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Why Every SERVICE MANAGER Should Understand Dealership Financials

June 1, 2026

Most SERVICE ADVISORS and SERVICE MANAGERS spend their careers chasing numbers they don’t fully understand.

Hours per RO.

Effective labor rate.

Gross profit.

Net profit.

Expense percentages.

They’re expected to improve these metrics, yet many never receive a clear explanation of how they’re calculated or why they matter.

The reality is that understanding dealership financials isn’t just for general managers, controllers, or dealer principals. It’s one of the most valuable skills a service leader can develop.

In Service Drive Revolution #361, the discussion focused on dealership financials and why understanding the numbers behind the business can completely change the way SERVICE ADVISORS and SERVICE MANAGERS approach their roles.

Why Financial Knowledge Matters

Many people in Fixed Ops focus heavily on daily operations.

They’re working with customers, managing technicians, handling repair orders, and solving problems throughout the day.

While those responsibilities are important, understanding the financial side of the business helps leaders see the bigger picture.

When you understand dealership financials, you gain insight into:

What drives profitability
Which expenses impact performance
How labor sales affect the bottom line
Where inefficiencies exist
Which decisions create the biggest results

Without that knowledge, it’s difficult to know whether your department is truly improving.

Understanding the Scoreboard

Imagine trying to win a game without knowing how points are scored.

That’s how many service departments operate.

Teams are given goals and benchmarks but aren’t always taught how those numbers are calculated or what affects them.

When leaders understand key performance indicators, they can make better decisions and coach their teams more effectively.

Instead of simply tracking numbers, they understand what causes those numbers to move.

That knowledge creates confidence and accountability throughout the department.

Strong SERVICE MANAGERS Know the Numbers

The most effective leaders don’t just understand people and processes.

They understand performance.

A great SERVICE MANAGER knows how to read the story behind the numbers.

Financial statements often reveal issues long before they become major problems.

For example:

Rising expenses may indicate staffing concerns.
Declining labor sales may point to advisor performance issues.
Increased unapplied time may reveal workflow challenges.
Weak gross profit may expose process breakdowns.

The numbers often tell you where to look.

You simply need to know how to interpret them.

Many successful leaders in Fixed Ops spend just as much time understanding financial performance as they do improving daily operations.

Additional leadership and management articles can be found on the Chris Collins Inc. blog: https://chriscollinsinc.com/sdr/service-manager-goal-setting-fixed-ops/

Curiosity Creates Better Leaders

One of the biggest barriers to learning dealership financials is intimidation.

Many SERVICE MANAGERS assume accounting is too complicated.

The truth is that financial statements become much easier to understand once someone takes the time to learn them.

The strongest leaders stay curious.

They ask questions, they seek clarification.

They work to understand how the business operates instead of assuming someone else will handle the numbers.

That curiosity often becomes a major advantage throughout their careers.

Financials Connect Every Department

Another important lesson is that no department operates in isolation.

Service affects sales.

Sales affect service.

Parts affect profitability.

Warranty performance impacts the entire operation.

Understanding dealership financials helps leaders see how every department works together.

That broader perspective allows managers to make decisions that benefit the entire dealership—not just their own department.

For service leaders who want to move into higher levels of management, that understanding becomes even more valuable.

Better Understanding Leads to Better Decisions

Financial knowledge doesn’t mean becoming an accountant.

It means understanding how your department contributes to the success of the dealership.

When managers understand the numbers, they can:

Make smarter staffing decisions
Identify opportunities for improvement
Increase profitability
Improve accountability
Create stronger long-term performance

The more you understand the business side of Fixed Ops, the more effective you become as a leader.

For more insights on improving dealership performance, visit the Chris Collins Inc. blog’s Fixed Ops resources: https://chriscollinsinc.com/sdr/motivate-technicians-fixed-ops-part-1/

The Bottom Line

Many SERVICE ADVISORS and SERVICE MANAGERS spend years focusing on operations while overlooking the financial side of the business.

But the leaders who consistently grow their careers understand both.

They know how to build relationships, improve processes, and develop their teams.

They also understand the numbers that drive dealership success.

Because at the end of the day, dealership financials aren’t just accounting reports.

They’re the scorecard of the entire operation.

And the better you understand the scorecard, the better equipped you’ll be to lead.

Feel free to explore the linked articles above for deeper insights into each strategy. If you have any further questions or need additional resources, don’t hesitate to ask!

FULL VIDEO TRANSCRIPT

Welcome to the Big Show

Welcome everybody to the big show. Today we’re going to be talking about how I learned financial statements. I meet somebody who used to be on the Kansas City Chiefs, and Hogi and I talk about that. We also talk about fatalism and patriotism in America today and much, much more. I’m Chris Collins. Hogi’s here. Adam’s here. Coming up right now on Service Drive Revolution.

So, we are going back in time and we’re kind of going through how we got to where we are. It’s something that happens a lot when people are like, “Hey, how did you get to this point? How did you get started?” And there’s a lot of twists and turns to it. We’ve gone through the first two episodes. The last episode we did, we talked about how we created the best advisor training out there. That’s a fun one. Today we’re going to be discussing how I learned financial statements. It’s an interesting story. It’s kind of fun. It isn’t probably in any way, shape, or form how you would think somebody would learn something, but we’ll go through it.

The Service Drive Reality

All of this is in the buildup to something we’re launching called the Service Drive Revolution Academy, where we are going to go live and train on financial statements, train on systems in your service drive, and train you how to run a profitable, healthy business that’s growing and thriving in a world where most service departments barely break even. The average service department out there barely breaks even. Most of the departments we see are losing money, and there’s no reason for that to happen. Service departments were designed to be very profitable and be the backbone of the dealership.

On the other side of that too, dealerships lose 80% of their clients to independents. That’s an interesting stat. Crazy is the word; it’s a crazy stat. There’s a lot of great independents out there and they do a great job, but the dealerships have homefield advantage, and they lose that homefield advantage by indifference, right?

Indifference and Choices

It’s kind of funny. Hogi, I did an interview for Books That Changed My Life yesterday with somebody from your NFL team. I don’t know if you know who he is because he was a long snapper for the Chiefs: Andrew East. Have you ever heard of Andrew East? Oh, yeah. He’s married to the gymnastics girl, Shawn Johnson. Yeah, of course. So, they wrote a book together, and they came in and did Books That Changed Their Life. Then we talked about their book, which is really good. It might be coming out soon, but we get it early from the publisher because we time the release of the episode to when their books launch, but we film it way ahead of time most of the time. A lot of times we have the books before they’re out there.

Their book talks about, and one of the subjects that came up is, indifference is a choice. When you’re indifferent about something, you’re still making a choice. That’s still a decision that you’re endorsing; you’re choosing. Just ignoring it or not caring about it is still a choice. It makes sense. I’ve always thought that. I’ve always thought that about people that don’t stand up for what is right, people that don’t try to improve and get better.

Measuring True Success

It happens a lot in fixed ops where there’s a lot of people that think it’s okay that we’re running the same system we ran a hundred years ago. They think it’s okay that we’re not profitable. They’ll give you a long resume statement about how great and how important they are, but they’re really not that great or important if they’re not running a healthy department that’s profitable, growing, and taking care of customers. You can tell me how long you’ve been doing something. You can tell me how great you are. But at the end of the day, the report card says something else. The only measurement that matters is: am I successful in running a healthy department that is doing great things, improving, getting better, and growing future leaders?

It was a great conversation. You would have loved it. I thought about you many times. I asked him—and there was no prompt for this, it was completely cold, but I had you in the back of my head, Hogi—because he’s played for like six teams, I think. One of the teams was the Seahawks very briefly. He went to training camp for the Seahawks but didn’t make the team. I said, “Of all the coaches you played for, who was the best coach? Like the leader of men, the one that really blew you away?” Guess who he said? By the way, he went to Vanderbilt, so that was in the equation, too.

The Andy Reid Approach & Player Perspectives

He said Andy Reid. Not Pete Carroll, even though he was on the Seahawks when it was under Pete. He had a bunch of stuff to say about Andy, too, that was great, He just said Andy’s got this way of approaching things where he’s very intentional and serious about what he does, but he’s also fun and lighthearted, He said the first season, before the first game, he expected Andy to give this big speech. Andy said something to the effect of, “Hey, we’re getting cheeseburgers for everybody after the game, so let’s go win this and then eat some cheeseburgers. Break.”

So funny. On the player rankings that come out after the season, where the players rank the team, they rank the practice, ownership, and facilities. Coaching always scores really high since Andy Reid’s been there. Facilities, obviously, they’re trying to get new facilities, so they’ll always score really low. But he consistently ranks really high amongst the players, which has to say something. What says something is all those Super Bowl rings. That’s fair. That’s probably the outcome you’re looking for most of all, for sure.

Results vs. Servant Leadership

One conversation we had was about how, even in business, there’s a lot of people that pride themselves on being a “players’ coach.” I think the subject came up because I was giving him a hard time about servant leadership. Whenever somebody says servant leadership, I’m like, “Oh boy, here we go.” The self-help, “I’m not really a leader, I want to feel good” stuff that people say just drives me crazy. I told him I’ve been in many situations where the leaders were really tough and hard, and they got better results than the soft players’ coach. What’s the most important measurable here? That everybody is happy, or that you’re getting the best out of everybody? Then he was quiet and stared at me for a while like, “Who’s this guy?”

The Illusion of Self-Help

Doesn’t he know number one to effective leadership is loving yourself? I thought everybody knew. Oh my gosh. Thank God that wasn’t in anything. For listeners, this might be more of an inside thing. I don’t know if we’ve ever talked about this on SDR, but there’s a lot of people whose “book that changed their life” is something to the effect of, “You’ve got to love yourself.” I’ve personally never seen anybody who tried to love themselves figure it out. They usually end up really miserable because your happiness is derived more from what you contribute and your expectations of things. Loving yourself is an impossible thing to do.

I have a book that I’ve been working on about this subject, in the sense that the most successful people I would pattern, who I think have a healthy balance, like themselves, but they also can be brutally honest with themselves. When you love yourself, you have to break up with yourself and get back together. The bar is just too high. You want to root for yourself, you want to like yourself, but you have to have a sense of humor about what a clown you can be too, and how you can make mistakes. You become the crazy one in your own relationship in a weird way.

Attaining Work-Life Balance

It reminds me of one thing I learned from you years ago. We were talking about work-life balance, and I’ve always thought that was an important thing. But you’re like, “Hogi, if you notice, most people that want a lot of work-life balance aren’t effective in their job. People that are really effective in their job have a work-life balance.” In a way, that’s what we want to give clients, too. We talk to service managers about how there’s a world where you don’t have to work 14-hour days. If the department has a good culture, what needs to happen happens when you’re not there. When your department’s producing the outcomes that it needs, there is a world where you don’t have to be the last one to leave every day and work 70 hours a week.

I don’t know if that ties into that conversation completely, but as it relates to a lot of conversations I have with dealers, GMs, and service managers, it’s a weird thing where they’re wanting work-life balance, but they’re not doing anything to truly work towards that. The “bumper sticker talk” slogan stuff in the leadership world is everywhere. You can scroll LinkedIn for five minutes and I just have to turn it off. There’s so much of it; it’s nauseating. They call that clickbait. There’s just so much clickbait that’s out there. It’s funny the stuff that gets clicks or that people buy, like leadership training about servant leadership or loving yourself. It really is nonsense. It’s total nonsense. It’s not that clear.

Ownership and Responsibility

It’s just like any other relationship you have in life. Maybe this gets too deep for service drive talk, but just in a marriage or anything else like that, it’s usually the things that nobody can see that mean you’re a good partner in that relationship. All the self-help stuff, like I said, I feel like it just belongs on a bumper sticker or a quote on a wall, but it doesn’t actually fix anything or improve your life or those around you. It is a funny thing to put your thumb on and have a guided discovery conversation with people because there’s so much working against you to have honest conversations like that.

In a lot of the training that I’ve been to, one of the things that is very clear is people just want to be told what to do. People don’t want to take responsibility for themselves. Even at the highest levels, even in the military, people are very opinionated, but at the end of the day, they don’t want the buck to stop with them. Their superior ultimately is the one that takes the fall.

There’s a lot of interesting studies in that about war where these soldiers do terrible things and then they’re like, “Well, I was ordered to do that.” Where does that responsibility stop? If you’re a soldier in Germany and you’re told to kill certain people because of their race and you do that, is that your fault or is it the fault of the commander who told you to do that? That’s the extreme human behavior science part of it.

The Realities of Leadership

But just when you talk about running a department, how many times is it never their fault that their department isn’t good? It’s never their fault that they don’t recruit good people. That Dave Anderson line always cracks me up. He’s like, “Yeah, when you say your people suck, you’re saying you suck. It’s confessing.” It’s that sort of thing that has always blown me away about leadership. Those are the same people that are like, “Oh, I just read a book on servant leadership,” or “I just went to this leadership workshop,” and the results never change.

Okay, you did all this, but if you want to be a more effective leader, leadership is about getting people to put aside what their personal agenda is and commit to a mutual goal that everybody’s established and go after that.

Most of the time, that vision doesn’t even exist. There isn’t even a goal of, “Hey, we want to be the best,” or “We want to be better than we are,” or “We want to be profitable,” or “We want to have the best customer experience.” Usually, that’s not even a topic. It’s just funny. People are funny. We’re funny. I mean, we’re really funny. I think the key is to realize you’re not normal. The people that think they’re normal are the ones you have to worry about, for sure. We say it all the time: we’re the island of misfit toys. Absolutely.

Ambition and Default Settings

We ended the last one talking about advisor training and how I came up with that. From that point, I wanted to figure out how to advance. I remember very specifically standing in the alley of that dealership with another employee there—he was the general sales manager—and the owner of the dealership. I remember asking the owner of the dealership how much a dealership like that cost. In my head, I was thinking, “Hey, if I want to be a dealer someday, how much money do I have to come up with?”

I remember him saying like seven or eight million dollars. I remember going, “Okay, how would I come up with seven?” I just thought in my head that was possible. There’s something in me—I’m not quite sure what it was—but the fact that I would ask him how much the dealership was worth, and then my reaction wasn’t, “Oh, I could never do that or I could never be a dealer,” it was just like, “Oh, okay. So, I’ve got to come up with seven or eight million. How would I figure that out?” That was just my natural process, the default setting, which is definitely different than most people.

The Drive to Understand the Numbers

In my head, I started having this narrative of, “Well, someday I want to own a dealership.” I’m just an advisor. I’m in my early 20s—I’m 21, probably 22 at this time. The thing that I understood, or that became very obvious to me, is that most of the people in the dealership didn’t understand what the numbers were. My first insight into this was when I got promoted to be a service advisor after being passed over a bunch of times. It was really a big deal to me when I finally got my own advisor number and I got my own desk and I was on the schedule. My service manager said to me, “If you drop below 2.5 hours per RO, you’re fired and you’re going back to the lot to being a lot attendant.”

The Metrics Confusion

So, I asked everybody, “What are hours per RO?” and I got a different answer. Nobody could explain to me how to calculate the thing that I thought I was going to get fired for. Then I would ask, “Hey, what are my hours per RO?” and nobody would tell me. I’m living in this constant fear, and everybody I ask to help me doesn’t understand really what it is. They’ll give you an answer. You’ve both experienced this in many different scenarios when it comes to numbers. You ask somebody, “Okay, what is gross profit?” and they give you some crazy answer, but they don’t really understand what gross profit is.

Or you ask somebody, “How is effective labor rate calculated?” They don’t really know how ELR is calculated. They kind of know what it is, but they don’t know how it’s calculated. You ask somebody about net-to-gross. Just the other day I asked somebody on a job interview, “So what was your net-to-gross there at that store you were running?” And he goes, “Oh, 85%.” I’m like, “That wasn’t your net-to-gross.” He didn’t know.

Keeping Score to Win

Even when you ask, “Hey, what’s the benchmark or the gold standard?” they’ll just throw out a number because they know that’s kind of what maybe it should be, but they throw it out there not even knowing what really drives it. Whenever I would ask my boss, “Hey, can we sit down and can you explain to me how to figure out hours per RO?” he’d say, “Yeah, yeah, yeah, we will, we will.” But it never happened. I could never tie anybody down to really explain the numbers to me. It just became very evident to me that the secret was understanding the numbers. You needed to understand the numbers because I felt like every day I was going to get fired over something I didn’t understand, which is a terrible place to be. I hated everything about that.

Striking a Strategic Trade

I have always kept that in mind with our training and our approach to things: people are empowered when they understand what it is they’re doing and how you win or lose. But I didn’t understand how I would win or lose because I didn’t know how to keep score. I didn’t know what the game was. You’ve got to know what the game is in order to create some sort of plan to win the game. If you don’t know how you score or how you lose, then you really have no point of reference or where to start.

I had this in my head. At the same time, this consulting company that had come into the dealership that I was working in had asked me to talk to some advisors, and I had created some advisor training. I told that story, but they started paying me to go do advisor training in other dealerships in my off-time. I’d either leave early and go do it, or I would do it on a Saturday, on my day off.

I do think at the time I was on four 10s as an advisor, which isn’t something I recommend, but we were doing that. I would do it a couple times; I did it on my rotating day off during the week. They were paying me like 1,500 bucks to do it or so, which was pretty good money back then for me. I’d maybe do like one or two a month. I started to like them, and I knew that they knew how to read financial statements.

Perishables and a Sudden Termination

I asked them, “Hey, would you guys teach me the financial statement, like explain it to me, and I will do the advisor training for free? I will trade my advisor training that you’re paying me 1,500 bucks for” I figured I’d do five of them for them for free, I wanted to make it worth their while, something that they wouldn’t say no to. You also have to keep in mind I’m a 21 or 22-year-old kid asking to learn financials. Nobody takes me seriously; I’m just an advisor. I’m already thinking of myself as a dealer someday, but they see me as an advisor.

I’m not second-generation—I don’t have a dad that owns a dealership, I’m self-made; this is all me, I’m used to people not taking me seriously, so I’m trying to make them an offer that they can’t refuse. Invariably, I trade a couple, but they’re not really training me on the financials; they’re explaining different things. So, I learned hours per RO and I learned that sort of stuff, but I still didn’t quite understand the financials.

What happens is I asked them, “Hey, I want to come work for you guys. I want to come fix stores.” They were hiring and growing; the company was growing. They said, “Well, we can’t hire you from a current client. So, you would have to leave the job you’re in, go somewhere else, and work for a year.” I started applying at other places to work as an advisor for a year so I could go do this, I thought, “This is a thing that I really want to do, I want to learn how to fix businesses like these guys are.”

The Flower Shop and Perishable Business Lessons

While this is going on, I own a flower shop in the mall there in Bellevue, Washington. There’s a big mall there called Bellevue Square. I owned a flower shop, and so I was trying to figure out business with that, too. The flower shop was a completely different type of business because you had perishables. When you bought flowers, if you didn’t sell them, they went bad. You kind of have perishables in the shop in the sense of unproductive wages in a way, but I didn’t understand unproductive wages at that time.

I just knew that we would time things wrong. On Valentine’s Day, you have to buy enough flowers in order to fulfill the possibility of sales. But if you overbuy—and the wholesalers raise their prices on flowers during holidays—if you overbuy, you basically break even because you had a lot of waste that you didn’t sell. I’m very interested in business and how numbers work, and I thought that it would all apply. I also thought I could fix stores and also own other businesses; that was kind of in my head, too.

The Interview and an Unexpected Termination

What happened is I applied for some jobs, and I had applied for a job, I think, not knowing that the consulting company was in that store. The guy that owned the consulting company goes, “Hey, you applied at one of our clients for an advisor position, and I told him to interview you.” So, I go to an interview during my lunch break. I come back from my interview and my boss, the service manager, calls me in and he goes, “How was your interview?” I was like, “Oh no, how does he know?” And he goes, “I’m going to make this easy for you. You’re fired.” And he fired me, right on the spot.

Processing the Loss

That was a really eye-opening experience because I had trusted this consulting company. Clearly, he had told them that I’m interviewing, and maybe he was trying to get me pushed out the door, I’m not sure. But I hadn’t planned on getting fired. That wasn’t something that was in the cards. So now I’m really looking for a job. That was a really hard moment because I went through all the stages of mourning. I was mad—how could you fire me? I’m your top advisor, that sort of thing.

The Advisor Rebellion

If we go back in time a little bit too, there was an interesting thing that happened. That manager was not very good. He wasn’t a very good service manager, and all of the advisors had gotten together and created this letter that they wrote that basically was asking for the service manager to be fired because he was incompetent and the place was a mess. We opened the doors at 7:00 and it was just “hold on for your life,” and then after work, go to a bar and drink as much as you can so you can sleep, get up, and do it again. That literally was kind of everybody’s routine.

They had written this letter and they had all signed it except for me. They presented it to me and I said I didn’t want to sign it. I think I just didn’t want to sign it because I didn’t think that anything would happen, but they pressured me and I eventually signed this letter. This letter goes to the owner of the dealership, basically saying that this manager is incompetent. If we go back in time, I think I talked about how the manager would show up at 10:00 and leave at 3:00; he wasn’t that great.

Packing Up for Portland

The owner gets this letter and calls us all up to his office, all the advisors. We go up to his office and the manager’s there, and basically nothing happens. But the fact that I signed that letter was always in the back of my head as the reason why he fired me. I was kind of his kid, in a sense, because I started off as a porter and he had allowed me to get promoted and move up. Granted, most of that was me kicking and fighting and proving myself, but he would take credit for that and say that he was the one that got me to where I was, because that’s just how people are.

So, I’m fired. I don’t have a job, and I double down trying to find a job as an advisor now. Kind of everything is off the table. I’m not thinking about working for this consulting company because they told me they wouldn’t hire me unless I’d been somewhere else for a year. I don’t have income, and I went for almost a month and a half without a job or without income. I worked in the flower shop more and just applied everywhere I could. Eventually, that job that I interviewed for, I got hired there.

That was in Bellevue, and I worked there for a year. When I got hired, it was understood that after a year I was going to leave and go work for this consulting company. That’s exactly what happened. I worked there for a year and did a really good job, learned a lot. At the end of a year, I was done.

The Move to Oregon and Liquidating the Flower Shop

In the meantime, during that year, the consulting company grows a little bit and they have more consultants. When it comes time for me to work for the consulting company, they tell me that I can’t work in the state of Washington. I have to move to Oregon if I want to be a consultant or if I want to learn. I’m faced with selling the flower shop, which I ended up doing. I sold the flower shop, but I couldn’t sell the actual business; I sold the accounts because the mall had first right of refusal for anybody new going in there, and they wouldn’t approve anybody that I presented as a buyer. I sold the flower shop, packed up everything, moved to Portland, Oregon, and their plan was I was going to spend six months training and then I would start going out in the field.

Classroom Training and Financial Statements

This was kind of a new thing that they had started where there were two partners in this consulting company. One of the partners was just going to stay put in basically Vancouver, Washington, which is the other side of the river from Portland, but they’re next to each other. He was going to train coaches or train consultants while the other one was out in the field kind of growing the business; that was their deal. I’m introduced to this other partner who I’d never met, never seen him.

It was pretty disruptive to move all the way to Portland. Portland is a different world when you live in Seattle. It’s just smaller. It oddly rains there more; it’s just different. But I’m going to do three months in a classroom with him. By classroom, it was a tiny little temporary office I’d rented in this office building. It was a desk, a table, and that was kind of it. It was very small. I was going to show up there every day. To his credit, he had a pretty good plan laid out for me, and right out of the gate, it was financial statements.

The High-Stakes Financial Test and Qualifications

I was told that at the end of the three months of the financial statement training, I was going to be given a test. The test was going to consist of a financial statement that had issues and inconsistencies. I had to know how to read a financial statement so well that I would be able to see those. If I did not point out those inconsistencies in my analysis of the financial statement, I would have to go back through the training and I wouldn’t be able to go out and work and make money. One other part of this that I should kind of clarify too is, in order for me to get the opportunity to do this, I had to have, I think it was $15,000 in the bank.

I had to have a car that was newer than five years. I had to have a laptop that was a certain spec. There were some qualifications. I had to have enough money to live the six months without worrying about money. When I would go to dealerships, I had to have a car that was presentable, that looked good, that sort of thing. I lined all that up, I had my savings and I proved that to them, I got a new—well, a new to me—Ford Explorer that was three years old, and I got one of those IBM laptops that were like indestructible. What were those things? The Toughbook. Yeah, the Toughbook. So, I had an IBM Toughbook. I was ready to go.

Grand Strategy and Building Excel Projections

I show up and we start doing this training every day, and we’re learning the financial statement as a whole. It’s not just fixed ops. I’m learning how sales plays into that, how used cars, how recon, F&I, and how extended warranties play into it. I’m being taught the grand strategy of a dealership, not just fixed ops, with the understanding that our role is fixed ops, but it’s part of a bigger thing. At the same time, I’m learning Excel. It was very important that you knew Excel back then because you would build projections, and they were using me kind of as a guinea pig to create projection templates for the rest of the company.

A Chrysler financial statement is different than a GM financial statement. That’s different than a Mercedes financial; that’s way different than a Ford financial, right? What would happen is I would get a Ford financial and I had to create a projection for the Ford financial so consultants could just go to the zip drive, click on the Ford one, fill in the numbers, and it would work.

The Before-and-After Projection Model

Basically, the way that they sold their services, they would go into a dealership, they would get a financial and some other measurables like effective labor rate, how many techs do you have, that sort of thing. Then they would plug all those numbers into the left side of the projection. On the right side, you would change the numbers to what you thought. If I added two techs, if I increased the hours per RO by half an hour, if I raised the labor rate by this, if I cut the expenses by this much, there would be a before and after kind of contrast, right? A gap of, “Here’s where you are, here’s where we think you could be” sort of thing.

The contract was a 14-month agreement where two months were research and planning, and then it was 12 months of commission. You were basically compensated on the increase year-over-year that they did in customer pay sales. If they were doing $100,000 in customer pay sales for the month of January 1992, and in 1993 you did $200,000, you got paid a percentage of the difference of that 100,000. Does that make sense?

Retail Sales Growth and Industry Defaults

Besides the signup fee, which was nominal, you only made money if you increased the sales of the dealership—the customer pay sales. Internal would go up, warranty would go up, but we smartly never wanted to have those go up because it was something we were doing besides making their systems better. The real measurement of us improving things was: did their retail sales increase? We were compensated off the retail sales. If their retail sales went down or stayed the same, we did all that work for nothing.

These consultants are out there in the field doing this and I was building these spreadsheets. The first thing was I had to learn all the different financial statements, which are all very different and nuanced. I think a lot of people in our industry have only worked for Ford and that’s their default. We have dealers whose first store was a Ford store, so they run their whole dealer group off of a Ford statement when GM and BMW and other brands just don’t fit into that. But that’s how they understand the financial, so that’s how they run their whole business. It’s just funny that way, but that’s how it is.

Structuring Complex Excel Projections

The first thing I had to do is build these spreadsheets kind of showing like, “Hey, if you added a couple more techs, if you got personnel expense down…” A big thing right away you would see was the personnel expense. Like, advisors were 12% of the gross and you could say, “Well hey, if I get that down to eight, that goes right to the bottom.” You would be able to build that in these spreadsheets and projections. Then the next part was to make that spreadsheet even more in-depth where you add in days of the week. If you can imagine, I’m learning Excel and learning how to write these formulas in order to take a spreadsheet and now say not just, “If we add two technicians,” but, “What if we are open Saturdays? What if we go to 4/10s?

How would you build that into the spreadsheet?” The spreadsheet went from one page to three pages because you had to have an input page, then you had another page that had the before and after which you would present to the dealer, and then you had a third page which was just other numbers that we cared about but would confuse everybody else, right? It kind of evolved over time, and through that process, I learned the financials.

Overcoming the Mental Strain of Programming

I remember many times driving home from Vancouver, Washington to Portland and wanting to quit. My head hurt so bad learning these formulas and all of the different variables, and it wasn’t natural for me. It was not intuitive in any way for me to build these sheets; it was really hard. I’m not the kind of person that can sit still and stare at a screen all day. It’s just not me. I want things on a card in front of me.

We talked about this, Hogi, when we’re doing the hour of labor at boot camp. I’m like, “Why don’t you just hand them $100 and show where the $100 goes?”

That’s just how I think. I’m tactile; I want something in front of me. If I buy something at IKEA, I never open the instructions unless I’m stuck. I just figure out how to put it together by looking at it and touching it. I learn by doing things; I learn by watching.

Staring at this screen all day, learning these complicated formulas—how do you get the whole thing to move just by changing to 4/10s? How do you even approach that? Now everything else you built before has to be undone, and you’re almost better off just starting from scratch with the sheet than trying to change the sheet you did last week. It was a growth opportunity for me to really be disciplined about numbers and understand something. Math came naturally to me, but the programming of an Excel spreadsheet and the different formulas did not.

You would build this thing for a couple days and then it didn’t work, and you’d have to try to figure out why it wasn’t working. There are all these weird nuances about Excel, and back then, computers weren’t what they are now. Sometimes you couldn’t just Google it. Have you ever seen those books that you would use to do Excel? It’s crazy, huh? Was it like Excel for Idiots or something, or was this before that?

The Learning Process and Creating Safe Spaces

Chris, I’m more curious about how you broke through some of that, knowing what your approach was. Just like the discipline? How did you overcome all that? One thing I have to say is he was very patient with me. I think he really liked me, and I think people saw my potential in that way. He was very patient because I struggled at first. The thing with me is I will struggle with something, but once I get it, then I can make it something even better usually. But that in-between where I’m trying to understand it is always the rub, where I have to have it explained to me over and over again.

That is one of the reasons why I really feel, and we intentionally try to create, an environment where there are no stupid questions and people can ask the same thing five times. The only goal is for you to understand it. However it is you learn, it’s a safe place. There’s no judgment because I experienced that, and that’s how I learn.

Intentionality vs. Forced Learning

I tell people all the time—and I don’t think they really believe me when I say this—but it took me five or ten times to learn some of this stuff. I took it on myself to seek it out, right? We’re sometimes in a different situation with teaching where the people that we’re teaching aren’t seeking it out. They’re here because their dealer sent them. They don’t really care if they get better or if they improve the business.

They’re just here because their dealer said, “Go to the Chris Collins thing and I want you to learn that.” But I was very intentional; I wanted to understand this. I wanted to learn. So, that was part of it, and then he was very patient with me. Also, just keep in mind the part I’m saying about how I was building things for them that they were using with the other consultants, which was very helpful for them to scale and to be more efficient. Does that make sense?

Unlocking Shop Capacity Secrets

The magic behind those spreadsheets was incredible. Remember the first thing that kind of blew me away, and you could do this to any service manager and put them in a position of, “I could definitely improve or get better.” Can you guys guess what that is? If you did one exercise with a service manager, just about every service manager out there has a huge gap between where they are now and where they could be. Even the best ones. What is that measurement? This is one of the first things he taught me. I think there’s a few of them, but there’s one that stands above everything else: shop capacity. Yeah, that’s what I was going to say. Probably hiring techs? No, just shop capacity.

The thing he said to me is, rent goes on 24 hours a day. Think about how service managers used to function back then; we’re talking about the early 90s. They were open Monday through Friday. It was cutting-edge to be open on Saturday. For a long time, I would go into stores and they’re like, “Oh yeah, we tried Saturdays. It doesn’t work.” It doesn’t work because you don’t want it to work, but okay. People are definitely off on Saturdays. If you go by Jiffy Lube, there’s a line of people on Saturday, but okay, it doesn’t work. I got it.

Stalls and Operational Math

If you do that exercise with anybody where you do shop capacity and what your techs are actually producing, you see the gap. The other enemy of shop capacity is when techs have two stalls, because a tech can never run at 200% efficiency. When you do shop capacity—let’s say you go into a shop with 30 stalls, and let’s just say, I’m just making up a number, they’re doing $400,000 a month in sales—their shop capacity probably says they could do 800,000 even without being open 24 hours a day. The gap is just so huge. If out of those 30 techs, five of them have two stalls, you are dead in the water. You can never make up for that loss capacity when you talk about stalls in the shop.

I have that conversation a lot. One way I’ve had success in illustrating it is they’ll say, “Hey, you know, Adam gets two stalls, but he’s also 125% efficient.” I’m like, “Okay, so if you have a tech that’s 100% efficient in one stall and you have the tech next to him in a stall that’s 25% efficient, what are you going to do with the tech that’s 25% efficient?” They say, “Oh, I’d get rid of him.” I’m like, “Okay.” It’s always kind of an interesting conversation. The techs do a good job, too, of convincing them that they need the extra stall for whatever reasons.

Expanding Capacity through Schedules

Well, you can do the other math too, Hogi, right? If you have a guy in two stalls doing 125%, would you take two techs doing 70%? Yeah, because it’s more, right? Because you’re at 140% with two milk-toast techs that aren’t even that good doing 70%. But now, could you hire two techs to do 80%? Well, yeah, of course. Oh, okay. We’re almost doubling our capacity just by that.

Then when you talk about 4/10s, that was the thing that really made sense to me. Okay, now you’ve got these things running, these stalls are running longer, and even if your shop efficiency goes down a little bit on 4/10s, you pick up so much capacity it makes up for it dramatically, right? There are stores that run 24 hours, and that’s even more fun, or they run two shifts, you can run another shift, that sort of thing. But yeah, that whole part of it was like, “Oh, okay, I’m starting to understand this.”

Then he explained to me the chart of accounts. In my training, I was given a chart of accounts, and I used to go into dealerships and ask the office manager for their chart of accounts, which isn’t something that you hear anybody talk about anymore. Basically, a chart of accounts explains every line on the financial statement, how it is derived, and what it means. What you find on the chart of accounts is a lot of times the default setting from the DMS is wrong, and you start finding that people or techs are in the wrong spot. The way that they’re calculating unapplied time is in the wrong spot.

Exposing Financial Imbalances

A lot of times also, what I’d find is sales advertising was in fixed ops advertising. I’d look at the advertising cost and I’d be like, “How would we spend $20,000 a month?” Oh, we’re paying for the used car ads in the newspaper. One thing that happens in dealerships is, once the DMS is launched, it’s rare that anybody goes back and looks, and you could be going for 10 years and have the financials be wrong—the calculations wrong to the positive or the negative. It goes both ways.

Going into the chart of accounts, another thing that we would do is get all of the vendor contracts because this is one thing that would happen quite often: we would find that the office manager was embezzling money. In my career, I’ve seen two office managers taken out in handcuffs, and probably another ten that should have been, but for some reason, the office manager had naked pictures of the dealer or something going on where it was like, “You can’t work here anymore, but I’m not going to have you arrested.”

That happened more than the arresting thing. Used car managers and office managers would work in tandem embezzling money. What would happen is the used car manager would get somebody to set up a used car wholesale company, and then they would wholesale cars to that company and take some sort of margin, and the office manager would be in on it.

Prioritizing Revenue Growth

What’s funny too is a lot of times they weren’t even smart enough not to put their name on these corporations that they were doing this with. You literally can go find the filing of who set up these corporations, and they weren’t even smart enough to put it like three layers down into another corporation and then another; literally, their name is on the corporation. It’s just so funny. But learning the chart of accounts is a lot because you have the sales side of the financial—the revenue side—and then you have the expense side, and they kind of operate differently.

I would start building these spreadsheets that detailed every line of the financial statement. What was the expense as a percentage of gross? What would happen if we increase sales? The thing that you find out very quickly when you’re doing these sort of exercises is that the quickest path to any sort of profitability is increasing sales, not cutting expenses. You need to run expenses tight. You need to be a good steward of them and understand them, but I don’t know how many times I’ve gone into a dealership that’s losing money and they say, “We don’t have anybody washing cars anymore. We don’t have anybody answering the phone.” It’s like, “Okay, can we hire all those people back? We can only increase sales if we are functioning like a true business.” The amount of times that that’s happened, I wouldn’t even be able to count.

Demystifying Financial Statements

Learning the chart of accounts, learning the financial statement, and then learning the different financials was key. At the end of that three months, I passed my test. I came up with things that weren’t even on their list by looking at the financial statement. Once I got it, it was really fun. Even to this day, we love when we get a financial from a potential client that we’re going to work with and just look at their numbers. It’s just really fun. You can pretty much tell what’s going on by looking at the financial. That was the other big takeaway, and something that was kind of said but became very true: you can tell the culture of a dealership by the financials without ever meeting a person.

If it’s sloppy, if things don’t make sense on the financial, the business is probably sloppy. If they’re losing a lot of money and nobody’s paying attention to the important measurables, the rest of the business is that way. There’s no accountability. If there’s no accountability on the financial statement, there’s no accountability on the service drive or in the shop. It just goes hand in hand. Warranty, receivables, parts, inventory—it all tells the story, right? Unapplied time, yeah. If it’s tracked, that’s kind of an interesting thing.

Psychology Over Math

It’s always been fascinating to me in the sense that you can tell human behavior by the report card. The financial statement is the report card, and you never have to meet the humans. When you meet the humans, they do everything they can to tell you that that thing isn’t really that thing, that the way it’s recorded is really not it. “We’re not really losing money.” You’re like, “Okay, what are we talking about? We’re not really losing money?” But it’s funny. It’s super funny.

I was locked in that office, that little tiny office in Vancouver, Washington for three months, and then I got my test and passed it with flying colors. The test was on the full financial, so it was every department; it wasn’t just fixed ops. Then I just remember like everything made sense. All of my questions and everything that I thought was a secret behind a veil, like a Wizard of Oz kind of a thing, it was like, oh, once you meet Oz, it’s not so scary. This is really simple. Warren Buffett says business and numbers are easy; it’s the people that are complicated. That was really it.

Finding Courage to Inquire

Knowing the financials is really important, but if anybody asks me—and I tell people all the time—”Hey, what should I go to college for?” I say psychology. Psychology is more important in fixing a business or running a successful business than the numbers. The numbers actually are pretty easy once you understand them. It’s the psychology of the customer and the employees. You’ve got to understand how to move a market to action, and that’s psychology. Marketing is psychology. But then also, how to get people to do the thing you want them to do.

There are lots of funny stories that I can’t talk about on here that happened during that time, too. I don’t know if you guys know this, but at the time, Portland had the most adult dance clubs. I did not know. Yeah, there were a lot of funny conversations and things that happened that you just kind of shake your head at. It was a different 90s car business, and most people have an idea of magic receipts. What? Maybe we can make a Netflix special. People went to lunch and didn’t come back for the day, let’s put it that way. It was for the steak buffet. Yeah, steak, a glass of milk, and a table dance. Pretty funny.

Overcoming the Fear of Asking Questions

A piece of your story that’s always resonated with me on a high level is that I’ve learned through working with you over the years, and then even as a client years ago, to ask questions. This whole story started with you saying, “Hey, I don’t understand financial statements, and I’m going to ask questions.” You made them an offer they couldn’t refuse so somebody would take you seriously enough to teach it to you, and then you went through what you had to in order to get to the point where you could learn them.

Looking back, I wonder how much less collateral damage I would have had and how much more effective I could have been as a 26-year-old service manager if I would have known to ask questions. I was terrified of our controller. I just didn’t want to be in her office for any reason. If I was in her office, it was because something was wrong and I was in trouble. That’s the default setting for a service manager today. If you can just push through that and just ask questions. I just remember figuring out, for months, people talking about unapplied time and cost of sales, and hoping that soon I would figure out what that was instead of just asking.

Indifference and the Midwest Mentality

The other thing you were talking about at the beginning with the guy you interviewed—Aaron or Eric? Shawn Johnson’s husband, and don’t tell him I called him Shawn’s husband, because that’s really how I remember him—Andrew East. The thing about indifference is, I don’t know if it’s because I’ve seen a lot of people from a bunch of different areas, and I’m from the Midwest and I recognize it in my people, but we’re really bad in the Midwest of having indifference, of not wanting to just speak up. Like I was just describing myself, that’s really what that was. I was indifferent and I was just hoping that I would figure it out soon.

Open Doors and Honest Conversations

It takes too long. I agree with you. It’s a weird thing where when people are more honest instead of doing the Midwest thing where you just kind of “okey-doke” them and say, “Okay, yeah, yeah, yeah, yeah.” If you disagree, figure it out. Say you disagree. If you agree, that’s great; let’s go. Indifference is the enemy. It’s odd the lengths people will go to to not have an honest conversation. Indifference is a position. You are putting your flag in the ground when you’re indifferent.

The one thing that also, on the flip side, stuck out for me in your story, Chris, is that we’ve encountered this in years past with ownership and leadership. When someone is asking questions about financials, senior leadership shouldn’t take it as a defense. If someone’s willing to ask those questions, open it up for them because it could actually be an opportunity to increase the business. I think that is what’s crucial too, because how many times have we come out and met with owners or even GMs and they say, “Oh yeah, we share these two or three things, that’s the information they need; they have everything in order to run their business and run their shop.”

I don’t know if that’s really truthful, honestly, because when I finally asked the questions, I had to go and seek the education on financials. If I would have known even at an earlier stage in my career, I think it would have been eye-opening. You’re right, I was just kind of hopeful of figuring it out, but continuing to ask those questions is important. From the top, recognizing someone’s asking questions to better themselves for the betterment of the business and the customers—how can you say no to that?

The Psychology of Defatist Backlash

It’s interesting too, and my head goes even deeper in the sense like I was having this conversation with Andrew East. He was saying that his wife posted something online about Memorial Day—an American flag, that sort of thing—and they got a bunch of backlash on social media, like, “How could you be posting that when America is so terrible?” The default thing for these people that think this way is they attack your character, right? That’s what they do. They don’t agree with you, but they don’t understand that they hate themselves.

If you’re in America and you’re an American and you’re not proud of the flag… somebody asked me today, they go, “Would you get mad if somebody burned a flag?” And I’m like, “Yeah, I don’t like watching somebody burn the flag.” Okay, they have the right to do it, I get that, but I don’t agree with it. You’re in America, and it’s our responsibility to make America what we want it to be. By hating America, you hate yourself, and you’re just a fatalist. You have no point of view that there is a future; the only future is death and destruction. That’s basically how you see the world, and that’s the context that you’re walking around in.

Cult Tactics and Character Attacks

Then if anybody agrees with you, or if anybody disagrees with you and they are proud to be an American and they want to make this better, then they attack your character and it’s like, “Oh, you’re MAGA,” or “You’re this,” or “You’re that.” It’s like, “No, I’m an American.” We have a whole section right here in the library on cults, and one of the techniques that cults do is they isolate people, and then they attack the character of anybody that disagrees with them because they can’t talk about the issues.

They can’t talk about what’s really going on. The only way to discredit somebody is to attack their character and say you’re an extremist or whatever it is. It’s like, “No, I’m not. You’re in a cult.” That’s what it is. You are in a death cult and you want America to die. There’s a bunch of countries in the Middle East that won’t take you, but they’re your people basically, in that way.

Capitalism and Corporate Resistance

I just feel very strongly about the idea of waking up every day and rooting for your country, rooting for yourself, and wanting it to be better, accepting it for its flaws. We could do better in many ways, and we have done better. If you look at the country in the 50s and where we are now, we’ve improved in so many different areas. Capitalism, although not always fair and there are issues with capitalism that we could address, is the best system by far. The most innovation and the most progress comes out of this system that we’re running. You can’t present something better than this system.

The same thing happened to me when I started fixing stores, right? I would go in and want to talk about getting better, and then they would just attack my character. They’d be like, “Oh, well, you’re from California. Oh, you’re young. What do you know?” It’s just like, “Whoa, I thought if we just did some simple things a little different, we’d have a much better outcome for you and for everybody.

This business would thrive. You would absolutely be a hero.” But you want to hate—you hate yourself. If you’re working in a business and you don’t think it can be better, and you can’t look at it for what it is and be honest about it, and your only option is to attack the character of someone who is positive and wants to make it better, it’s a chase to the bottom. It’s an odd thing that has never made any sense to me.

Breaking Through the Status Quo

I started fixing stores when I was 24. So, imagine me going into a department and you’ve got the 50-year-old service manager with the bottle of whiskey in his drawer and a stack of ROs hidden in the ceiling that he can’t get claimed under warranty. I’m in there talking about how we could bring in more traffic, add some techs, and how we could put a real system in place. “Oh, what do you know? You’re from California.” It’s like, “You don’t understand, people are different here.” And it’s like, “Really? Are they?” No, Chris, he’s just like, “I need a bigger bottle and I need more ceiling tile to hold up the ROs.”

I’m pretty sure people everywhere just want to be validated and recognized. They want to be treated like they mean something; that’s at the core of human nature, to want to matter. Then they want a fair deal. They want to feel like whatever it is they’re doing was worth what they pay. The bar is low; it’s not hard to exceed that. “Yeah, but oh, you’re from California. You don’t know what you’re doing. You’re young, You’re a kid, You’re this, you’re that.” It’s like, okay, I guess, but you don’t want to talk about the real thing that’s going on.

Overcoming Fatalism and Blame

It’s interesting you tie it to them hating themselves. It sounds extreme, but it couldn’t be more true. One of my favorite quotes from The Six Pillars of Self-Esteem—a book the coaches did a book report on—he says in there, “The human being is the only creature on Earth that finds out what is good for it and then goes and does the opposite thing.” You’re presented with information that you know, and by definition, it’s not a feeling, it’s not an emotion, it’s just a fact. If you want to put up enough walls against that thing, the human mind goes about that in a lot of different ways. It’s an odd thing where, in our world, we just view everything as criticism instead of strategy, when it doesn’t have to be that way.

Your body rewards you, right? If you file it in one of these buckets that says, “Hey, this guy has a funny beard and he’s from California,” your body rewards you with that and there’s finality to it. Whoa, whoa, hold on. Funny beard? Did I say that out loud? If there’s a beard contest, I think I would win nine out of ten times. Please show me the person who has a better beard than me. No, I’m kidding. I knew that one would stick.

Taking Responsibility for Your Life

When you meet these people that hate themselves, who are so negative and so anti-whatever, they’re in that cult. The thing that they need more than anything is a hug. They need to be told it’s okay because, as we talk about in the leadership training, when you externalize control to something else, when you relinquish control of your life to a higher power like the government, God, fate, or luck, the path is fatalism because you have no control or say over your life.

Until you take responsibility for your life, until you take responsibility for what happens to you… if you don’t like the weather, then move. Ultimately, your indifference is still a decision. The people that externalize control and blame say, “Oh, I just have bad luck,” or “It’s the government’s fault.” Those people end up acquiring a fatalistic point of view on life because that’s the only perspective you can have if you have no control or say over the outcome.

They need a hug. Really, at the end of the day, that’s what they need. They need a hug and they need to be told it’s okay, and you have to unindoctrinate them from this cult. Things are just way simpler, and it’s not so linear. Well said, well said, for sure. Wow, what did you say about my beard? The weird beard, funny beard. I wish I could do that Joe Pesci line from Casino: “Funny? I’m funny? How am I funny? I’m funny to you?” Oh, this is so good. It’s great.

Elevating Your Superpower

Thanks, you guys, for hanging out with us and letting us talk. It was good. Don’t forget, if you’re not signed up for SDR Live, we’re going to be starting that here at the beginning of June. Make sure you sign up. We’ve priced it so anybody can afford it. You’re worth investing in and learning, and we will unveil a lot of these secrets that our industry has kept behind closed doors; it will be your superpower. They will help you find the leverage. So, we’ll see you next time on Service Drive Revolution.

Thanks so much for watching this episode of Service Drive Revolution. We’re uploading new stuff every day, so make sure you subscribe and click the bell icon so you don’t miss out. If you have a question you’d like us to answer on the show, call 833-3-ASK-SDR and we’ll answer your question on the show. That’s 833-3-ASK-SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com. That’s offers.chriscollinsinc.com. I’m Chris Collins and I’ll see you in the next video.

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