On May 8^th of this year I published an Up to Speed article titled “Did You Ever Look at Your Service Gross Potential THIS Way”  In that article I stated that NCM Institute (NCMi^®) research showed that, on average, with the proper departmental structure and processes, every incremental customer-paid labor dollar produced should result in approximately $1.25 in fixed gross profit, which should then result in approximately $0.875 in Retained Net Profit.

Unfortunately, my statements were inaccurate, and based on the positive example recently set by Hyundai and Kia, November is a good month for admissions of guilt.

Fortunately for me, however, and unfortunately not for Hyundai and Kia, the inaccuracies I supplied to you in May significantly understated the benefits you should derive (with the proper departmental structure and processes) from producing each incremental customer-paid labor dollar. When I made those bold statements back in May, I didn’t provide any supporting information for you to review. Not so, in this article!

The following chart displays a recent pro forma developed with an NCMi attendee. The “Current” columns of the chart display the current average year-to-date (YTD) monthly performance of the attendee’s service department. The “Projected” columns display the service department’s potential performance, if, in fact, the attendee is able to effectively implement and execute the NCMi recommended processes to which he is now committed:

Note that in this example, the ratio of Incremental Gross Profit Improvement (IGPI) to Incremental Labor Sales Improvement (ILSI) is 1.531. This means that for every incremental customer-paid labor dollar we sell, the resulting fixed gross profit is $1.53. Also note the ratio of Net Profit Improvement (NPI), at a 70% retention level, to Incremental Labor Sales Improvement (ILSI) is 1.072.  This means that for every incremental customer-paid labor dollar we sell, the resulting Net Profit Improvement is $1.07. These incremental improvement metrics are obviously very significant…and they are 22% higher than those that I presented to you in May.