Do nothing and face the consequences

By Paul MacDonald, ServiceSource

In preparing the trainings on keeping service departments profitable for the upcoming BrandSource region meetings, I reviewed last year’s content.

Topics included: 

1. Setting service rates based on CODB (cost of doing business)

2. Hiring technicians: Where are you looking? 

3. How service department efficiency impacts service rates 

4. Warranty rate negotiations

While these four topics are critical to a profitable service operation, my 30-minute time allotments proved too short to do them justice. I wondered how many dealers acted on the content presented at last year’s region meetings or at the recent Summit in Las Vegas. I frequently speak with dealers who are still stumbling on these topics.

Changes in your business aren’t going to happen by themselves. Owners/managers must move beyond the fear of making business changes. I hope sharing my knowledge and experience in service will give you the confidence to change your way of doing business. 

“The price of inaction is far greater than the cost of making a mistake.” Meister Eckhart

Let me recap three of those topics now.

Service Rates

The current rate of inflation is costing every business in America more than it did just six months ago, and if you haven’t raised your service rates since then, you will lose even more money this year than last.

With today’s volatile economy, dealers must reevaluate and adjust their service rates as frequently as they do their retail pricing for appliances on the floor. A dealer must review their service department’s CODB every six months and set service rates accordingly to remain profitable. BrandSource assists you by providing a CODB calculator in the Backroom, or you can find a simple CODB calculator and worksheet here. If you need help calculating your service rates, feel free to contact me at paul.m.macdonald@brandsource.com and I will help and guide you.

Hiring Technicians

Finding technicians during this historically low unemployment time is as challenging as setting profitable service rates. CareerPlug is an incredible member benefit for your recruitment strategy (check the Backroom for details), but it’s insufficient on its own. Today, employers must think outside the box to recruit sales staff and service technicians.

According to the U.S. Bureau of Labor Statistics, there were 10.8 million job openings on the last business day of January 2023, while the number of unemployed people was 5.7 million. These numbers yielded a ratio of unemployed people to job openings of 0.5 — down from the 0.9 or higher it had been since May 2021.

Consequently, employers must depict an inviting workplace to win over applicants deciding which job to take. In addition to the standard Indeed posting, employers should also consider local community and industry job boards, employee referrals and adding a link to their website career page in their email signatures. And last but far from least, employers should take advantage of their social media feeds, such as Facebook, Instagram and LinkedIn.

The point is, don’t stop at just a job posting. In today’s market you must sell candidates on the benefit of working for you. Pictures, videos and employee testimonials are powerful ways to tell your story and significantly improve your search engine results. Visit Cate Bloom’s impressive career page for AAA-Appliance Service Center in Chicago and check out this Facebook post from the same company. Now that’s outside-the-box thinking!

COD to Warranty Ratio

The pandemic’s lingering effects will take years to correct. The demand for appliances and service caused much chaos during that period, with overwhelmed dealers limiting repairs to warranty service only to keep up. Running a service operation at 100% warranty will drain all profits from the best service operations. The corrective action is to sustain the warranty business while growing the COD business, although returning to a healthy 30:70 warranty-to-COD ratio will take time.

Once achieved, profits will return. To get there, dealers must allocate funds to service in their marketing budgets. It may sound cliché, but you must spend money to make money. Yet service marketing doesn’t necessarily mean spending a ton of cash. Read my article on service marketing plans for 2023; it spells out five effective strategies that won’t deplete your marketing budget. They’re simple, cost-effective and deliver results. Delegate this activity and hold that person accountable for designing and executing your service marketing plan for this year.

I guarantee you this: If you do nothing, there will be no change in your service business and you’ll continue to lose money on repairs.

Paul MacDonald, AVB’s senior ServiceSource lead, ran his own 38-tech service business and is a past president of the UASA. He currently operates The Expert Service Program, which helps servicers run their operations more efficiently and profitably. You can reach Paul at (647) 500-7785 or at paul.m.macdoanld@pmdgroup.ca.

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