Retail Observer

RETAILOBSERVER.COM MARCH 2024 56 I n the ever-evolving business world, staying proactive cannot be overemphasized. I was reminded of this by a call from a BrandSource member in the Northwest who was grappling with a significant loss and looking for advice. A local independent service company lured away one of his productive technicians who had two years of invaluable experience under his belt. The enticement was a promise of annual commission pay of over $100,000 with no upper limit. The dealer had invested heavily in training this promising technician, only to see him slip through his fingers into a competitor's waiting arms. Sadly, this tale of technician churn isn't an isolated incident but a recurring theme in our industry, and it continues to haunt the dealer community. A closer examination made it clear that the technician's defection could have been averted with proper attention to the intricacies of the dealer's service operation. At the heart of the issue was a fundamental oversight — the dealer's service call fee, which had remained stagnant at $89 for an extended period. In stark contrast, the local independent service company charged $129 for core brand services and a whopping $229 for luxury brand service calls. It seems our dealer had failed to recalibrate his pricing strategy, leaving substantial untapped revenue potential. The remedy was straightforward, though at first it was somewhat puzzling to the dealer. I suggested he leverage a cost-of-truck-roll template to better understand the cost of dispatching technicians. Armed with these insights, he could adjust his service rates to cover these costs and offer his technicians a competitive wage. If the dealer had had these critical calculations in place, he could have matched the competitor's job offer and retained his talented technician, for a win-win. The best strategy was clear – raise his service rates and transition his three technicians to a straight commission remuneration package. Under a commission-based pay structure, technicians only stand to earn more as the company's revenues increase, which creates a powerful incentive for both parties. I stressed the effectiveness of this approach, drawing on my own experience implementing it in my companies and witnessing its success in a number of other businesses. Straight commission compensation plans not only work, they work exceptionally well. Still, it's crucial to acknowledge that making informed pricing decisions requires a deep understanding of costs and financials. Effective decision-making becomes an uphill battle without a firm grasp of these key metrics. In business it's a universal truth that you can't manage what you can't measure. For those who aren't ready to transition to separate department financials, a more modest approach involves meticulously classifying every expense into either sales or service categories. This way, at the very least, you can gain some semblance of control over your financial landscape. The cautionary tale of the Northwest dealer serves as a vivid reminder that inaction within your service operation can lead to dire consequences. But the remedy is well within reach: comprehensive cost analysis, prudent pricing strategies, and commission-based compensation can be the keys to a thriving and resilient business. As you navigate the ever-changing industry landscape, remember that proactive measures can be your best defense against the cost of inaction. Paul MacDonald Service Trends RO Paul MacDonald is senior lead of ServiceSource, the exclusive AVB BrandSource initiative that helps servicing members run their repair operations more efficiently and profitably. Paul previously headed his own 38-tech service business. He has served as president of the UASA and currently operates The Expert Service Program. You can reach Paul at (647) 500-7785 or at Paul.m.Macdonald@brandsource.com HOW TO RETAIN YOUR SERVICE TECHS The price of inaction can be very high

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