The contractor understands the importance of keeping his technicians on the job site, but does not truly understand the impact that unapplied labor has on the bottom line. If a technician spends a half hour a day leaving the job site to pick up parts, his employer may be breaking even or not making any profit on that day.

The overhead it takes to run a service department is substantial. It goes well beyond what the technician gets paid per hour. There’s the expense of the vehicles, commercial insurance, and stock for the service vans. If the service department has a service manager and a dispatcher, the overhead to run the department is ratcheted up a notch.

If your service department generates 20% of your total revenue, then the department should be providing 20% of your total overhead costs. If you take that into account, with all the overhead for just that department, plus the service department’s share of overhead for your company’s overall infrastructure, whatever you charge that isn’t being consumed by overhead is the service department’s profit margin. It may be slimmer than you think.

I typically run through this exercise with the owner or general manager, who typically realizes that the service department does not make the money that their technicians believe it does.

It is important for you to help educate the service department and technicians so that they can realize how important it is for them to be always charging for their time and to make sure that their vehicles are stocked properly to prevent downtime or unprofitable activities.

Service technicians typically feel that their employers are making a ton of money in the service department, and that they charge too much for their services, when in reality the opposite may be true. You should be charging more! Educating your technicians on the reality of the situation is key to running a successful service department.

I always say that service technicians have to be like lawyers: They need to always be charging for their time. All owners realize, to some extent, that this is a problem they are facing. If you can convince an owner that you can assist him in reducing unapplied labor, you will become a problem-solver for your customers, not just another salesperson trying to gain more sales.

The contractor must understand how any unapplied labor is killing the profitability of their service department. If you can help them to understand this and you are able to fix this problem with a strong vendor managed inventory (VMI) program, you will win the business.

The price of the products that you sell to a service department is almost irrelevant. The service department takes the cost that you charge and marks it up to sell to the consumer, so the price for parts to a service department is not important; if anything, the higher cost yields more profit. What does matter is assisting the contractor in controlling their inventory and keeping their vehicles stocked and on the road earning income. Change is difficult, so you really need to work with the contractor’s service department to help change the way they are doing business.

If you want to be successful as a distributor partner, you must be able to work with your contractors and assist them with educating their technicians and understanding how profits are generated or lost within the service department.

The sales consultant will always win the day and beat the competitor who is just offering lower pricing. You need to learn all about the difficulties that your contractors face and how you can assist them in overcoming these obstacles. If you are able to do this, you will have no problem gaining market share and becoming a trusted advisor for your contractors.