responsibility is to earn money for the company. I have learned from experience, self-talk
reinforces my courage and determination. Tell yourself, "If other dealers can learn how to change their shop's efficiency and take it from a cost center to a profit center, I can and I will." Because you are willing to invest time and money informing yourself and learning new management skills, as we proceed, it is important to remember there are no shortcuts to success. However, at the core of reinventing your service department, there are certain principles and methods that must be practiced.
Principle #1 The service department is responsible for
its fair share of company operating expenses such as rent/lease, electricity, telephone, property maintenance and income taxes. We will refer to these expense items as hard cost. Additional costs are incurred in
properly equipping the department: benches for work stations, lifts, grinders, welders, steam-cleaning station, and tools of all kinds. All of these costs must be considered before it is possible to establish a relative hourly shop labor rate. Wages and benefits are not included at this time.
Principle #2 After determining an effective hourly
labor rate, service department efficiency must be managed to a level that enables it to pay its fair share of business operating expenses while earning a healthy profit.
Principle #3 Hard work alone is not enough to take
your service department from a cost center to a stand-alone profit center. It takes business skills, talent, and a proven process linked to the profit principle to earn an equitable return on invested dollars. Developing a profit-centered mindset
is essential as we begin the process of reviewing mathematical formulas designed to track department efficiencies. Let's begin by considering the answers to the following three questions: 1) How much profit do you need? More than enough to break even and
pay expenses 2) How much profit do you want? Sufficient to paying better wages and
benefits Grow, expand, and pay for equipment Earn a meaningful pre-tax net profit 3) What is the service department's
potential? To become an exceptional profit
center What is the math for producing an exceptional stream of revenue? Formula: Payroll hours billing efficiency x Hourly labor rate = Revenue It's also essential to possess a clear understanding and definition of two
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