Seminar Series Announcements and Registration Forms!

Overview of a Successful Equipment Dealer – September 29-30, 2011

Register for Overview of a Successful Equipment Dealer here:
 

Participants

First Participant $750.00 Additional Participant(s) $500.00

or visit EventBrite or  download the registration form here!  You may email your registration to Robin@CurrieManagement.com or fax it to 508-752-9226.

Sales Management for the 21st Century – October 13-14, 2011

 Register for Sales Management for the 21st Century here:

 

Participants

First Participant $750.00 Additional Participant(s) $500.00

or visit EventBrite or  download the registration form here!  You may email your registration to Robin@CurrieManagement.com or fax it to 508-752-9226.

Maximizing Service Department Contribution – November 10-11, 2011

 

Manage the Rental Department – December 8-9, 2011

 Register for Manage the Rental Department here:

Participants

First Participant $750.00 Additional Participant(s) $500.00

or visit EventBrite or  download the registration form Manage the rental Department!  You may email your registration to Robin@CurrieManagement.com or fax it to 508-752-9226.

Leadership and Management – January 19-20, 2012

 

Long-term Strategy Development (for Dealer Principal, General Managers and C-Level Executives) – February 16-17, 2012

 

 

Currie Service Profitability Seminar

Registration is now open for this summer’s Service Profitability Seminar.  The program will be taking place August 8-9, 2011 in Chicago, IL.

This seminar is a must for owners, controllers, general managers and service department managers.  This program is instructed by George Keen, who has over 30 years of experience in organizational development.  Attendees will learn how to maximize profit in the service department through best practices sharing, financial benchmarking and other critical strategies.  The material presented is applicable across a wide variety of industrial equipment industries.

Please register early in order to secure your place.

Click on:  Currie Service Seminar Summer 2011 to download a copy of the Service Profitability Seminar Brochure and Registration.

If you have any questions, please feel free to call 508-752-9229 or email cmc@curriemanagement.com.

Hard Data + Soft Skills = Improved Absorption

 

Using Service Scorecards to Improve Absorption

Absorption is a critical measure in the equipment industry.  George Keen and George Russell provided this article to help dealers work towards achieving a high absorption rate.  This article appeared in Farm Equipment Magazine’s Planning for Profits column.

Click to download Scorecards to Improve Absorption in PDF format.

Business Matters by Bob Currie June 2010

Here’s the latest article by Bob, as seen in NAEDA’s Equipment Dealer Magazine.  Click to download Business Matters, June 2010 Service Department Expense Recovery in PDF format.

Summer Seminar Series – Service Profitability and Running Rental

Currie Management Consultants, Inc. announces it’s two public seminars entitled Achieving Service Profitability in an Equipment Dealership and Running Rental Successfully in an Equipment Dealership.  The dates of these seminars are:

Service Profitability – August 2-3, 2010 (2010 August Service Seminar Brochure)

Running Rental Successfully (2010 August Rental Seminar Brochure). 

These meetings are taking place in Chicago at a location close to Chicago’s O’Hare Airport.

Summer Seminar – Achieving Service Profitability

Currie Management Consultants is now accepting registrations for the next Achieving Service Profitability in an Equipment Dealership seminar instructed by George Keen.  The spring offering of this seminar was sold out so please register early!

Click now to download the 2010 August Service Seminar Brochure in PDF format.  If you have any questions or need further assistance, please call the office at 508-752-9229.  We hope to see you there!  

 

 

  

 

 

 

 

 

Service Department Expense Control, Part Two

Now that we have defined the big buckets on the financial statement, let’s get back to uncovering whether you have a service operating expense issue or a gross profit issue.  The biggest challenge I come across in performing the reviews with dealers/distributors is in how they are accounting for Service Recovery Items.  These items are what you are charging your customers for service vehicles, shop supplies, hazardous materials disposal, etc.  Let’s look at the example below.

Service Labor Revenue	$      1,050	100.0%
Cost of Goods Sold	$         375	35.7%
Gross Profit	$         675	64.3%
Personnel Expense	$         215	20.5%
Operating Expense	$         160	15.2%
Occupancy Expense	$           55	5.2%
Total Dept. Expense	$         430	41.0%
Department Profit	$         245	23.3%

At first glance you would conclude that there is a major issue with Operating Expense due to the fact that is over 5% out of line with the CMC model.  Other areas of the department such as Gross Profit is less than 1% off model.  This is not very uncommon to see in many of our Best Practice Groups.

But when we dig further you discover that $50 of Service Labor Revenue is actually revenue associated with charges such as mileage, zone charge, EPA, shop supplies, etc. that are common in most distribution companies.  The CMC model would place those items not in Revenue but as a contra expense account under Operating Expenses.  Now let’s look at what that does to the financial statement.

Service Labor Revenue	$      1,000	100.0%
Cost of Goods Sold	$         375	37.5%
Gross Profit	$         625	62.5%
Personnel Expense	$         215	21.5%
Operating Expense	$         110	11.0%
Occupancy Expense	$           55	5.5%
Total Dept. Expense	$         380	38.0%
Department Profit	$         245	24.5%

The bottom line figure of $245 did not change but we are now much closer to identifying the bigger issue.  Operating Expense went from being off 5.2% down to 1%.  Occupancy Expense stayed relatively the same but Personnel Expense jumped up 1%.  But the biggest jump occurred in Gross Profit.  It went from being off model by 0.7% to being off 2.5%.  We have a bigger revenue and productivity issue and less of an expense recovery issue.

This happens in other departments as well.  Think about the same exercise when it comes to Parts Freight Expense & Recovery.  If you put the Recovery under Parts Revenue and the cost under Parts Operating Expense, you think you are doing well in margin but it is inflated.

So if you are wrestling over what you think is a Service Operating Expense issue, make sure you are accounting for the recovery items correctly.  Place them down as contra accounts and match them up with the actual expense.

Service Department Expense Control, Part One

Service Department: Operating Expense Problem?  Or is it really Gross Profit?

In completing dozens of expense reviews for our dealer/distributor clients, I came across this issue on almost every occasion.  When interviewing key managers, more often than not both the service managers and the controller were in agreement that they had an Operating Expense issue in the Service Department.  They also were in agreement that they had no idea how to solve the problem.  What I discovered on most of the reviews was the issue was not in expense control but was really a service gross profit challenge.  Before we get too far down the road let’s define what we mean when we say Operating Expenses and Gross Profit.

As our clients will tell you, Currie has developed a financial model for distribution companies through our research and development projects with manufacturers.  From there we have refined the financial model over the years through our experiences with the Currie Best Practices Groups.  The Service Department Financial Model is as follows:

Service Labor Revenue	$      1,000	100.0%
Cost of Goods Sold	$            350	35.0%
Gross Profit	$            650	65.0%
Personnel Expense	$            200	20.0%
Operating Expense	$            100	10.0%
Occupancy Expense	$              50	5.0%
Total Dept. Expense	$            350	35.0%
Department Profit	$            300	30.0%

• Service Labor Revenue is pretty self explanatory.  It is the labor charged to customers, whether it is internal, external, contract, warranty, etc.
• Cost of Goods Sold in our model is the wages of the technicians only.  In other words, their W2 wages at the end of the year.  Included in this should be their pay for vacation, holidays, sick time, etc. as those are true wages.
• Personnel Expense includes the benefits of the technicians (health insurance, taxes, workers compensation, etc.)  Do not include vacation, holiday, sick pay, or other wages that are included in COGS.  Also in here should be all the wages and benefits of the service overhead staff (managers, dispatchers, warranty clerks, aftermarket sales reps, etc.).
• Operating Expense includes all the expenses that are not either people related or building related.  The largest of these expenses include service vehicles, liability insurance, supplies, telephones, etc.
• Occupancy Expense includes all the costs associated with the building/facility of the dealership or branch.  Things such as rent/lease, property taxes, property insurance, heat, light, power and other utilities are the major expense items.

This excerpt is Part One of a Two Part series.