Digital Dealer - March 2020 - 16

DEALER OPS & LEADERSHIP

Fixed Operations

By
Ed Kovalchick
CEO & Founder,
Net Profit Inc.

What to Charge? How About
a Little More Big Boss

>

Let's face facts, our fixed ops
margins are generally blah in some
accounts. In my many years of
traveling, I have had the opportunity to view financial statements
from various industries, as well as having
discussions with numerous wholesalers and
retailers from industries/businesses other
than franchised retail automotive. What
struck me often was the difference in some
of the gross profit margins others enjoyed,
commonly to offset areas where the margins were minuscule, so that the overall
result was nicely profitable.
A simple example is one most automotive sweat-hogs like me can relate to
- booze. Think about what one pays for a
lousy ounce or so of bourbon in an eatery/
bar/juke joint versus purchasing an entire
liter-sized bottle of medium quality smack
at the local boot-legger. It almost feels illegal, but we lay the bucks down anyway so
we can hang out and whine to our cronies.
Blah, Blah.
The good news is that with a little configuring, we can bump our meager margins
too. Like other businesses, we have items
that carry different "value perspectives" to
the purchaser. For instance, those oddball,
I-need-it-now-4.89 differential ring and

16

[ d i g i t a l d e a l e r. c o m ]

Labor Beat Down

" The overall
experience is the
real driver of loyalty,
not price. Don't
give away what
isn't accomplishing
anything but a
crummy margin. "

pinion gears deserve a heck of a larger
markup than a common engine air filter.
Here, the ring and pinion represent the
bourbon, while an air filter is scrambled
eggs. The bottom line is that we just don't
do enough price nitpicking, but rather we
often tend to stick to the so-called published MSRP.

The mechanical effective labor rate falls
into the same pricing trap. While we take a
proverbial ELR beat-down on basic service
packages, especially when we are coerced to
pay inflated pricing (some not all) manufacturers charge dealers for common maintenance items, we have opportunities to make
up the difference elsewhere.
Unfortunately, too often, we don't
take the time or effort to do it. Consider
the massive overhead franchised dealers
are strapped with - oh, we need another
remodel - new factory management groan. When I explain to employees that
we need to generate a half-million dollars
in gross profit every four weeks just to pay
the company bills, they can't believe it.
And that isn't even a large store. Consider
the literally thousands of dealerships that
have closed over the years - there are less
than 17,000 now. In 1950, there were some
49,000 outlets - how's that for a poke in the
financial eyeball?

Robbery Not
Re-examining your pricing strategy isn't
about ripping anyone off. Although, if you
haven't been exposed to the markup, on
clothing for example, at cost times three or

March 2020


http://www.digitaldealer.com

Digital Dealer - March 2020

Table of Contents for the Digital Edition of Digital Dealer - March 2020

Digital Dealer - March 2020
Up to Speed|Tech, Dealer News, & People on the Move
Culture Three Tips to Improve Retention
Strategic Planning Strategic Planning for Sustainable Future
Leadership Five Lessons From Fearless Female Leaders
Spend Management Best Practices to Reduce Costs & Drive Profit
Fixed Operations What to Charge? How About a Little More Big Boss
Buy/sell a Generational Shift Is Boosting Buy/sell Activity
Meet the Speaker|q&a With Marketing Mastermind Phillip Stutts
Exclusive Interview With Jay Feldman of Feldman Automotive Group
Social Media q&a With Facebook
Speaker/session Spotlight|a Quick Look
Social Media Social Media Spring Cleaning
Ad Spend Marketing for Profit!
Cpo Toyota Led Record Cpo Growth
Fixed Ops Every Service Department Should Have a Salesperson Running It!
Fixed Operations
Digital Dealer - March 2020 - Digital Dealer - March 2020
Digital Dealer - March 2020 - Cover2
Digital Dealer - March 2020 - 1
Digital Dealer - March 2020 - 2
Digital Dealer - March 2020 - 3
Digital Dealer - March 2020 - 4
Digital Dealer - March 2020 - 5
Digital Dealer - March 2020 - Up to Speed|Tech, Dealer News, & People on the Move
Digital Dealer - March 2020 - 7
Digital Dealer - March 2020 - Culture Three Tips to Improve Retention
Digital Dealer - March 2020 - 9
Digital Dealer - March 2020 - Fixed Operations
Digital Dealer - March 2020 - 11
Digital Dealer - March 2020 - Leadership Five Lessons From Fearless Female Leaders
Digital Dealer - March 2020 - 13
Digital Dealer - March 2020 - Spend Management Best Practices to Reduce Costs & Drive Profit
Digital Dealer - March 2020 - 15
Digital Dealer - March 2020 - Fixed Operations What to Charge? How About a Little More Big Boss
Digital Dealer - March 2020 - 17
Digital Dealer - March 2020 - Buy/sell a Generational Shift Is Boosting Buy/sell Activity
Digital Dealer - March 2020 - Meet the Speaker|q&a With Marketing Mastermind Phillip Stutts
Digital Dealer - March 2020 - 20
Digital Dealer - March 2020 - 21
Digital Dealer - March 2020 - Exclusive Interview With Jay Feldman of Feldman Automotive Group
Digital Dealer - March 2020 - 23
Digital Dealer - March 2020 - 24
Digital Dealer - March 2020 - 25
Digital Dealer - March 2020 - 26
Digital Dealer - March 2020 - 27
Digital Dealer - March 2020 - Social Media q&a With Facebook
Digital Dealer - March 2020 - 29
Digital Dealer - March 2020 - Speaker/session Spotlight|a Quick Look
Digital Dealer - March 2020 - 31
Digital Dealer - March 2020 - 32
Digital Dealer - March 2020 - 33
Digital Dealer - March 2020 - Social Media Social Media Spring Cleaning
Digital Dealer - March 2020 - 35
Digital Dealer - March 2020 - Ad Spend Marketing for Profit!
Digital Dealer - March 2020 - 37
Digital Dealer - March 2020 - Cpo Toyota Led Record Cpo Growth
Digital Dealer - March 2020 - Fixed Ops Every Service Department Should Have a Salesperson Running It!
Digital Dealer - March 2020 - 40
Digital Dealer - March 2020 - Cover3
Digital Dealer - March 2020 - Cover4
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