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F A R M E Q U I P M E N T • F E B R U A R Y 2 0 0 9
By Joseph Holschuh,
Associate Editor
If you’ve ever wondered why your
service department never seems
to make money — or worse, if
you’re not sure if your service depart-
ment is making money — then it’s
time to step back and reevaluate your
backroom operations.
Greg Schneider, a trainer with
Spader Business Management, says
there is simply no excuse for not
knowing what kind of money is mov-
ing through your service area.
He talks about the dealer mentali-
ty in the ‘70s and ‘80s, where there
was a “fishbowl” model of account-
ing. In the fishbowl model, overhead
and expenses were represented by a
large empty fishbowl and money
from every department was poured
in to fill it. Hopefully, at the end of the
month the fishbowl was full, but even
if it was overflowing there was no
way to monitor how much individual
departments were pouring in com-
pared with how much of the empty
bowl they were responsible for.
With the widespread use of com-
puters and software in the 1980s and
‘90s, dealerships were able to move
away from this model and begin con-
centrating on the “wheel and spoke”
model. In the wheel and spoke
model, every department in a dealer-
ship is set up as its own personalized
profit center. Income and expenses
are individually monitored for the
sales, service and parts departments,
and each one of the three “spokes” is
responsible for a share of the overall
business expenses and expected to
be entirely self-sustaining.
With how much easier it’s become
to monitor individual performance of
each department, Schneider says he’s
surprised when he runs into dealer-
ships that don’t. It’s impossible to
know whether a department is mak-
ing money unless there are detailed
records kept on income — and
expenses.
Schneider maintains that in order
for the service shop of an ag dealer-
ship to break even, the shop has to
have an effective labor rate of $55-
65/hour. If you just breathed a sigh of
relief because your labor rate is $80
or $85/hour, or even $100