Forecasting service operation sales


Jim-BellBy the time you read this article, you will have no doubt worked out your service department forecast for 2014.

Our question is how did you arrive at the number? Did you use the outdated method of taking last year’s number and adding 10 per cent, because you just raised the door rate again? Or did you get more technical by wetting your finger and sticking it in the air? One thing to remember is that if vehicle sales declined three years ago, they will impact next year’s customer service base.

When someone tells us they just had a record year, we ask if they mean in terms of dollar sales or in terms of produced hours. If the year-over-year comparison is based on dollar sales and you happened to raise the labour rate sometime during the year, then you’re just fooling yourself, because if productivity stayed the same, dollar sales would obviously have to go up.

We believe that the only thing you really have to sell in the service department is labour or hours so we think in terms of hours produced per work order, hours per technician and hours per bay.

It goes without saying that there is a relationship between both labour and parts sales so the more labour you sell the higher the parts sales will be. It is worth noting that in most stores we have seen a major decline in the parts to labour ratio over the last few years.

To formulate a realistic forecast, you’ve got to ask a lot of questions. What does the last five years’ history look like? Are you expecting your retail customers paid work order count to increase or decrease this year? How about warranty and internal dollars, are they trending up or down? If you are forecasting an increase in business, then where is it going to come from? How many hours per day did you produce last year? How did that look from a technician’s productivity and efficiency point of view? Is there room for increasing the hours per work order, or has the manufacturer still got you swimming upstream by taking away traditional business.

Like it or not low maintenance vehicles are here to stay, even though low maintenance appears to have been causing some mechanical failures. How is the shop’s utilization? For example, how many hours per day are you currently producing per bay? Do you need more or less productive staff and is the ratio of licensed technicians to installers correct? There is no point in paying brain surgeons to remove warts and running with gross profit under 73 per cent. What about non-applied time, is that going to be part of the forecast and how is it trending?

This is also a good time to look at expenses like policy, shop supplies and personnel expense, which are key if you expect to make any money.

This is a great opportunity for team building and getting input from the people who ultimately produce your numbers, so it should be a component for good forecasting. As an example, in the case of the technicians, both management and the technicians should sit down and agree on a workable forecast for the coming year. Let’s make sure they’re up to the challenge of increasing their performance if necessary compared to last year.

Tell them that you can provide a decent wage, and good working environment, but they’re the ones under the car, looking under the hood; they need to be proactive to help the store and their co-workers thrive.

And remember that the technician is just one member of the service team, how are the service advisors performing? All employees should be given a formal appraisal for the year that just ended, and have performance goals set for the coming year. The call-centre person, for example, should know how many appointments they are expected to book in the coming year.

These goals should be set with agreement between management and the employee. When setting these performance goals, you will find some staff will need to tone down their expectations, while others will need to be encouraged to meet suitable goals.

Explain to your staff about the forecast and the goals that need to be achieved — we have just
completed a service meeting with the staff of a poorly performing service department. The staff all made more or less the same comments along the lines of, “We thought we were doing great!” They were actually doing anything but!

Will the service manager sign off on this year’s goals, and have those goals been effectively communicated to staff?

Are you posting basic performance numbers in the shop every day or did you graduate from the school of mushroom management? Goals should be broken down into more comprehensible bits, like how many hours the shop needs to bring in every day to meet the forecast.

Remember, if you’re not keeping score, it’s only a practice. Winning is not the only thing, it is everything — being average means that you are as close to the bottom as you are to the top.

In an age of shared information it is hard to understand why we often fail to communicate the department’s goals with the very people who are involved with producing them, most staff would like to know how they are doing! After all, money people tend to work for a leader (manager) and a cause (goal) so if you don’t share it then don’t expect it!

Related Articles
Share via
Copy link