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When Performance is Measured, Performance Improves.

How Important is a Service Advisor?

Most Dealers and GMs are more comfortable with the Sales end of the business. While they may have had stints “back in Fixed”, the vast majority of dealership bosses were groomed as salespeople. So how, if the powers that be have such a firm grasp on sales, does the Service Advisor position get so little attention? Is this not a key sales position? Let’s do a little exercise to determine the value of a Service Advisor:

A Service Advisor should be able to support four to five technicians, according to the industry benchmark – let’s play it conservative and say four. At 8 hours per day produced by the technician, 21 working days per month and 12 months per year, this is equal to 8,064 hours sold in one year by one Service Advisor. With an Effective Labor Rate of $80 (again, this is hopefully a conservative number) and a gross profit margin of 70%, you are looking at $451,584 of labor gross generated by one Service Advisor every year.

Of course, you can’t ignore the parts that are sold on this labor. With an industry standard 0.84 Parts Sales to Labor Sales ratio and 40% Gross Profit margin, you can add another $216,760 in Parts Gross. Put that together and you have $668,344 in gross generated by one competent Service Advisor.

To make this clearer to you Dealers out there, a salesperson would need to sell 25 units at $2,228 gross per unit to match this level of profitability. Needless to say, this would be an especially gifted (and overworked) salesperson.

Recognizing the value of a productive Service Advisor should make you think: “Do I spend the same amount of time, money and energy on developing my sales team in Service as I do in Sales?” The answer is likely no and it is costing you big time. Nobody in the dealership sees as many customers on a daily basis and nobody generates as much gross. Are you staffing this position with a minimum wage employee? How often do you offer structured Service Advisor Training? Before you look at hiring a Service Advisor as “just another expense”, stop and think about how important they are to your operation. It probably couldn’t hurt to put some talent back there and see how much more profitable you can be.

 

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