Digital Dealer - October 2019 - 19

and the body shop, the costof-sale technician budgets
are readily known, since that
calculation blares at anyone
viewing the sales and gross
profits page, which includes
the vital gross profit labor
margin. One can even
subtract the totals of labor
gross profit categories from
the labor sales, to calculate how much was paid to
the tech staff. Divide that
amount by the tech count
and that calculation is what
the average tech wage was
for the period. You may find
yours most interesting.
The reality is this - if the
labor margins aren't in-line,
such as at least 75 percent
minimum in service and 65
percent in the body shop,
the personnel expenses will
never fit a nicely profitable
budget plan. Managing both
the effective labor rates and
the effective tech cost of
sale are big challenges for
today's department managers thanks to the ever-growing loser quick service
programs. And I still see
body rates here and there,
which have lavished in the
lower $40s for a decade.
You can't make this up! I
never thought in my lengthy
career, I would be so thankful for continuous recalls and
warranty work. Especially
thanks to most manufacturer
execs who have stepped up
to the needed warranty service and parts rates in the
past couple years - some
we are still waiting for - hey,
it will be Christmas soon.
In service and the body
shop, the lion's share of
the direct personnel cost
is the manager and his or

her assistant managers,
(service writers-advisors-consultants-babysitters,
or whatever the next round
of marketing execs invent).
I can't figure how these vital
folks can have the tremendous responsibilities of job
management, but get titled
as such. Anything less than
'manager' is unfortunate for
their positioning with the
consumer when they want
to "see a manager" cause
you're 'nobody.' In the body
world, that would be the esti-

culate to a similar amount.
I constantly see pay plans
in place, which were never
related to any budget, let
alone fully calculated to predict the very best, expected
average, and worst-case
scenarios before installation.
The "Let's just use it and see
what happens" approach is
too common. How I know,
is long ago, I made these
mistakes for you!
The same budgeting concepts are important in the
parts depo too. While this

...IF THE LABOR
MARGINS AREN'T IN LINE,
SUCH AS AT LEAST 75
PERCENT MINIMUM IN
SERVICE AND 65 PERCENT
IN THE BODY SHOP, THE
PERSONNEL EXPENSES
WILL NEVER FIT A NICELY
PROFITABLE BUDGET
PLAN."
mators or whatever the people who estimate collision
work are titled in various
shops. Assistant body shop
managers are not out of the
question here either.
PAY THIS

All support staff budgets
should relate to the available
bill-paying monies, gross
profit. As at home or at the
business, the 'take-home' is
the dough creating the funds
for budgets related to any
expenditure. In the case of
personnel, note that a budget of a percentage of gross
isn't typically a pay plan;
however, that is the first
calculation to make to begin
a pay plan designed to cal-

subdivision has been the
last area to blow up personnel expense over the last
decade, I see it happening
more and more, particularly
with the dastardly low wholesale gross profit margins
now prevalent. Frankly as
an add to the "Holesale"
fiasco, too many of the service parts margins running
under 40 percent make it
nearly impossible to retain
a competent margin on the
expense page. If the margins are poor, forget hitting
a budget, and pray big-time
for lottsa volume that doesn't
cost a leg-lamp to gain.
STUDY THIS

I have made an easyD I G I TA L D E A L E R . C O M

to-use Excel workbook,
including an overall budget,
for anyone to document the
actual percentage of gross
profit versus their (your)
budget (or make one) for
each support staff associate
for the service, body, and
parts entities. As a bonus, I
made an additional tab for
you to study your assistant
service manager and estimator pay versus a provided
budget range based on
skill and experience. Just
forward an email to Ed@
NetProfitGroup.com and put
on the subject line "Gimme
the Budget Buddy" - please.
Sometimes I am not sure
what to send when you
apply an unrelated subject
line - I send a ton of goodies
to folks.
It's important to note not
to eat at least an hour before
this exercise is performed
so that there is little chance
of puking from the results.
I'm just sayin'... unless of
course, you don't need no
stinkin' budget.
ED KOVALCHICK has
traveled the world training and
consulting in fixed operations
for manufacturers and dealers.
His extensive background
includes master technician
status, independent shop owner,
dealer with all Chrysler & Nissan
franchises, and founder of Net
Profit Inc., fixed operations
consulting and training. He is
a graduate of the University of
Louisiana and has served as
state president of the Automotive
Service Councils, and the
advisory boards of Wyo Tech and
Virginia College. He has been a
regular columnist and conference
presenter with Dealer Magazine
since 1995. EMAIL: Ed@
NetProfitGroup.com.

OCTOBER 2019

19
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Digital Dealer - October 2019

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