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Not Quite Perfect

What can your dealership do to thrive and survive in a challenging market?

Prior to becoming a full-time domestic engineer, my wife was a fourth-grade school teacher. At that time I was a director of operations of four powersports dealerships in Atlanta and thought my responsibilities were pretty challenging. But then my wife would come home a tell me about her principal who had to deal with a high-maintenance faculty consisting of 30 men and women, not to mention the overbearing parents of all of the students that could do no wrong. My job was really simple compared to what this principal had to deal with. One story in particular stuck to my ribs. A group of teachers were gossiping and complaining about a particular situation at school, and the principal (who always impressed me) called for a meeting immediately. The theme of the meeting was, we’re not perfect and there is no such thing as a perfect school, so we all have to work together as a team in order to make performance improvements.

I’ve been reluctant to address the recent challenges of the housing market, economic conditions and there effects on the powersports industry. After all, everything that I’ve read in the last six months has exploited the situation so why should I contribute, right? Well, after seeing the MIC data through the first quarter showing that retail sales are off 15 percent, it’s time I face the music. So if business is down, what can your dealership do to thrive and survive in a challenging market? There is good news because there is no such thing as a perfect powersports dealership either. When armed with this perspective, there are ways to improve any business during any conditions. So what is the best way to diagnose potential areas of improvement for your store? You guessed it … data! Let’s look at some key data that can help you focus your efforts in the most productive areas.

Balance Sheet: What’s this? It’s pretty amazing how few dealers analyze the balance sheet on a regular basis. The balance sheet is the true healthometer for every dealership and should be closely analyzed. This powerful tool is where you can review all company assets and liabilities, and it is a great place to spot aging receivables and excessive inventory levels. Chances are you didn’t get into the business because you love accounting, but this report is too critical to overlook.

Profit and Loss: Most DMS systems will allow you to print your P&L in a side-by-side comparison with last year and show a variance column. Go through each line-by-line with a highlighter and closely analyze your biggest variances from last year to this year. This can be a quick and easy way to spot potential areas of improvement for both income and expense challenges.

Sales Department: View new unit gross profit and used unit gross profit reports by month. Then dig a little deeper and print a report showing sales person by sales person numbers. This will allow you to spot trends for who are your A, B and C salespeople. Other key statistics for sales are traffic figures. Swing counters are an invaluable tool to let you know how many people are coming through the door on a daily basis. Don’t let the daily duties of pulling bikes in and out, smokers, dual entries and other variables deter you from investing in a swing counter. As long as you are close to comparing apples to apples on a daily basis, you will have valuable information. Cross reference your swing counter with your traffic log over an extended period, and you will be armed with valuable information. Do you have a traffic problem or a training problem? Either way you can address the issue head on. If traffic is really down, look closely at your marketing plan and closely scrutinize how every dollar is being spent. Do you have a current marketing calendar with seasonal promotions being planned in advance? General Motors just announced that they are allocating half of their advertising budget to online. How is your online marketing presence? If you are getting good traffic but not converting the leads into sales, then most likely you have a training problem. There are many resources available to help you develop a quality sales training program that focuses not only on selling skills, but product knowledge and more.

Finance and Insurance: You may have heard this should be the most profitable square footage in the dealership. Well, if you don’t believe it, do the simple math for yourself. If you sell 60 units per month at $200 per unit sold, you make $12,000 in F&I. Let’s say that due to a challenging market, sales decrease to 45 units. But say you implement a menu-based F&I system, increase that to $500 per unit and make $22,500. The increase in F&I has more than offset your deficit in unit sales.

Fixed Operations: Measuring your P&A and service department sales on a per-unit-sold basis can be invaluable. Has your dealership implemented a smooth Customer Path program that ensures all new unit sales are introduced to all departments? This is a system that is designed to improve both CSI scores and related add-on sales. Margin by source, average sales per invoice and salesperson gross margins should all be reports that are available from your D.M.S. I’m no longer in denial about the current state of the market, but I do genuinely believe that there is no such thing as a perfect dealership. Print reports and look at the data for your store, and make the appropriate action plans to improve those numbers. Now more than ever it is time to take advice from the late powersports industry legend John Wycoff and, “Mind Your Own Business.”

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