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:
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:
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:
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:
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:
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:
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:
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!
Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.
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