Are You Making These Common Mistakes In Your Service Department?

When it comes to the service department, most dealers know they need one. But, many don’t think they can have a service department that actually makes money.

For instance, imagine you have 3 technicians in your service department. You’re paying each of them $40,000 in labor and benefits, which adds up to $120,000 per year. But your service department is only bringing in $115,000 per year. And that doesn’t include all the other expenses that go along with the department. This means you’re losing money just to offer your customers the convenience of fixing their equipment.

This can be incredibly frustrating for owners, and unfortunately this scenario is all too common.

The good news is that you can reinvent your service department into one that’s actually making money. To start, however, you’ve got to avoid some of the common pitfalls that plague dealerships.

Mistake #1: Having the Wrong Perspective

First, you need to look at your service department as a stand-alone profit center in your business. One of the key ways to do this is to measure your service department’s operating efficiencies. You can measure this information if you have good outdoor power equipment software.

You need to know how much it costs to operate your service department with and without technical wages. And, many owners don’t measure this information. But, this metric is vitally important to running a profitable service department.

Mistake #2: Not Making Goals

Another common pitfall is that many owners don’t set any objectives for their service department. They assume the department is probably going to lose money, and so it does.

It’s important to define what you want, however. What do you really want to do with your department? Do you want to break even? Make a 30% profit? You need to define quarterly objectives for your service department so you know where you want to go.

Mistake #3: Selling the Wrong Product

Many dealers make the mistake of thinking that their service department doesn’t sell anything. And, it’s easy to think this at first glance. There are no soft goods, and no gleaming rows of equipment for sale. But, this is a common mistake. Your service department is selling a product. Just not the type of product your sales floor sells.

When you think about it, your service department is completely unique from the rest of your business. It’s the only time you’re buying time from your employees, and then selling it back to your customers.

As a dealer, you must understand that your service department is selling something: time. Time is your product. If you want to make your service department profitable, then you must make it as tight and efficient as possible. When your technicians waste time, or your department isn’t operating as efficiently as possible, then you’re going to lose money.

Your service department can become an incredibly profitable part of your business. But the path begins by avoiding these three common mistakes. It’s also going to be incredibly helpful to have quality OPE business management software. OPE software helps you easily look at key metrics so you can make sound decisions about improving efficiency.

Remember, your service department doesn’t have to keep losing your dealership money every quarter. It is possible to turn things around and dramatically improve your bottom line. But you’ve got to start by avoiding these three common mistakes.

Shop Management | March 5, 2010 9:50 am