A Check List for Success

Clients often ask me to look at their operating statement to identify any areas of opportunity or concern that need addressing. First, there are no magic numbers, but I've learned there are fundamentals to dealership success.

After quickly glancing at dealership net profit and volume, the first area I always check is the dealership's average month personnel productivity and departmental gross per employee.

This particular measurement can lead you in so many directions when analyzing an operation. For example, if your gross per employee is low, the first logical area to check is your total personnel count for accuracy.

Next, break out the personnel by department and then by position to determine your ratio of productive to support. For definition purposes, NCM considers productive staff:

For your reference, I'm providing NCM clients' June 2003 year-to-date averages. Compare your operation to theirs.

The first number shown and the first you need to check (after verifying your personnel count) is your average month's gross per employee. The next number is often ignored in a dealership. If your support staff number is too high, normally your compensation percentages will also be high.

There are few absolutes in our business, but one is the ratio of support to productive personnel. In no case should your support staff be more than 50% of your total staff.

After checking your gross-per-employee and productive-staff ratio, you are now ready to narrow the analysis to the individual departments. This analysis won't answer specific questions, but it will lead you “down the path” to specific answers.

The next measurements (sales and service) are key to increasing your monthly dealership gross generation. Begin with average monthly sales person production.

For example, if your monthly vehicle sales volume or departmental gross is low, look at the number of sales personnel your sales manager is responsible for.

If it's high, does your sales manager have the time required to work with them on basic fundamentals, i.e. one-on-ones, customer follow-ups, telephone skills, deal structure?

From personal experience, many sales managers spend much time on administrative details, customer satisfaction issues, dealer trades and such. It can cut into their time with sales personnel on training and follow up.

Your service department is another key area of gross profit. Obviously most dealers know their vehicle sales volumes and the unit volume production from their top sales people.

Do they also know their top technicians and their monthly performance levels? How about your service advisors? How many hours did your average and top service advisor sell last month? How many repair orders does he or she average per day? Take a look at the chart and compare the gross per variable sales person with that of the average service advisor. Is it different in your dealership?

I must be brief due to space limitations. But the more you look at your individual departments and the departmental gross per employee, the more accountability you'll establish with your department managers for gross production.

Good selling!

Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.