In the powersports industry, the majority of dealers have priced out service work based on the OEM flat rate guide plus some arbitrary percentage. Over the last five years, additional companies have started to provide resources to help dealers to do a better job of estimating the time each job will take. Spader Business Management offers printed or electronic Flat Rate Manuals, and Service Manager Pro offers their SMP software that integrates with multiple DMS, including Lightspeed EVO. Both of these tools can be customized to better reflect the time it takes to complete repairs.
Most OEMs will tell you that they develop their flat rates based on qualified personnel completing each job. While I have seen some techs who can meet or beat OEM flat rate times, most can’t (especially the first time they are attempting a specific repair). I believe that OEM flat rates just don’t do a good job of accounting for the issues that arise when a vehicle has been used and abused for thousands of miles. The vehicles are dirty, bolts break off, surfaces require lots of time to clean up so that gaskets will seal, customers may have made changes to the vehicle, and the instructions contained in service manuals often miss important steps.
My philosophy on setting times for work is that a task should have been completed a few times (preferably by different technicians) and the work should be commensurate with the skill level of the tech. An entry level technician who is attempting to rebuild a transmission is going to take a long time doing that work, and that shouldn’t be the baseline for how that work is quoted in the future. It can also be a conflict of interest to let technicians be the sole source of how internal flat rates are developed. I’m not saying they shouldn’t have any input in the process, they just shouldn’t be the sole source of labor times.
Recently, I had a discussion with a dealer about the amount that he was escalating OEM flat rate times to come up with his quotes for each customer pay repair. It was such a high number that I wanted to know a little more about his operation. What were the skill levels of his techs, who decided what amount they would escalate each job, how were repairs presented to each customer, and what was their labor rate?
My concern with this dealer is that his labor rate was too low, and so he was using the escalator to make up for that shortfall. It also sets a bad precedent for the technicians. If the techs can pace themselves and still hit flat rate times, then there is a good chance they aren’t going to push themselves to improve. And, since we can’t escalate the times that each OEM pays for warranty work, a culture of not wanting to do warranty work could develop. A large escalation percentage is an easy way to paint yourself into a corner.
Over the years I have learned that the best way to price service work is by the job. When I come across a dealership where the employees tell me that the labor rate is a problem they must overcome, it’s typically because their service writers have not received proper training. Instead of telling a customer “that will take 4 hours and our labor rate is $130 an hour, would you like us to do this work”, the job should be presented as “that repair will cost you $520, we have the parts in stock and you can have it back tomorrow.” Salesmanship 101. Don’t ask customers to opt in. Assume the sale.
The labor rate only becomes an issue when the dealership staff make it an issue. Customers want 3 things:
- Fix it right
- Fix it fast
- Communicate with the customer
Correctly present the repairs to the customer, stay on top of those 3 items, and the price will rarely be an obstacle that the dealership has to overcome. Give the customer more information than they need, and you’ll end up negotiating each repair at the service counter. Make it easy to buy, and then move on to the next task.
For the last year, business has been good, possibly too good. Many dealers are no longer paying attention to areas of the business that should warrant attention, and many bad habits are developing. At some point in the future, there will be a time where the aftersales (service and parts) portion of our business needs to carry its fair share of the dealership’s expense load. History has shown that a powersports dealership cannot wind up a service department in a short period of time. It can take years to develop a well-oiled service operation, and a reputation in the market that creates a constant flow of repair work. If your service department has developed some bad habits, then now is the time to address them. If you wait until we are in the middle of the next recession, you will have waited too long.
#Service #Powersports #FlatRate #Billing #LaborRate #OEM #Warranty