Top Five Tips for Service: Discovering the Keys to Hidden Profits16 Dec, 2003 By: J.J. Morrison imageSource
Top Five Tips for Service: Discovering the Keys to Hidden Profits
We all know that the service
department can be profitable, yet it can be ten times more profitable than you
have ever imagined. A significant amount of your payroll expense is for the
service department. Most companies have many more service technicians than they
have salespeople. So, if you’re paying them, why not use them to produce more
Unfortunately, many owners only
see these people as support personal, and totally overlook the profit that can
be made if they are properly managed and trained. Continuing our top five lists,
we’ll countdown the top five ways that a service department can generate added
income and increase business.
TIP #5 – DEVELOP AND USE A
TECHNICAN TRAINING CENTER.
One of the major problems in every company’s service department is the
constant revolving door of technician turnover. It is time to stop this costly
loss and have your competitors’ technicians wanting to work for you! So how
can you do this and how do you afford it?
With a space in your company
dedicated to the training of your technicians and a full time technical trainer
put in place, the Technical Training Center (TTC) is born. All of your service
personnel rotate through this program on a regular basis depending upon the size
of your company and the number of people you have in your service department.
Every technician wants more training and, as technicians rotate through the TTC
getting updated on the maintenance and repairs of the latest machines, they are
also learning how to do overhauls on older equipment.
Better constant training leads
to less callbacks and more confident technicians. The technicians look forward
to their turn in the TTC and it’s a great break from the field. This
essentially stops technician turnover as techs see that you are investing in
their future and making their job easier.
Developed correctly, the TTC
provides enough profit to allow your company to have extra technicians. These
additional people can be added to recondition trade-ins for resale, perform
billable overhauls, rebuild parts, or unpack and set up new equipment for the
sales staff. Having extra staff means that when someone is out sick, on
vacation, or you have an overwhelming amount of calls, you now have trained
technicians to that can be assigned to these areas as situations arise.
TIP # 4 – INSTITUTE AN
Do you realize that 50 percent or more of a dealership’s account base is in
need of upgrading or overhauling? Machines that are three to four years old and
still included in your present active account base are nearing the end of their
average life expectancy. You need to re-tie these accounts back into your
company or your competitors will take them from you. Many dealerships are
working hard at upgrading old machines into new digital equipment, yet 50
percent are still not being upgraded. That leaves a lot of expensive junk still
in the field. How do you save these accounts?
Overhauling old equipment is an
option that most of your competitors do not offer their customers. In today’s
tight economy, 50 percent of those offered the option to overhaul will take it
and appreciate the service option. Service technicians are in the field on a
daily basis and can provide a continuous feed of equipment into an overhaul
program. Use your Technical Training Center (Tip #1) as the area to perform
these overhauls. Depending on the machine, an overhaul can generate from $1,000
to $4,000 net profit per unit and will secure the customer back to your company.
Doing overhauls gives you the opportunity to liquidate all of those old parts
you thought you were going to get stuck with. And, don’t forget to cannibalize
all those old trade-ins that are taking up space and gathering dust.
Implementing an overhaul program can be a new HUGE revenue source, amounting up
to $50,000 additional profit per month in some dealerships.
TIP #3 – HAVE YOUR DISPATCHERS
GO THROUGH A PROFIT CHECKLIST ON EVERY INCOMING CALL.
Does your dispatcher get a meter reading number whenever a service call is
placed? Most do not, or if they do, the information is often not used to your
Each dispatcher should be going
down a profit checklist on every incoming service call. Start with getting that
meter reading number and putting it to work for you. For example, let’s say a
copy quality call comes in and it’s a chargeable customer. The dispatcher gets
a meter reading number of 125,000. The dispatcher then proceeds to go down
through the profit checklist. The first profitable item that jumps out is that a
drum good for 50,000 copies was installed at 50,000 copies and thus that drum
meter reading expiration number is 100,000 copies. The meter reading number just
taken is 125,000, so the customer is 25,000 copies over the manufactures drum
replacement number. No wonder they are having copy quality problems! Your
company needs to sell them a drum!
No checklist…no sold drum. Go
have a look at the number of billable drums that are not being installed for
your customers and add up the drum turn profits you are missing.
Another example of the
effectiveness and payoff generated by a dispatcher doing the research and using
the checklist occurs frequently on maintenance agreement calls. Say a customer
on a maintenance agreement calls in for a feeder problem. Right there on the
checklist, it is noted that this guy signed a liability waiver (see the next
tip) and would not let the service technician properly fix that feeder on the
last call. This call is now outside of the customer’s maintenance agreement
and is chargeable. The dispatcher informs the customer that the call is
chargeable and gives this information to the technician before they even walk in
the customer’s door. If the dispatcher hadn’t followed the checklist, the
charge for this call would have been missed. Lost profit.
Develop the right checklist and
be sure it is being used consistently and correctly. You will be amazed at the
lost profit the service department begins to recover for your company.
TIP #2 – USE A LIABILITY
Give your service technicians an amazing tool! Not only can the liability waiver
prevent loss of profit as seen by the previous example, it can allow the service
department to generate much more profit by doing their job right the first time.
Right now, a lot of old machines
are in need of work on accessories like sorters and feeders. And, although most
maintenance agreements clearly state that reconditioning or major and minor
overhauls are excluded, you are probably performing the work for free. The
service technicians need to be properly trained to explain that the accessory in
question needs a minor overhaul and that the expense is the responsibility of
the customer… not your company. If the customer refuses to allow the
technician to repair the problem correctly, the liability weaver should be
brought in to play.
Usually, the customer will go
ahead and authorize the technician to fix the problem. You have now profited not
only by selling the chargeable parts, but also by not having tied up your staff
with another service call for the same issue in a short period of time. If the
customer chooses to sign the waiver, you will profit with the next call being
A liability waiver reads
something like this:
Customer's Company Name
TIP #1 – ESTABLISH A PROFIT
SHARING POOL FOR THE ENTIRE SERVICE DEPARTMENT.
We all know that “People work their pay programs,” yet service pay programs
are at their all time low. For an example, does your sales manager get an
override on the sales department? Most do. Does your service manager get an
override on his service department? Most don’t. What is wrong with this
As an owner you want increased
profit. It is not that your service manager is not doing a good job; he probably
has just never thought that his primary objective should be to increase profit
for the business. The service manager and the entire service department need to
understand that increased profit for the company results in increased profit in
What makes that dispatcher take
the time to go through the checklist and relay the information? What makes the
service technician want to sell those billable parts? Establish a fair and
equitable service profit sharing pool and you will see their job performance and
production improve drastically. Programs that offer a bonus for a sales lead
that is sold here or a maintenance agreement (MA) that is sold there don’t
work. Everyone has to be involved and everyone has to realize that there is
something in this for them. Administered correctly, a profit sharing program
doesn’t have to cost the company anything. But, boy when everyone is looking
forward to that extra check, will you ever see the difference in your bottom
Watch for our top five tips on
sales coming next month!
- - -
JJ Morrison, CEO of Servco
Management, Inc., has been implementing “state of the art” management
programs in dealerships for over 32 years. Contact JJ at 1-800-517-7900 or at email@example.com
for more information or to request your free copy of our introductory package