Should You Dedicate Technicians To Internal Work
Chris Collins and Christian discuss paying service advisors around 8% of gross revenue and dedicating technicians to used-car reconditioning. They recommend one tech per 60-80 cars, a recon budget of $1,500-$2,000 per vehicle, and a 2-3 day turnaround to keep inventory moving.
Questions this video answers
8% of gross (gross = sale minus technician cost).
Effective labor rate $125 per hour, technician pay $35 per hour → gross $90 per hour.
Approximately one used-car technician per 60–80 cars processed.
About $1,500–$2,000 per used car (speaker used $2,000 as an example).
Two to three days (about half typical retail customer turnaround).
Chapters
Welcome to your Friday drive by on Service Drive Revolution. I'm Chris Collins and this is Chris Shone.
Hello everyone.
Christian has had a little ditty in his head all day. So he's been walking around singing something which I can't quite tell what it is you're singing, but you definitely have a song in your head. What is the song? Do you. Wait, if you tell me the song, am I going to be singing it?
Yeah, probably.
It's fair.
It's catchy. Do you believe in love by Huey Lewis in the news.
Sing it.
I was walking down a one way street.
Oh, that's a good song. But what's the chorus? Do you believe in love?
You know.
Do you know you're walking around singing it?
Not always, but I. I was painfully aware of it when you just said that.
I want to give everybody in the audience some advice before we get to the questions. I'm gonna give you some other advice that you didn't ask for. But it's a life hack. This is what this is I'm about to share with you.
Right before this. Even though the air conditioning out here where we film with all these hot lights still, after spending the amount of money of the economy of a small country, it still doesn't work.
Well, the Rolls Royce is on the ceiling.
Yeah.
What we decided to do because we have our first in person boot camp tomorrow. So there's a pretty big group of people coming from. Are they coming from Canada too? Are there people from Canada?
Everyone's us for this particular one, so they're coming here.
It's going to be the first time we've hosted anything of consequence in our new building. So we've been working really hard to get our conference room set up and we're missing chairs. And so my idea was right before we film and come and sit in a hot room with. With less than adequate air conditioning, we should run up and buy some chairs. Which literally we ran run back and ends up being a bad idea. Yeah.
That's funny.
So your life hack is don't do that.
Yeah, that's true. And it is it. I guess even thinking about that like just traveling across the city right now is weird. It's just an. It's an odd time right, with you never know when people are going to be assembling. I passed a sign the other day and it said, it said end road work. Like they're literally protesting everything these days.
Pretty good. So you were driving through a construction site.
Yes, sir.
And then you saw a sign that said and Road work.
Like someone's upset about them doing.
They're protesting everything.
Yep.
And yeah, I get it. It's funny. Okay.
Here'S how it works, everybody. You call this phone number. Get a pen or a pencil or open notes on your phone.
Yep.
Do you. I know we have iPhones, but do those Android phones have notes in them?
Have a note thing?
Yeah. So even if you have an Android, you can do this. Open them up and then type in this number. It's 8333-ASK, which is spelled A S K. That's right.
It's not the A S C that it used to be.
Ask SDR. So it's 833 3, ask SDR.
I totally just made you second guess. Ask.
I know. And that's the number you call now if you call and we play your question on the show. And we do not play all the questions on the show. No, we nixed some today. Actually.
It wasn't. Most of the ones we nix aren't really questions. Can we tell everybody that? A little hint, a little life hack, if you will.
Yeah. If you're calling 8333-ASK SDR to make a statement.
Disguised as a question. We can see right through that.
Trained.
We're looking for a real conversation that will help other people listening. Right. It's a. It's a conversation that we're looking to have more than anything. Not a statement. And then if. If we do play it on the show, we send you some swag. Some pretty cool swag. T shirt, coffee mug, notebook. And pretty soon, you know what else is coming is swag for parts hold. We got. We got the logo going.
The logo is phenomenal.
So much more fun we can have with parts hold swag. Yeah, I'm pretty excited about that.
Keychains.
People think that parts hold is negative, but really the logo is a hand holding a part which is kind of like, hey, we're in service to you. We're get. You know, we have your part. Here you go. It's very friendly. And the hand of Jesus almost handing apart to somebody. It's not a phone with a blinking red light.
That's right.
But it is a phone with a brinking blinking red light also.
That's confusing.
What do you call it when something can have seven meanings?
Septumenary.
Okay, so let's get to the questions for this week.
Hello, my name is Eric and I am just recently a service manager at a dealership that I've been an advisor, a parts manager, and then I left for a year and a Half. I've come back to being a service manager and I'm losing.
Service advisors and my techs are.
They're wondering how we can keep this about. And I've heard you talk about advisor pay being.
Or should be like 8% of sales. But I'm wondering is that gross sales where it's counting parts and the labor sales, or is that just labor sales? What is that 8% of.
Thanks for the question, Eric. I am really curious if it's Eric with a C or Eric with a.
K. I've also seen Eric with Erich.
I've had a lot of Eric's debate that's like, oh, Eric with the C isn't a real Eric. Yeah, very.
It's clicky.
Those Erics be very toxic conversation. Yeah. So kind of the. The. There's a couple things you got to keep in mind when we're talking about this is.
There are some financial statements out there where the service advisor comp is split with parts. So in this scenario, it would be half of what we're saying.
Right now. Other financial statements have a parts transfer and other financial statements don't take it into consideration at all. They're just like service can pay for everything.
Advertising, new car advertising, whatever. Just build to service, many roads to go down. Yeah. So you got to keep that in mind when we're having this conversation is what is the accounting manual? Now, every manufacturer has an actual accounting manual. It's not something that that is talked about, but you actually can go to your. To your office manager, business manager, and it. Sometimes it's in printed form, sometimes it's online, but they'll actually have an accounting manual where every line of the financial has an explanation. And that's actually a good exercise for people to do because you learn a lot by. By doing that. Like just like how people account for, you know, unproductive wages or, you know, unapplied. Sometimes you see some. Some interesting ideas on. On how that's done, but the kind of. The guide we follow is that the service advisor comp. Should be 8% of the gross. And let. Let me explain what gross means. Gross is the sale less the cost of the technician. So if we sell an hour of labor, our effective labor rate on an hour of labor is $125 and we pay the tech $35. What's our gross?
$90.
$90. So now it should be 8% of the $90.
In a sense.
So $7.20.
Well, yeah, but on a big scale, the whole thing, they're not going to get paid on just one hour and go home and be happy.
Yeah, but you can't stop this calculator.
From running Rain Man.
There's no clear on that thing.
Christian really is Rain Man. The funny thing is when you're not involved in a conversation, like, let's say you're in another room and we're talking about something involving numbers, and then you scream out the answer with all this enthusiasm, like, let me save you the time of opening up your phone and pulling up the calculator.
Yeah.
I have done that a few times.
It's impressive, honestly. Yeah. So then 8% of the gross. Now, my preference is to pay the service advisor on sales, not gross, because they understand sales more sales is. Is easier to report and calculate.
And so now if you're. If you want it to be 8% of the gross, you're probably going to be around 5% of the sales in that area, plus some bonuses and some other stuff. And we. The other thing that I would say is.
We have plenty of clients where their Advisor comp. Is 12% of the gross, and their advisors make good money and they stick around and they have low turnover and they're very talented. So you can pull that from somewhere else, too. It doesn't have to be eight. If you. If you can figure out how to cut somewhere else.
Yeah, it's a guide.
I'd rather overpay and have good advisors that don't leave and turn over. And I think we've been seeing it more and more that we're going into stores and they've had a lot of turnover in advisors. And I think, to your point, Eric, they're under. They're underpaying the advisors. So let's keep that. Keep that in mind. But 8% is the answer. Hopefully that makes sense.
Well, I think the other thing, too, is not just about the total amount. Also, Eric, when you're calculating or developing your pay plans for your advisors, please, please make it easy for them to figure out how they're making their money. So there's been a lot of plans.
Should fit on one piece of paper.
Yeah. Because there's been a lot of times that I've seen advisors leave jobs where they actually were getting compensated really well. They just didn't know it.
Great point.
So make it really easy for them to figure out.
Yeah, great point.
Question number two.
My dealership is undergoing a little bit of change in the service department, and I am currently the new shop foreman. And me and the service manager were trying to figure out a better way to be able to fit in internal work like used cars and new cars along with.
Customer work. Right now we're doing about 60 to 65 appointments a day and it seems like we don't have a lot of time to be able to deal with the new cars and the used cars that's coming in. So any advice would be greatly appreciated.
Great, great question.
My preference is to dedicate technicians to internal. In the beginning, if you're not selling a lot of used cars, you can have the warranty administrator or somebody like that. Heaven forbid you have a dispatcher, but somebody write the arrows and follow up. But once you get to about 80 used cars selling 80 not, not, you know, if you. Well, isn't like this now, I don't think. But three years ago, pre pandemic.
If you were selling 80 used cars, you were probably wholesaling 20 or 30. Yeah, the percentage is maybe there were 110 coming through. But you were kicking a bunch, right? I don't know that we're kicking as many cars as we were before.
They're kicking almost all of them because the wholesale market was so crazy.
So you got to take that. How many are you kicking into consideration? But for every 60 to 80 you need one used car tech. And now you're, you're. One thing you might be thinking which is, which is smart is well, our used car department buys them all at one time. Yeah, that's okay. The use. The used car tech's job is to get them all checked out. Once you know what's wrong with them and you know what they're going to approve, then you can feed a couple of them into the shop. But you're feeding a couple. And also it's really easy to go to a tech and say, hey man, I got this used car. It needs brakes. This and this and this. Can you knock it out this afternoon before you go versus check it out, wait for the used car manager to okay that sort of thing. And then I, you know, advanced plus plus used car.
Department is dedicated advisor, dedicated techs and you have an amount that you can work with. So like let's say your used car recon is $2,000 a car. Anything you know, around that you can just. Okay. And so you don't really have to get a used car manager involved. You're kind of on the honor system and you gotta, you know, respect that and do the right thing by the used car department. But then you don't even have to wait for approval. You just know that if the used car Manager sent it and it's less than two grand or 1500 or whatever. You can just do it. And that dramatically increases the throughput.
But it is the key to the two day turnaround, in my opinion.
Yeah, when I do, it's interesting to me in the environment that we're in. When I do strategy sessions, one of the questions on the questionnaire before I do the strategy session is how far out are you booked for a retail customer and how far out are your used cars? Like how long for a used car to go from we took it in or we bought it to the front line. And most of the time the used cars are twice what the retail is. If you have a internal advisor and internal techs, the used car turnaround will be half what the retail is. So let's say we're booked out five days for a retail customer. Used cars should be two or three days, including detail. If you're doing it right now, there's people listening to this that are going, there's no way you could ever do it in two or three days.
You can. It's just you got to think a little different and you got to have a little trust. But sometimes it takes the used car manager two days to okay stuff because they're just so busy. But it surprises me in today's environment where used cars are where they are, that you would take that long to recon a car that's worth so much. It's almost like, oh, because they're holding their value, we can slow roll. But really good business would be the opposite is let's, let's get that money in that gross in the bank now. Like we, when times are good, we should have a faster throughput in my opinion. I want that cash to turn.
So dedicated internal tax. And then when the, when they overflow, you can give the work to the shop. But it's already diagnosed.
Yeah, it's a gift at that point.
Which is great looked at. And another thing too is a lot of times those used car tax, maybe like technology's passing by a little bit, but they're good at doing brakes and you know, the main used car stuff. And so you can pay a little less too because they're going to, you know, they should run at 120, 130% easier and that's across the board. It doesn't really matter the brand because their work is just lined up.
So yeah, I would dedicate.
I guess one more thing on that is you can do it off site.
Yeah. Where it happens does not matter. At all. That's a great point.
Sometimes, like in a, in a bigger dealer group, the way we'll set it up is there'll be a used car tech at the dealership and they will inspect them. If we're keeping the car, then the wreck will go to parts. Parts will pull the parts, put it in the trunk of the car. Car goes to an off site thing and then tech's there just knocking them out. So literally, they're just lined up like rental cars at a rental car return. They're just lined up, they grab the next one, they get the ro. The parts are in the trunk, they go. So there's ways to make that really, really efficient. And those texts will flag. Deservedly so. But they're flagging some hours. Yep.
That was it. Right? Three questions.
That's everything.
Thanks for watching this week's Drive By. I hope we gave you something to think about over the weekend. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com now that's offers.chriscollinsInc.com I'm Chris Collins and I'll see you in the next video.
