Increasing hours versus rates

In the final installment of six-ways to lose money in service, Jim Bell shows why average hours per customer-pay work order under 1.5 hours can pose a significant problem

When it comes to average hours per customer-pay work under 1.5 hours, those hours in question can be impacted by a number of factors, such as type of franchise or local demographics. But most important of all, hours are directly controlled by your staff.

You might not be convinced of the importance of this measurement on the business profit picture, so let’s start with some basic number crunching.

Increasing hours per work order beats increasing door rates every time.

Take a store with an average of 700 customer-paid work orders per month: 700 multiplied by an average of 1.3 hours per order equals 910 hours. Multiply that by an effective door rate of $75, and you get $68,250.

So let’s move the effective door rate up $3. Now, we know we have an effective rate of $78 multiplied by 901 hours, which comes to $70,980.

We gained $2,730, which might seem good, but staff will probably want a pay increase and you risk losing some of your customers because of pricing.

Now, let’s take a look at what happens when we increase the hours per work order by 0.4 hours: 700 customer-paid worker orders multiplied by 1.7 hours equals 1,190 hours. Multiplying that by the old effective rate of $75 gets us $89,250 — an increase of $21,000, plus parts sales.

In some of the stores, this would create the same bottom line revenue as selling another 180 new vehicles per year!

OLDER VEHICLES, GREAT VEHICLES
Are you convinced? Great! So where do you begin when you want to increase hours per work order? Answer: By professionally managing your customer base.

If you are losing 80 per cent of your customers to the competition after three years, it will be tough to maintain good average labour sales because the vehicles in your customer base will then be mostly newer, low-mileage vehicles — ones that requires less maintenance and often zero repair work.

The tendency in the industry is to spend a whole lot of money in bringing new customers on board, but very little in keeping our existing customers coming back.

So when one of the few customers you still have left drives an older higher-mileage vehicle and phones in for an appointment, how is the staff trained on telephone skills appropriate for that customer?

Do they look up the customer’s vehicle history while the customer is still on the phone to turn an oil change into a maintenance service?

Are they spreading the service appointments so not all the customers have to come in between 7:30 a.m. and 9:00 a.m. when it’s tough to spend enough time with the customer to do a thorough write-up and ask for the incremental business?

TEAM APPROACH
At times, the industry hires technical people as service advisors rather than people-oriented sales staff, who love dealing with customers and are not afraid to ask for the business.

Do your advisors walk around the vehicle and pop open the hood at the time of the write up? That alone can create substantial increases in sales per order.

Are estimate and check sheets attached to every work order and completed in full by the technicians?

Increasing hours per work order is a team effort. Sometimes, if there are 10 technicians in the shop, probably only two will do a good job on inspecting the vehicle, writing up a good estimate sheet and asking for the business.

The entire service staff has to be considered as salespeople — and yes, that includes technicians. It’s the only way to get top results.

Posting staff performance numbers daily against a goal creates a huge positive impact on the bottom line, and thus creates accountability.

Increasing average sales per work order should not mean doing a professional job of recommending needed maintenance and repairs. We owe it to the customer not to leave legitimate money on the table just because we weren’t professional enough to ask for it.

Some days, we leave more work on the table than we actually do, which is probably why the independents are still in business.

If you really want to see how much business you could be missing, start by completing an opportunity analysis. It takes some time to complete, but it’s worth it.