As someone who’s been in the automotive industry for decades, I’ve observed numerous dealerships make the same mistakes repeatedly. These errors, particularly in Service Departments, can significantly impact profitability. Let’s examine the five most critical mistakes and how to avoid them.
1. Prioritizing Metal Over the Curb (Vehicle Sales Over Service)
Many Dealers focus excessively on new vehicle sales, often at the expense of their Service Department. While unit sales are important, they’re not the whole picture.
In numerous Dealerships I’ve visited, management can readily quote weekend sales figures but struggle to provide basic information about their Service Department’s performance. This oversight is costly.
The Service Department is a Dealership’s consistent revenue stream. It’s not just an afterthought – it’s a crucial component of your business model. Neglecting it means overlooking a significant profit center.
2. Ignoring Unfamiliar Areas
Many Dealers come from sales backgrounds, which can lead to a knowledge gap in Fixed Operations. This unfamiliarity often results in neglect.
However, your Service Department won’t run itself. Active engagement and continuous learning are essential for its success. Ignoring this vital part of your business just because it’s not understood is a recipe for underperformance.
3. Imposing Arbitrary Salary Caps
I’ve encountered numerous situations where high-performing Service Managers are constrained by predetermined salary caps. For instance, a Dealer might insist that “a Service Manager doesn’t make more than $7,500 a month,” regardless of performance.
This mindset is detrimental. Top performers in Service Manager, Advisor, and Technician roles often earn – and deserve – significantly more. Limiting compensation based on arbitrary figures rather than performance metrics is short-sighted.
Consider this: If a salesperson consistently sells 50 cars a month, most Dealers wouldn’t hesitate to compensate them generously. The same principle should apply to your Service Department. Pay for performance, not for job titles.
4. Misunderstanding the Business Model
The automotive business isn’t solely about selling cars. A more accurate analogy is the printer and ink model: the initial sale (the car) leads to ongoing revenue (service and parts).
Your Service Department, Parts sales, maintenance work, and repairs form the backbone of long-term profitability. Yet, many Dealers remain fixated on the “nothing happens until you sell something” mentality, neglecting the very aspects that ensure customer retention and consistent cash flow.
5. Reluctance to Seek Help
Many Dealers prefer to maintain the status quo rather than seek external assistance. This resistance to change and outside input can stagnate growth and improvement.
Industry leaders consistently seek new information, strategies, and methodologies. They invest in books, training sessions, and coaching – whatever it takes to enhance their operations.
Wrapping In Up
Recognizing these mistakes is the first step towards improvement. If you’ve identified with any of these issues, it’s time for change.
At Chris Collins Inc., we specialize in helping Dealerships optimize their operations, particularly in Fixed Ops. We offer 15-minute strategy sessions to assess your specific situation and develop a tailored plan for improvement.
Our goal is to help you maximize profits, enhance customer satisfaction, and build a resilient business. If you’re ready to transform your Dealership’s performance, particularly in your Service Department, we’re here to help. Let’s start with a quick 15 minute call. Book it here.
