Profits In The Service Department

In my opinion, this may be one of the toughest assignments in the Outdoor Power Equipment business.  I believe that the proof of that is the fact that the "BIG BOYS" have avoided the service end of the business, like the plague.  You and I know that if there was easy money in service,  they would surely be involved. I like to look at service and repair from two quite different perspectives.  

One is that the service department is  in place, strictly to support the sales department.  I call this "service supports sales" or SSS.  Its goal is not to make money, but only to provide great service to back up the product sales effort. You see some evidence to support this when you see more and more dealers who state. "We service only what we sell"  Would dealers turn down service work if it was really profitable?  This service philosophy is also in keeping with SSS.  The service department can do all those little things for the customer, without being concerned with a goal of 90% or higher billable hours.  This service department mode is also easier to justify when sixty or seventy percent of your business is commercial.  In this case, it is almost expected that when you sell a piece of commercial equipment, some "free" service comes with the purchase.

The second philosophy, is that the service department is a pure profit center.  In general, this is the approach most auto dealers employ today.  If this approach is right for your business, then keeping track of every service department expense is very important.  

The service department must be assigned a representative piece of the business overhead, in addition to other expenses that are unique to service, chemicals, oil, parts washer rent, waste oil disposal, etc.  You also have to have the service department "bill" the sales department for set up time.  You also must track technician efficiently.  I suggest you also have to charge for estimates.  You also must decide whether the profits from parts that go into service work gets assigned to the service department or the parts department. I believe I can help you, as a business owner, decide what philosophy is right for your business.  In fact what was right a few years ago, might not be the best approach today. 
I am not suggesting that the service department should ever lose money.  Even in the first case, described above, you must know the income and outgo of service.  What I am suggesting is that the detail in which you track it changes.  The increase in dollars generated by service, will surely justify the cost of the review.