One of the best things we can do to prevent a poor performance month is to have strong margins in our fixed operations. If your overall parts department gross profit as a percentage of sales is below 35% place some attention to your margins. My suggestion is that parts gross profit margin to service customers is at 42%. Use of a parts matrix program might need to be used to achieve this result. I recommend a matrix generated from list plus pricing and if anyone e-mails me I will be happy to share this concept with them. I have seen many matrixes over my days and some of them are very aggressive. Recently I was looking at a statement with a matrix higher than I’ve ever seen yet was below 37% on the customer pay margin. Asking the parts manager about this he admitted not using the matrix because of the extreme nature of the retail pricing. The dealer came back after a 20 group and demanded this matrix be installed.

The point I want to make here is simple. Your matrix must be reasonable and be used by the parts employees. The best matrix in the world will have no result if it’s never used. Gross profit margins on labor should have a goal of reaching 74%. This can be accomplished with a strong effective rate and the technicians staffing skill levels matching the workload. If you’re shop is below 74% look at what labor operations are your poorest performers and massage them for improvement. We could literally spend a week on this subject however obviously we don’t have that time in my newsletter. Just understand the truth to better your margins and must take an action today to change.

Rob Gehring is the President of Fixed Performance
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