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.

Photo © by Brooks Elliott

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.

How to Boost the Profitability of Your Parts Department

Is your parts department as profitable as it can be?

Or is profitability only a secondary consideration?

For many Powersports dealers, their primary objective is to have in stock, for immediate delivery, just about every part a customer is ever likely to ask for—even if it’s only suitable for equipment that’s decades old and obsolete. So their dealer parts list software is loaded with parts that very few or no customers ever buy—taking up valuable space and wasting purchasing dollars that could be put to far better use.

And their parts department personnel waste valuable time manually checking the inventory of these parts, re-ordering new parts (if still available), updating the price of every part…and dusting off all the old boxes.

If your parts department is anything like this, it may be time to reconsider your priorities.

Photo © by bobbyh_80

The primary customer of your parts department, many experts say, should be your service department—not the end-user. Therefore, your parts department’s inventory should consist primarily of whatever parts your service department uses most often, and for brands and models you currently sell, or sold in recent years.

It should not be a warehouse packed with aging parts that might, just might, be requested by somebody with an obsolete piece of equipment he’s trying to keep running instead of buying a brand new one…or even a used one.

And the longer you keep old parts in stock—unless they’re gold-plated—the less they’re usually worth. (Keep this in mind when conducting inventories and putting a dollar value on each item.)

Unless a profitable part of your business is operating a parts warehouse for other dealers (as some car and truck dealers do), your parts department should not strive for a 100% fill rate; 80% to 85% is good enough.

Depending on your location, you can probably get almost any new part you want from the manufacturer or distributor within 24 to 48 hours, and most customers are willing to wait at least that long.

If they can’t or won’t, call other dealers nearby to see if they have the part in stock and (if so) either buy it from them or send the customer there.

As is the case with everything else you sell, dealer shop management software— when properly and effectively used—makes it incredibly fast and easy to keep track of every SKU in your parts department. If you regularly enter the appropriate data for each and every part, you can instantly find out how many units are in stock, how many need to be re-ordered, who bought each unit sold, when each was bought, the price paid, what kind of equipment each purchaser uses, its age, whether it was bought from you, what related items might be promoted, etc.

And when you see, thanks to your dealer management software, that a particular customer is constantly buying replacement parts for a particular machine, you can say to him: “You may be able to save a lot of money by purchasing a new machine. It comes complete with all the parts you need!”