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Service Advisor Incentive Pay Should not be an Entitlement

Joe Marconi

Entry posted by Joe Marconi in Employee Retention

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I am a firm believer in providing employees with a competitive wage and the opportunity to earn more through incentives. However, any additional incentive bonus must pay for itself. That means any additional incentive compensation must not eat into company profits. While we typically look at payroll as an expense, everyone in your company must be productive enough to support their compensation plan. This is especially true with service advisors.

Too often, shop owners don’t properly establish sales and gross profit goals. What occurs then is that the incentive pay, which is above the base pay, reduces overall gross profit, which decreases net profit.

Here are a few guidelines when considering a pay plan for service advisors. First, you need to know your breakeven and calculate it at least twice a year. Remember breakeven is never a goal, it’s just the sales number your company must attain BEFOFE it makes any profit. Next, you need to establish sales and net profit goals above breakeven.  Many shops shoot for a 20% net profit, so you need to determine your desired labor and part gross profit. If you don’t know how to calculate your breakeven or gross profit, please reach out for help from your accountant or a business coach.

After that, you need to establish minimum sales and gross profit goals that must be achieved consistently before any incentive is to be paid.  In other words, if you determine that achieving a 20% net profit requires on average $30,000 in sales per week with an overall gross profit of $20,000 per week, then that becomes your minimum required weekly goal that must be maintained by your service advisor team every week.

This is important because you don’t want three weeks where your sales and gross profit were below your goals, and pay an incentive bonus in the fourth week, just because your service advisors had one good week. Additional pay incentives can only be paid when the company is consistent in achieving its required sales, gross profit, and net profit.  One thing, if the goal is too high and perceived as unattainable, your service advisors will give up. Lowering the bar in some cases may be needed, just have a plan in place to incrementally raise the bar to ultimately achieve your desired financial goals.  Please also note that for you to have a consistently profitable business requires a healthy work environment, training programs, systems, processes, and of course a great technician team. 

One last thing, the service advisor’s base pay must meet the individual’s basic needs in life. And as I said earlier, incentive pay is the opportunity to earn more. However, they must consistently produce, after all, incentive pay should be earned, and never an entitlement.  

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weighit

I have in the past been a service advisor for a very large Cadillac dealer and I was one of 5 advisors. We all got paid the same, a flat weekly salary and then the commission. The weekly pay was barely enough to say we got a check every week, back then it was $300 per week. Maybe at that time is was good but seemed low. Commissions were paid the second week check of the month for the previous month. As I recall it was 1% for the first $10,000 is parts and labor, not including any warranty sales, 2% for the next $10,000, 3% for the next $5,000 and 4% for the next $5,000 and 5% there after for the months sales. Way back then we were each writting anywhere from $45 to 60 grand a month is sales, again not inclulding warranty or sales taxes on the repair orders. Then there was "spiffs" added if a sale incorporated any of the few items on the list that month, tire rotation & balance, transmission flush, detail cleaning and waxing. That kind of extras. It was a flat $$ figure per sale added to the commission check. Owner was very concerened we didn't sell things that were not nor even needed. No funny business to add to your checks. This was back in 1975  or so,  a long time ago, but all of us advisors were pleased at that time with our incomes. Times have changed and I'm sure pay has changed upward a lot. 

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Joe Marconi
10 hours ago, weighit said:

I have in the past been a service advisor for a very large Cadillac dealer and I was one of 5 advisors. We all got paid the same, a flat weekly salary and then the commission. The weekly pay was barely enough to say we got a check every week, back then it was $300 per week. Maybe at that time is was good but seemed low. Commissions were paid the second week check of the month for the previous month. As I recall it was 1% for the first $10,000 is parts and labor, not including any warranty sales, 2% for the next $10,000, 3% for the next $5,000 and 4% for the next $5,000 and 5% there after for the months sales. Way back then we were each writting anywhere from $45 to 60 grand a month is sales, again not inclulding warranty or sales taxes on the repair orders. Then there was "spiffs" added if a sale incorporated any of the few items on the list that month, tire rotation & balance, transmission flush, detail cleaning and waxing. That kind of extras. It was a flat $$ figure per sale added to the commission check. Owner was very concerened we didn't sell things that were not nor even needed. No funny business to add to your checks. This was back in 1975  or so,  a long time ago, but all of us advisors were pleased at that time with our incomes. Times have changed and I'm sure pay has changed upward a lot. 

Thank you for your perspective on your situation. Pay programs have changed throughout the years, with an emphasis on bringing the service team together and understanding the needs of the company and the individual.

One thing, you mentioned you got paid a base wage of $300. I remember hiring service advisors years back from dealers, and they were shocked that I paid a decent base wage.  I can't help thinking that a low base wage is a constant concern in the mind of the service advisor.  I always believed that the base pay must take care of the basic needs of life, with the opportunity to earn more. 

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