Greenwood: Supplier vs. Partner?
How examining your sales mix can determine if you’re taking care of your customers and your business.
It’s critical today, in measuring shop finances, to break down the revenue and examine the type of revenue coming through the door. But most shops just measure parts and labor, and then look at their bank balance to see what they owe.
That has to change because profitability boils down to what business you’re really in, which is ensuring that your clients’ vehicle is safe and reliable based on how they use it and their expectations for its value.
To achieve that goal, a shop’s business must move to a “service-on-need” model. That means to manage the vehicle’s service intervals based on how it’s being used (highway, city, off- road driving) and the mileage it’s driven.
The days of using a preventative maintenance, seasonal package are over. Service now must be tailored to the individual client. As an independent aftermarket shop, this is our value proposition to the client and a compelling marketing tool.
It says to the client that you take seriously your professional responsibility and will manage their vehicle’s service at the intervals recommended by the manufacturer. Your judgment is based, though, on how they use the vehicle and their expectations for its reliability.
Next, you consider what type of work you’re performing. First, at minimum, the revenue categories that should be measured daily, weekly and monthly include fluids, tires, aftermarket parts, dealer domestic parts, dealer foreign parts, labor (maintenance), labor (diagnostic) and labor (re-flash). After examining each of these categories, you’ll know their histories and can move on to a critical examination of the type of services required by your customers.
Your objective should be that 30 percent of revenue comes from preventative maintenance, meaning that the client came to you because the vehicle was due for service recommended by the manufacturer. The rest of the revenue should be from breakdown and repair, as well as client/customer demand.
To learn those facts, examine each repair order (RO) to see why the vehicle was brought to the shop. The ROs tell whether the shop is managing the vehicle on behalf of the client or only performing services requested by the client.
To achieve this level of service-on-need, paperwork must be in order because the process demands proper follow-up and scheduling based on how many miles the client is driving. You then must establish a calendar, with dates booked forward, to know when the next OEM service is due.
Follow up with the client, based on how they want to be contacted – e-mail, text or phone call – two weeks in advance and one week later to confirm their next appointment. Take nothing for granted; your shop must follow up with each client.
Most shops are in the 5 to 12 percent range, not even close to 30 percent. But this is unacceptable because the clients have selected the shop to take care of their vehicle. Clients want to drive a safe, well-maintained and reliable vehicle, but they also expect a reasonable financial return from it.
Is your shop maximizing your client’s trust in the relationship, and are you maximizing your shop’s profitability, by doing it right?