At GSA, we track benchmarks through our involvement with dealer groups, such as the Best Operators Club. Some of the members have kindly consented to let us share their numbers from our real-time, web-based data reporting system.
In this column, we’re going to review the May sales numbers for one of our member dealers, and the related TBOC averages. In 2007 this dealer sold just over 2,000 units — approximately 1,600 new and 400 pre-owned. His dealership is located in a suburban area of 65,000 people. However, he is close to a major metro area of 600,000 and can draw from a total market area of more than 3 million. Of course, this also means he must deal with heavy competition, including some significant discounters. In spite of this, he has been able to remain one of the most profitable dealers in the country by steadfastly following his established business model rather than reacting to other dealers. I encourage dealers of all sizes to take note of this. Decide on your business model, make a business plan and stick with it. You may have to respond to periodic changes in the market, but that does not mean that you have to abandon your business plan; modify it for the short-term market conditions, but strive to maintain long-term results.
This dealership is noted for providing exceptional service through a highly trained and disciplined staff. You can only demand premium prices if you can back them up with premium-level customer service.
Chart 1: In May, more than 8,000 people were recorded on the electronic door counters. This gives them a base line for comparison of traffic, write-ups and closing ratios. They closed just over 27 units-per-salesperson with two sales managers, 12 salespeople and one support person. These kinds of numbers are invaluable for performance measurements and analysis.
CY: current year
PVS: per vehicle sold
TBOC: average of the top five BOC members in this category
* Some rows and columns without data have been removed to reduce table sizes.
Chart 2: Here you can really see their exceptional profitability. This dealer is knocking it out of the park in unit sales gross profit. He’s blowing away all the TBOC numbers as well as most of the benchmarks (which the members set as stretch goals). The next time you think you can’t make a profit because of heavy competition in your market, you should review these figures.
Here are the basic things you can do to maximize your profit potential in the sales department:
Hire salespeople, not order-takers. Use a 4-square. Have a sales manager that provides training, coaching and counseling for your sales staff and is accountable for desking every deal. Work every sale for maximum profit. Pay your staff on a percentage of gross profit. Have a fully trained F&I department that kicks butt. Ensure all of your major unit buyers have the opportunity to purchase clothing and accessories. Build up your pre-owned business to avoid direct price competition and attract new customers.
Discounting is a downward spiral in which no one wins. They discount, then you discount, then they discount more. It is important to recognize that you can make a profit on unit sales! You have to work for it and at it but having a solid business plan and sticking to it can give you positive results in the long run.
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