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Lessons For Resolution

Successful dealers set goals and manage by the numbers.

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I recently read a study conducted on Harvard University MBA students which concluded that only 3% of the students set clear written goals for their futures and had plans on how to accomplish them. These are Harvard MBAs, imagine how few average people actually write down their goals and action plans! The really interesting statistic was that on average, those 3% earned 10 times more annual income than all the others combined. That’s a pretty powerful study!

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With that in mind, and the fact that we are starting a new year, if you haven’t already set your overall dealership and departmental goals for 2008, now is the time for a New Year’s business resolution.

Chalk Talk

In 1979 a study was conducted on students in the Harvard MBA program. The students were asked, "Have you set clear, written goals for your future and made plans to accomplish them?" Only 3% of the graduates had written goals and plans; 13% had goals, but they were not in writing; and a 84% had no specific goals at all. Ten years later, they were interviewed again, and the 13% of the class who had goals were earning, on average, twice as much as the 84% who had no goals at all. Most notably, the 3% who had clear, written goals were earning, on average, 10 times as much as the other 97% put together!

 

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Sales Goals

How many units do you plan to sell each month in 2008? What is your goal for gross profit per unit? What about the F&I department? Can you believe it’s possible for metric stores to do well over $500 per unit sold — with full disclosure and a high Customer Satisfaction Index? Parts and accessories goals can be set for not only total sales and gross profit, but also for per unit sold average, dollars per invoice and even the number of different line items per invoice, and we can’t forget about the service department. What is your goal for monthly, quarterly and annual sales? You can set goals for the average hours per R.O. (repair order) and better track technician stats like efficiency and productivity. It’s amazing how many areas of each department you can track and set clear goals for.

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Drive Your Numbers

With the market in a bit of an uncertain state, it’s very important to drive the numbers, not react to them. Now that we’ve set our goals, financial statements like the profit and loss and balance sheet are great tools to manage with. However, the numbers being reported by these documents are historical data. By the time the month is completely closed and accurate financial statements are in your hand, it’s usually two to three weeks into the following month. By now, it’s too late to take corrective action.

Today, the highest performing dealers continue to grow and improve despite market challenges because they close the month every single day. Daily reporting tools like DOC sheets (daily operating control) or DPRs (daily performance reports) are used to quantify key department data on a daily basis. These powerful tools allow problems to be addressed in real time and success to be recognized immediately.

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Not only can you see what has happened today and in the month-to-date, but you can forecast where you are going to finish the month in comparison to the goals you have set.

Dealerships In Action

Let’s take a quick look at two different dealerships. Both operate in a similar market area and carry the same OEM brands.

Re-Active Cycles is not big on goal setting. They can’t control the market, weather or economy. Their department managers have never seen any performance-related numbers because owner Tom Tyrant has determined this information is confidential. Departmental meetings are rare and only called for to address negative issues. Tom Tyrant only uses his month end income statement to make key decisions.

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Unfortunately, the holiday season has been slow, so it’s time to cut expenses and try to stay profitable by eliminating advertising, training, cutting inventory, company benefits and even firing a few key people.

Now let’s take a look at Pro-Active Cycles. They have taken the time to set aggressive yet realistic departmental goals and included key personnel in on those decisions. All goals are committed to in writing.

Every day by 10 a.m. department managers complete a short, yet thorough report including all of the key data for the previous day’s business. Then the report is e-mailed to the staff accountant Suzy Excel who compiles the data into one snapshot report for the general manager Steve Systems to review.

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By 11 a.m. Mr. Systems has a complete and accurate analysis for exactly where the store stands for the day, week and month. Once a week Steve Systems and his team have a structured meeting to review their departmental performance in relation to the goals that have been set. What’s working and what’s not working is discussed as a group, and all managers leave the meeting with a clear list of action items that need to be completed to achieve departmental goals. At the end of each month when Pro-Active Cycles achieves its goals, they celebrate their successes by ordering pizza, issuing gift certificates, top performer awards, etc.

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Effective goal setting and managing by the numbers go hand in hand. You can’t improve upon something that you are not tracking, just as you can’t win the game if you don’t keep score. Make a resolution to join the 3% of high performers who regularly set and track goals and have a record year in 2008!

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