Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
Breaking Down Service By The Boxes: A Marine's Methodology
What separates thriving heavy equipment dealerships from struggling ones? The answer might surprise you. It's not their sales volume or brand lineup—it's how they manage their service departments.
Marine Corps veteran John Dowling transformed an agricultural dealership from $40 million to $139 million in less than five years by focusing on what most dealership owners overlook: the profitability of the service department. In this eye-opening conversation, John reveals how his "Service by the Boxes" methodology breaks down complex service operations into 10 accountable steps that eliminate bottlenecks and dramatically improve efficiency.
The numbers tell a compelling story. A single technician generates approximately $260,000 in gross profit annually—equivalent to millions in equipment sales. Yet service departments remain misunderstood and mismanaged by owners who see them as cost centers rather than profit engines. John and host Ron Slee explore why service departments must transition from reactive to proactive management, why guaranteed pricing beats estimates, and how simply committing to close work orders the same day can transform cash flow.
Perhaps most revealing is what customers truly value. At a recent industry survey, when equipment managers were asked what factors most influenced their dealership choices, price received zero votes. What mattered most? Service capability—having technicians available when equipment breaks down. As product differentiation between equipment brands diminishes, service excellence becomes the true competitive advantage.
Whether you're running a dealership, managing a service department, or working as a technician, this conversation offers practical wisdom to transform your approach. Try implementing just one principle from John's book "Service by the Boxes," and he guarantees you'll see returns that dwarf your $20 investment—or he'll buy the book back himself.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. We're joined today with a really interesting young man by the name of John Dolan. Of course, everybody's a young man. To me now, john is a Marine. I say is a Marine because once a Marine, always a Marine. Hoorah, yeah, and I'm not going to go any further than that. John, why don't you introduce yourself to my audience and tell us who you are, what you are, what you do yourself to the my audience? And and tell us who you are, what you are, what you do, all the rest of that stuff, and we'll just start our conversation.
Speaker 2:Yeah, yeah, I guess what you, you, you, you talked about the Marine Corps. I remember I think I was in junior high and, um, I was watching cartoons and they had a Marine Corps commercial. Come on, and you know, if, if, if and if, if you, if you're old, if I was going to say old, but you know, be kind, be kind, be kind. But they used to have an off, an off, an officer in his dress, blue, uh, uniform and he had his sword, he'd bring it up and he said the marines, the few, the few, the proud, the marines.
Speaker 2:And I remember running into the kitchen and, um, and telling, like I know what I'm going to do, I'm going to join the Marine Corps. And so that was like seventh grade, I think it was. And so, yeah, so two weeks after high school, graduated high school, two weeks later I was in San Diego, mcrd going through Marine Corps boot camp. I was a heavy equipment mechanic in the Marine Corps and so after I got out of the Marine Corps, I was sitting around the house for a week or two and I was like I got to get a job. So I just start telling how old I am, and so I want to say thank you for calling me a young man, because I'll be 50 this year.
Speaker 1:Oh, I'm almost 80, young man Almost 80, yes, so.
Speaker 2:I'll take young man every day of the week. But to show you how old I am not as old as some I've got the big yellow book, you know it had all the phone numbers in it and I just started flipping down to like construction equipment dealerships and just calling people on the phone and said, hey, I'm a mechanic and I need a job and so I went to work for Rush Equipment Centers. It was a John Deere industrial John Deere dealership in Houston, Texas. They've got they were acquired by Doggett Machinery.
Speaker 1:The John Deere site was yes.
Speaker 2:Correct Yep, yep and so yeah. So I worked for them for about three years or so and then promoted up to be a field mechanic and then did that for another couple of years with them and then left them and went to work for the Case dealership. Ironically, the Case dealership Also in.
Speaker 2:Texas, also in Texas and Houston. So Doggett owned the Case dealership and so I worked for the John Deere dealership and the Case dealership that Doggett has owned, both of them at separate times and which is kind of ironic, but anyway. So I went to work for them for maybe a year or so as the, as a field mechanic, and then got promoted to service manager, then branch manager. Then I took a role with cni um. I was a manager, field service operations on the case side covered texas and oklahoma, and um then left there um and went to work for chris whackman. He had just recently acquired washington county tractor and um he like hey, I can continue to buy locations, but if I don't make any money, like what's the purpose in that? And so he realizes his parts and service business just like every other ag dealership you know, very sales focused. And so he's like I need somebody that knows ag or not ag, but I need somebody that knows parts and service. And so employees that used to work for me were currently working for him and then the territory manager for New Holland, because they were New Holland dealer. Him and I were good friends and it was ironically they all told Chris like well, john lives in Brenham and if you can get a hold of John Dowling, like he's your guy. And so over several months, um, I was doing very well at CNH and at one point Chris is like, just come work for me and let's just take, take, take, take over the world. You know the track, the track, the tractor world. And I was like, well, why not, let's do it. And so turned down a two pay grade promotion with CNH to go work for Chris and had great, great success. I mean, um, we are, uh, I think our initial revenue when I started was like 40 million. In less than five years we grew it to 139 million Um, so almost 200% growth. Um had over 200% uh uh growth and service about 140% I think. In parts revenue doubled in locations, employees, everything, and so had a great time there. And I think it was about year five.
Speaker 2:I had a conversation with Chris and told him I was ready to move up, wanted to do something different, and he was like, well, the only place you can move up is my job and I'm not leaving. And he was like, well, the only place you can move up is my job and I'm not leaving. I was like, well, I guess it's time for me to move on, and I like a challenge. And so I stayed on for one more year and left there.
Speaker 2:Different things happened. That was during COVID, and so, anyways, found myself without a job and didn't know what else to do. And so I'd started writing a book about a year or so before and I was like, well, I don't have anything else to do. So I went out to my pull house every day and wrote for eight hours and then, after I did that, my wife says John, you need to go get a job. And I was like I do have one, I'm writing a, writing a book, you know. But she didn't, she didn't, she didn't go for that. She wanted me to get out of the house.
Speaker 2:And so, uh, long story short, uh, went to work for jay lucas, who owns jordan sitter associates. Um, I think that's how you and I got connected, um, through jay. And uh, yeah, you know, jsa's been recruiting in the heavy equipment industry for man, probably about 40 years now and so went to work for him as director of dealer accounts management and then left in January and I've gone full time in consulting and training and I do speaking engagements and stuff. So and then oh, by the way, I also Kevin Landers Landers, which I think you had a, he was on as a guest a while back ago Uh, him and I just, uh, co-founded a software development company called by by the boxes. So if you've ever read my book, service by the boxes break service down into 10 basic steps. And so this, this um by the boxes, is the work order tracking app and basically just tracks every step and stage of the work order process, gives you a nice visual dashboard and instantly you can look at the dashboard and find out where's my bottleneck, like where exactly in the service process is, is, is everything getting getting hung up at.
Speaker 2:And so, if you've read my book, service by the boxes, it's a methodology, it's a philosophy of accountability let's break down the complex to simple and it's undergirded with accountability. And what I mean by that is like there's one required task to move a service work order from one step to the other. There's one identifying thing that you have to do. And once we identify that, that's how we broke down the different boxes. But then we assign that task to one person and one person has to be responsible. Like everybody says, if everybody's responsible for it. Nobody's responsible for it. So you hold one person responsible for it. So you, you hold one person responsible for it. And so when you utilize the, the work order tracking app, it undergirds that. So when you have a bottleneck, you know the exact employee, that I, that I, that I need to go and have a conversation with um which. So, like I said, ron, I started out as a technician and I remember consultants would come in and the executives would come down and they'd always tell how bad service was doing and every time they would stop all the production in the service shop, bring all the mechanics to the front of the service shop and tell everybody to work harder and work faster and to work more efficient.
Speaker 2:But what I've discovered it's usually not the technician, sometimes it is, but usually it's a poor billing process. It's a poor process from opening the work order to getting the estimate approved, ordering the parts. It's all those in-between steps, or boxes, like I like to call, that really adds time to it. And for a prime example you know average. You know an average dealership. It takes them 14 days to 30 days to close a work order. So much now that CAT is dictating that, that that their, their dealerships, close their work orders between seven and 12 days because it's such an issue, but that has nothing to do with the technician. You know the technician can get the job completed in a couple of days, but if it takes another two weeks or a month to close the work order, you know. So, anyways, I can digress.
Speaker 1:Let's take that one and let's take the growth you had with the ag dealer from $40 million up to $130 or whatever. Why do you think that was possible?
Speaker 2:So I think, two things I would say. One part of it is an internal labor rate deflates your numbers, deflates morale, deflates everything. But with that, one of the successes I had to drive efficiency is we. So maybe it's three-pronged. One of them is you need a flat rate every internal job, because a lot of times, if you have an internal flat or service labor rate or not, everybody says, oh, it's an internal job. Because a lot of times, if you have an internal flat or service labor rate or not, everybody says, oh, it's an internal job. We'll just take our time. Those jobs should be flat rated. And so, believe it or not, when you give an employee, a technician or whatever, you give them an objective, you give them a goal. They want to reach it. And so we increased our efficiency. One way was saying hey, technician, you've got X amount of time to get this loader installed, the radio installed, and so they had a clear objective. And so instead of taking two or three days to get a loader and a radio and washed it, it took one day. Because they know this is a one day job, Like we're going to hold you accountable for that.
Speaker 2:Streamlining our processes, you know. So the service by the boxes. That's the process that I developed while, while while I was there at at Washington County Tractor and I rolled that out. So we did training, ad training every month, parts and service manager training to re, re, re, ingrain. I guess you could say, like this stuff that we're working on day in and day out. Human people are very forgetful, so you got to constantly remind them on that and so.
Speaker 2:But with the training that we knew exactly what it was, and so I had a work order.
Speaker 2:Uh, I caught it, a work order timeline audit, I think it's what it's called, basically the app by the's app. I had that in an Excel spreadsheet and I could go into the business system and I would pull different dates within the business system, put it in this Excel spreadsheet and it could tell me how long did it take me to open up a work order, how long did it take me to assign it to a technician, how long did it take me to get a parts estimate? How long did it take me to get approval from, how long did it take me to order parts? And so then, when I'm seeing my bottlenecks, instead of going to the technicians and saying, hey, work faster, work harder. If it takes me two days to get a parts estimate, well then I need to work with that back parts guy and it's like why is it taking me two days to get a parts estimate? I want it in 24 hours and so, cutting all those little things out, we increase the efficiency.
Speaker 1:So stop there for a second and go back to your marine days. How did those work orders work?
Speaker 2:So, yeah, so we would. I was at a component rebuild shop, so I was at GSM company at Camp Pendleton in Southern California, and so what we would get is we'd get a unit, would bring it in and would have to tear it apart, diagnose it, and if we were less than 65% of total value, then we had approval to go, go go ahead and do it and um, but one of the benefits we had there is is um, we, we, we'd have an NCO, so you're, you're, you're, you're what we call a non, a non, a non rate. So if you ever see a Marine doesn't have a blood stripe like the red stripe down their dress blues, they're called a non-rate um, and that's a really great story. But probably don't have time to get into it. But those, the non-nc or the ncos, would kind of manage you know, four or five guys at one time and really help them.
Speaker 2:You know, because you got kids like myself. I was right out of right out of high school, had what? Three months of training and it was really more a theory of operation. And then I get dropped in a unit and like hey, here's a, an, l, an, l, an, l, an lvs, transmission or transfer case, to rebuild um, and so that's that's how that that would work. You would be assigned it, but you'd have like a mentor there to really help you so let me.
Speaker 1:Let me explore that one. Basically, what I think you were saying is you had an NCO and you had four direct technicians reporting to them. Correct, Basically, a density of supervision of one to four was because most of the guys in the rebuild shop were rookies, like yourself. If I transfer that around a little bit and do repair and maintenance not maintenance but repairs does that density change? Say that To technicians.
Speaker 2:Are you talking about, like, getting in the civilian shop or, oh, any shop?
Speaker 1:Like, if I'm going to repair a washing machine, a lawnmower, and in the Marines in the military, for the most part you've got standard time, so it's a very different gig. In the dealership nobody's given them any guidance, either from the OEM or from anybody, and I attribute that to the fact that the OEM doesn't make any money on labor. They make money on parts and machines. So they only pay a third of parts and machines. Yeah, Dialogues after warranty, but that's to minimize costs, not to get revenue. Yeah, I think one of the biggest problems we have in the you know, service by the boxes or any application of labor is direct floor supervision is critical from my point of view.
Speaker 2:Yeah, I think that goes right back to you know flat rating, like like your internal repairs, and have and having that supervision of telling that technician, this is a, this is a five hour job. And because the technician may think it's a 10 hour job, well, if they think it's a 10 hour job, they're going to mentally prepare for to take 10 hours to do it. But when you have that supervision of saying no, this is a four-hour job, and then they go, well, I have no idea how the heck I'm going to get this done in four hours. Then that shop foreman or that lead mechanic can work with that newer technician to reach it Like this is how you get there, this is how you can do the job in four hours. Um, this couples with this man. This is like a a rabbit hole we could go down.
Speaker 2:But part of the problem we have with technician recruitment and also retention is I've learned that shop foremans and service managers they don't want to do that work. They don't want to coach and train the technician. They want to hire a technician who maybe was in the military, maybe has gone to a tech school, and treat him like a 20-year veteran and if they have to give him any assistance at all're like oh, he doesn't know anything. These, these guys in tech schools, they don't teach them anything and that's that's. I think it goes. Going back to what we're saying about supervision is we've got to train and grow technicians, but this hasn't changed. There's no difference in 20, 30 years ago. I had a conversation the other day and I talked to the shop foreman and I was like well, when you started out, how old were you? Oh, 20. I said did you know anything? No, I didn't know anything. I screwed everything up. I was like okay, what's the difference with the, with the new generation?
Speaker 1:Okay, so stay there for a second, because that's true. No, we're, we're, I call it. We're hiring tools in a toolbox. That's the people. And if the skills that are required for that tool are not sufficient from the actual guy that is there, I'm just going to replace them rather than train them.
Speaker 1:When I started, we had the Caterpillar dealer in Quebec. We had three apprentice programs going a year and they went for 18 months. So there was no plan. Yeah, we had a 40-foot trailer that was a school that we would hook behind a low bed and take it off to the customer site, to store sites and just do mobile training. Yeah, and we spent a lot of money on training. Mm-hmm. And one graduation party, one of the guys got drunk and drove himself into a phone pole and killed himself, and that was the end of those graduation parties which took a lot of the emphasis away from training, and they ultimately stopped. And then every single aspect. And I'm anal, I, I love service departments. I love saying to the sales department or the rental department I don't have time for you because my shop's full with customer work and I'm not going to take somebody off a retail job because you want a discounted price. I can't go find somebody else yeah.
Speaker 1:And they finally said well, how do I get into your shop? I said pay the same price as my customers which they did, and I'll take care of you all day long, and that was the end of the argument.
Speaker 1:So now, it's first come, first serve first in, first out, all very simple stuff. But then and I'm talking about 100 years ago, this is 1970. I put an order parts ordering station on the floor so they didn't have to walk to the warehouse because we had a big damn shop. It was like a youth gate with 20 bays on both sides. So the guy would be walking for about 15 minutes to get there. And I remember Monday morning after a football game or Thursday morning after a hockey game. At night I'm up in Canada, you go to the back counter of the parts department. There's a lineup and they're all hanging around talking about the sports or whatever the hell it was, until they got their turn and it never. My little pea brain says why do I have two people doing something that one person can do by himself? So we put in these order stations Again, this is 1970, a phone. We had four of them and we had direct pick up the phone and it rang in the parts department to three women that sets on.
Speaker 1:Yeah, and in those days we had an npr, an numerical parts record, microfiche, right. So the guys would go in, they'd pull out the fish, they put it in. They'd either write it down or go right from the fish, pick up the phone and call in. That was it. Then back to their bay, and the most walking they'd have to do is you could see it, you know, maybe it was 20 feet and the part was delivered to them.
Speaker 1:Now the parts department's upset. They don't want to deliver it, come and pick it up. Well, wait a second. So now we look at the parts department and dealers don't do this when I'm finished this little diatribe. So we used to say, okay, who's the highest priority order in a parts business? And everybody said, oh, the guy that walks in. I said that's not true. Well, who is it? It's a field service technician. Oh, so what do we do? We take order by order by order two items, three items, six items, one item, whatever the hell it is. I say, well, wait a second, we're going to give it to somebody in the warehouse with six orders at a time. Well, how the hell are you going to do that. I'm going to use a dolly.
Speaker 1:I'm going to put tote boxes on the dolly, one for each order. Oh, polly, one for each order. Oh, so if it's an order for a transfer to the branch, when am I going to pick that part? Well, it's not going to be when the order comes in off the computer. It's going to be a couple hours before my shipping leaves. So started to get. What I was trying to do is get people to think about what the damn thing is that they're doing and they don't. So I'm famous for going up to a guy at the counter, picking up the phone and putting that handset by their ear and say what's that noise? Yeah, it's the dial tone. And they don't normally hear the dial tone because every time they're on the phone they're answering a phone. I want them to call out too. Oh, my God, what are you doing to me? So that, going from 40 to 80, somebody lost business, yeah, and that somebody that lost business had taken the business away from you because you didn't do the business the way the customer needed and wanted you to. Mm-hmm.
Speaker 1:And I submit to you today, john, that's even more critical and more prominent. Yeah, because over the last 40 years we've had the number of dealers in the marketplace is down by half twice. Yeah, canada had 10 catapulted when I started. Now there's two. Is it because the others are bad? No, is it. What's it causing it? It's too damn expensive now.
Speaker 2:Make any sense to you. Yeah, yeah, labor is expensive, parts are expensive, every it takes a lot of cash. You got to manage. I think you've got to manage your business better. I mean, back in the day you could sell a couple units and you made plenty of money and labor was cheap, parts were cheap. You know? Um, I mean, I think when I started, I think our labor rate was like 55 an hour. You know now it's like 255 an hour. So, but it is ironic, I'm glad you brought that up.
Speaker 2:I was working with the dealer the other day and they had an issue that the wrong part came in and so parts and service was fighting each other and the CEO was all aggravated, like why are you even bringing this thing to my attention? And so as I dug down, I told him I figured out the problem. The problem is you have a service technician telling the parts guy they're both looking at a part screen, like you said, two people doing one person's job. And he pointed at the rod rod, he thought it was the gland. The wrong part came in and now we don't know who to blame, we don't know where, where is the fault at. And then I told him I said in 1998, I was looking up my own parts like the. Your technicians in 2025 can look up their own damn parts.
Speaker 2:And now you're being more efficient because you're paying one employee to do one job and if the part comes in wrong or we don't have all the parts, who's at fault? The technician? If the technician, if it's on the technician's list, you know, and it didn't show up, well, then it's on the parts fault. And I tell people I'm not trying to find somebody to blame, I'm not like trying to point the finger. I want to know what part of the system isn't working. If, if the failure is in the parts department, then I tell them you pay it. You pay freight overnight, get the part in. If the technician forgot to order the part because it wasn't on on his or her parts list, service pays freight overnight. There's, we don't have to think about it. There's no discussion. There's no like mental capacity being wasted on 200.
Speaker 1:Everybody knows what the process is, so let's, let's stop there for a second, because nowhere in this discussion and, I'll bet you, nowhere at that dealership was somebody expediting the part so they got the right part there tomorrow. Yeah. So my gig is any part you want to order, every part that is received from a customer or mechanic. You want to get that processed today before you go home? Yeah, but any part you're short I want you to find today before you go home and call a customer and tell them where it's available. Yep, and we'll get in a plane. We'll go visit a thousand dealers.
Speaker 2:I bet you we don't find three that do that yeah, yeah, and kind of what's been a kind of getting back to by the boxes, and one reason that we we were able to grow service by 200 is because we were able to find our bottlenecks. And so if, if we can keep that technician and that piece of equipment in the same bay as long as possible, you're more efficient instead of moving things in and out, in and out, in and out, in and out. That's just time you can't bill. And so one part of it of tracking it's stages, but I call them boxes, so tracking one box. So one box is parts to be ordered and we should be tracking.
Speaker 2:How long does it take to order parts, especially for the service department? And so I tell everybody you order service parts the same day, same day, every day. You don't wait for a stock order, you don't. And so what comes to find out or what I've discovered a lot of dealerships the parts manager is getting his butt chewed out about freight, and so instead of selling the freight to the customer and quoting that up front, he says well, we're going to put everything on a stock order and get free freight. Ok, great, great initiative to do something.
Speaker 2:But what happens now? We're ordering parts once a week, and now you have those $250 an hour technicians standing around there twiddling their thumbs because we wanted to save $1,500 on freight. And so that's a part of the software that's good that you can say here's my bottleneck. That's a part of the software that's good that you can say here's my bottleneck. Why does it take us five days to order parts if the approval was already done? And just by doing that will cut off five days from your billing cycle, which increases profitability, technician efficiency, billing efficiency, cash flow All of that can be laser pointed down on. How long does it take you to close a work order?
Speaker 1:So I'm in Finning and I'm running the parts business and it's 1978. And we have a meeting interview. I was from Quebec so they weren't happy to see me, and we went through all kinds of many stories. But the thing I said to the 53 guys is you don't go home until you've found every part that everybody's ordered today. Yeah, and I sent 53 cots, one to each parts manager in each store. That's funny. And one of the guys actually called me up and he said what's this for? I said you haven't figured it out yet, have you? And I didn't answer the question. He called me back the next day and he said I got it.
Speaker 1:I got it, but if you change the dynamic, I don't care how much the freight costs, I don't care of any of that crap. What does the customer want from me? He needs a part. He wants the part. It's my duty to get it to him, and as fast as I bloody well can. He's got a down machine. He needs a technician. I repair the machine as fast as I bloody well can to get it. So I don't care who pays for what. We'll figure that out afterwards. If you're a surgeon in a hospital, I don't think anybody cares if you use an extra pint of blood. Yeah.
Speaker 1:Get the guy healthy.
Speaker 2:Yeah, if you got a job shut down, it's losing you $10,000 a day.
Speaker 1:Do you really care about a $500 freight bill? Well, so then then you yeah, the interesting thing about that the owner operator, his machine's down, he doesn't have any money. A quarry, the loader's down, he's got 20 trucks backed up. Yeah, you know, we're not looking at the job properly. So now, when you're in consulting or with the book service by the boxes, you're looking at a solution to the problem.
Speaker 1:I'm, I'm from a different school. I'm going to bring them a process. Yeah, I'm going to change. They're not going to use their process anymore. I'm not going to bring them a process. I'm going to change. They're not going to use their process anymore. I'm not going to adapt their process. We're just going to and find out where the bottleneck is. I tell them where the bottlenecks are allowed. And if you go beyond the bottleneck, guess what? We're going to visit.
Speaker 1:And there's a consequence to bad behavior. I'm not a hard ass. I don't fire. I've never fired anybody in my life. They've always been smart enough to realize that they don't. They're not doing the job. Yeah, these people, john, and say wouldn't it be nice if you could be successful somewhere, because it ain't happening here? That's pretty good, I like that. But so every, and I agree with a hundred percent with what you're you're talking about. It's helping people get better, because nobody has helped the service department, the management and the service department. They're not business people, they're technicians. And how often do you find the best salesman makes the best sales manager?
Speaker 1:Very, very, very very rare and, similarly, the best technician ain't necessarily going to be the best manager no, no. So this is this is an interesting gig, isn't it?
Speaker 2:Yeah it, I think it. But it goes back to most owners don't understand the service department Not at all, I agree, and they are fearful, and I mean fearful of the unknown. They would rather lose money and not get involved and not dig into it and just turn a blind eye and they focus on trying to sell more equipment. But it makes no sense at all to continue to sell more equipment because it makes the service department issue even worse. Like loading up more pressure or more weight on something that's already broken. You're just going to crush it and then you have this high turnover on the service manager role. Because he can't do it, he can't keep up with everything, he doesn't know what he's doing, nobody knows what's going on. And I've talked to so many dealers. They're like you know what? Owning a dealership would be great if we didn't have to deal with the service department like that. Everything is great except for that one aspect, and I'm like that's your money maker, that's the fun part, that's, that's that's where you really earn the your, your customers, loyalty and trust is right there and they're willing. They're willing to pay anything for it. Um, I was.
Speaker 2:I spoke at the oh, what was it? The association of equipment manager professionals or something like that. Yep and so, uh, and then one of the main break breakout sessions they so this is all. Majority of these people are construction company managers, owners, and we took a survey it was like a live survey, it's pretty cool Of what were they looking for or what was their decision factor when they chose a dealership.
Speaker 2:And you know, the one response that got zero votes was the cost. They didn't care about the cost. They're like. Number one was can they take care of me, can they service me, and um.
Speaker 2:So I talked to some people afterwards and I was like I am so glad that y'all did that, because I'm gonna go back to my to my clients and say, look, I was just there with your customers and they could give a rat's butt about the cost. They want value, they want good value, but they'll pay. What? If you take care of me, you take care of my equipment, you keep me up and running, I'll buy everything from you and that's the service department. That is the key and I think in this, in where we're at now in the market we're at now, product differentiation, I think, is no more.
Speaker 2:If you name whatever top five manufacturer you have. There's not a bit of difference between performance, fuel economy, warranty, like whatever. You want to say that this brand is better than that brand, it's really the service department. Do you have technicians and my equipment goes down, because I don't care what brand you have, it all breaks, right, it's all going to break and and customers know that. They just want to know when it breaks. Do you have the parts and do you have the technicians to keep me up and going?
Speaker 1:One of the things that has been fun is, for decades now, everybody has agreed that the salesman and equipment salesman sells the first machine. The parts and service department sell all the rest. So when many dealers over the years I said, okay, I'm not going to pay any commission for a machine that we've replaced that's the same brand as ours. I'm only going to pay a commission to a salesman when they bring me a different brand as a trade-in. And everybody says you're nuts If you think about equipment salesman. John, this is the month of April 2025. Right now, I'm 80% certain of the machines that will be sold in 2026. True or false? True, you're certain. I'm certain 80% of the time that that machine will get changed in 2026. 80% of the time that machine will get changed. Why? Why do I know?
Speaker 2:that Because the industry they always roll them.
Speaker 1:Well not just that I've got telematics today. Oh yeah, yeah, I know every machine and how many hours it is. I know what they're spending per hour on parts and labor. So I've got the graphs coming out. I know which ones are too high relative to the replacement cost and I know what the trade-in value is going to be like after the number of hours. So there's an optimum time. And like after the number of hours, yeah, so there's an optimum time. And you know I do this discussion with equipment sales.
Speaker 3:When they look at me like I have to run another horn, it's true though, isn't it?
Speaker 2:Yeah, it is. But I would say this most equipment dealerships are very reactionary in posture, even selling, like you said. Now they can be proactive and they can go and really provide that service for that customer right. They can go with telematics like hey, mr Customer, if you trade right now or you trade within the next three months, you'll get the highest trade in value for that equipment. Once you get past this, repair costs are going to start to creep up and your trade in value is going to start going creep up and in your trade-in value is going to start going down. So before those two things meet, you may want to trade it in. If you plan on training in the next 12 months, now's your time. You can do it six months later, but it's going to cost you another thirty thousand dollars, just heads up. I don't care if you buy or not, but and but that's proactive, sure? Um? So, versus being reactive.
Speaker 1:Let me talk about some transitions then. You've seen it in your work life that over the years we've cut costs out. We bring in computer systems. I say we've gone from paper to glass because all we did was we made it go faster by putting in a computer. But we've put profit ahead of customer support and by doing that we've had customer retention go down. And it just so happens that over the last 20 years we've gone from 100 dealers to 50 dealers to 25. The 25 are still surviving because they got lots of money, because sales have gone up. If they haven't gone up you're not going to be there because you've got 75% of the competition gone. But why don't I sell maintenance?
Speaker 1:Because the service manager is not interested in having a maintenance technician. He wants a journeyman for everything.
Speaker 2:Yeah, yeah. And I think another thing. So once again, they take a very reactive posture. Right, it is so easy. I was working with a dealer the other day and we were talking about campaigns. Like you've got, this was a deer dealership. They call them pips, and so they have a slew of them.
Speaker 1:So I think the journey for everybody Pips is a product improvement program, yep, and so A change to a machine.
Speaker 2:Yep, and so they have you got a lot of them. You know every every manufacturer has them, every manufacturer wants you to get them down. And so I was talking with their service managers and I think it was like January. And so I asked them I said what month comes after December? Every year? And they go January. I was like what happens in January? And so they said everything in the world. I was like the shops dry up. We don't have any work in January, do we? And they were like yeah, we don't have any work in January.
Speaker 2:I was like can you ever think of a January where you had a lot of work and some people? So I asked the oldest guy like how long the oldest service manager, someone who's got like 20 years? He was like no, not really. There's. This. One year we had a bunch of work, but usually we don't have any work in January. And I was like January comes around every year, right? They're like yeah, it does. Every year it comes January and every January we don't have any work. And I was like so why weren't we planning three months ago to order in all the parts that we needed and start contacting customers to bring in their machines to get these pips done in January Because we know we're not going to have any work to do. And I made the point I was like anybody that's in the heavy equipment business can make money in June, july and August. The ones you can make money in January, february and also December, those are the ones that make money, those are the all-stars in the business. But once again it gets to that reactive mindset. Service managers don't like to do pips or campaigns because, like to your point, they got to pick up that phone and they have to listen to that dial tone. Because they're used to the customer calling in saying fix this, fix this, fix this. And they just stand back and there's a very reactionary posture of just taking it in, shipping it back out, versus the phone goes both ways and if you're going to be successful in that December, january and February timeframe you've got to be proactive. You've got to have more of a strategic view of how you're going to manage your dealership and spread that workout.
Speaker 2:An example I had a customer who, when I was a service manager, brought and this is one of those guys who looks like he he was a bum and had no money, but this guy was worth millions and millions of dollars and um, and so he came in. He brought some machine in. I gave him an estimate on it and he made the point he's like john, that's way too much money, I'm not gonna, I'm not gonna afford that, you know, I'm not gonna pay it whatever. And I was like that's fine. I said, well, bring it to me in December. And he's like what I said, bring it to me in December. He's like I said you don't need it, you've got plenty of equipment. If you can wait till December, bring it to me. Then he goes well, what happens in December? I was like I push brooms in December, like I will make you one heck of a deal if you can keep my shop full in December. And so he got it.
Speaker 2:And so after that he would call me ever so often. He's like John, are you busy? I was like, yeah, I'm swamped, I don't have any time, okay. And then he would call me and finally I was like, yeah, you know I'm not busy, I'm all caught up. You know kind of have a lull. He's like all right, I've got some equipment I'm going to bring into you. And so, just being strategic, like that, I'm saying, okay, I'm okay discounting, but I want to discount to cover my costs, not discount because I mismanaged my customer relationship.
Speaker 1:So let's go a different direction. How? How much money does a technician make for the dealership?
Speaker 2:how much money like percentage wise or dollars dollars.
Speaker 1:Yeah, you're in a standard dealership. You're working as a shop technician, not even a fee about 300 grand a year okay, how about the parts?
Speaker 2:uh, in addition, I'd say another 300 000 in parts, so over half a million okay, so let's just make the arithmetic easy.
Speaker 1:Let's say it's 300,000 parts, 200,000 labor. What's the gross margin on labor?
Speaker 2:Should be about 65% to 75%.
Speaker 1:Well, let's make it easy, 70% halfway in the middle. So 70% of 200 is how much? 140. Yeah, how much does the parts department make in gross profit? Should be about 40, 35 to 40%. So let's take 40% of 300,000. That's another 120,000 of gross profit. So between the labor at 140 and the parts at 120, a technician generates $260,000 worth of gross profit. How many machines have to be sold to equal $260,000 of gross profit? A lot, is it 10%? What's that? You think you got 10% on gross profit on machines anymore?
Speaker 2:I don't think so. I think you're probably looking around five.
Speaker 1:If it was, they have to sell $2.6 million. Most of them are around $3 million, and if they make 8%, that's $2.70. That's less than what we're giving up. That a technician's making One technician? Well, that's right, yeah, and you know. So that's something else that bugs the hell out of me, see, and it's worse today than it has ever been. When I started out, there were still probably half the men that ran dealerships started them. Today it's second and third generation and it's a different gig.
Speaker 1:But if you have people that weren't at the foot of a founder Lewis Pierce at Walker Shaw Pierce the old man you're lucky as hell. You know Bill Blackie. When he was chairman of Caterpillar he'd go around and visit all the dealers. He's a Scotty, he's about five foot six. I offered to work with him for $500 a year because I thought I could learn a lot from him. Foot sick. I offered to work with him for $500 a year because I thought I could learn a lot from him. And the son of a gun said to me well, I'm not sure I could teach you a lot, but isn't $500 a month a lot of money? I nearly smacked him, but it's okay.
Speaker 1:So let me go to the next place. What's a good backlog, let's say, for a shop? Forget the field, just the shop. What does a service department want to have as a backlog for the shop? One to two weeks. So what does a customer think when they call up and say, well, you're not even going to start me after one or two weeks? What do they think the customer thinks?
Speaker 2:Well, I don't. That's not how I'm going to manage a business. I'm going to, I'm going to look at everything within 24 hours. That's not how I'm going to manage a business. I'm going to, I'm going to look at everything within 24 hours.
Speaker 1:Now we're starting to talk. But your your comment about one to two weeks. That's a go around. We'll get in a plane. We'll go visit a hundred dealers. One or two weeks would be pretty standard. Five days would be pretty standard in the field. Yeah, tomorrow Get your machine in here tomorrow. Why don't we do that?
Speaker 2:Yeah, yeah, I learned this the hard way because I used to tell the customer like, hey, I'm two weeks out and they'd bring the machine. It would sit there for two weeks and then I would diagnose it. You know, do an estimate. You asked me one reason how we grew service sales by 200 percent estimate every job. You know, sell the whole job. That's you.
Speaker 1:OK, stop there for a second. Where did this word estimate come from?
Speaker 2:I like estimate because I want to say, if I'm within 10 or 15 percent, I'm good Like if I do quote to me sounds like I'm going to quote exactly what the job is and I believe, like a lot of service managers get, they're like well, I don't know exactly what it's going to be, just estimate it Be within 10 or 15% and we're good, like they're fine, like we like. I think service is a range. I don't think it's a hard, fast number because it depends on the value is in the eye of the beholder. If you got a customer who's down his excavator is down, he's willing to pay another 10, 15, 20 percent to get that machine up and running, versus somebody who uses his excavator on the weekend at the family farm, he's not going to want to pay as much money and and so there's a range of value for that, for that job.
Speaker 1:So I, I, I do things differently and I teach things differently. I'm going to give you a guaranteed price and I'm going to give you a guaranteed completion date and I'm going to give you a six month warranty, and that's the way I work. Yeah, if I'm over, it's my problem. If I can do it in less time, it's my gain. So how do you define or how do you develop a standard time for a job?
Speaker 2:John, that's a great question.
Speaker 2:That is a really good question, and I think that's where technology is going to come in and really, really help us with that. In the times past I have used warranty flat rate codes, like looking up the warranty jobs, which is a complete pain in the butt, and then doing a multiplier of, you know, 1.5 to 1.25, doing everything differently. I've done it like hey, shop for me, let's sit down and let's talk about the job. You know there's like a thousand different ways to do it, and what's aggravating or this is what's frustrating is we have probably what 30, 40, 50 years of data in our business systems of service repairs that we've done a hundred times over and over and over again, but there's no good way for us to access that data in an efficient way to say what does it cost us to do that repair?
Speaker 2:And so this is where AI can come in, that you can get digital iron. They're an AI platform based out of Ireland. They have a model, an AI model, that will go into your business system and say hey, I'm going to rebuild a transmission on a 310B or C or whatever or J, wherever John is on now and it will pull all those service reports and look at how much labor you had on it, what was the parts on it, and give them a good range. Of this is what it normally takes.
Speaker 1:So what you're talking about and we've been here for a long time we're still dealing with transactions, not dealing with data. Yeah, and your problem with standard times, flat rate, whatever the terminology is. You came through the John Deere world. You know what the service pricing guide, the SPG code, is right. Yeah, terminology is you came through the john deere world. You know what the service pricing guide, the spg code, is right. Yeah, do you attach an spg code to every segment of every work order that you're doing? No, why?
Speaker 2:not, it's a lot of work, isn't that a shame?
Speaker 1:yeah. So you're not saying right or wrong, I'm just saying that's, that's what they don't, why they don't do it.
Speaker 2:Well what?
Speaker 1:what so is okay. So an sbg code for uh and and john deer, 0417, I think, is a water pump, and how many different sizes of water pumps are there?
Speaker 2:many, 10 yeah, I haven't been around deer for a while, but they've got a lot more engines now than what they did when I was around.
Speaker 1:Well, actually anything under 45 horsepower comes from Kubota. Really. I mean. So there's all kinds of things going on here that are kind of cute. 250-hour service. Well, it's not that anymore, it's 500 hours. Yeah, I remember putting a presentation on to a dealer group. John's, not that anymore, it's 500 hours. I remember putting a presentation onto a dealer group John Deere dealer group all the principals, 15 or 20 of them in the room. I said, geez, have you heard about the change in the oil change, the filter change on your maintenance? No.
Speaker 1:Well, it's gone from 250 hours to 500 hours. In other words, the cost for your customer has gone down by 50%. You don't know about it. So there's another illustration, but with data. I want an SPG in a John Deere world. Caterpillar has flat rate codes. Commencement has flat rate codes they all do.
Speaker 1:And rather than me going through the books because those times are to reduce how much they pay me and I'm subsidizing the quality of their machine, which really bothers me and they don't like it when I say that. But I'm going to take the standard times. I'm going to use a flat rate code on every job all the time and it's just like parts. Once I've done them six times, I'm going to take my time, and that's what's going to be the standard time. But what you're going to come up with then is typically, I got 10 jobs and there's 20 hours total. Well, my standard time is two hours a job. A man drowned in river of average depth of six inches, so average doesn't work, so I got to get into what's the deviation off the average for each of the jobs and how much comfort do you want to have?
Speaker 1:Because I'll say that a technician every day. John, I'm giving you eight hours of labor, eight hours of standard time labor. When you're finished, you can go home. Now you got to hold a quality level, but when you're finished you can go home. Now you've got to hold a quality level, but when you're finished you can go home. Or, if you want to stay, I'll give you more work and I'll pay you extra for the eight hours of labor you're here.
Speaker 1:Yeah, all this stuff is simple. If only the owners paid any attention. Your service by the boxes would take you to all of this. Yeah, so, nick Maverick, another young guy would take you to all of this. So you're one. So, nick Maverick, another young guy. Three clicks and he can manage a sales territory for equipment salesman Equipment salesman when I started. Or product support salesman. Here's your customer list, there's your truck, here's your keys, there's the door. Goodbye. Yeah.
Speaker 1:We're not running. We're not running a business. It's like we're doctors. Doctors are the worst damn business people on the planet. Yeah. Yeah, so everybody worries about absorption right. The real challenge is asset turnover. We have way the hell too much inventory that might turn one and a half times a year. So work in process, labor, you say. Fine, we got to close it within 7, 14, whatever days. Why not tomorrow?
Speaker 2:yeah yeah, I'll give I'll give you a day. So what I if you? I mean when you, when, if, when, when our listeners, if they haven't, if they have read my book, or when they do read my book.
Speaker 1:Well, okay, so wait a second. How do I buy your?
Speaker 2:book. You can just go to M M M Amazon. You can probably just Google service by the boxes John Dowling and they'll come up, okay, I'll include that in this podcast, okay, as a little bit of a spur.
Speaker 1:But how much does it cost, john?
Speaker 2:$19 and something cents. Okay, so I guarantee instant ROI. If they read my book and apply one principle, they'll make that a thousand times over.
Speaker 1:Okay, so guarantee is what you're going to get your 20 bucks back in how long?
Speaker 2:If they do it in the first month and they don't see a difference, I'll I'll. I'll buy the back book back from them. If they apply that well at least one principle found in the book and they don't see a difference, then I'll buy that book back from them.
Speaker 1:Okay, so people that are listening to this and pay attention to it, because John's an honest man. If he says he'll buy it back, he will, but then those of you listening have to pay attention to what I'm going to say now. Whatever's in the book, do it, it works. It works for many, many dealers. Is it perfection? No.
Speaker 1:But good is the enemy of great. Let's get good, yeah. So what would you think? Ok, so they've read the book, they understand it, the company wants to do it. What's the biggest problem they're going to have from there, john?
Speaker 2:Well, before we go go, I want to talk about, like you said, close the work order right now, close the work order today. So in the book that's what I say service manager, you don't go home. Just like you said, buy them some cots before you. Close every work order now, the this is a general statement. Now, if you, if you're doing a rebuild at a cat dealership and it's, you know, hundreds and thousands of parts and it may take you more than a day to make sure everything's right, stop.
Speaker 1:That's looking at the mess. Yes, every day I finish a segment. My segments are never longer than eight hours. Oh, that's a good point, good point. So if the end of the day comes, everything I've done today is disposable? Yep, so this argument and I used to get it all the time we rebuild a tractor it takes six months. How long is it going to take me for the invoice? Oh, it's tomorrow. Yeah, I want the money, honey. Yes, yes, all these guys, yes, the parts give me especially a rebuild.
Speaker 2:Yeah, so what? You, what, what I found? The reason you can't close the work order the same day that it's done is because we didn't estimate the work order. We have no idea how much it should be, we don't know if the customer is going to pay for it or not, and we're we're fearful to pick up that phone and call the customer and say, hey, it's $10,000, because we have no idea what their, what their reaction is going to be, because we never got approval.
Speaker 1:I'm with you. So there's one objective I want to have with you, because we're at the point of winding this thing up. We'll have another one in another month or something, if you're interested. But I want to get the word estimate out of your goddamn head Guarantee the price.
Speaker 2:So when I say estimate, I'm doing the same thing you're doing. This is my price. If I go over, it's my bad. If I go under.
Speaker 1:But change. The word Estimate means that there's something, and that's what every service manager has used since the beginning of time. Yeah.
Speaker 1:Guarantee Every machine that comes in. I'm going to do an inspection, mm-hmm, and I'm going to talk to the customer because I'm going to find things that he doesn't know are wrong with his machine. Yep, and I used to get really damn tired about a guy calling me up and needing a machine for a job and getting it out before I had everything finished and having the damn machine come back in worse shape in a day. So I'm the doctor, the machine is the patient, the owner of the machine is the insurance company, and I've had lots of trouble with the insurance companies, mind you. But how can we wrap this conversation up? We've covered a lot of ground. We did, we did.
Speaker 2:Surprise you. No, I've thoroughly enjoyed it, and I I tell everybody, um, when I, when I work with dealers, it happens more often than not they go. Have you ever heard this ron sleigh guy? And I was like, yeah, I know him, they go, you know him. I was like, yeah, yeah, I was like he is, he's a wealth of knowledge. And so I would say that our industry needs to be forward thinking. We need to look at our parts and service like. The purpose of parts and service is to make the dealership money.
Speaker 2:I think one of the reasons that we take a reactionary posture is we believe the service department is to fix equipment and keep equipment up and running, and that's not the purpose. The purpose is to make money. The way that we make money is by repairing pieces of equipment. Make money is by repairing pieces of equipment, and so what's key on that is the reason the technicians don't like to do inspections, and the reason service managers don't like to be proactive and ask for more work is because they believe their job is to fix as many pieces of equipment as they possibly can. Why would they add more work to their workload?
Speaker 2:But once they realize it's my job to make money and that goes back to hiring, you know, your technician versus hiring a business guy, like, would you hire a heart surgeon to run a $3 billion hospital system or an MBA business guy? You know it's not this. Doing heart surgery and running a $3 billion business is not the same thing. You know, replacing a hydraulic pump on an excavator is not the same thing of running a service department. So if we can get people to realize you need to be business focused and business minded and realize that the purpose of the service department is to make money, not to repair pieces of equipment. That's how we make the money.
Speaker 1:That's a perfect place to stop John. So, to everybody listening, thank you for being here. Thank you, john, for doing this. Yeah, glad to be here. This will probably be posted the 14th of this month, so look for it, remember. Service by the boxes 20 bucks, a 30 day guarantee. John said that he would buy it back if it didn't make enough money back in 30 days. And thank you all for being here and I look forward to having you with me at another candid conversation, mahalo.
