Fixing a Low Closing Ratio
If Danny Wisian had to describe the environment in his shop in one word, he says the first 14 years of shop ownership could be summed up as “chaotic.” Although the shop continued to grow every year, he says the small staff of five at Tech One Automotive in Austin, Texas, was always overloaded and had a hard time keeping up. Wisian had a staff of master-level technicians and a service advisor with more than 30 years experience, but Wisian says he couldn’t escape the feeling that the shop wasn’t as efficient or as productive as it could be.
We had the cars here and plenty of work,” he says. “The problems came after we got the cars in the shop.”
The sole service advisor was often left scrambling and never had enough time to spend with customers, building the relationships needed to sell the job. And that problem was reflected in the shop’s sub-par closing ratio of 50 percent and a $316 average repair order that Wisian says he knew could be much higher. Looking to turn around that closing ratio and truly get the most out of every job in the shop, Wisian decided to reinvest in his staff and focused those efforts on the front office.
Like many shop owners, Wisian started in the industry straight out of high school in 1983 and worked first as a mechanic’s helper before moving on to working in dealerships until 1997. He opened his own independent shop, Tech One Automotive, in 1999 in an oversize two-bay garage, where he acted as both the technician and service advisor.
In 2000, the shop did $200,000 in sales and the following year, Wisian hired an additional technician and his brother, David, as the service advisor, and moved the shop across the street to a 3,700-square-foot former parts store. It was at that time that he also moved away from his former Honda and Acura specialization and began working on all makes and models, thanks to the large number of used car lots on the same road as the shop.
The changes paid off, and Tech One saw steady, if not slightly slow, growth. Wisian says the shop grew by 5 or 10 percent each year and by 2014, was doing $900,000 in sales with a staff of five.
Although Wisian says the shop was doing fine, he couldn’t escape the feeling of being in a rut. Every year around the holidays, Wisian says he got the itch to make a change but he didn’t know how. The slow growth was starting to get old, he says. He wanted to spend more time with his family and truly get the business to the next level. Wisian knew that getting work into the shop wasn’t necessarily the problem. He had always invested in Internet marketing and says that not only are 20 percent of the shop’s appointments made online, 50 percent of new customers come from the shop’s pay-per-click and SEO campaigns. The problem, Wisian says, was what happened after the cars came in: He didn’t understand the numbers and where the money was going.
“I was a mechanic. I didn’t know how to run a business properly,” he says. “I would say the biggest thing was efficiency, productivity and knowing what my numbers should be as far as gross profit, profit margins. I didn’t understand them and what they should be.”
Average repair order hovered at $316 in January 2015, closing ratio rested at 50 percent and average hours per repair order were at two hours, which meant that technicians never had the opportunity to raise their efficiency levels beyond 65 percent. All of that added to the shop’s inability to get past its highest monthly sales of $80,000. And although gross profit was at a healthy 55 percent, the net profit wasn’t where he wanted it to be.
“The biggest problem was that I only had one service advisor. He didn’t have enough time to spend with each customer,” he says. “A lot of it was also not knowing every option of why you should do these services.”
Wisian says that those numbers indicated to him that the shop was not only not selling work well enough, it also wasn’t completing that work efficiently after coming into the shop. Wisian says that because the service advisor was so overloaded, things were falling through the cracks and not everything on the inspection was getting sold. That low average hours per repair order, in particular, he says, was a huge indicator. While a solid average hours per repair order is at least three hours, his average was sitting at a full hour below that benchmark.
Wisian knew it wasn’t a training issue—he had sent his service advisor to training over the years. Instead, that low average hours per repair order and closing ratio indicated to him that he wasn’t taking enough time with each customer to walk through the benefits and sell the value. But with 200 cars a month, taking that time with each customer was becoming more and more impossible as he was the only employee up front.
Wisian says the solution wasn’t evident to him until he started working with business coach Doug Stoll of Elite Worldwide in early 2015. In fact, he says he thought that merely hiring another technician and sending the service advisor to training would solve the problem. However, it didn’t take Stoll long to pinpoint the problem: He needed to hire another service advisor. Stoll told Wisian that $900,000 in sales was too much for most service advisors to handle alone and that while the skeleton staff helped keep costs down, it was actually prohibiting the shop from growing. Wisian realized that even with additional service advisor training, his service advisor would still be lacking the additional time he needed to spend with each customer.
“It would give each of them enough time to spend with each customer,” he says. “Not rush through a repair order or sales. They could take their time.”
Wisian got to work searching for an additional service writer and a mechanic’s helper to address the issue but he also took the opportunity to overhaul his hiring processes during this time. First, he placed job ads on Craigslist and Indeed, where there was the most potential for exposure in his area. Next, he began using Berke Assessment tests for all the candidates that came in to interview. The assessment is an aptitude test that looks at the candidate’s attitude, how well he or she can handle stress, and gives the shop owner follow-up questions to ask during the interview.
“Before, I had already interviewed a few advisors before the test came,” he says. “Some of these guys I thought did really well, did terrible at the test. I could see things. He’s jumped around from job to job. Then I realized that it would have been a bad mistake to hire someone like that.”
Wisian also began to offer increased training, paid vacation, weekends off, holiday pay and company-matched retirement plans as a way to make his company more desirable. He also sent his current service advisor to Elite’s service advisor training and promised to send the new hire, as well.
Finally, he switched up his service advisor’s pay plan to create a bonus system based on benchmarks in gross sales, gross profit, average repair order, average hours per repair order, etc. Wisian worked with his coach and his service advisor to create benchmarks that were both feasible and goal oriented. Before, Wisian says he was arbitrarily paying his service advisor a salary that seemed fair, rather than basing it on incentives. Incidentally, he says his service advisors are actually making more now than they were on the old pay plan.
The bottom line, Wisian says, is that he wanted to hire the right people and provide a working environment that ensured those right people would stay with him.
Wisian says that the numbers—which he attended training to get a firmer grasp on—speak for themselves: After hiring a second service adviser and mechanic’s helper in February 2015, the shop had its biggest month ever: $100,000 in sales. And sales continued to climb in March when the shop did $130,000.
Sales eventually leveled off around $120,000 per month to produce $1.4 million in total revenue in 2015 with a consistent 60 percent gross profit. In addition, ARO jumped to $510 and average hours per repair order is at 3.5–4 hours. For the service advisers, closing ratios have jumped to 75–80 percent. Technician efficiency is at 92 percent.
Besides the service advisor training, Wisian says that switching to electronic inspection sheets from Bolt On Technology also has made a difference in communication between the front and back of the office and ensuring that the service advisors don’t miss recommended items when talking with the customers.
“It gave each one of them enough time to spend with each customer,” he says. “Not rushing through a repair order or sales, they can take their time. That made the biggest difference.”
Wisian says he never considered that having too little staff was the issue that was holding back his shop. If anything, he thought he wasn’t in a position to add more staff at all. However, adding more staff has allowed his shop to work more efficiently and concentrate more narrowly on the tasks associated with their particular positions.
Updating his job processes, he says, also ensured that the transition was smooth and both employees he hired have been a great fit for the company. “Since then, my staff is really happy now,” he says. “They’re doing well. They’re making more money and they’re more productive now.” The shop has grown so rapidly that it’s maxed out its current facility, and Wisian says his next project is to find a new facility that will allow him to keep growing.
EXPERT ADVICE: When to Hire Another Service Advisor
Adding another service advisor can be a big decision for any shop owner. Knowing when is the right time to hire, if the current service advisor is overloaded and if he’s maximizing his time are imperative to understand before hiring. Jonnie Wright, CEO of service advisor training The Buyosophere, breaks down when to hire another service advisor.
There's a really big difference between being busy and being productive. The first thing you need to do is look at, do we have processes and procedures in place to create efficiency that help maximize a service advisor’s time? The first thing we look at is the structure of the workflow. If there are inefficiencies, we need to address that. You need to look at hour per RO, labor and gross profit numbers and see if they’re meeting industry standards. If you’re average hours per RO is hovering around two and your GP on parts is 55 percent, then you’ve got some work to do.
If we say to ourselves, all of that seems maximized, then I’ll ask an owner, tell me why you think you need another service advisor. I don't think there's a real template or a number. I know service advisors who can sell $100,000 a month by themselves and some who can barely touch half of that. So, much of it is dependent on how the shop is set up and the culture of the shop. Is it a positive, supportive culture?
Ultimately, it’s time to hire another service advisor when they want to take that next step. Maybe they've been at $900,000 a year for years and they want to break that million dollar mark and they’re doing it with 1.5 service advisors. Or car count is really up and the service advisor can’t keep up anymore.