Building a Profitable Fleet Business – Part 2
Last time, we talked about the importance of having a good plan to generate fleet business for your shop, and some of the elements it should contain. But once you have created that plan, what do you do with it?
Many savvy shop owners are employing outside salespersons to source new fleet accounts and maintain existing ones. If you’re considering using an outside salesperson, be prepared to invest in that position for a period of three to six months. It could take that long before that person will be generating enough sales to justify the position.
One method used to calculate the increased sales volume necessary to break even on having an outside salesperson is to add together cash earnings, benefits, travel expenses, vehicle allowance, and any other costs, such as office space. Divide those total costs by your overall gross profit percentage, and the resulting number will be the sales dollars necessary to break even. If you divide the sales figure by your average invoice amount, that number will tell you roughly how many additional repair orders you’ll need to break even.
Customer Interview & Fleet Agreement
Another document that should be developed with the assistance of your attorney is a fleet agreement that will enable you and your prospective fleet customer to itemize agreed-upon expectations of each party. Some of these expectations may include the level of priority service you’ll provide, hours and days you’ll provide such service, mobile service you’ll provide (if applicable), plus any sublet and customer-specific services. The fleet customer may agree to deliver and pick up its vehicles, perhaps only on certain days and during specific hours. The customer may agree to provide you with purchase orders for each vehicle on each visit.
The purpose of the fleet agreement is to eliminate possible misunderstandings between the parties. This document requires the signatures of responsible parties and should be notarized. It should be written in easy-to-understand layman’s terms so it doesn’t require legal review every time it’s used to sign up a new fleet customer.
Once the fleet customer has demonstrated a sincere interest in using your services, continue the process by obtaining more information about his business.
To fully satisfy your new fleet customer, you’ll need to obtain a complete list of the vehicles you’re expected to service, including the customary information such as year, make, model, VIN, plate number, company vehicle number, etc. Additional information is also necessary to complete your fleet agreement. That information includes answers to the following commonly overlooked questions:
- What hours of the day are the vehicles operated? The answer will provide some insight on when the vehicles may break down, and when they can be available for routine service.
- Is there one operator assigned to each vehicle? Often, when there’s more than one driver, the wear and tear on a vehicle is substantially increased, since the operators are likely to have different driving habits.
- Where are the vehicles operated? You’ll need to know how far you may have to go on a service call or to have the vehicle towed.
- How many miles per day are the vehicles driven? Knowing the answer to this question should assist you in compiling an appropriate service schedule for each vehicle.
- Are the drivers required to do a daily inspection of lights, tires, fluid levels, etc.? If not, chances are there are some repairs and services outstanding on some of the vehicles.
- Are there any known problems with the vehicles? If so, which ones, and what are the problems? This will help you get acquainted with the vehicles and perhaps effect some immediate diagnosis and repair to prevent future breakdowns.
- Is the company planning on retiring and/or adding any vehicles in the future? If so, which ones and/or how many? Answers to these questions will help you calculate an annual service investment required by the customer.
- What level of authorization is available routinely, that is, without contact? You want this as high as possible so you don’t have to spend hours on the phone getting authorization every time a vehicle comes in for service or repairs.
- If authorization is required, who’s responsible, and to what limit? This information will also be helpful in determining the customer’s level of trust in your shop’s ability and integrity.
- If needed service exceeds the responsible person’s level of authority, whom do you contact and how long does it take to obtain a decision? What you’re trying to determine here is the length of any possible delay and how it may affect the flow of work through your shop.
- When (days and times) is the responsible person available? How is contact to be made? This is critical information necessary to keep shop production moving as planned.
- Will it be possible for someone from your company to make a presentation to the operators of the fleet vehicles for the purpose of getting acquainted and educating them on how best to do business with you? Drivers have a tremendous influence on the relationship between the companies. If they’re happy, management is usually happy.
- Are there any seasonal or heavy-use times the vehicles must be prepared for? Knowing this information will enable you to plan and cycle the vehicle through an inspection process well in advance of seasonal or heavy-use periods.
- How will the vehicles get to and from the fleet customer’s place of business? In addition, take into consideration heavy traffic times (whoever brings the vehicles in), which may significantly lengthen the normal time needed to pick up and drop off vehicles.
- What method of communication is used to convey drivers’ concerns to your company? Most fleets do not have a process for this. Perhaps a “vehicle concerns” form should be provided in each vehicle by your shop to improve the process.
- Who do you contact and include in a periodic fleet review? There should be a weekly, bimonthly, or monthly review of repair and maintenance activity with management.
- How does the fleet customer intend to notify you when a new person becomes responsible for overseeing fleet maintenance? Having consistent and frequent contact with the person in charge helps you service the account. When someone new takes over, you want to be among the first to be notified.
- Would any of the fleet customer’s employees be interested in having your shop service their personal vehicles, as a benefit of the business relationship?
Once you’ve gotten answers to these questions, and obtained any other information you deem pertinent, you should incorporate it into your formal fleet agreement.
Vehicle Inspection & Warranty
Before you finalize the fleet agreement, arrange to inspect the customer’s vehicles. If they’ve been seriously neglected, you may want to proceed cautiously, or maybe even reconsider doing business with this customer.
Most fleet owners fully understand the costs of one of their vehicles sitting on the side of the road, and what late deliveries mean to their customers. Chances are that if the vehicles have been neglected, the fleet owner may not be in a financial position to put them back into top condition. Based on the vehicles being in very poor condition, you may end up paying far more attention to keeping these vehicles running than is profitable.
The warranty your shop offers on products and services pertaining to commercial-use vehicles should differ substantially from that of private-use vehicles. Warranties should be tailored to each fleet customer based on vehicle use. For instance, you wouldn’t provide the same warranty for a clutch installation on a fleet of 4WD vehicles routinely used off-road by surveyors that you would for a customer who owns a similar vehicle that’s rarely used off-road.
Many fleet owners elect to use a fleet administrator to oversee the maintenance and repair of their fleet as an alternative to doing it in-house. These administrators often charge repair shops a fee as part of their agreement to send the customer’s vehicles to a particular shop. This fee is usually calculated as a discount when the administrator makes payment, and ranges around 10%.
When dealing with a fleet administrator, make sure to provide an accurate and complete estimate and determine whether they’ll require a discount. The positive side of dealing with a fleet administrator is that they usually handle thousands of customers and vehicles and, if they’re satisfied with doing business with you, will routinely refer vehicles to you. Aligning yourself with several administrators substantially reduces your cost per customer. Often the discount is viewed as a bargain in that it may be more than offset by the additional volume of service.
Who Are Your Potential Fleet Customers?
Once you’ve made the decisions regarding vehicles, credit, and the other items described earlier, you’ll be ready to aggressively seek fleet business. Your final decision regarding fleet business concerns the type of company you want to deal with, and the vehicles they operate. There are literally hundreds of fleets of vehicles available for solicitation in most market areas. Once you’ve established your target, it’s time to implement your plan.
Along with the detailed information above on adding fleet vehicles to your repair business, keep these tips in mind:
- Grow slowly
- Read fleet publications to remain current on industry trends
- Attend fleet industry trade shows
- Make sure no single fleet customer comprises more than 10-15% of your total business
- Be sure to keep your accounts receivables under tight control
Maybe it’s time for you to consider (or reconsider) adding fleet customers to boost your business!
Want to learn more about adding fleets to your business? Sign up now for our upcoming Fleet class. Our Fleet class begins January 29th at 10am. Visit rlotraining.com/enrollment or call us at 800-755-0988 to enroll today!