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Exposing the 5 Profit-Sucking Causes of Unapplied Labor

When was the last time you peeked behind the curtain of your Service Department’s unapplied labor? If the answer is never, I’ve got some potentially ugly truths you need to confront. Hidden profit killers are likely lurking unseen right under your nose. 

But don’t worry – today, I’ll shed some light on what’s really hiding in that vague accounting bucket. With some targeted fixes, you can uncover lost revenue and boost Service Drive performance fast.

First up, let’s define unapplied labor if it’s still murky for you. Simply put, it’s man hours that don’t get connected directly to an RO and show up as waste. It’s found money when reduced (but a silent killer at many dealerships.) 

Digging into the nitty gritty details is step one in diagnosing areas needing TLC. 

attracting new customers

Here are five of the top areas that hide profit-gobbling unapplied labor:

1. Accounting Errors  

It’s tedious, but verifying exactly who and what gets dumped into unapplied labor reveals a lot. You can’t tackle what you don’t measure, after all. This isn’t as exciting as selling services all day, but if you see porters, salespeople, or other random charges here, it deserves discussion. Don’t let accounting become a case of “that’s how we’ve always done it” complacency.

2. Inefficient Technicians

Low performers struggle. But inflated guarantees or doubling up labor on two Techs per car prove even pricier. And don’t get me started on Advisors over-flagging in an hourly pay structure! Easy money has a way of growing into profit-crushing monsters when left alone for too long.

3. Quick Lube Challenges  

Two words – volume and slim margins. Quick lubes already walk a tightrope, so any sloppy time tracking turns red ink redder. Add guarantees into the mix, and you wind up overpaying without optimization. There’s big hidden potential here, but only with diligence.

4. Training and Development

Some training truly elevates skills, while others clog productivity and bleeds the bottom line. Differentiate between smart seeds for future growth versus handing out gift money for checking social media or ” organizing tools.” 

5. Charging Practices

Advisors consistently under-flagging jobs may indicate underlying issues in your fee structure. And over-allowing expenses like Tech costs and inventory to minimize other losses fosters bad habits. Sweat the small stuff now so profits don’t trickle out in bigger ways down the road. 

By itemizing unapplied labor accurately, you take control of the puzzle instead of guessing from the sidelines. We’ve helped countless shops uncover an extra 20-30% in hidden gross profit through tighter practices and entities.

If this sounds like your shop and you want to learn directly from someone who’s been in the trenches of the auto industry, book a 15-minute strategy session to discuss how to customize an action plan that works. We’ve coached nearly 1,000 service drives since launching our unique accountability-based coaching model focused on results.

Stop leaving easy money on the table and take back profits hiding in areas like ineffective guarantees, double-teaming loops, Advisor oversight (or lack thereof!), and improper costs tracking. Now’s the time – book your session today.  

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