The ending of a year is often a time of reflection regarding the lessons we might learn to make the coming year even better. Most of us would agree that 2020 was full of unexpected surprises. Honestly, how many companies truly had a plan to deal with pandemic management? The truth is, most companies in our industry were caught off guard and at a loss for how 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 into what we hope is a more positive outlook for 2021, there are some valuable lessons every dealer can take from this experience to better prepare for the future.
We work with some of the best dealers in North America—they represent over $2 billion per year in collective aggregate revenues. That gave us the benefit of a large cross-section of companies on which to test different strategies for successful pandemic management. Below are a few of the many lessons we learned.
Lesson #1: Understanding the Importance of Minimum Base on All Contracts
The low point for dealers was April 2020, when we saw an average of 40% to 80% reduction in call activity. Where most companies fell within that range was largely dependent on the area of the country in which they lived and the measures their specific states took to deal with the pandemic. During this period, companies that had a base minimum on all their contracts saw a significantly lower reduction in their revenue (15%-40%) while call activity reduced at a significantly higher rate. Companies that were less effective in getting a base minimum saw revenues decline at a greater rate—one that was more proportional to their reduction in call activity.
Lesson #2: Defining Tech Workload for Staffing Purposes
Many companies were faced with the decisions of whether to furlough employees, how many to furlough and when they should bring them back to 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 (four gross calls per day average) is a conservative baseline that represents a tech’s workload. Therefore, every 80 calls reduced in monthly call volume represents a single technician’s workload. If your call activity reduced by 360 per month, you would have lost 4.5 tech workload’s worth of call activity and may have considered furloughing four techs.
Conversely, as call volume begins to increase, every 80 calls we gain per month represents an additional tech we can bring back to work full time. As we closed out 2020, we saw 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 Pandemic’s Impact on Your Business
In addition to what we learned from lesson #2, effective parts cost management was another big factor for companies that more effectively navigated the pandemic’s economic impact. The industry model looks at parts costs used as a percentage of revenue. However, during the pandemic, this hasn’t been an effective method for evaluating the parts cost your service organization should spend each month. Since parts are used on service calls, parts cost spent should reduce at a rate at least equal to the percentage of reduction in call activity. Therefore, if a parts spending plan was $20,000 under normal business conditions, and call activity reduced by 30%, the new service organization spending plan would be $14,000 ($20K less 30%). That would be the minimum improvement target you’d expect every month on parts cost spent.
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 PMs earlier than planned. However, this isn’t the most effective cash management strategy during the pandemic. Don’t let your service organization fall into the mode of spending more on parts per service call than you spent on each call prior to the pandemic.
Lesson #4: Utilizing Tools to Successfully Manage Costs
One thing our industry doesn’t lack is data. We often get it from our ERP, CRM, third-party applications, data intelligence applications, etc.—you know the drill. However, more data means more to evaluate.
The companies that performed well through the pandemic used automation and intelligent tools that aligned their company to meaningful indicators. This helped them 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 to use PIVOT, a Pros Elite Group product, to develop sales territories by net-new business and MIF opportunity by market. This 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.
To find out more about this Industry-first capability, please contact the Pros Elite team at (855) 776-7764 or jerry.newberry@proselitegroup.com.
