Why settle for 85%-90% of your door rate ?

[JamesBlack]

Why settle for 85%-90% of your door rate in terms of your customer pay effective labor rate? Why not meet or exceed it?

Industry standard and conventional wisdom tells dealers that their customer pay effective labor rate should be 85% of their door rate and if they are really doing a good job it should be at 90%.

For example if the door rate for customer pay labor is $85.00 conventional thinking and a successful model should have the actually customer pay effective labor rate* either at $72.25 (85%) to $76.50 (90%). If the location turns 12,000 customer pay hours a year and functions in a traditional way they are leaving anywhere from $102,000 and $153,000 ($127,500 on average) a year in Net Profit on the table.

If you get paid on the Net that is about $10,200 out of your pocket!

For a rough calculation take the number of locations in a chain multiplied by the average number of $127,500 to determine the hidden net profit that is not recovered by the organization on a yearly basis.

Why is this acceptable?

It should not be!

Here are reasons why some people live with less than stellar performance.

1- Making more net profit takes a back seat to running the operation, keeping people out of the dealers office, putting out fires, crunching spread sheets and watching the 7 controllables.

2- Change is difficult.

3- They have been doing it like that for 25 years and that is how it is done.

4- Time, or I should say a lack of time, prevents people from finding additional net profit!

5- They think that they do not have the right people in the lane or turning wrenches.

6- The market will not bear it.

7- They are doing everything that they can do. This is because they live inside the conventional box of conventional thinking about fixed operations!

8- Despite the fact that their customer pay effective labor rate is at 82.45% of their door rate they claim to be Gods gift to Fixed Operations!

My thoughts are that there is only one valid reason why 95% of the dealerships out there do not have an effective labor rate that equals or exceeds their door rate at a current price that the market will bear;

The reason is because they do not know what they do not know.

(Think about that one for a minute.)

There is no valid reason for this condition to exist. Do we have all of the answers?

No! We do, however, have the answer to this question and can produce results. The result does not lurk within the platitudes of conventional fixed operations consulting or conventional thought!

The answer is in looking very closely for missed opportunities which is more difficult than it sounds.

Discuss?



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James Black
800-948-9377
Director of Business Development
KEEPS Corp.