Raising rates without anyone noticing?
Raise your rates! I see this comment a lot in discussion groups.
Here’s how to do it without anyone noticing.
First, let’s use some numbers simply for the sake of discussion. Our fictional shop’s labor rate is $100 an hour and sells about $80 in parts for every hour of labor. $180 an hour divided by 60 minutes in that hour means the value of technician’s time is 3 bucks a minute. They need more revenue. Perhaps this operation is simply inefficient.
Events that reduce sales
Rather than trying to add things to increase sales, let’s look at events that reduce sales. If we can reduce 10 minutes waiting, for example, we’ve just gained 30 bucks.
Familiar slowdowns are customer concerns that can’t be verified. It’s so common that we even have initials for it—NPF (No problem found). Now, techs have to wait while a call is made to the customer to ask for more information.
Techs waiting for parts, waiting for approvals, waiting for the first job of the day or waiting to get their next job assigned all add costs to a job by reducing revenue.
The morning rush further complicates things because the office staff is beyond capacity for an hour or two. No calls will be made and nothing will be sold during this time.
Start by sharing this “3 bucks a minute” concept with your team. Is it unrealistic to expect that an hour or two per day might be unproductive?
The morning reception bottleneck
Let’s start with the bottleneck in the front office during morning reception. The office can get jammed with people dropping off cars and this can make communication problematic. Few customers have a lot of time to sit and answer a bunch of questions in order to produce a clear repair order for the technician. We end up with “car makes a noise” and the “check engine light is on”. Every car makes a noise when it’s started. How many times has that light really been the maintenance light?
We can create more time if there is a plan when taking the appointment on the phone. Customers call when THEY have time. Have job skills for noises. NSS means noise sitting still, NB means noise on bumps and so on. A list of questions can be built into each skill to help the Service Advisor get the right information. In many cases, it’s a real time saver to have the tech take a short ride so the customer can point out the noise. If it can be heard, it can be known to be real. Performance issues are similar. Confirm the customer concern right away, don’t let a tech waste time at 3 bucks a minute.
Next, while on the phone, check the service history to see what maintenance is needed on this visit. Get a commitment from the customer. If you demonstrate that maintenance is a needed item, they’ll believe it and it happens more often.
Now we have an idea of what the symptoms are, if any, and the maintenance to be done. Verify the email address, that sets up service reminders. Get their phone number and ask if the best means of communication for this visit is text, voice or email.
The appointment now contains what you’ll do and how to reach them on that day. Set up the time of reception that works for both of you. Spread arrivals out so you’ve got enough time for each customer. Now, customer reception is super fast, on the order of 2 to 3 minutes. This enables the Service Advisor to go out to the car and SEE which light is really on. If the reported MIL (check engine light) is really the maintenance light, nearly a hundred bucks has just been saved. No need for a scan tool or any wasted tech time. Same with a window that doesn’t work or a door that’s difficult to close. Communication is the essence and seeing is everything.
‘Show me what you mean’
I read a story about a little old lady who reported frequent no-starts on her car. Five visits produced nothing but a lot of wasted time trying to duplicate the symptoms. Finally, she was asked to show how she started the car. Being weak, she had to move to twist the key and in so doing, her foot was pressing the accelerator. This put the car into the “clear flood” mode, causing the no-start. Using the “show me what you mean” can drastically reduce wasted effort.
At the time of appointment assign each job to the tech who will do the work. No time is wasted dispatching or by techs camping out on a brake job to avoid getting the intermittent electrical problem on the Jaguar. Greater efficiency will happen just because the techs understand what they have to get done. No longer will they have to watch coolant drain. They can start another job during that time. They can attack the pile in the way that produces the most revenue. This alone has increased our production substantially.
If they do hit a road block, time can be productively spent checking TSBs on cars that are yet to arrive.
Do less, make more
Raising your labor rate 10% only gives you a real increase of 5%, since half your sales are labor. Increasing your billed hours from 30 hours per week to 36 hours per week is a real, genuine increase of 20%! Not only will your customers not complain about the increase, they’ll actually thank you for being so much faster. That’s $1,080 per week or $54,000 a year per technician!
Your techs will produce more in the same time and your front office staff will work less. Once you get started and really establish the “3 bucks a minute” culture, it grows and develops. Everyone can earn more money and the best part is that the shop owner gets more for less.
Your goal should be to bill 50 hours per tech while working a 40 hour week. Then, start closing at noon on Friday. Going from 30 billed hours a week to 50 is a 67% “price increase”.
There’s more to it than this, but this is just a good start. Do less, make more.