An operations director in Clinton, Mich., writes:
“I´m looking to change our companywide pay plan for service advisors. My thoughts are to put the advisors on gross profit sales for labor and parts.
“I´m trying to decide what my comp as a percentage of gross should be. My thoughts are the more they (sell) the better it is. Anyone have a pay plan like this? Any help is welcomed. Thanks.”
Tom Ham replies:
“The plan that we used is a base, plus an incentive based on gross sales, then adjusted by parts GP. But I´m guessing that your SAs cannot determine GP.
“Regardless, we start with what percent of gross sales, not GP, that we can afford to budget as SA pay. Then it´s a matter of working the numbers backwards to determine what percent of gross sales, or in your case GP, that they can be paid.”
A shop owner in Amarillo, Texas, responds:
“I give mine 4.5 percent of gross sales for the whole shop and an extra 1.5 percent when I´m gone goofing off. Seems to work out pretty good.”
A shop owner in Traverse City, Mich., replies:
“I have seen SAs get paid very well on a percentage of gross when the shop actually found no profit and lost money on jobs. I pay salary plus bonus based on the following formula: gross sales, minus sales tax, minus cost of sublet, minus cost of parts, times 0.75=7.5% of gross profit on controllable profit margins.
“Cost of labor is not really controllable by the SA, but they of course can sell more.”
A shop president in Chicago answers:
“My SA is paid on a percentage of net profit after parts and the break-even point is met. If he does not meet the break-even point he does not get a bonus.
“It is human nature to figure out how to make things the best for me. So you need to make sure… that the owner is not left out in the cold. My system only works if the owner is making sure all his percentages are in line. It is not set it and forget it.”
A shop president in Sheboygan, Wis., responds:
“SAs want to make $50,000 a year (gross pay), they better sell me $50,000 in sales a month. They want $100,000 a year in pay, they better sell me $100,000 a month in sales and vice versa, they only make $20,000 a year if they only sell $20,000 in sales a month. But they won´t be here long then.
“There are minimum levels of acceptable performance that must be met each month. Cost of parts, cost of labor, sublet, etc., need to be in line so the shop doesn´t get ripped off. But it´s pretty basic, comes out to about 7.5 percent of gross sales (this 7.5 percent is their gross, all benefits included).”
The questions and responses are posted on the Automotive Management Network website, which is operated by Deb and Tom Ham, owners of Auto Centric (formerly Ham´s Automotive) in Grand Rapids, Mich. The comments have been edited for clarity and brevity.