I flip television channels often (son of a gun, there are a lot of them!) and I seem to be landing on a lot of paper towel commercials. “Absorbs more, and picks up what others don’t” seems to be the common message.
You know, paper towels really haven’t changed that much over the years. They still absorb and pick up. Is there a correlation here, perhaps? If you’re still relying on vehicle sales as your dealership’s foundation for stable profitability, time to change the channel. Gone are the days that vehicle sales are the foundation for consistent profitability in a dealership.
If you want stronger ratings, it’s time to turn your parts and service departments into shows that absorb the majority, if not all, of your dealership expenses. What is an absorption rate? It is the percentage of a dealership’s operating costs that are picked up, or “absorbed,” by the dealership’s parts and service departments. Great script, with great endings.
A dealership’s absorption rate is a big part of economic stability in less than stellar times. Just think: If your parts and service departments picked up on average 80-90 percent of the dealership’s monthly expenses before you sold one vehicle, what would your profitability look like? It would be your favorite show.
Today’s economic climate dictates that your parts and service departments do just that: Absorb the lion’s share of dealership expenses. The dealers that focus on this and control expenses are more profitable than the dealers that don’t. This is not a fantasy created in a galaxy long ago — it can be done.
I still see a lot of dealers out there in my visits that still think unit sales are the way to build a long lasting, profitable Emmy-winning series. The last economic downturn should have changed more folks’ thoughts on this, but it hasn’t. Memories fade all too quickly.
Here’s a thought, and something to look at. Look at a few financial reruns of your previous months. What would the difference have been in overall dealership profitability if your parts and service departments had absorbed 80 or 90 percent of the dealership’s expenses for those months?
Paper towels might not change how they do things, but you can...MM
Mark Mooney is the principal of Mark Mooney Powersports Consulting, a Santa Cruz, California, company that works with OEMs and powersports dealers to strengthen dealership performance. Mark is a nationally known speaker and teacher that works with dealers throughout the United States. Mark Mooney Powersports Consulting is “empowering performance and strengthening profitability through practical solutions.”Click here for reuse options!
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