ is doing; it’s called accountability. (Okay, there’s another word for it too; it’s called leadership).

Creating a sales culture in fixed ops isn’t easy, but it is imperative; it is non-negotiable. You must. It is worth your investment and the return is huge. 2019 is half gone. I want to challenge you to make the last half the best half. Happy sales to you!