Fixed Ops Journal is one of 31 rooftops owned by the Umansky Automotive Group, based in Memphis, California, Mississippi, Tennessee, Virginia, and Wisconsin, to manage the service department at a 55-year-old Honda dealership. interviewed Butler in April shortly after he was hired. In his June issue of FOJ, he outlined the challenges he faced and laid out his detailed game plan to revive the dying division.
Butler also agreed to provide an update on the status of the department within six months. verdict? I agree with you.
Butler said the facility, which has 19 service bays, has 11 line technicians, four express lane technicians (one more than last April), six in the parts department, and four in the service department. Regarding the department, he said: Advisors (one more than before).
“We have the right processes in place and the numbers are right,” he says. “Everyone is in tune with each other. So there’s less communication breakdown.”
Butler likes to say numbers don’t lie, and the numbers he quotes tell compelling stories of recovery.
For starters, repair orders have nearly doubled from April’s high 20s to just over 40, he said.
“Our goal is 60 to 70 ROs per day and we have the ability to do that,” he says. “So there is still room for improvement there.”
Additionally, revenue per repair order nearly tripled to $300, compared to the low $100s when Butler joined. In addition, total service and parts revenue for the division increased by approximately 100% from approximately $160,000 per month to approximately $325,000 per month. And net income that was in the red to $25,000 a month is now consistently between $50,000 and $75,000 a month, he says.
Digging deeper into the numbers, Butler notes that the effective labor rate for the department’s total (both customer paid and warranty work), a measure of the profit the service department generates per billing hour, is $136. That’s a 60% increase compared to the sector’s effective labor rate of $85 last April, Butler said.
At the time, Butler determined that the division’s “door charges” were significantly lower than its local competitors, and acted quickly to resolve the issue.
“is higher than [effective labor rate] Butler is a healthy sign that he’s pricing competitively in the market, but not too high to alienate customers… $100 per hour worked.so your [effective labor rate is] Anything less than $100 means you’re losing money. ”
The sector’s fixed absorption rate also increased significantly from 60% to 90%. He says this is well above the industry average of about 70%.
“Our target is 100%, which means fixed operations cover all our dealership costs and sales income is pure profit,” says Butler.