BOLSTERING SAGGING PROFITS: SELLING PREVENTIVE MAINTENANCE SERVICES

Motor, Feb 2004 by O'Connor, Bob

Independent shop owners claim to be proficient at identifying customers' vehicle preventive maintenance (PM) needs and adept at selling PM services. They also claim to be able to profitably perform as much PM service as their shop capacity will allow. However, our observations do not support these claims.

Our company routinely audits thousands of repair orders each year submitted by independent auto repair shops throughout North America. This audit activity reveals many areas in need of improvement; one of the major areas identified is that of preventive maintenance (PM).

These audits have revealed that, generally, independent repair shops do a very poor job of identifying, selling and performing PM services. As other industry analysts have stated, their competitors, newcar dealerships, do a much better job in those areas. On average, these analysts say, 57% of dealership service business consists of PM work. Our observations indicate independent auto repair shops attribute a significantly smaller percentage of their tot al revenues to preventive maintenance.

There are five major reasons why many repair shops don't focus on preventive maintenance work:

1. Many of the shop staff, including the owner, do not believe in those types of services or in the elements included in those services. This philosophy is more prevalent with people who've been in the business for more than 20 years. If this mentality exists in your shop, it must change for your shop to be able to maximize its revenue and profits.

2. Preventive maintenance is not at the forefront of the minds of those managing the shop. Selling PM services requires planning, educating customers and aggressive, organized scheduling. Most shops are too busy repairing vehicles that break down as a result of age and a lack of maintenance to focus on the proper mix of repairs and PM work necessaiy to maintain high efficiency, large gross profits and desirable net profits.

We've been slowly changing our financial model over the last several years. We've found that in order for a shop to meet these new benchmarks, PM work will have to account for approximately 55% of its total revenues, and be performed with an efficiency factor of 150%.

3. There is a lack of education on the part of the shop staff. Most shops are not fully prepared with information systems, inspection processes and forms and other information necessary to sell and perform manufacturer-specified interval and other PM services.

4. Many shop staffs lack the selling skills and pricing procedures necessary to make the shop competitive. Shop owners generally have a difficult time competing on price with dealerships, chains, niche repair shops and other aggressive competitors. While it's true that almost every segment of the automotive industry is competing for general repair business as well as PM work, the same methodology that enables the independent shop to compete for other types of repair business must be integrated into a shop's plan to acquire its share of PM business, as well.

5. Many independent shops do not see the value in performing these services. They believe that its ability to solve problems through diagnosis and repair places them in higher regard with their customers, is more profitable and provides greater customer satisfaction. This mind-set is most prevalent in those shops whose staff prides itself on its ability to solve tough technical problems.

It's no secret that todays vehicles are built better, and therefore require fewer repairs, than their predecessors. Sure, having technical expertise is a necessary part of the equation, but as the need for diagnosis and repair continues to become a smaller part of total shop revenues, the need for shops to offer PM services will increase.

Why Focus on PM Work?

There are four major areas of your business that can benefit from your selling PM services: shop efficiency, gross profits, technician earnings and customer satisfaction. Let's look at them individually.

Shop Efficiency. In years past, repair shops had been able to raise prices to offset increased operating expenses and exorbitant discounting practices. However, today consumers are placing a ceiling on those rates, which is demonstrated by their purchasing habits. As a result, shop efficiencies must improve to support the need for increased billable hours. This will require each shop to evaluate its processes and procedures, staff capabilities, equipment, information systems, facility layout and a host of other elements.

With regard to production requirements, we've advocated through our training over the years that shops must accomplish 90% productivity and 125% efficiency to generate enough shop billable hours (9 hours billed out of a technician s 8-hour workday) to yield the sales and gross profits necessary to meet ever-increasing operating expenses and to provide desired net profits.

We are establishing new benchmarks requiring increased operational efficiencies and more billable hours out of the same 8-hour workday. Today, a shop needs approximately 11 billable hours out of a technician s 8-hour workday, or 90% productivity and 150% efficiency.