Spring Ahead

With winter here and New Year near,
time to move from making resolutions
to resolving or re-solving problems

By Jeff Sheets

As the New Year approaches, now is a natural time both personally and professionally to look forward and see where you want to be in the future. I think of resolutions as more personal, things such as losing weight or physical exercise. I know that a lot people create these resolutions, and much like most lists that we write, they are lost or forgotten when the grind of the year starts. We need to move past resolutions and spring into action by resolving or re-solving those things that we know need to be fixed. For this article, I decided to take a close look at the results of Outdoor Power Equipment’s 2016 Dealer Survey that were published in October 2016 OPE, highlight some areas where dealers want and need to improve, and offer some possible solutions.

I mentioned resolving or re-solving in the title of this article, but both terms need to be addressed. The definition of resolving is “settle or find a solution to a problem, dispute or contentious matter.” You are not just formulating a list, but taking action. Sometimes, you may have tried to solve a problem, but it didn’t work, hence the word re-solving in the title. You should never give up on trying to make your business better. Sometimes, when things don’t work out, you may give up or make modest attempts when what you need to do is come up with a new plan. Here are a couple of areas from the survey that show some good room for improvement.

The service department

Results from the survey:

  • 53 percent of respondents pay less than $19 per hour to their best technicians.
  • 59 percent of respondents charge less than $70 for their shop labor rate.
  • 92 percent of respondents say there is a shortage of qualified service technicians for the OPE industry.

What do these results tell us? Number one: Dealers can’t find good service technicians. Number two: The majority of dealers charge less than $70 an hour. Number 3: Dealers pay their best technicians $19 or less per hour. The biggest takeaway from these results is that you should raise your shop labor rate. Call your local car dealership and ask what it charges for its shop labor rate. The car dealership will probably tell you $100 or more per hour. Your goal is to increase your hourly shop labor rate to within $10-$15 of the car dealership’s shop labor rate. You might need to gradually increase it, but when March hits, make sure that you’re bumping up your labor rate by $5-$10 per hour if there is a big difference, or incrementally if it is a small difference. If you have a shop labor rate of $90 per hour, then there is room to pay your best technicians more. As a goal, I would suggest paying your best service technicians 30 percent of your shop labor rate. I favor paying a base salary plus commission as the efficiency of your technician increases. In the $90 example, that would mean paying a $27 hourly rate for a 100-percent efficient technician – one that would bill out 100 percent of the hours that he or she is working on equipment.

Guess what would happen if you could advertise such a salary for technicians? You would have more people beating down your door to come work for you. A fully productive service technician could make an annual salary of $54,000 (based on making $27 per hour for 40 hours a week and 50 weeks a year with two weeks vacation) and generate $180,000 in annual revenue for you. You really get what you pay for, and if you pay someone a $13 hourly salary with no incentives, you get an employee who does not see a reason to work harder or become more efficient. Whenever you raise your shop labor rate, you correspondingly raise the opportunity for more compensation in your incentive structure. This is for your best technicians — the ones you want to keep around. For new, entry-level technicians, I do favor paying them a lower base salary with incentives, giving you room to gradually increase their salary and incentives as they become more efficient.

If you’ve tried to solve these service department-related issues multiple times without much success, then I suggest you try to implement my aforementioned suggestions. Do not give up on trying to make your service department better or trying to find the right service technicians. As I illustrated, the service department offers great profit potential, and you can become a go-to destination for repairs because of the expertise and efficiency of your service technicians.

Recruiting good employees

When OPE asked dealers in its 2016 survey about the biggest concern of their business, the availability of quality employees was by far the biggest concern. At 30.56 percent, it was almost triple the weather or economy in this year’s survey and double from what it was in OPE’s 2014 Dealer Survey. My service department proposal certainly provides one way to attract quality employees. I favor offering potential employees a base salary with ways to incentivize them to make more. In each job, there is something you are looking for employees to accomplish, and when they accomplish it, they should be rewarded accordingly.

In this year’s survey, I did notice that very few dealers currently offer 401K or retirement plans to their employees; 76 percent offer no such vehicle. If you aren’t currently offering a 401K or retirement plan to your employees, I have an alternative suggestion: Offer your employees a profit-sharing plan. If there is available profit, then distributing it to the employees is a win-win situation for all parties involved and something that would separate you from other small businesses. I think many employees desire a profit-sharing plan and may have no interest in working for a business that doesn’t offer one. If I were you, I would go to my accountant and look at how to set up a profit-sharing plan. If you decide to implement a profit-sharing plan, then perhaps you would reduce the incentives in your pay structure. I recently worked with a company that implemented a profit-sharing plan, and the employees enjoyed it so much that the company had zero turnover in the past 5 years!

Ultimately, however, you need to find the right employees and that means opening your eyes and looking for them in other businesses. While I was working as a store manager in my first job out of college, I made such a positive impression on a customer that he wound up recruiting me to work for him. To make a long story short, he handed me his business card, asked me to give him a call, and offered me a better position that I wound up accepting. That sort of personal invitation meant much more to me than landing a job through a newspaper advertisement or even a headhunter. It was someone who saw something in me worth approaching me with a job offer. That is very hard to turn down. Sometimes, you need to hire people even when you don’t have a current opening, especially if you have underperforming employees. If you’re a business owner, then you need to be scouting for new employees constantly. Yes, you need to put ads on job boards and network through other people, but the personal touch works so well.

I want to thank all of the dealers who took the time out of their busy schedules to complete OPE’s 2016 Dealer Survey. Looking at this survey should be important to all dealers. If you didn’t see it, go back to the print or digital edition (http://read.dmtmag.com/i/726432-october-2016) of October 2016 OPE and review it. See how you compare to your fellow dealers across the board and find ways that will inspire you to resolve to do better or look at a problem that you’ve tried to work on and re-solve it. Never give up on trying to make your dealership better! I will leave you with the following words of wisdom from Jack Welch, the former CEO of General Electric: “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” Don’t just make lists — take action!

1504_OPE_FS_Profit Center Series-Part III-Service2_author-Jeff Sheets-webJeff Sheets is the founder and owner of OPE Consulting Services. Whether a business is thriving or struggling to survive, Sheets’ rich experience in both the corporate and not-for-profit sectors allows him to partner with business owners to customize unique strategies for their needs. For the past nine years, he has worked extensively with hundreds of outdoor power equipment dealers to create best practices in business structure, personnel management and financial profitability. For more information, he may be contacted at opeconsultingservices@gmail.com or (816) 260-5430. You can also follow him on Twitter @opeconsult, connect with him on LinkedIn, and visit his website at www.opeconsultingservices.com.