Dealer LAB: Service figures hurting profits

Publish Date: 
Aug 26, 2012
By Joe Delmont

PERSONNEL ISSUES continued to haunt Destination Powersports in June 2012. The impact was especially evident in the store’s Service department, where revenue in June was only about half of what it was in June 2011 ($21,176, down from $40,890). However, total business revenues for June were up $135,999, or more than 34 percent, over the June 2011. Gross profit was up almost $9,000 over last June, and net income increased $2,400.

Unit sales did well in June, as the dealership sold 50 new and used units and generated revenues of $431,606. That’s up $156,867 (57 percent) from the $274,739 revenues generated last year on the sale of 39 new and used units.

Sales continue strong for the year, with the dealership selling 303 new and used units through the first six months, compared to 261 units sold for the same period last year.

Total revenues for the year are ahead of last year ($2,934,749 compared to $2,807,102) but gross profit is off about $50,000 — down from $746,642 to $692,605 — and net income is down $42,180, to $109,773.

Service is giving the ‘big hurt’ to the dealership. For the first six months, Service revenues are off nearly $70,000, dropping to $155,571 from $225,306 last year.

Revenue per employee in Service dropped from $7,435 to $2,823, and gross profit per employee plummeted to $253 from $3,339 a year earlier.

The Service department increased its employee count to 7.5 staff in June.

Dealership owner Bill Shenk in May hired a Service department manager. The new manager would have a strong monthly guarantee for six months before he switching to a commission-based compensation package. However, the new hire didn’t work out, and Shenk let the man go in June, after less than two months on the job.

Shenk initially thought he had a heavy hitter in his new Service chief. “He had worked for and managed many departments, and even had been selected and trained as a GM for a dealer group for many years,” Shenk says. “They sent him through the complete ... dealer candidate school.”

Shenk believes the manager’s failure had to do with a shift in performance culture. “First, he was a bit resistant to our dealership systems, and it was obvious that he had never been exposed to our philosophy where every department is a sales department.

“In addition, his personal life was taking a great deal of his time, even during business hours, as well as keeping him from working more than 40 hours per week. This situation was well-documented by recordings on the dealership’s security system,” Shenk says.

Finally, Shenk adds, the candidate had “viewed the Parts and Service departments as necessary evils or support departments to the business of selling major units.”

STAFF WOES CONTINUE. Personnel problems continue at the dealership, and it is an ongoing challenge, Shenk says, to get the right person in the right position. (continued)