July '18

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rv-pro.com July 2018 • RV PRO • 163 manager and the warranty clerk. For the finance manager, the reserve is so closely related to revenue as to be the same. So that position can be paid, at least in part, on revenue. For the warranty clerk, I com- monly see that position paid 5 percent of parts and labor on collected warranties. That also could be on submitted warranty dollars, less adjustments. 4. It is generally best to pay on gross profit (available income). You get the rev- enue focus along with cost controls when you pay that way. In other words, if you pay on gross profit (GP), which can be defined as the result of subtracting cost of sales from revenue, you are actually paying to control both those other components. 5. Paying managers is usually best on a salary and a percentage of the department's GP. There are reasons to pay on the net profit of the department as well. Unless the manager makes decisions that actually impact the profit and loss statement, I find that GP makes more sense than net. At the least, you will get better results than paying for performance the manager can really control. 6. Flat rate for techs is viable in the right circumstances. You must fix the adminis- trative side of the shop prior to implemen- tation or you will have a struggle. 7. Pay plans should be modeled before you implement. By that, I mean for you to pull out a spreadsheet and calculate what the pay would be for each of the past 36 months to allow for seasonality. You also should see what the annual comp is for each of the past three years to be sure your plan is in the "market." Finally, think about the aberrations. Think about the exceptional months – both good and bad – and how the pay would be affected. 8. Finally, there are metrics. If your total business is paying much more than half the gross profit in personnel expense, you have an increasingly difficult time making a profit. The higher that percentage goes, the harder it becomes. FYI, 20 Groups are an excellent source for those benchmarks. This has been a quick recapping of key points I've seen over the years. It is cer- tainly not exhaustive. My hope is that you see there are some key guidelines. First and most important is that the pay must respond to the market. Second, is the case I've tried to build that a commission or bonus plan helps generate better people and better performance. I didn't mention that this sort of variable compensation also helps the business. When business is slower and you can't afford as much payroll, it is self-adjusting. Likewise, when you are going like crazy with an abundance of business, the com- pensation increases to reward hard-working employees. In any case, a carefully crafted compensation plan strengthens the business and its relationship with employees. Offer your customers Compass RV Service Contracts, Tire & Wheel Coverages, GAP, and Appearance Protection Products. AGWS provides great customer service, fast handling of claims, training workshops, reinsurance, and so much more. For more information, contact Kurt Harbeke at 800.579.2233 x4213 or kharbeke@agwsinc.com. RV PROTECTION • F&I Products • Service • Training • Technology • Claims Administration American Guardian Warranty Services, Inc. is part of the American Guardian Group of Companies. 800.579.2233 | agwsinc.com

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