Identify Your Hidden Profit Opportunities

In Fixed Ops Toolbox by Don Reed

– Don Reed, CEO
DealerPRO Training

“We’ve looked at the performance of service and parts operations of RV dealerships all across the country.
“Our evaluation includes financial statement analysis, performance trends, staffing levels, facilities, compensation plans, inventories and of course customer driven processes.

In doing so, we strive to identify the hidden profit opportunities that abound in RV dealerships.”

Make the Most of Your Opportunities
Once these opportunities are identified then we work with the Dealer to develop their own Profit Improvement Plan to take advantage of these missed opportunities and then measuring the performance of their service and parts Team and then hold them accountable for compliance with the plan.

The most common missed opportunity that we find is Shop Productivity. I’m talking about how many hours do their technicians produce compared to how many hours their technicians are on the clock working. Typically we see that percentage to be around 60%. This means they are billing out 24 hours on the repair orders (Customer pay, Warranty & Internal) for every 40 clock hours worked. (60%) We believe every dealer should set a goal of no less than 100% and in some cases as much as 120%, which means 40 to 48 hours billed for every 40 clock hours worked.

So if your Shop Productivity is below 100% I’m going to share with you some ways you can start to improve your individual technician’s performance.

  1. Measure the productivity of each technician DAILY. Hours produced versus hours worked.
  2. Identify those technicians who are performing below your goal and find out WHY.
  3. Minimize “Non-collectible Time.” Let Technicians be Technicians! In other words are they moving inventory, doing building maintenance, plowing snow, etc. when they could be producing hours?
  4. Technicians should inspect every unit for additional repairs and/or services just like they would when reconditioning a Used Unit.
  5. Your parts department must understand their Primary Mission is to Support the Techs! Get those parts in the hands of the Techs in the shortest amount of time possible!
  6. Compensate to Motivate! All Techs should be incentivized to produce more hours regardless of whether or not they are paid flat rate or hourly.

Additionally, your Service Advisors can certainly have a positive impact on productivity since they are essentially the ones responsible for bringing the work in the door and then identifying further opportunities for selling maintenance services and additional repairs. Here are some examples:

  1. During Customer Reception always go to the RV with the customer and conduct an interactive walk-around. Ask questions regarding past maintenance performed or not performed and look for obvious maintenance items and repairs to properly advise the customer, then allow the customer to say “yes” to get the work done.
  2. 100% of your Service customers should get a “Maintenance Menu” feature/benefit presentation for recommended services on the coach, appliances, power train, etc.
  3. Service Advisors should insure all customers’ RV’s are inspected by the technician within 24 hours of drop off to enable the parts department to get the parts ordered as quickly as possible once the customer has approved the repairs.
  4. Service Advisors must review ALL of the technician’s findings and recommendations to every customer, just like you probably do with your sales department when reconditioning a used unit.
  5. Measure your Service Advisor’s performance DAILY, i.e. Sales per RO, Hours per RO & margins

We find that when all of the above processes are in place and all personnel are properly trained, you can expect to see the following increase in sales which of course is the ultimate benefit to increasing shop productivity:

Opportunities for Improvement –      Towables           Motorized         Motorized & Body Shop

Customer Walk-around Adds                    .5 HPRO              .5 HPRO                       .5 HPRO

Maintenance Menu Adds                             .5 HPRO             1.0 HPRO                     1.5 HPRO

Inspection Results Adds                               .5 HPRO             1.0 HPRO                     1.5 HPRO

Total Opportunity =                                       1.5 HPRO            2.5 HPRO                    3.5 HPRO 

Now for those of you reading this article who are skeptical of this amount of improvement in your store then don’t just take my word for it, prove it to yourself by completing the following exercise:

  1. Review 15 of your Used Unit reconditioning repair orders
  2. Total up your dollar sales for all 15 RO’s and divide by 15 to get your Average Reconditioning Dollar Sales Per RO.
  3. Total up all of the hours billed out on the RO’s and divide by 15 to get your Average Reconditioning Hours Per RO
  4. Compare your Average Reconditioning Dollar Sales Per RO to your Average Retail Dollar Sales Per RO
  5. Compare your Average Reconditioning Hours Per RO to your Average Retail Hours Per RO

I guarantee you there will be a significant difference between these two comparisons! Why? Who owned the Used RV before you did? Obviously it was a retail customer. Question: “If you inspected the RV when the customer owned it would you find the same reconditioning repairs that you did for the Sales department?” Of course the answer is “YES!” So, why not start inspecting all of your customers’ RV’s today, at no charge, and watch what happens to your technicians’ productivity? To further exemplify my point, I did my own 15 used unit reconditioning analysis for an RV dealer who is looking to increase his shop productivity and maximize his net profits. Here are his results:

Average Retail Parts Sales Per RO = $305

Average Retail Labor Sales per RO = $528

Average Retail Hours Per RO = 5.2

Average Dollar Sales Per Retail RO = $833

Average Reconditioning Parts Sales Per RO = $547

Average Reconditioning Labor Sales Per RO = $1046

Average Reconditioning Hours Per RO = $13.1

Average Reconditioning Dollar Sales Per RO = $1593

Make the calculation for your service department to determine your real hidden opportunity for profit improvement. If you offer 100% of your customers a Maintenance Menu that’s specific to their unit and you perform a courtesy inspection on every unit you service, you will indeed increase your sales and gross profits by 30 to 40% or more. I rest my case!

Tweak Your Margins
We often find that profit margins on parts and labor are below industry guides. A good goal is a 75% margin on labor sales and 40% on parts sales. Most dealers tend to do a better job on labor margin than parts. To improve your margins you should start by using consistent labor time guides and those times are used to compute your Techs productivity. Secondly you must adjust your parts matrix to produce a higher margin of profit by utilizing a variable matrix that increases the margin on lower priced parts and maintaining a lower margin on higher priced parts.

Most of your DMS systems have this feature available to you. Remember, the only way to increase margin is to “ask for it.” Margin is the easiest opportunity to positively effect since all it takes is your commitment to do so and then hold your service and parts Team accountable for complying with your new policy.

Identify your opportunities for profit improvement in both service and parts departments. Develop your own profit improvement plan for maximizing those opportunities. Get committed to following your plan. Train your staff on your new processes, measure their individual performance every day and then hold everyone accountable for complying with your plan and watch those Hidden Profit Dollars flow straight to your bottom line. Why not make 2014 your best year ever in fixed operations?

Call Don Reed toll free at 1-888-553-0100
Or email


Don Reed
CEO--DealerPRO Training