Dealers Need to Stay Alert

For many of us, snowy weather challenged our travel to San Francisco to attend the J. D. Power Roundtable and the National Automobile Dealers Assn. convention.

But once there, we were reminded why these are must-attend industry events.

I'm not sure if it was the 70-degree California temperatures or dealer attitudes, but there was an air of excitement and optimism among those I spoke with.

While the consensus is that auto sales are expected to reach 13 million units in 2011 and steadily increase during the next four years, it does not signal we should return to our pre-collapse methods of doing business.

Probably now, more than ever, it is critical we stay on top of our business and look into the near future for a sign on the adjustments we need to make to remain profitable and viable. A common human tendency during improving times is to relax, but this isn't a luxury we can afford.

Following, I will list a few items, both macro and micro which, will require constant monitoring as we move forward.

At the J. D. Power meeting, there were various comments about certain items that will affect us.

The most immediate concern is the rising price of fuel at the pump and, a bit further out, rising interest rates. This is something we definitely need to watch as we plan new- and used-inventory levels and mixes.

Here's what else we should be mindful of.

Cash: If we have learned nothing else during the past 24 months, it is the importance of cash. Going forward, we must continue to monitor our cash position and any weekly and monthly changes. Remind management personnel of the actions that impact our cash positions and the importance of exceptional asset management.

Customer Pay repair-order count: I am not a fixed operations expert, but I do understand the numbers and the implication of those numbers.

If you own a franchise which has seen a significant decline in new-vehicle volume, eventually, the resulting decrease in units in operation will affect your service and parts operations.

Many of us monitor our repair order counts monthly and compare that count to previous periods. But break out counts by category, too. Today, quick lube, express service and the like represent a significant part of most of our business. But we should know what percentage each represents and how that compare to last year and last quarter.

Many of you have different retail labor rates for your traditional work and quick service plus discounts for our monthly specials. Our repair order count may be up compared with previous comparison periods, but we may be declining in total gross and departmental net profit.

It is important to identify and monitor the individual components of this business and take action where necessary to ensure you balance and mix of work does not get out of line.

Personnel: When business conditions begin to improve, we need to make adjustments in our staffing levels to ensure we are positioned to take advantage on this improvement, but how do we make this decision?

Hopefully, you make it mathematically. For years, I have encouraged you to track your employee productivity monthly by department and in total. Just as a significant decline in gross per employee may dictate a reduction in staff, a significant increase over industry same-franchise comparables may dictate the need to add personnel.

The first personnel we need to add are classified as productive (i.e. variable sales personnel including finance and insurance producers, service advisors, body-shop estimators, parts-sales personnel and technicians, mechanical and body. Remember, the productive staff mix should always exceed 50% of your total employee count.

Focusing on businesses growh vs. constantly playing defense is a great feeling, but use analytics to build your case for the decisions you make. Good selling!

Veteran dealership consultant Tony Noland is at [email protected].

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