Monday, February 23, 2009

Ask and Ye Shall Receive, 20% off

My dealership needs a minimum twenty percent reduction in costs to ensure our survival in the market place.

Like many dealerships, we were looking to reduce our expense structure. After months of watching the numbers come in and working hard to improve the bottom line, we decided on a new strategy. This new strategy is a wholesale reduction of variable and some fixed expenses.

Our General Manager drafted a letter similar to the one below…

Dear Vendor Partner,

We value you as our vendor and appreciate the years of service we have had working with you. We would like to continue our relationship for many more years to come. In order to achieve this continued relationship we are requiring a minimum of a 20% reduction in your pricing. Once the economic situation turns around we are willing to renegotiate the terms.

Please send a letter with your current pricing as well as the new discounted price level that you are willing to work.

If you are unwilling or unable to lower your prices we have already contacted a replacement. Please consider this as our letter of termination of your product or service.

The General Manager

(Please feel free to copy my letter)

This letter was sent out to every vendor we use on February 1st. To date all of our vendors, with one exception, have agreed to the price concession. The vendor that did not participate is no longer with us.

Here is a list of potential vendors: computer people or IT, shop supplies, wheel weights, gloves, sprays, chemicals, tow companies, body shops, dent doctors, advertising guys, newspapers, license plate frames and more. Have your controller run a list of every single vendor from your DMS. Or just attach this letter to every check that is going out at the end of the month for goods and services.

Be aggressive

Do not take this lightly. My suggestion to all dealers is to do the same thing today. Make your vendor partners share the burden of this economic time. It is your survival that depends upon controlling your expenses today. We all know that there are multiple vendors for almost every situation in our dealerships.

In fact, the license plate lady was in the shop on Friday. We were out of plate frames. My general manager personally asked her for a price reduction.

She stated, “We don’t have 20% mark-up in the plate frames”.

So my boss said, “Well you won’t be selling us plate frames then. Thank you”.

That was the end of the conversation. We will have a new plate lady tomorrow. And I am sure the plate frames will be the right price.

Get Creative

Look at the car wash soap. Look at the wheel cleaner. My wheel magic guy was able to reduce soap by over 50%. Along with the discount we switched to a different product. A barrel of the original concentrate soap was $610. Now it is less than $210. That is a huge savings. My detail manger was in the office discussing the new product. It works just the same at the expensive stuff.

We all want our cars to look great on the line, right? Imagine instead of waxing and polishing the cars to a perfect condition, just so the cars can sit in the weather for days or weeks to be sold, how about we wash the new cars for the lot. Make them look great. However, when the car is sold, then use the premium stuff for the customer. The customer needs to take the car home at its very best. I suggest you can save a few dollars everywhere you look.

Every dollar counts toward your profit, or loss. Which will it be for you?

Steve Shaw

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Wednesday, February 18, 2009

The Cure for Everything is Effective Labor Rate - ELR

Since my last exercise I have had so much response regarding increasing ELR. Immediately questions arise about customer satisfaction and decrease in production. I suggest that we can have it all. We just need to train our service advisors how to sell effectively. I have made a career of walking the parking lot touching the car and keeping my WIP to a minimum. I also have traveled and worked with hundreds of service advisors. We always look for ways to sell service more effectively.

It all starts with a daily service advisor sales meeting. I have been a preacher of the technician production meetings. Each day I walk out to my shop and have a quick round meeting about production.

…What’s up guys? Just a hello, how were your FRH (Flat Rate Hours) yesterday? What’s going on today? Any issues. I know the answer to that. We meet every day. The issues are over. It’s all about production now…

As of February 1st we do the same thing with the service advisors. I mean SALES PEOPLE. Dealers, is that no what we are here for? We are here to sell things. I think we forget that sometimes. We get stuck in our routine. We mundanely meet customers, fade heat and try to fix cars. What happened to selling something?

So we are having regular service advisor sales meetings. My new agenda looks like this. Arrive at work, 7:30 AM. Some may argue that point. I grab a cup of coffee and head to my office. Of course I check my email and go to the ROAMS tool and print out yesterday’s sales reports.

1. Report 1. Summary Report.

2. Sort by individual service consultant.

3. Yesterday

I print the reports and head to the meeting. I usually run a RAP Report from ADP as well.

“Who sold the most FRH yesterday,” I ask? We quickly review the service advisor sales, gross profit and ELR. Simple and Effective, I say. Quickie incentive pay out and we are starting our day.

I have one store that has moved the needle from $121 per hour as of Jan 31st to $138 per hour today. I think that is quite an improvement. If I tell you about the others it just may make you cry.

Unless Chris Collins manages your store, he is the king of ELR. I know one of the BMW deals have an overall effective labor rate of $167. CRAZY GOOD STUFF!

Congrats to his team and to mine as well. They are moving the needle. Time to walk the parking lot again.

Steve Shaw

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Thursday, February 5, 2009

Stimulus Package

President Obama is trying to do it for the nation; I say its time to stimulate ourselves! Let's increase the profits of our service and parts departments. The goals are real simple, get our effective labor rate UP, increase gross profit and straighten out the expenses. Raise the gross on parts while you are at it!

Spread out your appointments. Customers need time to spend with your service advisors. It is my suggestion that we make sure our processes measure up to the challenge this year. Our customers want satisfaction! And we service managers will give it to them.

Go down on expenses. And lick up the profits this year. Your dealer and I will be watching and cheering you all the way and every way you do it!

It’s time to get those cars in the shop, get them up on the racks and get ‘em back out on the street. I want you to do it so well that they keep coming back all year for more.

Congrats on a job well done.

Steve Shaw

P.S. Don’t forget the car wash!

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Thanks goes out to Jay Huffschmidt (my crazy Marketing Manager) for the car wash image of Brooke Banx. It was taken last year on my service drive during the filming of Bikini Driving School.

Monday, February 2, 2009

Super Bowl Exercise

You will be world champions with this mind game.

I have one service department that is breaking even or loosing money consistently. I consulted with Chris Collins at and developed a game plan. After careful review of my financial statement, we realized that the simple solution is increasing the labor rate. I need $20 increase in ELR to send my dealer to the Superbowl next year. More if we can.

Sounds easy.


Oh yes will be. Here is the game plan. I utilized my ROAMS tool.

First I went to Report 17 and chose FRH Frequency. I reviewed where my service advisors hit on the grid. Then I went to “grid design”. I input my target ELR and hit submit. It was that easy. I need to move the needle huge this month. I want to go from $120 per hour to $150 and send my dealer packin'. That was actually the easy part. And for anyone who has tried to get service advisor buy in, well the hard part is to come.

Step 2. I held a meeting on Thursday evening. All of my service advisors came from across the stores. We talked about our dealership profitability. Is it a sin for a company to be profitable I asked? Why else are we here? I submit to my service advisors that if the company is not substantially profitable, we are out of business and ALL of us will be in the unemployment line. That usually wakes them up.

Step 3. I shared with them the financial information of the company broken down by the Flat Rate Hour. Based upon 1 hour of service, I showed them the dealership profit (loss). It was an eye opener for everyone. And where on the surface one would think that a high line European store with an effective labor rate way over $100 would be swimming in the black, its just not the case these days. So as we walked through the exercise I could see their minds churning.

Step 4. I asked each advisor to write down what our dealership offered to our customers. List each service and list everything we do well. Our strengths. Then in the next column, I asked them to list the competition. Most advisors listed an entire page of our strengths. And they could only list ONE of our competitors. A perceived lower price. After a careful and jubilant discussion of our dealership and how great we are, I asked them to write one more item on their list. Their name.

“Is their any better service advisor better than you at sales” I asked. I hammered it home, “Is the tire guy better than you?” And as Nick Neumeyer from MOC Products watched on, the preacher in me rose up and we drove the devil out of my dealership. The devil is lower prices. We are going to sell work here! My service advisers were fired up to sell that night.

Step 5. With new grid in hand, and the first sale of the month, we sold a 9-hour job for $186 per hour.

Thank you and good night. I have a Service Advisor Sales meeting in the morning.

Steve Shaw

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