14 strategies to take your service department to the next level and increase your bottom line.
If you’ve survived this recession, you probably have a decent service department.
You measure technician efficiency. You market your offerings here and there. Maybe you even do some menu selling. You track customers’ satisfaction with the service experience. And you probably make a little profit for the dealership in the process.
But chances are you’re still leaving money on the table. You see service as a small piece of the bigger picture rather than the high-performance profit machine it can become for your dealership.
Now is the time for that to end. As you ramp up to take on the 2012 season, Boating Industry has collected 14 strategies you can employ to take your service department to the next level. To do so, we called upon three service department experts: David Parker of Parker Business Planning, a 20-group moderator and consultant with more than 40 years of experience in the marine industry; marine dealer consultant and Yamaha University instructor Valerie Ziebron of VRZ Consulting Co.; and Sam Dantzler, a powersports industry trainer and consultant who has worked with Harley-Davidson Performance Groups, Spader Business Management and many others in his field.
Implementing a single one of these strategies might not be enough to transform your service department, but taken together, these ideas can make a major contribution to your dealership’s overall revenue and, ultimately, its success.
The ultimate goal behind most new initiatives is to increase revenue, and there are two primary ways to do that in the service department.
The first is something everyone is trying to do — sell more boats, motors and trailers. At the end of the day, selling more products will always be the No. 1 way to increase revenue throughout a dealership. The more boats you sell, the more service they’re going to need.
Unfortunately, that’s not always possible, so we turn to the second option: increase revenue per customer.
To do that, Parker says dealerships should ask themselves the question, “Are we a preventive maintenance shop or a break and fix shop?”
A break and fix shop is one that just takes care of whatever the customer asks for, which isn’t efficient for the customer or the dealership, according to Parker. In his experience, those shops are usually two to three weeks behind in season and struggling to keep their heads above water.
“If you’re stuck in break and fix mode and can barely keep up with your customers, it’s hard to imagine how you can sell additional services,” he says. “But if you become a preventive maintenance shop, service is easier to manage; you’ll have happier customers and make more money. A win/win for everyone.”
Changing that philosophy starts in the sales department, and it involves teaching customers the benefits of preventive maintenance. Customers must be coached that while preventative maintenance is more expensive in the short run, it is significantly less expensive in the long term, since theoretically the customer is likely to have far fewer and less costly problems with the boat.
“It’s easy to point out that you can spend $5,000 to $8,000 replacing an engine when you could have just replaced the water impeller instead,” he says.
You can also explain to the customer that if you have a problem, it’s most likely to happen when you’re using the boat. At that point, you’ve blown one weekend, if not two or three, waiting on the dealer to make the repairs. That’s a lot when you only have 13 weekends in a season in an average climate, Parker explains.
“Theoretically, with preventative maintenance, you will never have a problem with your boat, because items are replaced before they break,” he adds.
Another reason for customers to agree to a preventative maintenance plan is if dealers offer that when they do have a problem, they go to the top of the service priority list. Some dealers also offer a discount if customers schedule preventive maintenance over the winter months, which can help a service department create a more balanced workflow during this time period.
“When you’re a preventative maintenance shop, July is the often the slowest month because few customers are breaking down,” Parker says. “The busiest time of the year can be the winter months.”
Move to flat rates
The most direct way to increase revenue per customer is to increase your labor rate.
Dealers who haven’t recently evaluated their rate should ask themselves if they’re charging enough, recommends Parker. About $99 an hour is average, but more and more dealers are charging $110 to $150 an hour depending on the area of the country.
Another option is moving to flat rates, which Parker believes is the fairest way of charging.
“If a tech comes in with all their tools in a bag or satchel and takes twice as long, are we going to charge the customer twice as much? I hope not!” he says. “Or if a tech has a huge investment in all the latest tools and can do the job in half the time, do we charge half as much? No! Flat rates are based on an average tech taking an average time for each job.”
For the system to work properly, Parker says dealers should make sure their times account for bringing the boat in and out of the service department, uncovering and covering the boat, and cleaning up after each job.
Once you’ve determined the appropriate flat rates, you may want to bundle them together using a menu pricing system.
“That allows you to do the preventive maintenance in a manner that is easy for the customer and staff to understand,” Parker says.
Add a service upsell checklist
A powerful strategy to increase sales is the adoption of a service upsell checklist. One dealer last year added more than $100,000 in service labor by creating and implementing this simple form, according to Parker.
“The customer brings the boat in for whatever reason, and you go in and check everything,” Parker says. “You look for things that may need repair down the road — especially safety items. And if they won’t repair safety items, tell them you can’t work on their boat.”
To encourage more sales, techs can be paid an incentive based on the upsell amount — 10 percent of the upsell labor and 5 percent of the parts, for instance.
Those same techs should also be the people calling the customer to discuss the service work. That worries some dealers, but the actual time involved is minimal, says Parker. Some techs are initially hesitant to speak with customers, however, so he suggests holding role-playing sessions to get them more comfortable.
To be successful with preventative maintenance, you have to decide it is the direction you want to go and fully commit.
“If you switch over to a preventive maintenance mindset in your dealership, life in your service department becomes significantly easier, with happier customers and better cash flow,” Parker says. “Who would not want that?”
Adopt a scheduling system
Dealers have no trouble understanding that if you have two boats and one part, only one boat is going to get the part. However, when it comes to an hour, Valerie Ziebron of VRZ Consulting Co. says they frequently want to stretch it.
That’s why she tries to help dealers see their time as something concrete. Dealers inventory parts, boats and motors. Similarly, they should inventory their time.
“Unless a dealership makes their time tangible, you’ll constantly be having to stretch, and that means corners are going to be cut and customers are going to be unhappy,” Ziebron says.
Many stores are working with fewer people today, and that makes scheduling more important than ever. Still, some businesses have no scheduling system at all.
“That’s a big problem,” Ziebron says. “The biggest resistance that I see to starting a scheduling system is people think you can’t have a perfect system. You can’t write it in ink. And they’re right. A scheduling system is fluid — a constantly changing document.”
Depending on the time of year, dealers tend to schedule between 70 and 80 percent of their work, treating the rest as flextime.
One of the benefits of scheduling is it lets dealerships know when things are starting to look a little slow and they need to consider how to generate additional business.
“One of the biggest things I’ve seen in stores without schedules is they’ll be pushing work away because they see a big stack of work orders, and they’ll think, ‘We’re a week or two out,’” she says. “But when you start looking through the orders, you realize some of these are sublet, some of them are just quick service, some of these are things where we’re waiting on parts, and we might not have work in two days.”
Another benefit of scheduling is that it opens up lines of communication. For example, service managers make an educated guess about how long a job will take, Ziebron explains. If a tech can see what jobs are coming up and how much time is allocated for each, it can help raise red flags if a job hasn’t been allocated enough time.
A scheduling system can also help eliminate conflicts between sales and service. Sometimes conflicts arise when someone from sales comes into the service department and says, “Drop everything. We’ve got to get this boat rigged by the weekend.” Or “Drop everything because my best friend’s boat needs to be serviced. I’m playing golf with him on Friday.”
With a scheduling system, the service writer can open up a book and look at the schedule together with other staff members.
“It really is so nice to have an honest discussion about what’s going to have to happen, instead of just this ‘Make it happen, stretch that hour out over three or four boats,’” Ziebron says.
Select the right tool
A lot of times people use technology, or the lack of it, as a crutch. However, successful scheduling systems can involve a white erase board, a metal tree, a scheduling book or an online system — providing dealers have a system and use it, according to Ziebron.
“I think we need to be creative in allowing our team to use the approach that best fits their comfort level and style,” she says. “As long as we’re getting the same result, I’m not so picky about what tools they’re using to get there.”
For those dealerships that use a simple scheduling book (physical or electronic), Ziebron recommends starting with a dispatch guide sheet. On that sheet, each one of your technicians is listed along with ratings of their skill sets on the various things you would have them working on. Take it to your best technician first and have him rate himself. Then, based on how he scored himself, the other techs will fall in line where they think they rank.
The advantages of this system are several. For example, when you’re hiring a new tech, with a quick glance at the dispatch guide sheet, you can see the areas where your staff is weak. When it’s time for training, it also helps you identify areas the team might brush up on. But most importantly from a scheduling standpoint, it really helps make the decision of who is the right tech to consider for a particular job.
When you’re speaking with a customer, you can quickly identify which tech is right for the job, then flip to that tech’s tab, look at their schedule and pencil it in.
Eliminate the excuses
Another excuse for not scheduling is, “We have so many boats … we’re not your average store.”
In that case, dealers can develop one schedule for rigging, one schedule for internal customers, one schedule for external customers, etc.
Whatever the size of the dealership, though, scheduling requires buy in from the top down.
“A lot of times I get a call from owners, and they want me to come in and fix it, but they don’t want to be involved. And it really takes the involvement of everybody for it to work,” Ziebron says. “I can fix it with your service team, and we can come up with a system. But if after we come up with a system, you’re going to come in and demand things that don’t fit in the current system, there’s just no point.”
Take the first step
Though the tools are flexible, the objective of a scheduling system is solid. The goal is to work more efficiently and for every department to be on the same page about what jobs are coming down the pike. That includes sales, parts, techs and everyone else in the dealership.
The first question to ask yourself, according to Ziebron, is whether you track your open work orders in one place.
Many shops have a system that allows them to access individual work orders, but they don’t have one place where they can see everything at once. A simple solution is a route sheet. A route sheet is one sheet where you enter the basics every time you open a work order: customer name, contact information, boat information, primary concern, the status of the job and when you’ll be communicating with the customer next. This can be physical or online.
That’s the beginning of your schedule, and it allows you to quickly determine when a work order originated and decide which one you should look at first.
“First come, first served is not necessarily a great scheduling system by any means, but we should at least be able to know who came in first,” Ziebron says. “And that should be a factor in determining when a boat gets looked at.”
Choose a gatekeeper
A common scheduling mistake is allowing too many people to schedule.
One person needs to be chosen to set the schedule storewide. Other people can come in and talk to that person, but there has to be a gatekeeper. Ziebron suggests it should be one or possibly two people.
Who that person is can vary, depending in part on the size of your store, although it’s usually the person who is writing up the tickets or a dispatch individual.
However, even if the person dealing with the customer is not the one setting the schedule, he or she should at least have access to it.
One of the big advantages of scheduling is that it’s visual, according to Ziebron. If a customer hears you say they’re scheduled for a week and a half out, that’s not as believable as if they can see you reference the schedule.
Track your absorption rate
Dealer to dealer, absorption rates are extremely different even though the dealerships might appear very similar and have the same number of staff and techs. To maximize results, dealers should consciously decide what their goal is and then track it.
“I sometimes have dealers who say, ‘We can’t have 100 percent service absorption, it’s impossible,’” Ziebron says. “And if you say that, you’re right, you never will. But there are certainly plenty of individual shops that all they do is service boats, and they’re making a fine living off that. To say that it can’t happen because of the size of your business, it absolutely can. You just have to make the decision of how important it is.”
With that said, not every dealership needs to have a 100-percent absorption rate. If your priority is to have techs do building maintenance or set up boats shows, that can kill your absorption rate. It’s a business decision each company must look at individually.
No matter what rate you decide on, though, tracking absorption is the most important first step. If you track it, the number automatically tends to go up, and dealers are more aware of what’s going on and able to correct problems sooner.
The next question to ask is: If you were to set up a camera, what’s pulling techs off their work? Are they having to look up parts? Are they having to pull their own parts? Are they in charge of getting their own work order? Is the scheduling system efficient enough that they can just open a page, immediately see their next job and get to work?
Some of those things might be necessary parts of their job description. The rest can be eliminated. If you track that information and share it with them, the problem is much more likely to correct itself.
“If we’re holding people accountable, through sharing the numbers regularly with them, it tends to improve,” Ziebron says. “Whether or not pay is tied to it.”
Improve your culture
The recession has had a negative impact on dealership cultures.
“People are being asked to do more with less. A just-be-happy-you-have-a-job kind of thing,” Ziebron says. “And it’s really affecting culture.”
A lot of managers don’t make the connection between culture and the bottom line, but there is a clear link. Culture affects how co-workers treat each other, which often determines whether your dealership fixes boats right the first time. This impacts employee satisfaction and customer satisfaction.
One question to ask your employees each year is, “Are you personally better at your job than you were a year ago?”
“You’d think that after a year, you’d automatically be better,” Ziebron says. “But so many times they admit, ‘No, I’m not, I’m worse.’”
A slow decline in culture is kind of like boiling a frog, she says. If you stick a frog in a pot of boiling water, it jumps right out. But if you stick it in tepid water and slowly raise the temperature, it doesn’t even notice until it’s boiling.
“If you were to take someone and stick them into their shop three years into the future, they’d say, ‘We can’t act like this,’” Ziebron says. “But when you slowly raise it over three years, like I’ve seen in this recession, it just becomes the new norm.”
The key is to notice the problem as it develops, she says. Some questions to help you understand your culture are: If there’s a piece of trash on the lot, would one of your people pick it up? What does your shop look like? Is your space organized? Do your employees look professional? Do they look and act like someone you would want to talk to your customers?
If you don’t like the answers to those questions and suspect your culture has fallen off, Ziebron suggests commenting on the good, rather than always complaining about the bad.
Stephen Covey, author of the book “The 7 Habits of Highly Effective People,” distinguishes between rewards and recognition. He says the key to lasting improvement is not so much the reward you get for achieving a goal as the recognition of the individual steps that led you there. Yet Ziebron says when she gives surveys, the most common question to which people answer “No” is “Do you receive meaningful praise?” And praise doesn’t cost anything.
Find the right service writer
For a service department to reach its profit potential, it’s critical for dealers to put the right person on the front lines as service writer.
“Most people take former techs, or older techs, or I-don’t-want-to-turn-a-wrench-anymore techs, and that’s just not who you want up front,” says powersports consultant Sam Dantzler. “You want a salesperson up front.”
Some dealers feel it’s important that the service writer have intimate knowledge of the work being performed, but Dantzler says it can be an advantage to have someone with less personal experience. That’s because they aren’t tempted to offer free advice on what the problem might be.
“I always compare it to going to the doctor. If I go to the doctor, he’s not going to say, ‘Oh, it might be your kidney or it may be this or it may be that,’” he says. “He’s going to do some X-rays, he’s going to diagnose the problem, and he’s going to be very clear on what it is. And he charges for the diagnostic work.”
Many dealers don’t consider “service writer” a sales position, but it’s important for the person in that position to have a great bedside manner, according to Dantzler.
“You want someone who’s going to have a smile on his or her face and say, ‘You know what, I have no idea what the problem is, but I’m going to put my best technician on it. We’re going to have a detailed list of everything you need — and by the way, as long as we’re looking at it, have you thought about X, Y and Z?’”
Jiffy Lube is an example of how successful this philosophy can be. For every $19.99 oil change, the average sale at a Jiffy Lube is $72 because they discover that your air filter is bad or you need new wiper blades, Dantzler points out.
“If I come in for an oil change and that’s all you give me and that’s all you ask for, and there’s no incentive as a salesperson to upsell, then you walk out with a $19.99 average ticket,” he says.
If you want service writers to act like salespeople, so that they upsell and increase parts and accessories sold per repair order, you have to be prepared to pay them like salespeople. Too often, service writers are hourly employees or even salaried employees, where there’s no incentive to increase sales and profitability.
“In that case, you’ve paid them to respond as a clerk and not as a salesperson,” Dantzler says.
Owners who don’t believe in compensating their techs and service writers based on performance should ask themselves the question, “What percentage of your paycheck is guaranteed?”
The answer is zero.
“Why is it we have such an issue trickling that concept down to our staff?” Dantzler asks. “We should pay for what they produce. And any tech that tells you otherwise is not a tech you want on your team.”
Know your score
Imagine watching a football game where nobody knows the score.
“Is it third down or first down?”
“I don’t know.”
“How much time is left?”
“Four or five minutes, I don’t know.”
“Want to watch something else?”
If you don’t know the score, you’re not emotionally invested in the game. Dantzler says the same is true in a dealership.
“If you don’t know what your line items per ticket is, it’s not important to you,” he says. “It’s not even on your radar.”
To get your staff invested and working to improve, everybody needs to know his or her score, every day. Decide what is important to you in each position, and have employees actually write down their scores at the end of the day in a place where everyone can see it, Dantzler suggests.
Have them write the score in green if they are meeting their goals and red if they’re behind.
“If you have to use the red pen, I guarantee it doesn’t feel good,” Dantzler says. “And it just might make you upset enough to do something about it. The game changes when you know the score.”
Get the right work to the right tech
It’s critical to get the right jobs to the right person.
Dantzler compares a service department to a triage unit during wartime, where patients are rushed to the appropriate medical personnel based on the severity of their injuries.
“In wartime, it’s because you’ve got lives on the line,” he says. “Someone may die if you get the job to the wrong person. In the retail environment, your profits will die.”
That’s because it’s inefficient to have your top techs spending time on simple jobs that could be handled by their less experienced peers.
“I don’t want to give the A-level technician C-level work, just as I can’t give the C-level technician A-level work,” he says.
Instead, rate your technicians by dividing them into A-, B-, C- and D-level techs, Dantzler recommends.
That means the technician gets paid for what they produce, and that amount goes into an account that is tracked for the technician on a secure spreadsheet, explains Dantzler.
They get a consistent paycheck every month, and the overage stays in the account for the winter, so you can continue to pay the same amount throughout the year, even though there might not be as much work available. It's the tech’s money, so if they quit, you cash them out.
The benefits of such a program are that it provides techs with financial consistency throughout the winter, which can lead to higher employee satisfaction and therefore higher employee retention rates. That saves you money and often delivers a better quality of life for your technicians.