Painting Profits With Numbers
“Controlling Expenses and Increased Efficiencies”
While we continue to enjoy another record braking year in car sales at a pace of 17MM (SAR as of May 2015), efficiencies start dropping down and we tend to forget what we left on the table. Needless to say we have to remember that after summer and fall winter will eventually come. Therefore whatever processes we put in place to have tighter control of expenses and increased efficiencies will make us stronger and not feel the cold when winter comes.
Are You Ready For The Winter?
Two major areas in automotive retailing are the most difficult to control since both of them directly impact sales performance; Sales commissions and Advertising Expenses.Operators and general managers are often reluctant to cut expenses in these categories for obvious reasons, if things are going well and you are selling a lot of cars, you think your advertising is working and your commission pay plans are doing what they are supposed to do; sell more cars.
I suggest you do the following to put your dealership to test. Take a look at your commission plan in a given month including all of your bonuses written in the pay plan and bounce it against the gross profits and unit sales that month to calculate the pay plan. Then compare it to what was charged out on your financial statement that month. Don’t be shocked at the difference that you are going to see on the higher side. The discrepancy is usually north side of $10,000 in unaccounted spending that does not reconcile to the pay plan. This is where the “handouts” get out of hand. On this subject the test is that in metro markets average commission per unit retailed is about $425. How do you compare? If you are concerned about upsetting your sales staff take a look at your vehicle cost structure, and remember that sales and profits are a function of cost and you control that cost if you choose to.
WE all know that 50%
of what we spend in advertising is a waste if we only knew which part of the 50% is not really working. And yet we do very little about having a very comprehensive process to source our customers and keep good stats. I have seen those sourcing surveys with multiple choice answers where you also have a category which say “drive by” or “location”. Strangely these are the boxes that are most popular when performing these surveys. Here is a thought, how about preparing a survey that is designed to identify the buyers and not necessarily the prospects and conducted in the F&I office while the customers are waiting for their paperwork. Furthermore if we also solicit the most accurate answer from the customers while they are answering the survey we may have better information. Of course this information would be completely useless if nobody bothers to convert them into stats over a period of weeks and months to really understand what is driving customers to our showrooms.
More on both of these topics next month with some hardcore results that I will share with you.
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