Chris Collins and Christian Lafferty argue that net fixed absorption and customer retention matter most for service departments, not gross profit. Chasing higher gross often just increases expenses and discounts instead of improving what actually hits the bottom line.
What would you say, Chris, are the most important measurables in fixed?
Well, yeah, I mean, obviously your, your gross and your, your effective labor production. I mean, there's a lot of, a lot of measurables that I look at daily when I'm running a store. But your effective labor rate, maintaining that and maintain, maintaining your, your shop hours, obviously that's a, all of that's going to go hand in hand.
Okay, so there's really two important measurables. So this is where I hate being labeled a consultant because it's way simpler than that. The two most important measurables are net fixed absorption and customer retention. Those are the two most important measurables. Most of the time when I come in behind consultants and I ask for a financial statement, nobody's looked at a financial statement in five years. They say, get more gross. Get more gross. In every 20 group I've spoken at in the last five years and the moderators tell me all the time too, is these dealers say, get more gross, get more gross. And the managers outspend the gross increase in expenses by discounting and trying to drive traffic and chasing traffic and getting more gross implies getting more traffic. And it's a chase to the bottom and it's an end sum game. So what I want managers to do is focus on net and fixed absorption. Now, part of that is the effective labor rate, your gross profit percentage, your expenses, your personnel expense and all that. Now, when I'm looking at this equation, the reason why I would never think this way is because this is confusing. And I'm wondering, since you understand this and I'm looking at this and my add kicks in, where does it take into account how many technicians are in the shop?
Well, it doesn't, It's.
Yeah, so that's the problem is if I got 12 techs, I don't need to raise my effective labor rate by anything by giving one guy four. Also the idea here that the gross Profit percentage is 78, I want it to be over 80. So I like, I can get, you know, with our pricing strategies and the way we set things up, we, we shoot for 80% on that. But giving One Tech $4 is not going to affect that. It's going to affect it very little. And you know, with what we do, we can get any effective labor rate we want. And so I just feel like it's, it's, it's something to make serviceman. It's like, you know, one of my least favorite conversations, Chris, that consultants have trapped me at bars, at conventions, and stuff talking about. And I literally want to shoot myself in the face. Could you guess?
Shoot yourself in the back of the face. What is it?
Proficiency.
Oh God. You get into proficiency, efficiency, productivity. Yes.
There's eight. You're either on an eight hour day or a ten hour day. What did they flag? Eight hours, seven hours, six hours? I don't like. There's so many times I come into these dealerships that are in 20 groups. They're paying the advisors on gross, they're losing money, the managers are chasing traffic and gross and the techs are bonused on proficiency. And there's a consultant that just left the building and now I've been brought in and the technicians can manage proficiency all day long and not be efficient. And hey, if you're working an eight hour day, could you flag eight hours in one minute?
And the other thing is the quick lubes. Right. So most of the time the text on the quick lube are running at 40 or 50% efficient. So how do we get them out of a quick lube in a situation where they're, you know, they can be 80, 90 sometimes we've had it where they're 100. But that's hard to do and requires a really good leader in that department. But.
That'S why I think this is so funny, honestly, is that it really does nothing. I mean, do you think Rob would ever listen to this so I can tell him, rob, this is a waste of time and it doesn't even account for how many texts. If you have 12 texts, it's going to be like 20 cents or something.
33.
30. God, you're good with the math. He's good with the Christian. Lately has been like certain things we've been doing, he's like, oh, that's 33%. Oh that. Like it's because he used to be a desk manager and so he, he was, he was a desk manager when you had to do leases by hand where you, you know, you had rocks on a string and that's how you figured out your lease payment.
So what were those things called that were calculators in the mid. The abacus? Yeah, he did lease payments with an advocate and I still had to do foursquare.
Thanks so much for watching this clip of Service Driving Revolution. 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.chris collinsinc.com. now that's offers.chris collins inc.com I'm Chris Collins, and I'll see you in the next video.
