The ending of a year is often a time of reflection on the year we just completed and what lessons we might learn to make the coming year even better. I think most of us would agree that 2020 was a year of unexpected surprises. Honestly, how many companies truly had a plan to deal pandemic management. The truth is most companies in our industry were caught off guard and at a loss on the correct steps to take to successfully weather the storm. Absorbing the impact of a pandemic, coupled with an economic shutdown is difficult for any business to navigate.
However, as we manage our way out of this challenging 2020 and move into what we hope is a more positive outlook for 2021, there are some value lessons every dealer can take from this experience in order to be better equipped for the future. We work with some of the best dealers in North America that represents over 2 billion per year in collective aggregate revenues. We had the benefit of a large cross-section of companies to test different strategies on successful pandemic management. Below are a few of the many lessons we learned.
Lesson #1 – Importance of Minimum Base on all Contracts – The low point for dealers was April 2020. This is where we saw an average of 40%-80% reduction in call activity. Where most companies fell within that range was largely due to the area of the country they lived in and the measures their specific states took to deal with the pandemic. During this time-period, the companies that had done a good job of having a base minimum on all their contracts, saw a significantly less reduction in their revenue of 15%-40% while the call activity reduced at a significantly higher rate. Companies that were less effective in getting a base minimum saw their revenues decline at a greater rate that was more proportional to their reduction in call activity. Lesson #1 certainly highlights the importance of establishing a minimum base on all contracts that are sold.
Lesson #2 – Understanding How to Define a Tech Workload for Staffing Purposes – many companies were faced with the decision of furloughing employees, how many to furlough and when they should start bringing them back to a full-time status. Since the revenue per tech metric was not a reliable indicator to use during the pandemic, the best method of predicting this was evaluating call activity. Using the monthly number of 80 calls per tech is a conservative baseline that represents a tech workload (equates to 4 gross calls per day average). Therefore, every 80 calls reduced in monthly call volume represents a technician workload. If your call activity reduced 360 per month, then you would have lost 4.5 tech workloads of call activity and may consider furloughing 4 techs. Conversely, as the call volume begins to increase, every 80 calls we gain in monthly call activity represents an additional tech that we can bring back to work on a full-time basis. Currently, as we are closing out the year of 2020, we are seeing most dealers operating 15%-25% down in call activity. This is a significant improvement from the lowest levels we experienced in April 2020.
Lesson #3 – Managing Cost to the Impact the Pandemic has had on your Business – executing lesson #2 will help you effectively manage your salary cost during the pandemic. However, effective parts cost management was another big factor associated with companies that more effectively managed through the economic impact of covid. The industry model looks at parts $ used as a percentage of revenue. However, during the pandemic, this has not been an effective method to evaluate the parts $ your service organization should spend each month. Since parts are used on service calls, our parts $ spent each month should reduce at least equal to our percentage of reduction in call activity. Therefore, if our parts spending plan for our service organization was $20,000 under normal business conditions, and our call activity reduced by 30%, then our new service organization spending plan would be $14,000 (20K less 30%). That would be the minimum improvement target you would expect on parts $ spent on a monthly basis. This area is particularly important. Since we have less call activity than normal, techs often spend more time on machines and proactively replace more parts or perform PM’s earlier than planned. This is not the most effective cash management strategy during the pandemic. Don’t let your service organization fall into the mode of spending more parts per service call during the pandemic than you spent on each call prior to the pandemic.
Lesson #4 – Utilize Tools that Help Your Business Measure the Key Areas Necessary to Successfully Manage Through the Pandemic and Beyond –one thing our industry doesn’t lack is data. We often get data from our ERP, CRM, 3rd party applications, data intelligence applications, etc. (you know the drill). However, more data is often just more stuff to evaluate. The companies that successfully managed through the pandemic utilized automation and intelligent tools that aligned their company to meaningful indicator that helped guide them guide them to determine the correct staffing, cost control opportunities and business growth decisions that every business faced in 2020 and will face in the foreseeable future. The most advanced business analytic tool to drive Sales and Service organization performance was introduced as the Pandemic began. Members of the Pro Dealer Group and the Select Dealer group were among the first groups to use PIVOT, a Pros Elite Group product, to develop sales territories by Net New business and MIF opportunity by market. This same tool identifies and models pre and post Covid 19 service staffing requirements based on actual click variances. Dealers are now able to forecast their staffing and asset investment based on actual copy and print trends to get ahead of the new normal. PIVOT “Performance Improvement Virtual Operations Tool” is a must have technology to assist in resolving current COVID challenges and prepare your company to come out of the Pandemic fully ready to capture any and all opportunities!
To find out more about this Industry first capability please contact the Pros Elite team at 1-855-776-7764 or jerry.newberry@proselitegroup.com
SOURCE Pros Elite
