Dealerships vs. Independent Shops Part 2

Dealerships vs. Independent Shops Part 2

Monday, Monday, Monday, it's Round Two of the Shop Showdown!

Dealerships vs. Independent Shops: Who Has the Advantage? Who will win the fight for supremacy? Find out the answer, only on the final chapter of this special two-part Service Drive Revolution event!

On today's episode, Jeremy talks about independent shops and why (he thinks) they have an advantage. For those who weren't keeping score during the first round, there were 7 points for Dealerships.

It's no secret that, once a car is out of warranty, about 70% of consumers don't go back to the dealership for service. However, the dealerships control the first impression of the experience, so it does become the benchmark for what the customer expects from that point on. If a dealership does a great job by providing perks like car wash and vacuuming, but then you go to an independent shop that doesn't do that, then it's an incongruent experience.

Side note: Jeremy actually hand washes the cars at his shop if they come back.

Number 1: Independent shops service all makes and models.

Independent shops service all makes and models, anything you could possibly have on your driveway short of, I don't know, vehicles that aren't street-legal.

Sometimes the training at an independent shop is even more advanced than a dealership. Regardless of where a car is serviced, they're all machines; wires are wires and connectors are connectors. Most really good independent repair shops have their technicians and service advisors spend more time in the classroom than if they were at a dealership.

Jeremy claims that his technicians are better technicians than dealership techs because they don't fall into the rut of pattern failures. They see cars that are older, have more real world problems, and they overall have to fix tougher drivability issues because they're dealing with customers that might not have followed a proper maintenance plan. It's a harder job, but that makes them better at it.

Now, we had a little dispute over whether dealerships or independent shops have more comebacks where he felt that independents don't have more. He brought up a pretty good point that not many shops or dealerships even keep track of their comeback ratio.

Number 2: Independent shops provide a customized solution for the customer.

Independent shops provide a customized solution for the customer. Jeremy's parts department doesn't have a parts manager sitting there, not doing anything or messing up the inventory. They provide a customer with more options than if you were to take a car to a dealership for your make and model.

There's not just one estimate for the cost of repairs, there are many different ways that they can provide a solution. I totally conceded to this point because a lot of manufacturers would rather have you replace something than just fix it. If your BMW's transmission needs fixing, the BMW dealer would charge you $4,500-5,500 for a full replacement while an AMCO would just put a new seal on it or whatever for less than $1,000 and it's back on the road. There's not much leniency with dealerships if you're going against what the factory recommends.

In my experience, you do get what you pay for when you buy cheap brakes or whatever, but that also depends on the ethics of the person in charge of the shop. At Jeremy's shop, they don't do $89 brake jobs, they fix the $89 brake jobs.

Nowadays, customers are more market savvy and they want more choice. A big thing you get with independents is that their techs, advisors, and shop owners are resourceful and adaptable. Dealerships tend to be set in their way of doing things. They do what has statistically gotten the desired results, but good independent shops do what's best.

You know, one odd thing when we're coaching and looking at financials from independent shops is that their parts gross profit percentage is higher than the dealerships most of the time.

Number 3: Independent shops are grassroots and community-based.

Independents tend to provide a faster option where the customer feels like they have this personalized service experience where they don't have to wait for days for a phone call back from an advisor. There's more of a direct line, less layers. When you call, Jeremy is there to pick up. You don't have to listen to an automated voice telling you to press 4 for Parts.

Jeremy's had his shop for almost four years now and he's built so many relationships with his community that the shop is basically a part of their everyday lives. He knows everyone's names and faces. At a dealership, a lot of the time it's every one or two years when the car has a problem.

I do believe that this advantage isn't exclusive to independents, but there are definitely more of them that lean that way than with dealerships.

Number 4: Independent shops can provide a lower cost and better value repair.

Independent shops can provide a lower cost and better value repair, because they're nimble and can move quicker in certain areas. Areas like controlling overhead expenses rather than the large fixed ops at a dealership where, a lot of the time, advisors don't have any control over that. Everything at a dealership is preset – parts, pricing, labor rate, overhead – they have no control over it. Part of what gives independent shops this advantage is that they can understand each technician's specialty and what they're most efficient at. Because of this, their gross profit-per-actual-hour can be higher and they can manipulate the expenses better.

Number 5: Independent shops are better at marketing.

Strategic marketing! I gotta concede this one because dealerships don't really have to market, but that also makes them terrible at it. They think that marketing is posting pictures on Facebook of customers with their new car or ‘buy four tires, get one free,' but they focus everything on the commodity. Imagine if all of Apple's marketing was their hard drives and RAM. Buy the new Apple MacBook Pro and get a terabyte hard drive! They don't tell stories, there's no human connection, there's no vulnerability, no honesty, no authenticity; it doesn't pull you. Most of the time, dealers do marketing because they feel like they have to, not because it's actually effective.

With strategic marketing, the core of it is to be memorable and remarkable. Well, on the show, we both said ‘rememberable' which probably isn't a word but it sounds better when paired with remarkable. Be memorable and remarkable. If you succeed in that, the customer will share their experience with the world and that story will drive more business back to you.

Number 6: Independent shops are faster.

Number six is a bonus one, if you remember the terms you should know. What does SOS stand for? Speed of service. This is another one that's not necessarily exclusive to independent shops, but they execute on it more often. Dealerships don't really acknowledge it as a thing, but it's paramount to the customer.

Time is greater than money these days. Imagine being without your car for two weeks and there are two scenarios: one is that it takes the shop 95% of that time to figure out what's wrong with the car and they call you 13 days later to tell you that they'll have it fixed in five minutes. You wouldn't be very happy with that, but you'd be fine with the other scenario of them figuring out in five minutes that they need the rest of the two weeks to fix your car. Why is that? Because you know as early as possible how long it's going to take to fix it.

Jeremy firmly believes not only in giving the customer certainty, but that speed of service is a KPI that isn't generally tracked in the industry but really needs to be.

Ding, ding, ding! That's it, folks. The match is over, and it was certainly a close one. The winner and heavyweight champion of the world is Dealerships with a narrow margin of 7 to 6.

Really though, this was more just a fun little comparison than actually weighing which is better. I do think it's interesting because when you're sitting with an independent shop owner or a service manager in a dealership, they both think that the other has an advantage. What we know to be true is that the advantage is in your ability to execute the opportunity in front of you. Neither one has an advantage great enough to put the other one out of business. There's so much opportunity for dealers to do a better job at certain things and for independents to do a better job at certain things, and the advantage is really up to the beholder and who wants to execute. More than whether you're a dealer or an independent, more than what brand or market you're in, it's how you think and what expectations you set for yourself. The industry is plenty big enough for everybody that does it right, regardless of which corner you're in. I think the opportunity of a lifetime comes once a day, and everybody has that opportunity, so execute it and that's how you'll be successful.

This whole matchup was really fun. Be sure to post in the comments if you have some advantage for independent shops that you think Jeremy missed. We'd love to see your thoughts on it but I hope everybody agrees that it's your mindset and ability to execute more than anything else. Before we wrap things up, it's time for questions…

Audience Questions

This question comes from… [email protected]

Alright, then…

“I am a service writer. I learned through a trucking company and I worked at a dealership and now I'm at an independent shop. How do I learn more hands-on mechanical experience and grow in the industry?”

So my thought is that the mechanical experience is not that important. I remember when I was a service advisor before I was even 20 and when I was starting to do pretty well, everybody started finding reasons to diminish my value. This Volkswagen tech, let's call him Shane, pulls me into the shop, calls the other techs over, and on this wooden crate is a round metal disc. I didn't know that I was being ambushed here, and he says, “Hey, what's this?”

“I don't know, a brake rotor?”

Everybody starts laughing like how can you be a service advisor if you don't know the difference between a brake rotor and a clutch disc?

Anyway, Shane was an asshole. What he didn't know and what you need to understand, fitmommy1107, is that your value in the marketplace is your connection with the customer, not the commodity. You don't need to worry about the commodity, you can learn it any time. I spent most of my energy on connecting with the customers and petting the dog, and when a technician would bring me an inspection sheet and there was something I didn't understand, I'd just go back and ask them to show me. I would just say, “Hey, I can't present this to the customer if I don't understand. Can we put it up in the air and can you show me?”

Don't worry too much about the technical. Just take every customer, connect on a deeper level, over communicate, over deliver, and ask a tech when you don't understand something. You don't build trust by technical knowledge, you build it through empathy and genuine curiosity about people.

This next one is long, so buckle up…

“I'm currently a tech with 15 years experience in dealerships and independent shops. Hold all of my ASE, master Chrysler, and a Ford senior master. I want to get out of wrenching and into management. The trouble I'm finding is that I'm the second most productive tech in our dealer group and management doesn't want to lose my productivity and move me into a different position. I have looked at other dealers in my area, but I'm only being recruited as a mechanic. What am I missing? No one can tell me in between the books, podcasts, and your on-demand training. I'm still clueless about what I can do to move up. Any advice would be greatly appreciated.”

The sad part about this is, because of your technical expertise, nobody's going to want to move you from the shop to the front because there's a high demand for good technicians. If you're really good at fixing the cars, that's the one thing that dealerships and independent shops struggle with today, and they wouldn't want to give up the production.

Jeremy's advice is to show up early and offer to write up the night drops so you can start getting familiar with the system. Start to be a service advisor and be there when they need help. Go up and introduce yourself to customers more. Get out from behind the toolbox and get your cards out there! Realistically, you were always going to have to fight to get there.

If you want the position really badly, you're probably going to have to leave there. Another thing you could do is go to your current general manager or dealer and say, “Hey, this is where I want to go. I want to become a manager. I'd love for you to mentor me on how to be a manager. Will you teach me financials? Will you teach me what you know?” I've given this advice before, but for different questions, but chances are anybody who's older in their career is going to want to mentor somebody because it's good for their ego.

Then, I would hand-write some letters to some general managers saying, “I'm a technician here. I'm the top tech, and I want to be a manager. Obviously, there's more demand for technicians and service managers but I'm gonna move on, and I would love for you to mentor me to become a manager.” I bet if you sent out 20 of those letters, half of them would bite.

That's it for the questions this week. So what did we establish here? If you had a choice, you'd rather work in a dealership, but you still have opportunity if you work at an independent? Nah, more or less, everyone has the same opportunity. You just need to go out there and make it happen!

This whole two-part showdown was awesome. Remember to post in the comments your thoughts about the advantages of independents and dealerships because we'd love to hear your thoughts on it. Thanks for tuning in, and we'll see you again real soon on Service Drive Revolution!

Dealerships vs. Independent Shops Part 1

Dealerships vs. Independent Shops Part 1

Monday, Monday, Monday, it's the battle of the century! Today's big match is Dealerships vs. Independent Shops…. Who Has the Advantage? Find out now! But before we get to the title fight, let's start with what's happening outside the ring…

So I rented this Airbnb on this lake up in Washington. My family's had property there forever and every summer I would go there and we would water ski until our hands swelled off. Swelled? Swole? Anyway, even if we got there late, we'd still water ski in the dark with a flashlight.

However, this generation of kids you guys are raising don't water ski. You know what they do? They blow up these inflatable lounge chairs, not even inner tubes, and they sit there texting behind the boat!

Listen: everyone tell your kids to put down the phone or Xbox and actually go outside and – I don't know – throw rocks at cars or something. Just as long as it's not from an overpass…

We gotta acknowledge that these kids are lazy. You're raising a generation worse than the last lazy generation!

Okay, the “back in my day” rant's over. Now onto the next one…

I drove by the Chevy dealership by my mom's and there were no cars for sale. Zero. They won't have cars until the middle of next month. Meanwhile, we still got clients. We did three of our monthly calls and our elite call with all the elite managers in our coaching group. Then, we had two of our bigger dealer groups and record months, booked out, two weeks, crazy.

And the whole time, I wasn't wearing pants!

But now… the moment you've been waiting for… Let's get ready to rumble!

The Shop Showdown: Dealership vs. Independents. Who has the advantage?

Two enter, one leaves… with the advantage. Today, we're going to talk dealerships and, in the next episode, its the independents' time to shine. Think of it like they're coming in with their entrance music right now, sitting in their corners, getting psyched up by their coaches. “You're gonna eat lightning and crap thunder!” All that.

In the blue corner is dealerships. That's gonna be me while next episode is gonna have Jeremy plead his case.

Number 1: Dealerships sell cars

The first advantage they have is that, in addition to service, they sell cars. If a car needs more work than it's worth, the customer can just walk up to the sales department. Granted, service is an afterthought in most dealerships, but the fact that they can sell a car is still an advantage. Not saying that they always use that advantage, but they could if they wanted to.

Number 2: Dealerships have perks

The next one is perks. Dealerships have more perks for their customers than independents. For example, loaners and shuttles.

Part of those perks is contingency. In most independent shops, there's like three customers that need a shuttle at the same time. In a dealership, you can pull somebody from somewhere. I'm sure there's somebody sitting around in Parts that's not doing anything. Another one is carwash. We had a dealership client that even had a movie theater! Christian's even seen one with a sushi bar!

Number 3: Dealerships have expertise

Number three is expertise, meaning expertise at fixing the same model car over and over again. In an independent shop, you could get an F-150 pickup one day and a BMW 3 Series another day, and so you might not have the special tools for each one. Sometimes you don't even have all the diagnostic equipment!

In a dealership, you have the tools and you have factory training. Part of that means they train techs to work on specific cars. Some dealerships not only have technicians that work on specific cars, some techs only do a specific service like suspension or transmissions. They're specialized so if you got a drivability guy, he knows everything about drivability ever for that manufacturer.

Number 4: Dealerships have the Parts Department

Next is the parts department. Believe it or not, that's actually an advantage. If you're a Ford dealer and you have a lot of F-150s and they go through brakes a lot, you have those brakes and rotors on hand. If the parts manager is doing their job, you're going to have the stuff that's needed, and they'll have a bunch of them right there in the back based on trends. You just walk back and somebody's there to put it on a repair order.

Number 5: Dealerships do everything

Next one is dealership service departments are one-stop shops. Most of the independent shops we talked to don't do tires or alignments or they don't have a body shop. If a dealership doesn't have a body shop, they'll have a relationship with the body shop that they get kickbacks from for sending them business, right? Let's say you wanted to exercise your home field advantage by being a one-stop shop. It would be very inconvenient for a customer to go to your shop to get the widget replaced, then go to another shop to get tires.

I don't know if you guys experience this as a day-to-day thing in your personal life, but the one thing that people don't have enough of is time, right? So a lot of times, a dealership is gonna have tires that are more expensive, but a customer isn't going to spend another two hours at some other shop they don't trust when they can get it all done at the dealer and save time. And if the car is there for the day, why not just have it all done there to save multiple trips?

Number 6: Dealerships have built-in traffic

This next one's a huge advantage: dealerships have built-in traffic. The service department in a dealership has built-in traffic because the customer has to come back in for the warranty when there's recalls. You don't have to be good at marketing! Basically, you can live off the marketing of the dealership most of the time while an independent shop has to spend money on marketing. The amount of money an independent shop spends on marketing is maybe 10 times what a dealership service department would.

On top of that, the little marketing that a dealership does is co-oped by the factory so they get money back! To be a good service manager at a dealership, you don't really even need marketing in your toolbox most of the time as long as you're at a good dealership that sells a lot of cars. It's dependent on the car sales. If a dealership isn't selling cars, then it ultimately hurts the service department.

Number 7: Dealerships have state-of-the-art technology

The last one I have is that dealerships embrace technology, and a lot of that's driven by the factory. Let's say you own a Chevrolet in Los Angeles and you want to make an online appointment. Out of 10 dealers, how many do you think you can make an online appointment with? The answer is it's 10 for 10, and keep in mind that this isn't just making things more convenient after COVID. Every dealership that you can hit here in LA or Orange County with a rock, you can make an online service appointment. 4 out of 10 independents offer online appointments…

So that's it for round one. Dealerships look like they might retain the title for now, but who knows. Maybe come next episode, Independents will be an underdog story. Between now and then, leave a comment on here or YouTube advantages that you think dealerships have over independents that I might have missed, because I think all you smart people in the audience are going to come up with some good ones to help my case even more. I'm sure some of them are gonna make me go, “Oh man! I wish I would've thought of that!”

So now it's time for our questions of the week:

“What advice would you give a parts manager who wants to transition to service? Let the jokes commence.”

Believe it or not, Jeremy said, “Go for it. It's about time.” I'm serious. Go listen or watch the episode. I think that first round of Dealerships vs. Independents psyched him out. Got into his head…

“Is there an ideal percentage for a door rate that an import dealership should be striving for? Our door rate is $120.”

If you have a good customer experience, well-trained advisors, and a pricing strategy that the advisors are executing on, your door rate means nothing whatsoever and your effective labor rate is what matters. It's all about the execution.

We have an elite member that manages a very big import store in the middle of the country where they do $12.95 oil changes for life if you buy a car there, and his effective was a little over 112. That's a negative effective labor rate. What it means at the end of the day is that he's got a team of advisors that properly execute on that pricing strategy. They're not just throwing it up against the wall and seeing what sticks! It's very thought out and methodical.

Another answer to that is get in on our coaching.

“If they buy repairs, should the customer get the diagnostic fees applied towards the repair shop or on top? I generally try to apply to build more of a relationship, but just curious. What do you guys think? Is that losing money or building a relationship?”

This is an age-old question that Jeremy's got the answer to:

If you give it away, you haven't built enough value in your diagnostic process. Once the diagnostic service is performed, the fee for service has been earned, and it's a fee that stays on the repair bill. You've got to build the value in it. You got to have processes and checklists. In today's world, the fact that you fixed the car right the first time, you should get fairly compensated for that, and the testing is part of it.

I think a bigger part of that question is what value as an advisor do you see for your time? It's more about how you see yourself and that value because, when I was a service advisor, customers were going to pay but I also took really, really good care of them. Unless you have 10 cars coming in every week that you have to do diagnosis on, what's going to happen if you sell the customers the diagnosis without rolling it in? How many of those are going to get towed or pulled out because of that?

Hopefully zero. It just doesn't happen. It's in your head. You're thinking with your wallet and you're not putting a value on your time and how much you're going to take care of customers. Customers pay for better service! Start looking at it like, “Hey, customers are going to pay for me, but I'm going to take really, really good care of them, and I'm going to be the best advisor they ever had.” There's a premium for that.

I've never even quoted a customer diagnosis. You'd be setting yourself up to do everything twice. What I did as an advisor was, I never quoted diagnosis, but I got a repair authorization. Let's say you got a radiator leak on your BMW. I'm going to give a figure of $2,500 to work with but I also tell the customer that it's the worst case scenario and we'll know more after a tech checks it out. If it's more or less, I'll give them a call.

By establishing it with two calls instead of five, I'm saving time for both the customer and for the tech not having to go back and forth. 80% of the time, they sign and say okay. The other 20% says, “Oh, I just want you to check it out. I'm going to take it to my mechanic.” In that case, you can still try to get their business. What if they say they're getting ready to trade it in? Well, in that case, let's not even diagnose it. Let's go down and look at some cars and sales will fix it. But in their mind, they're still working with $2500.

Customers don't come in and expect their cars to get fixed for free or even $150 in diagnosis.

That's it for this week's questions. Tune in next time for round two of Dealerships vs. Independents. I got in Jeremy's head today, but is he going to come back swinging?

If you got anything to add to either list, post it in the comments and let us know what you think. Maybe place some bets. Thank you so much, and we'll see you next time on Service Drive Revolution!

3 KPI’s Service Managers Are Judged On

3 KPI’s Service Managers Are Judged On

Being judged on something without you knowing is kind of like being asked to drive without a steering wheel, but it happens to Service Managers all the time… So that’s why today’s show is all about the 3 KPIs, or Key Performance Indicators, that Service Managers are judged on– Whether they know it or not.

But before we get to Service Manager KPIs, we got a story from one of our own guys regarding the infamous Parts Department. Our editor, Michael, had a question for the show. So he crawled out from the broom closet where we keep him, and told us about his recent experience getting his car serviced. Now, Michael needs his car serviced pretty soon because he's taking some buddies on a road trip across the state of California and into Oregon, so he needs to make sure his car is safe.

Keep in mind, Michael drives a 2020 Corolla hybrid. His car is literally a brand-new model, and the reason why he's bringing it in for service is because there's a recall on the back seat belts. So he's getting the car, which is brand new, serviced at the dealership of purchase due to something that was entirely the manufacturer’s fault. This is a slam-dunk for the dealership to give Michael a fantastic experience and earn his business for life (hint, hint: Customer retention is one of those KPIs that Service Managers are judged on). How do you think it went?

Well according to Michael, it went like this:

They told him on the phone, “Okay, well, we can't deal with the recall until we check out the car,” so he says, “Great, I'll take it in.” He takes the car in, they inspect it, and he gets a phone call at the end of the day saying, “Hey, we did your maintenance and everything's done. But unfortunately, we don't have the part for the recall, so we're going to order it, it should be here next week, and we’ll just have come back in and we’ll replace it then.”

Fast-forward to last week. He calls the Service department saying, “Hey, I'm bringing my car in tomorrow for a recall. Last week, they told me to schedule an appointment for this week. Before I bring it in, I just want to confirm that you guys have the part that you needed.” 

So, it's been a week and they still haven't confirmed with him whether they have the part. The lady on the phone puts him on hold for a good minute because, wouldn't you know it, she has to confirm with the Parts Department. Then she comes back and says, “Hey, so in order to do that recall, we need to get your car in so we can inspect it and see what part to order.” 

Now, Michael is certain that he doesn't have some form of amnesia, because he swore that already happened. “Oh, well, I did that last week,” he says. “They already inspected my car.”

She says, “Oh, well, in that case, your part is definitely here!” 

Really? You magically confirmed you have the part in the 5 seconds? “If they’ve already inspected it, it's definitely here. Come on in!”

So whatever happened to Michael? Is he still with us? Did he survive that trip? Maybe you'll have to tune in next time to find out.

In all seriousness, what I'd probably do in this situation is I'd call and ask for the manager like, “Hey, this is my confusion and I'm getting frustrated. Could you help me?” Either that or ask specifically for the Parts Department, because naturally everything's their fault.

However, Jeremy personally wouldn't rely on Parts for that. To him, there's two possible scenarios for what happened: they either have a stockpile of those replacement parts ready, but they need to have the inspection done first, which they apparently forgot that they did the first time. That or, like countless Parts Advisors, they're saying the parts are on order, then they never show up.

What boggles my mind is that this is a major Toyota dealership in Hollywood. Do they really not have an appointment system or CRM in place to just send him a text message saying, “Hey, your part has arrived. We're ready for your appointment. Confirm your time. Push the button.” I guess I should stop complaining. After all, if every Service drive was hitting their KPIs, there wouldn't be a need for coaches and training, would there?

So if you're ever in a situation like Michael’s, I would call and talk to Parts. Maybe even ask for the Parts Manager, but make a big deal of it. Christian gave some pretty interesting advice which is to make them physically touch the part when confirming with you, or at least maybe have them stare at it longingly from across the room.

There's also the chance that you could get them to provide a loaner vehicle. Although, if they don't have the parts for the recall, who's to say they might have misplaced some of their loaners? One thing to keep in mind is that places might not give you a rental if they know you're, say, driving across the state with it. So this is one of those few times when I'll tell you that it's in your best interest to lie.

This story was a perfect example of a Service department that’s objectively failing to hit their KPIs, so let’s get on to our main topic for this week– the 3 KPIs you're being judged on without realizing it.

Profitability

This is one that just boggles my mind. A lot of times when I get on a strategy session and ask shop owners, “What's your profitability,” nobody knows. Now I may be wrong, but I always thought that the reason for doing business was profitability. Your business doesn't work if it isn't creating revenue, so profitability is the KPI for everything. Last I checked, shops and dealerships aren't charities… unless you're just a nonprofit where you can pay yourself a salary of $5 million a year.

A key thing with profitability is to not get caught in the four letter word of B-U-S-Y like a lot of other Service Managers. Not all work is equal, some is profitable, and some isn't. Help people but, at the same time, be careful about work that's bound to be inefficient and will waste time, which will essentially mean you're paying to fix a customer's car.

Every month, the General Manager or Dealer is getting a financial statement, and the first thing they're going to do is look at the profitability of each department. Most of the time, the Service Manager never sees the financial statement, but they're still being judged on it. It's a trick bag from the Dealer's side, but they're not being educated on that. It's just this secret metric that you're getting judged on.

Let's say you come into a Service Manager position and your pay plan's based on gross profit. At that point, you're assuming the social contract that your measuring stick is gross profit. The truth is that it's net profit; it's total profit at the end. Whether or not you know that doesn't change the fact that this judgment is affecting your pay plan. That's why you might come in and generate a ton of gross profit and over-expand, only for your expenses to exceed your gross profit.

You lose the Dealer money, so you lose your job, and you're left wondering why.

I don't know of any industry where you're judged on something you're not privy to like that. It's like driving a car without a steering wheel. What happens in dealerships is that most of the General Managers or Dealers come from car sales. They're not sharing the Service and Parts numbers, because they don't understand them. It's kind of like, “I know this, I know sales, I know F&I, so let me work on that, but I don't understand this.”

So, the steering wheel you don't have is information, but even when you have access to the information you need, you still don't understand it!

It's like compounding problems on top of each other. If you were a person trying to run a good business, the only thing that you're going to revert to is ‘if we're busy, we must be doing good.' So what we see time and time again is that every hour of labor they sell, they're losing 10 bucks. At that point, you might as well be standing out front and handing the customers $10 bills.

My advice in this situation is to trick the General Manager or the Dealer into giving you the information. I would go them and say, “Hey, I want to be mentored on this. Would you mentor me?” I've mentioned this before to play to their ego, because they have huge egos.

Make no mistake, the Dealers are firing Service Managers because of a lack of profitability, even though they were never given the tools or training to do understand profitability. The turnover for Service Managers is high because of this reason more than anything else, even though nobody realizes it.

Customer satisfaction and retention.

In case you need a reminder, retention is one of the most important KPIs for your Service drive. An increase of customer retention by just 5% can lead to a 35% increase in profitability. So this means how many customers come back to you…. Like what Michael won't be doing for that Toyota dealership in Hollywood. So, if the dealership that sold the car has home field advantage, why do dealerships lose 72% of their customers to independents over time? The reason the retention falls is because of the customer's perception and feelings about you. That's it. So as a Service Manager, you need to get involved in the car sale!

You need to own the idea that you have home field advantage, but those customers are scared. They perceive that your prices are too high, or your new car already has a recall for faulty seatbelts. It's a huge hustle. The dealerships take advantage of the idea that the customer has to go to them, but they lose them eventually. As soon as somebody doesn't have to go to the dealership, 80% of them go somewhere else.

You're in the business of being the lubricant in the process and constantly improving the customer experience, because the customer experience is the future.

Shop Efficiency

It's incredible that you're running a factory and you have no idea what the factory produces. Most of the time, the monkeys have the key to the zoo.

There's two questions that can tell you how good somebody is at their job: “What's your net-to-gross?” and “What's your shop efficiency?”

If I go to a plant manager at a production facility, Pepsi Bottling Company or something, and I go, “How many cans?” they'll be like, “We bottled 3 million cans yesterday.”

You go into an American Express phone room and ask, “How many calls?” “We had 3,000 customer issues and 1,750 of them are solved within 3 minutes.”

If I go to a shop and no one can answer those two questions, that's suicide. You're not running the shop, the shop is running you.

So those are the 3 KPIs you're being judged on, but before we wrap up let's answer some questions. Remember, if you send us a question, and we read it on the show, we'll send you some free swag.

“As a fairly new manager of an independent repair shop, how would you deal with a technician that will not take any type of criticism? He gets mad and walks out. He comes back the next day and apologizes but I still lost a lot of time and service because of him.”

Now, you could fire him.

Or, the more creative option would be to call his wife. Or his husband, whichever it is, if he's married.

The challenge here is that nobody wants to lose a technician and the talent pool for techs is dwindling, so this is a scenario that happens all the time regardless of if you're at a dealership or an independent.

Nobody likes criticism. You have to understand you're dealing with human behavior and you need to manage that behavior. The thing that raises some flags is that the guy just walks out in the middle of the day. If he comes back and apologizes later, then his heart's in the right place, but he still needs to figure out how to deal with his emotion. Maybe get some sort of therapy.

Christian's advice is to start by pulling the whole thing back. One, explain that the behavior is not acceptable. Second thing is before you make a withdrawal, you have to make a deposit. You have to connect with your people and say, “Here's what I expect out of you and if you're not doing this or this, then there's kudos or there's corrections to be done. There's going to be times when I'm going to give you corrections, because I care. And I want you to be the best version of yourself that you can be. And I'll need you to accept that criticism, grow and learn from it.”

Beautiful. You could put that in a Hallmark card.

The other line in the sand is that he can't just storm off like a toddler. It's almost as bad as throwing a wrench.

“I recently asked the service director, after interviewing an advisor, if the advisor asked what our net -to-gross percentage is at. He informed me he did not. I then inquired what we averaged month to month, and he told me we stay around 11% each month. My question is, how bad is 11%, and what percentage should someone's dealership push to achieve? Thank you for your time.”

11% isn't bad. It's a little higher than the national average, so that's not bad. The goal would be 30% plus. I hesitate to say just 30 because it seems like when we say 30, people hit 30 and then they put their feet up and quit. Do as much as you can while having high retention and taking care of customers. It's a balancing act.

If you're losing money, it's harder to get from losing to break even than from 11% to 30%, net-to-gross. You're doing more right than you're doing wrong. Absolutely.

Thank you guys for tuning in, and we'll see you next time on Service Drive Revolution!

Are You an Amateur, or a Pro?

Are You an Amateur, or a Pro?

What a crazy week, but who am I kidding? Every week for the last 3 months have been crazy weeks, especially for fixed ops! So a couple weeks ago, we read this list by Car and Driver of the three most influential cars of all time… but it was a terrible list. Christian and I both agreed,  it’s pretty clearly just a list of the writer's three favorite cars. So we asked you to post in the comments what you thought are the most influential cars of all time. We figure all the Service Advisors and Managers out there probably understand a lot more about cars than whatever out-of-touch journalist wrote that list…

…And we got a ton of excellent responses! Any one of them could have made it on the list, but we had to narrow it down to what we felt was right. These could honestly be in any order (Except number one, because how could it not be number one), but we feel like we put them in the best order we could. Way better than Car and Driver's list, anyway:

  1. Dodge Caravan

The all-time famous Dodge Caravan was a game changer. People wanted to have more kids because they were like, “Hey, no longer are we restricted to just four kids in a car. Now we can have eight!” And that's why the population went crazy. It is actually the main reason for world hunger after the 80s. And probably global warming, too. Though there is still some evidence out there that both of those things are the Parts Department's fault.

  1. 1968 Pontiac GTO

Absolutely the coolest muscle car of that era.

  1. '66 Dodge Charger

…Or any of the Hemi products like the ‘Cuda, the Challenger, or the Javelin. What was great about those cars was they got amazing gas mileage.

That was a joke. They got like a mile for every two gallons. I had a Charger once upon a time, and you could literally watch the fuel gauge go down from gas station to gas station, but they're still great cars in other respects.

  1. '65 Ford Mustang

This one was a real game changer. When it came out in the 60s, it brought about a big generational change in the car world. 

We need to get some sort of medium on the show and commune with Lee Iaccoca's ghost so we can ask him if he was responsible for that Mustang… But we want to bring back the younger Lee Iaccoca, not the old grumpy one. Then, we could ask him what the next game changing car would be.

  1. Ford Model T

This one was a no-brainer for both us and all of you smart listeners who voted for it, but I guess it was a bit much for whatever writer at Car and Driver. Obviously, all you wonderful people listening to Service Drive Revolution probably have IQs that are 15-20 points higher than most other shows. So the big $100 prize is going to the first person who responded with Model T, and everybody else who suggested it will get some free swag.

Speaking of our smart viewers, we also have to name the $100 winner of our favorite question this week, but before I get to that, we got an update regarding the one about personality profiles.

“Chris, thank you for answering my question. We actually did test all of our employees and, guess what? They're even more introverted than me. Thanks again, Chris.”

In case you don't remember, we answered a question last week from someone who was denied a service advisor position because they didn't pass the general manager's personality test, and I basically said that those tests were bulls**t. If you had all the best advisors there take the test, they probably wouldn't even pass. 

Personality tests don't predict performance– performance predicts performance, and it's not news to anybody. Those personality tests are a waste of money. Like many tests, you could easily manipulate the result. If you're an introvert, just answer the questions the opposite of how you really would, and you'll come out an extrovert. It's that simple.

But anyways, I'm glad you found that out for yourself. With that, let's move onto this week's questions. Remember– if you send us a question, and we answer it on the show, we’ll send you a care package with some free swag. Great questions this week! Jeremy’s $100 challenge really paid off.

“What's your opinion about dealerships using a check-in kiosk? We have one and the manager wants us to use it, even knowing it takes more time and it can't check history.”

What do we think about kiosks for service advisors? The first thing I think is if you run the danger of getting replaced by a kiosk, you might want to get into selling mortgages or something.

Jeremy, however, disagrees. The way he sees it, kiosks are coming no matter what because they're going to help dealerships and service departments bring a higher net to gross so the only way to beat it is to slay the kiosk dragon. Come in every single day, pre-print and get prepared for all the customers coming in the next day. Contact them via text, email, or phone call. Let them know that the check-in process is going to take between 10-15 minutes so you can pet the dog properly, answer all their questions, get their ticket written up properly, and just ensure that they have this magical, personalized, customized experience that's tailored to them better than any machine can do.

Then after a month of that, two months, five months, your clientele is going to be lining up for you out the drive because they don't want to see a kiosk, they want you! Consumers do want a faster experience, but you got to remember if you've ever seen a customer at a kiosk on their own, eventually someone gets stuck and that's where they need a professional to come in so they can interface with a human being.

It's just another tool. Use it when it's appropriate, but find out how to slay the kiosk dragon.

“Hello, guys. I recently left a Japanese manufacturer after 15 years, and my complete dealership experience at the same store. I switched to a Jeep, Dodge, Chrysler, and RAM as a fixed ops director. What recommendations do you have to grow a store with a lot of potential and a lot of UIOs? I have many ideas, but love to listen to opinions to better a store.”

Jeremy's first word of advice here is to get a coach. We know you said you love to listen to ideas and all that but what's really going to separate you is your execution in how you create a remarkable service experience for your clientele, and a coach can help you get there faster and weed through the nonsense. It's all right there on our online platform.

The customer experience has to be the first thing you need to figure out, and then market it in a different way. By marketing, I mean ‘buy 3 tires, get 1 free' and all that. Tell a story, be engaging, be a part of the community! Go back to what this industry is about. Interacting with the community is a good way to build your RO count, too, but you have home field advantage. If you're a dealership and you're selling the car, you have home field advantage. It's the experience and the customer's feeling about you or us in that scenario that keeps them coming back so you need to manage their emotions and their perception of value.

“Chris, I need help knowing if I should pursue being a service advisor, BDC call center agent, or parts advisor. I've been in and out of positions at different dealerships but don't know which one is my passion.”

I'm sure you can guess that ‘parts department' was the first thing that caught our eye. It sounds to me like you might need something exorcised out of you. Like, you're going to have to go to a shaman and do some sort of hallucinogenic thing to remove the Parts from your spirit.

In all seriousness though, you have to look at where your passion lies. Do you really have a passion for helping people? If you don't, you don't belong in the service department. That's a deal-breaker. So if you like to help people, I would lean towards service.

For me, I grew up really, really poor so I wanted the job where the harder I worked, the more I could make from commission and it was all on me to perform. To me, it was about the pay plan and the investment of effort versus reward. That's how I thought. I didn't know any better.

Long term, service might have a more stable future than being on the sales floor. We don't know how things are going to change with sales coming up in the next 5-10 years, but in my training I talk about staying in one place, building your clientele, building your key throwers, and creating the trust fund that you deserve.

So the $100 winner is J Villa from YouTube, who asked the question featured in what's easily our longest Drive By to date and, man, I got more comments on that. People text me directly saying that it really affected them, which to me was feedback that the leadership training I'm doing is in the right vein because I'm going pretty deep on some things there that I know some people would be scared of. I was actually thinking today that I'm going to have two versions of it: I'm going to have the light version and then I might have the version that people can ask to turn on in the platform, but not everybody's going to want to go there. Some people will probably be scared of that, but Jay's question really did let me know that I was on the right track.

So thank you, J, and congratulations. You're getting $100, some swag, and some books, too.

Now, I'm going to talk about the difference between professionals and amateurs. This is something that Jeremy was real fired up about on the show.

  1. Not caring

There are some minor things that can tip you off whether someone is an amateur and a professional. Jeremy's a strong believer in having his team do a final quality check to make sure that everything, and we mean everything, is alright before giving it back to the customer. What an amateur service job might look like is a vehicle that's supposedly ready for delivery but the low oil light is on when doing your final test route, so you open the hood and check the oil and there's no oil on the dipstick… The car was just in the shop so what's wrong with that picture?!

The professional technician or service advisor genuinely cares about the customer and the financial well being of that vehicle, and they want to make sure that it's perfect when it leaves. Just doing the job that's on the repair order is not enough. You've got to go beyond that and take pride in what we do so it's like magic when the customer gets their car back. It feels different, it sounds different because you took care of that car and did the right thing by paying attention to the details.

  1. Attention to details

It's the little things like wipers or washer fluid. You have to think of yourself a little bit different and understand the depth and the amount that you have to care about something in order for it to be special and really be a career, right?

One of the number one things we look at when a car's ready for delivery but it's not staged is if the rear wiper blade is hanging down. The rear wiper is a key detail that can tell you that a store's CSI scores are a lot lower than the ones that actually take care of that.

And fingerprints, too. How many times have we done $5,000 worth of work on a customer's car and all of it has been done right and great and the car runs better, and the customer comes back in and points out that there's greasy thumbprints on the headliner or whatever?

Sit in the customer's driver seat when the car's ready and just look around. Be observant of the car and its condition, and don't forget your disinfectant.

Radio stations, too. You shouldn't touch the radio when you're servicing but if for some reason you get possessed by the spirit of Parts Department and you can't resist tampering with the customer's radio, you don't want a soccer mom to get in the car and it blasts heavy metal or mariachi music. Unless she already had it set to that station, of course…

  1. Practicing

The next big difference between a professional and an amateur in any field is practice. How many times do you see service advisors practicing outside of working hours? I rarely see it, and it's important to keep your skillset at a high level and recognize when you're out of practice.

  1. Investing in yourself by having a coach and training

Next one on the list is no coach and no training. What books are you reading? What training have you done to get better? Whether you're an advisor, a manager, a tech, it doesn't matter. There's so many different areas you can learn in that there's always something to learn!

  1. Making money instead of earning money

Another one is you make money instead of earning money.

What that means is an amateur does a job where you're exchanging time for money vs. a professional doing a job where you're exchanging results and passion for money. You actually really care about what you're doing, and then the money takes care of itself.

It's the difference between a salary or hourly employee vs. somebody who's actually vested in the result and their outcome. If you're just focused on doing the job and making money, the customers are going to be able to tell that experience apart from someone who's really focused on making it a remarkable experience every time.

The last one on our list of how to tell an amateur from a professional is professionals track results– They know their numbers. They're looking at their measurables all the time. They know if they're winning or losing.

So those are 5 ways to tell an amateur from a professional. Thanks to you guys for tuning in, and we'll see you next time on Service Drive Revolution!

How to Calculate Effective Labor Rate (ELR)

How to Calculate Effective Labor Rate (ELR)

Effective Labor Rate, or ELR, is probably one of the most important numbers in your Service Drive. It never ceases to amaze me when I'm on strategy sessions with Service Managers and Shop Owners, and we'll be reviewing their financials and I come to realize that they don't understand Effective Labor Rate. That blows me away.

This happens all the time, and it’s shocking and disappointing how many Service Managers don’t understand their Effective Labor Rate. So let’s set the record straight, because ELR is one of the most important Key Performance Indicators (KPIs) for every Service Drive, whether you're a dealership or an independent shop owner. It's also used to calculate other KPIs, such as Hours per RO, so you need to understand how to calculate ELR. 

What is Effective Labor Rate?

This may come as a bit of a shock to you, but your posted labor rate doesn't matter. It’s an imaginary number that you hope to collect for every hour of labor. I hear it all the time in strategy sessions, a Service Manager will say, “Oh, well, my posted labor rate is $120,” but when we actually look at it, we’ll find that although your posted labor rate might say $120, your Effective Labor Rate is actually closer to $80.

Why is that?

Well it's pretty simple, really…. Are your customer pay rates the same as your posted labor rate? How about internal rates, service contract rates, and warranty rates, are those all the same? Do you not offer any discounts? Does your posted labor rate take any of these variables into account?

So if your posted labor rate is $120, but you're not actually charging $120 for a particular service you provide (like an oil change), then is your posted labor rate an accurate representation of how much money you're actually making from the half-hour your Technician spends on that oil change?

No.

That's why your posted labor rate doesn't matter, and why you need to know how to calculate your Effective Labor Rate, because if you don’t know your ELR, then you ultimately don’t know what you’re actually collecting for every hour of labor you're selling.

To put it bluntly: If you don't know your ELR, you don't know what you're going to pay your bills with.

How do you calculate Effective Labor Rate? 

The formula for Effective Labor Rate is: 

Total Labor Dollars

÷

Total Flagged Tech Hours 

That's your total labor dollars divided by hours flagged by Technicians in the shop. That's how you calculate Effective Labor Rate. So, for example, let’s say you sold a total of $7000 in labor, and your Technicians flagged 7 hours. Your ELR would be $100.

One Major Consideration

Now, there is one big variable that you want to take into consideration when it comes to calculating your Effective Labor Rate:

If you have hourly Technicians, and they aren’t flagging their hours, then you aren’t going to get an accurate number for your cost of labor. Without an accurate number for your cost of labor, you won't have a real number to figure out what your Effective Labor Rate is, so you need to have everybody flagging their hours

Calculating Effective Labor Rate becomes easier when you really have a shop that is invested in flagging their hours consistently. If they're not flagging for oil changes, but you're collecting the labor, it throws your off your ability to calculate your ELR.

The main lesson here is that it doesn't matter what you have as a posted labor rate. What really matters is what you actually collect for every hour of labor you sell, and that’s your ELR.

Where can I learn more information like this?

This calculation was originally featured on our Service Drive Revolution podcast as a part of our Terms You Should Know segment, and you can watch the full episode here. We pack every episode of Service Drive Revolution with tons of valuable information just like this, so don't miss out! Make sure to subscribe today on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts!

If you’re in need of Service Department training, or professional coaching for your Service Drive, you can learn more about Chris Collins Inc. by browsing our products and services. Our motto is: “Training isn’t something that we did, training is something that we do!”