Make More Profit in '07

We often make New Year's resolutions conversationally, without much resolve or commitment. However that can't be an option in business life if we truly want to perform at the highest level.

Considering the final results of 2006, do we want to duplicate them or is it time to change?

When making commitments, there must be more than talk. There must be buy-in and accountability. The first rule of accomplishing a commitment is that it must be realistic and backed by a plan for accomplishment.

Many dealers tie their commitments to key performance indicators that they've identified as essential to organizational success. You can't eat an apple in one bite. Accordingly, business requires a series of “bites” to complete a job. So, what indicators should a business adopt to measure success?

The No. 1 indicator is your gross per employee. This is a simple measurement that takes the monthly total dealership gross and divides it by an accurate employee count.

There should also be a subset of measurements that takes an individual department's total month gross divided by the number of employees. Based on shared responsibilities, a department's total employment count most likely will include fractional counts.

Track these measurements monthly and tabulate them in an Excel chart format that quickly shows your status.

The next set of key performance indicators relates to asset management efforts: days' supply of new and used vehicles, contracts in transit and parts, as well as your accounts receivables balances for factory and customer.

Prior to establishing key performance indicators for asset management, look at your actual and historical performance vs. your goals. What are realistic targets? Should we factor in times when we actually want to be above the goal in certain categories (for example, in September as we near the model-year end)?

Expenses are a category that you might consider identifying as a key indicator of operational performance. Consider the expenses of selling, personnel salary and wages, total employment costs including benefits, floor plan and advertising. Remember, these items are normally expressed as a percentage of gross. So if out-of-line conditions exist, first look at your total departmental gross.

For your reference in establishing your key performance indicators, the above charts represent Benchmark® measurements derived from the NCM database.

In each case, the noted Benchmark® is a reflection of where our clients are currently performing. Compare your store.

The new year can be successful if everyone at the dealership is on the same page and understands that they will be held accountable and measured against established performance criteria.

Good selling!

Tony Noland is the president and CEO of NCM Associates Inc. He is at [email protected].