Digital Dealer - November 2019 - 18

D E A L E R OP S & M ANAGEM ENT: F ixe d Oper at i ons

By Ed Kovalchick
CEO & Founder,
Net Profit Inc.

Calculating
More Gross Profit
With expenses constantly rising in all
categories, except the
loaner and advertising
credits, digging out some
additional gross profit in all
categories of fixed operations sales is getting more
and more vital. If you are
experienced, you know that
in this world a shrewd
financial adjustment here
and there is a reality which
can add up to an impactful
amount. Seldom are there
massive aggregates of
secreted gross profit dollars
there for the taking, like a
fully stocked treasure chest
from the sea. It's more like a
variety six-pack from
7-Eleven.
There are a bevy of sales
accounts to consider for
gross profit improvement in
the fixed ops: multi-customer pay types; warranties of
various categories; internal
workings; sublets; materials
use; wholesale considerations; retailing; GOGs (a
little outdated); insurance
discounting; tires (OK, just
kidding); and the all-time
gross profit nemesis, accessories. Picking up a buck or
two or three in many or most
of these accounts, at the volumes many stores generate,
can be weighty and well as
refreshing.
SOME SERVICE
THOUGHTS

The cost of technician
18

NOVEMBER 2019

ADDING PRODUCTION
BONUSES IS THE SWEET
MOTIVATOR, WHILE
KEEPING THE COST OF
SALE SANE."
labor can be influenced in
many ways. Decades ago,
the standard was to pay
techs hourly, which morphed into a percentage of
what was produced. That
initiated at some 50 percent
after "The Big One," which
remained fairly stable until

D I G I TA L D E A L E R . C O M

the upheaval early 60s (the
birth of serious dealer competition), when that percent
began dropping to 45, then
40, and eventually, the idea
of flat-rate pay was hatched.
Flat-rate pay is now
prevalent, except for "lube"
techs (I hate that degrad-

ing designation, preferring
"maintenance" techs as they
are termed in Europe), who
have changed over to hourly
rates primarily because
there are few solid scheduling controls for maintenance-only work these days.
Now, people show up with
excessive expectations, and
then get pissed off sitting
around; however, the good
news is, no appointment
needed, and there are
doughnuts.
Smart management
applies a variety of flat-rate
dollars based on skill levels,
experience, certifications,
and how many times the
tech ticked off the super. Of
course, the really smart exec
studies the true work mix
to determine the amount of
work skill he/she really requires regarding diagnostics
and related repairs, heavy
line drive components, light
line components, and maintenance ops. Staffing to that
result usually lowers the cost
of sale nicely vs the overall
effective labor rate, while
providing an exciting vision
of growth for the techs,
something we are generally
pathetic at providing, to say
the least.
Speaking of labor rates,
I find that studying them
closely reveals underlying
issues lowering them too
often. Even the warranty
rate is effective in reality,
not the so-called actual
warranty labor rate. Pay a
few techs extra flat rate or
fat-flag tickets before they
are labor op finalized, and
walla, a lower rate prevails.
If your team has created
discount junkie customers
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Digital Dealer - November 2019

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