By the Numbers:
Productivity, Profitability

Posted 3/9/2011
By Charlie Polston

Earlier this year, a shop owner invited me to take an analytical look at his business and advise him on any growth opportunities I found. The shop is owned and run by a husband-wife team with one service adviser, two master technicians and a maintenance/lube tech. They have five service bays with lifts and enough room to add at least three more bays without being crowded.

They have a small, but classy, waiting area with leather chairs, a flat-screen TV and other amenities. The location isn't bad. It's in a middle-class area with upper-end office complexes less than a mile away in both directions.

The owners are paying the bills, making payroll, and the business is in the black. In addition to all of this, these folks are just salt-of-the-earth ... friendly, respected, personable ... just downright good people!

Don't miss the business opportunities

What's the problem? Honestly, the owners weren't doing anything "wrong," but analysis revealed a plethora of missed opportunities. Quite frankly, they were leaving a ton of money on the table. Here are some of those missed opportunities:

• Shop Efficiency. The first eye-opener came when we looked at how they were using their time. Their three techs are at the shop 40 hours per week (40 hours x 3 techs x 50 weeks = 6,000 clock hours). They flagged 4,000 hours for the year (4,000 ÷ 6,000 = 67 percent efficiency). In other words, the techs were not producing revenue 33 percent of the time. That's 2,000 hours lost. Ouch! (The reason I used 50 weeks instead of 52 weeks is to allow for two weeks of vacation).

• Maintenance Penetration Rate. Next, we looked at the effectiveness of their service "sales" staff. They saw 2,300 vehicles last year and sold 800 maintenance services (800 ÷ 2,300 = 35 percent maintenance penetration rate). A maintenance service is defined as a service that must be recommended (sold) to the vehicle owner. Some examples of maintenance services would be alignments, fluid maintenance services and flushes, filters and belts. I don't include oil changes because they are not typically sold; customers usually request an oil change, therefore there are no "selling skills" involved.

If you are only going to track one thing in your shop, the maintenance penetration rate is the thing to track! While the minimum goal is 50 percent, I know of several shops with more than 75 percent penetration.

The only things you do in your shop are repair services, oil changes and maintenance services. You can't control when something on a vehicle is going to break, therefore, repair services are not a consistent revenue stream. If it ain't broke, you can't fix it! Preventive maintenance is totally under your control as a shop owner. In fact, it is the quickest way to grow your business!

• One-Line-Item Repair Orders. As we continued to drill down even further into the numbers, we found 1,000 ROs had only one line-item (1,000 ÷ 2,300 = 44 percent one-line-item ROs). One-line-item ROs fall into two categories: an oil change or a repair service. For example, one of the ROs had a customer complaint of leaking antifreeze. The diagnosis and repair was a new water pump ... that's it ... nothing else on the RO. At the very least, they missed an opportunity for a coolant fluid exchange service. It was an F-150 Ford pickup with 81,000 miles; I can assure you they missed many other maintenance opportunities.

The technician was so focused on the primary item that he missed the other upselling opportunities right under his nose. I see this kind of thing every day ... and you do, too! The benchmark for one line-item ROs is 15 percent. How are you doing?

There are several other key performance indicators; for now, let me encourage you to focus on these three things: run the numbers, establish a baseline, set realistic goals and track the growth.

As important as it is to understand numbers, it is even more important to know how to change the numbers.

When the Automotive Service Association formed a strategic partnership with BG Products Inc., one of the commitments I made was to conduct a series of online live webinars. We are now in the second year of those webinars. The webinars last 45 minutes and begin promptly at noon (central time).

If you'd like to register for the webinar series, send an e-mail to Dana Henry at dhenry@bgprod.com. Dana will contact your local BG distributor for them to finalize your registration. We had more than 2,500 people enroll online last year, and there's plenty of room for you to join us. Once you are registered, you will receive an e-mail reminder a couple of days before the webinar ... just click the link at the date and time of the webinar and you're good to go!

2011 is going to be the best year the automotive service business has ever seen. The conditions are perfect for your shop to see record profits. What a great time to be an automotive service professional!

Editor's Note: This article is one of several management articles that will be contributed to AutoInc. this year by Automotive Management Institute (AMI) instructors. In 2011, AMI's knowledgeable instructors will continue covering a variety of topics designed to educate and train today's service and repair professional in AutoInc. To learn more about AMI, its courses and instructors, visit www.AMIonline.org. AMI administers the distinguished Accredited Automotive Manager (AAM) program.

Charlie Polston has been a customer retention and profitability consultant with BG Products Inc. for more than 29 years. He has been a frequent speaker at the National Automotive Dealers Association annual convention. Additionally, he has conducted an AMI workshop at the Congress of Automotive Repair and Service (CARS). You can contact Polston at cpolston@bglsi.com or call him at (918) 693-0164.