The business side of service

By Paul MacDonald, ServiceSource

The results are in from AVB’s latest ServiceSource Service Survey.

Based on a comprehensive member poll, this extensive study offers invaluable insights into the latest trends, customer preferences and industry benchmarks shaping the future of service excellence.

In this third of a four-part series, we examine the business side of service. (The complete survey results are available in the Backroom.)

So whether you’re a service manager, business owner or industry professional, these findings are essential for staying ahead of the curve, delivering exceptional customer experiences and gaining a competitive edge by leveraging the report’s data-driven strategies and best practices.

Part III: The Business Side of Service

1.         The P&L

 According to survey findings, only 26% of servicing dealers have and maintain separate profit and loss (P&L) statements specifically dedicated to their service operations. This statistic highlights a prevailing trend wherein many servicing dealers integrate their service revenues and expenses within broader financial statements.

While this approach offers a comprehensive view of overall business performance, it may also obscure the service department’s profitability and cost dynamics. However, for those dealers who maintain separate P&L statements for service operations, this strategic decision provides a clearer understanding of the financial health and profitability metrics specific to their service endeavors. It underscores a commitment to detailed financial analysis and strategic decision-making within a member’s service operations.

2.         Cost of a Truck Roll and Profitability

       The survey data reveals a notable disparity within the industry, in which 70% of respondents report being income positive, despite 70% admitting uncertainty regarding the cost of rolling a truck.

This discrepancy underscores a critical gap in financial awareness and operational understanding among servicing dealers. While most businesses claim to achieve positive revenue streams, a significant portion lacks clarity regarding the direct expenses of deploying service vehicles. Understanding the cost of rolling a truck is essential for accurate financial planning, resource allocation and profitability assessment.

This finding underscores the opportunity for businesses to enhance their financial literacy and operational efficiency by implementing robust cost-tracking mechanisms and by training staff to improve overall economic and efficiency understanding within their service operations.

3.         Technician Remuneration

 The survey results reveal that 54% of service technicians are compensated hourly, while only 46% receive a combination of commission and salary, indicating a notable preference for hourly wages. However, implementing a commission-based pay structure has been shown to significantly enhance productivity, as it incentivizes technicians to maximize their efficiency and effectiveness in completing billable calls, ultimately leading to improved performance and service quality.

The survey findings shed further light on the prevailing compensation structures within the service industry, revealing that the average hourly wage for technicians is $22.29. Alongside hourly wages, the survey also revealed an average commission rate of 38%, underscoring the potential for technicians to augment their earnings based on performance.

Moreover, many members opt to incentivize productivity further through performance bonuses, which provide additional rewards for achieving specific targets or milestones. These bonuses not only serve as a means to supplement technicians’ wages, but also foster a culture of excellence and accountability, driving enhanced productivity and service quality.

By leveraging a combination of hourly wages, commission rates and performance bonuses, businesses can effectively motivate their technicians while maintaining competitive compensation packages within the industry.

Up Next: Part IV, Warranty

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.Macdonald@brandsource.com.

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