King of Profits

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Tom Kaiser, Senior Editor
May 1, 2014
Filed under Features, Top Stories

Service pros on building a knockout service department

Running a service department isn’t easy. Boats and motors are complex, curmudgeonly things that can confound the best technicians. Customers ebb and flow in lockstep, leaving stretches of downtime followed by an early-season crush when summertime approaches. And then there are the debates of how to price labor, pay technicians and keep everybody busy during the off-season. At the end of it all, it would also be nice to turn a profit.

Far too many dealers run the service portion of their business at breakeven or a loss, hoping to minimize losses while maintaining the department as a crucial offering for customers, a necessary evil.

While service may not exceed the revenue earned by selling major units, there are several concepts employed by top dealerships to consistently turn a profit, improve customer relations, stay busy during the winter and boost the bottom line of the overall business.

Service as the hub

Located in rural western Vermont, Woodard Marine is a 2013 Boating Industry Top 10 dealer, as well as the year’s award winner for Best Service Department. Owner Lauren Woodard-Splatt has a fervent enthusiasm for service, and has combined creative marketing with an atypical team of technicians to build a service department that is the core of Woodard’s overall business.

Menu prices provide certainty for Woodard  Marine’s customers, while also giving the company a 5 percent margin to cover minor additional repairs that can be done on the spot.

Menu prices provide certainty for Woodard
Marine’s customers, while also giving the company a 5 percent margin to cover minor additional repairs that can be done on the spot.

“We call service our hub at our dealership, so everything revolves around that department,” Woodard-Splatt said. “For us, if we didn’t have the service department, we wouldn’t be in business.”

For 2013, Woodard’s revenue for service including parts on repair orders was approximately 25 percent of the company’s total revenue, but it makes up 40 percent of its annual net income due to the low costs beyond paying technicians’ salaries.

Woodard-Splatt went to medical school before moving into the marine industry. She has a Dr. House-like enjoyment of diagnosing engine problems, and has taken a similarly clinical approach to running the dealership’s service department. The company follows many modern industry best practices, and has established a few of its own along the way.

Customers are given a personal touch, where a service team member — often Woodard-Splatt — will go over a boat at pickup with them to detail the repairs that were made, why they were done, show the old parts and give them a list of recommendations. It’s all about presentation, and the goal isn’t to upsell the customer as much as it is to address any safety or warranty issues to build trust that begets future business.

P17-BI14MAY-ServiceEach service customer is given a sheet including recommended repairs and other work that may be needed within the next six months — all including quotes for the work. Woodard-Splatt says nearly all of its customers call to schedule at least some of the items before the store checks in with them at a later date.

“In the long run, we’re getting the income from it, but we’re not shoving it down their [throat] — we’re not demanding it at the time,” she said. “The boat is supposed to be a stress reliever, not a stressor, so our philosophy behind it is to hold their hand more so during the whole service process … than just saying you need to have this done, do you want it done, yes or no?”

Woodard’s suggested service form (above) goes out to all storage customers at the end of summer, and includes whatever manufacture maintenance items are suggested. Presented as a checklist, customers can circle “yes” or “no” on a variety of suggested items, including upholstery and canvas that add additional service business during the in-season months.

With 300 boats in storage, preventative maintenance and focusing on warranty repairs is enough to maintain service revenue throughout the winter and ensure the company can keep its highly-trained tech staff throughout the season.

“We’re trying to prevent something from breaking during the summer when they want to use the boat,” Woodard-Splatt said. “We pay our technicians year round, we’re open year round, so if we didn’t have that we wouldn’t be able to do that.”

Other profit-generating tactics employed by the small-town shop include menu pricing that simplifies the process for customers, with an additional 5 percent built in to all menu jobs to allow minor additional repairs to be completed by techs without an additional charge, and to ensure the company comes in under budget with every work order.

Woodard pays close attention to tech efficiency numbers, which enables a pay plan that achieves two goals: rewarding speedy work while discouraging returns with a bonus program that is reduced whenever a repair is returned to the shop.

The company’s recent “Talk to the Techs” booth at its boat shows puts its technicians front and center with customers to answer basic questions, which Woodard-Splatt says has built trust and also displays the fruits of its highly trained service staff to the public.

Processes, procedures & practice

Located halfway between Portland and Bangor, Maine, GM and owner Rob Brown has dramatically grown Clark Marine’s business since purchasing it in 1997 by focusing on service, the so-called backbone of the company.

“Last year we worked on just over 2,000 boats and we created 2,700 work orders — that’s our focus,” Brown said. “We’re a service-based company and we never forget that. Service drives our sales [and] our repeat buyers.”

For Brown, the pillars of his success are education, strictly adhering to its established processes and procedures, and practice — which at Clark means focusing on the staff’s execution by setting daily, weekly and monthly goals rather than simply completing the work and seeing how the financials add up.

Clark Marine stores 500 boats every winter, with 350 to 400 receiving winterization service. The service team creates condition reports for its customers that focus on any required canvas work or appearance issues that are suggested on a proactive basis. Staff follows up on every suggested repair, using discounted parts and labor to keep the team busy during the off-season. Its discounted winter rates have a 30-day window of approval to avoid customers waiting until spring approaches when service is running at full tilt.

Brown’s business goes the extra mile for customer service by occasionally picking up or delivering boats within the area at no extra charge, among other plus-ones. The benefit of doing more, he said, is making it “easy for folks to say yes.”

Peter SewingWhile Clark Marine’s service department typically starts the season in a fiscal hole due to the seasonal slowdown, Brown set out to improve results this past winter with a proactive approach to increase billed hours.

All service and storage boats receive a thorough systems check. The staff creates an itemized estimate and contacts the customer to discuss the recommended repairs, explaining that labor is significantly discounted if completed during the winter months.

Mobile service and a canvas repair shop at Clark Marine provide additional service revenue, while improving the customer experience.

Mobile service and a canvas repair shop at Clark Marine provide additional service revenue, while improving the customer experience.

“We’re not calling people to try to sell them things that they don’t need,” Brown said. “What we’re trying to do is be proactive and make sure that we’re trying to prevent a breakdown, and I think that’s why people bring in their stuff to begin with.”

Part of Clark’s approach is enabled by data, and the company’s recent upgrade to ADP Lightspeed was, Brown said, “easily one of the most painful things we’ve ever done in this business.”

While the changeover was an extended challenge, it has streamlined Clark Marine’s operations, allowing better records, thorough notes on repair orders and ensuring that every customer interaction is on file for future reference.

“Our biggest gains are not going to be pulling an extra 2 or 3 percent from our sales, it’s going to be by picking up 4 or 5 percent on billed hours,” he said. “We have the capability now of working on anywhere from 125 to 150 boats a week.”

Adding its canvas business in recent years has enabled the company to hire five new service employees who assist with other non-canvas-related functions as the schedule allows.

From a managerial level, participating in the MRAA’s Five Star Dealer Certification led to the creation of detailed process maps that are finely tuned to each individual position. Always useful, and constantly refined, Brown estimates the company has created 30 process maps for its staff.

“I am very lucky that I’ve surrounded myself with people who I think have the same enjoyment of watching our customers smile,” he said. “Nobody likes to deal with an unhappy customer. People that work with us have seen the success that following our processes creates and they want to be part of a winning team.”

An automotive approach

Greg Beauchamp took a four-wheeled journey to the Canadian marine industry after working as a GM dealer for more than 20 years. As president and co-owner of Alberta Marine, an hour south of Calgary, Beauchamp has applied an auto-centric approach to a service department that attracts customers from surrounding Nanton as well as the big city to the north.

After a poor experience getting his own boat serviced, he saw a need for significantly modernized customer service in the local marine service scene. He jumped on the opportunity by purchasing a soon-to-be-shuttered GM store and selling boats back in 2002.

While in-place dealer systems from the GM days have helped improve overall efficiency, an energetic new service manager has led to a dramatic reversal of fortune. Last year was the service department’s most profitable, beating the previous 2012 by a cool $100,000.

Alberta Marine advertises its service department above all else, and has created a VIP Benefits for boat buyers that includes storage for $20 per month, “front of line” emergency repairs, use of a loaner boat, an annual VIP event, customary quick clean with service and a customer referral program.

Alberta Marine restarted boat storage after seeing a significant drop in off-season service business soon after ending it. Last year was the company’s most profitable year for service.

Alberta Marine restarted boat storage after seeing a significant drop in off-season service business soon after ending it. Last year was the company’s most profitable year for service.

Beauchamp said the attention to customer service has increased off-season business while improving the company’s reputation within its geographic area.

While the service department used to run out of business during or before January, advertising reduced rates and one-off specials, like installing Roswell tow-behind towers the company purchased on clearance, has provided enough of a boost that the company’s technicians stay busy throughout the winter months.

Storage is a key part of the equation, a situation that became painfully clear after the company stopped storing boats in 2008.

“Storage is a bit of a pain here, because the weather is so terrible,” he said. “You get covers blowing off and ripping or you get heavy snow breaking things [so] we said no more storage, it’s just too painful for us.”

The result was a significant slowdown in winterization and off-season business, causing the company to revive its storage operation a few years later, as well as creating the VIP program.

Beauchamp feels that any profitable service business should be tracking its efficiency, both to ensure technicians are working quickly and to prevent leakage when hours aren’t charged to customers.

“The guys that don’t think efficiency is important — especially the technicians themselves — is because they’re not very good,” he said. “A good technician can do a job in the required time or even quicker than the required time because he knows what he is doing.”

He added that just a couple hours per day at $100 per hour could quickly add up to $60,000 or more in time worked at his business that isn’t charged to the customers.

Alberta pays its technicians straight time, with a monthly bonus for efficiency. The company only uses menu pricing on winterization and tower-installation jobs, but has explored expanding its menu offerings.

“As a service department, you really do have to try and keep the customer satisfied. If that means staying an extra half an hour or expediting something to get it there quicker or running to Calgary to go get a part you need, you just have to do it, because it comes back in so many ways,” Beauchamp said. “As an owner you really have to keep all of your customers going and happy and do whatever you can. The guys that I’ve let go over the years or have gone [had] the old attitude [of] ‘We’ll get to it next week.’ Those guys are all gone, they’re out of business or they’re working for a dealership that’s hanging on by its fingernails.”

A trainer’s perspective

John Spader, president of Spader Business Management, has talked with his fair share of service managers who told him their primary objective is just breaking even or not losing too much money to attract the boss’ ire.

While his company offers a variety of training and consultation services at a range of levels, Spader sees a handful of bedrock concepts that can help dealers improve their service operations.

One is “Collect-able Efficiency,” a term Spader trademarked that measures the difference between hours worked and hours collected in the form of billable hours. It’s not how good the department is at doing what’s told, he said, but rather how good the team is at turning all available hours into cash.

While some dealers with a healthy service department would advocate diversifying by adding storage, a detail shop, canvas or fiberglass repair, Spader says managers of struggling service shops need to decide whether to focus on stability or growth.

“Three-quarters of service departments aren’t stable, so adding to service is just going to mean they lose more money or they … add a lot of risk to their business,” he said.

He recommends placing a strong focus on technician efficiency, and says dealers shouldn’t make their service operation more complex unless what they have going is going well.

P16x20-BI14MAY-Service.indd“If what you have isn’t working well, the last thing you want to do is add anything at all to this thing until you fix it.”

Dealerships that are truly struggling with service, he said, should shadow high-performing automotive service operations to compare how their own process different in terms of the customer experience. The difference in presentation, he said, oftentimes “screams at you.”

Increasing preventative maintenance could be part of the equation, as well as storage, which can be a platform to help fill the off-season months with business. He added that many shops try to attract insurance claims or other sizable jobs during the slow months by offering a discount to customers willing to wait for the most opportune time of the year for the dealership.

Addressing the widespread phenomenon of shops frequently discounting ROs for customers that object to the cost of a repair, for example, Spader says the problem usually originates on the front-end of a service department’s interaction with a customer.

“They didn’t give them an estimate … they didn’t get pre-authorization, they didn’t diagnose well, they got in and found out there was more, and then they fixed it and the customer showed up and [the bill] was more,” he said. “It’s death by a thousand little cuts.”

Spader added that these situations often result from not having the best people in the right positions within the business, which should be a major focus for every dealership.

“If they’ve been struggling with it for years, they don’t have somebody that understands [service] and is passionate about it,” he said. “That’s the number one thing, get somebody leading the department that gets it and is passionate about service … because too many dealers are trying to manage both [service and sales]. It’s just not the same skillset.”

 

Become a certified dealership

MarineIndustry_5StarsDealerships looking to boost the bottom line in their service department should consider becoming a Marine Industry Certified Dealership (MICD) for a variety of smart-business benefits. The standards certified dealerships are required to meet for program participation are geared around the concept of maximizing efficiency, ensuring customer satisfaction and boosting profits.

The MICD program is dedicated to improving customers’ experience at the retail level. It is part of the industry’s Grow Boating Initiative, and has been administered by the Marine Retails Association of the Americas since mid-2013.

The following standards are a sampling of those that must be met by a dealership’s service department in order to become certified.

• Maintain service CSI process and track results
• Develop and monitor a service quality assurance process
• Develop, implement and maintain a mapped service process
• Provide technicians with timely access to parts, special tools, test equipment and service information
• Employ sufficient number of factory-trained technicians to ensure timely service
• Provide work quotations, repair progress, quality assurance, finish work on time and track comebacks
• Map service process; review annually and revise as needed (share w/employees)
• Develop, implement and maintain a mapped parts process
• Impart inventory control system
• Track parts inventory turns and obsolescence
• Map parts process; review annually and update as needed (share w/employees)
• Require all employees to wear logoed clothing and/or name tags
• Maintain 100 percent follow-up process for service
• Create an ongoing training and professional/skills improvement environment
• Set performance goals and completion target dates

 

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