Running a successful dealership is no walk in the park. It requires consistent focus, commitment, execution, and follow through.
This article will focus on the revenue generating aspects of dealership operations. The same attention to detail should also be applied to dealership expenses. By doing so, revenue can be maximized, and expenses minimized, resulting in outstanding dealership profitability.
As leaders and managers of any dealership, a great deal of time is spent poring over reports, trend sheets, composites, financial statements and a host of other relevant data. All this is extremely important but should not be done in isolation of the “living dealership”.
The positive result of any dealership endeavor is dependent on the successful execution of the business plan, and always paying attention to detail. As we all know, “the devil is in the details” and human nature is such, that “people respect what you inspect”.
Recognizing these two important business basics, every leader should pay attention to them. Not doing so, may result in an underperforming dealership, and potential exposure to liabilities that could have been avoided.
I have always encouraged leaders and managers to get out of their office, and regularly “S.T.R.I.D.E” through the dealership departments and interface with employees to execute these responsibilities.
Some added benefits of this approach are:
- Providing visibility to the entire dealership
- Building relationships with dealership personnel
- Seeing the dealership through the customers’
- Interacting with customers
The frequency with which you do so is entirely up to you and your schedule of planned activities. Some elements should be done daily, but others are more appropriately looked at on a less frequent basis. If any of the responsibility is delegated, strong follow up and accountability is required.
The Dealership is comprised of up to 6 different business units: (1) new vehicle sales, (2) used vehicle sales, (3) F&I, (4) service, (5) parts and (6) collision center. Paying attention to each one is equally important to drive overall dealership success.
There may be many more other items that you look at. The key areas of focus of S.T.R.I.D.E are:
Sales, Traffic, Receivables, Inventory, Dealership, Employees.
Let’s take a walk!
Sales: Measuring sales only in the “front end” of the dealership on a regular basis, is easily done but is a common mistake. Because fixed operations tend to close strong at payroll cut off dates, this usually provides a spike in the performance of these departments on those days, and more focus is given to these departments at that time. However, waiting for a month to close is hardly the right time to look at “what happened” in the fixed operations departments. To avoid this uncertainty and maintain a consistent pace with variable department performance, fixed operations sales activities must be looked at more frequently. Consider some key elements in all departments:
- Prior day recorded sales
- F&I rewrites and unwinds
- Gross margins in each department by sales or unit category
- One-line RO’s in service, to identify missed upsell opportunities or a possible breakdown in the process.
- Hours, dollars and effective labor rates per customer pay repair orders
- Performance against plan by each department
- Projected pace for the month.
- Daily DOC review for anomalies that may have posted overnight.
Traffic: Every department has traffic, but CRM systems and daily management focus tend to be primarily directed at the variable department. In order to ensure successful sales results in all departments, paying attention to fixed operations is essential. Traffic must be viewed through a much broader lens, to encompass the entire dealership. This includes:
- Unfilled prior day orders and no close sales
- Sold vehicle orders in transit and arrival dates
- Carryover service work, and current day shop load.
- Parts backorders and special orders
- Sales and service no show appointments and follow up
- Sales and service appointments scheduled today and tomorrow
- Collision facility work in process
- E-commerce traffic and leads
- SEM and SEO KPI’s
- CRM follow up processes
- In-store follow ups and “be backs”
- Portfolio mining
- Orphan customers
- Service drive conversion opportunities
Receivables: A sale is not a sale until the money is in the bank! Frozen capital places a drag on dealership cash flow, and with interest rates increasing, will adversely impact dealership profitability. Reserving for overdue accounts is a good accounting practice, but should not eliminate the push to collect delinquent receivables. Credit limits and term must be respected to avoid significant exposure to uncollectible accounts. Pay attention to:
- Aging review for all categories of receivables, to identify slow pay or delinquent accounts
- Wholesale parts and used vehicle receivable collections
- Missing title report
- DMV heat sheet
- Contracts in transit for collection effectiveness
- Hold checks
- NSF checks
- F&I heat sheet
- Factory receivables
Inventory: The sale of a vehicle starts the entire process in the dealership. Consequently, availability and mix of inventory of new and pre-owned vehicles, will dictate the success or failure of variable department performance. In addition, having the right parts inventory to support service operations, collision center and wholesale customers is also essential. The sales process is dynamic, and inventory changes frequently. As a result, constant review and scrutiny of inventory, to have the most effective inventory for the dealership, is essential. Consider the following:
- New and used vehicle display, should be appealing to customers and be representative of the brand(s)
- Availability and days’ supply criteria must be considered, relative to sales, market share and allocation methodologies, including:
- Model years on the ground
- Final pay units
- In transit units, on order units, customer orders
- Dealer trade activity
- Any stop sale or restrictions on inventory
- Reconditioning throughput days and cost per vehicle
- Website accuracy
- Pictures and video
- Frequency of updates
- Parts inventory availability and days’ supply
- Special orders,
- Recall parts availability
- Parts returns current
- Parts scrapping current
- Service and collision center work in process
- Available hours vs. sold hours
- Technician efficiency
Dealership: The “Dealership” is represented by the dealership facility, its people, the online presence, reviews, marketing materials and other items in the public domain. Irrespective of the product represented by the Dealership, there are certain core values that must be evident. Professional representation at all levels, including product display, merchandising, marketing and a well-trained team to ensure that every point of customer contact, (irrespective of the source), is a consistent and positive experience. This should be true for, telephone, E- commerce, Social media and in-dealership experiences. In addition, Ethical business practices, including integrity, good faith dealing, and an outstanding attitude to customer care, during, and after the sales transaction. All the above, are all essential components of professional representation of the product and the Dealership. To achieve this level of representation, focus on:
- Dealership appearance, maintenance, displays, and cleanliness.
- Don’t forget about the bathrooms!
- Customer satisfaction scores and verbatims in the surveys.
- Customer reviews and your responses
- Social media posts
- Customer communication or issues requiring resolution.
- Departmental meetings to communicate culture, plan and performance tracking.
- Phone call handling and effectiveness
- Call the dealership from time to time!
Employees: People are the most important asset of the dealership. For a dealership to be successful, employees must be trained, coached, mentored, empowered, appreciated, trusted, compensated and accountable. To achieve this, considerable time will be required working on these components with the dealership team. This includes:
- Attendance in all departments
- Safety considerations
- Appearance and compliance with the dealership dress code
- The attitude of the team should always be positive
- Motivation must be a prime focus every day
- Spread and reinforce the culture of the dealership
- Challenges or issues must be resolved as quickly as possible
- Recognition of a job well done should be publicly acknowledged as often as possible
- Address HR issues as quickly as possible
- Ensure schedules are manageable, reasonable and ensure full coverage
- Training should be a consistent focus
- Customer care must be a core value throughout the dealership
- Live up to promises made
This article is not an exhaustive list of items requiring attention. Most can be done in the various departments, by walking the dealership and by informal discussion with personnel.
If you approach your responsibility with a desire to “walk the walk”, rather than “talk the talk”, then you and your team will ultimately S.T.R.I.D.E towards a successful result!