Small operational changes in service and parts can translate into big gains for dealership profitability. On today’s episode of Service Drive, President and CEO of M5 Management Services, Lee Harkins, outlines the shifts dealerships can make to boost net profits in service and parts. His core message is direct: apply sales-department discipline to fixed ops.
Most dealers can recite how many new or used units they’ve moved, and that level of focus drives accountability. Harkins says service departments need the same intensity, where the “units” are flat rate hours. Since service operations run on time standards, dealers should set clear production objectives, reinforce expectations and make progress visible every day.
He recommends anchoring the department around three core questions: how many hours were produced yesterday, what the effective labor rate is and how many repair orders were written. Building this rhythm creates urgency because consistency shapes culture. When performance is tracked and discussed daily, managers and technicians stay engaged and aligned.
"Develop the focus and the culture within your service department. It's all about the flat rate hours and get aggressive on knowing."
Visual performance tools can reinforce this environment. Live dashboards in the service bay help technicians see where they stand relative to goals, strengthening motivation and driving healthier competition. Recognition tied to performance further supports this system.
With the fundamentals in place, Harkins emphasizes that technology should support production, not distract from it. Even modest productivity gains, such as a 10% lift in a store with 10 to 15 technicians, can translate into large increases in net profit. Using historical daily data, raising expectations incrementally and training advisors to communicate value all contribute to these gains.
Inventory management also presents an opportunity. OEMs now allow more frequent ordering, enabling dealers to reduce parts depth without risking availability. Faster service production moves inventory faster, increasing parts gross and freeing up cash. In some stores, tightening production alone can add hundreds of thousands in additional parts profit.
As dealers head toward 2026, economic uncertainty and shifting customer behavior require sharper operations. Warranty rate increases have pulled some focus away from customer pay work, and customers facing tighter budgets are more sensitive to the value they receive. Advisors should better communicate technician expertise, certifications and strengths to help customers understand what they’re paying for.
Customer retention remains another priority. Independent shops aggressively market service offers, so dealers must stay top-of-mind with clear value propositions and consistent outreach. Mobile service is becoming a key differentiator as consumers prioritize convenience. The presence of a branded mobile truck in a neighborhood not only satisfies service needs but often generates additional traffic and sales opportunities.
