May 4, 2009: Improving profitability at a relatively new store

These articles recap some of the opportunities uncovered by Gart Sutton & Associates’ powersports specialists during consulting visits. These are followed by recommended actions that address the issues. Our goal is to provide ideas to help improve your dealership.

Dealership details
This dealership was a new start-up for Yamaha in 2005. The store recently added Suzuki as its second major product line. They have a new facility with freeway exposure and reasonable access. They have a good reputation for customer service and maintain good CSI scores.
They are located in a “bedroom community” less than 20 miles from a major population center with a market area of more than
1.5 million. Their particular county is considered to be one of the most affluent counties in the state. By all accounts, this area should easily support good growth for a dealership that carries name-brand metric product lines.
In this first part of a series on this particular dealership, GSA consultants report on their analysis of the overall dealership.

Analysis
The owner and general manager has a background in Internet products and insurance with medium-sized corporations. He is an enthusiast who had a long-term desire to purchase and run a dealership. When he discovered this area had a strong demographic and no dealership, he convinced Yamaha to establish him as a dealer.
The dealership is involved in community events, promotions and related shows. It has been spending quite a bit on advertising, and see little ROI. The store was encouraged to focus on expanding low-cost mail and e-mail promotions and community events. The owner/GM has a good outlook and really wants his managers to manage their departments so he can focus on his role as owner. They have only had one formal manager meeting. Weekly or monthly meetings were recommended.
They have been working on job descriptions. We discussed incorporating non-negotiable standards. These should be developed in cooperation with the managers.

Other comments
They are using one of the lesser-known brands of software for their DMS and are struggling with software and training issues. The owner does a lot of his work outside of the system in Excel. They are not using departmentalized accounting. There was some discussion of whether their software was capable of being set up to handle this. They were encouraged to sign up for a Web-based, real-time data analysis and comparison system. They could use it to help them establish their accounting system. This would also help them establish goals to attain the benchmarks as described in the system.
Once they have established methods of measuring their current numbers accurately, they will be able to stabilize this business and begin working for improved profitability.
They were encouraged to seek additional flooring sources outside of the OE in order to bring down their flooring costs.
They have had one employee handling AR, AP, counting deposits etc. This is not a good business practice. The owner is taking over the accounting duties.
We discussed how to better utilize the window display areas with theme displays, raised platforms and spotlights. We also discussed developing theme displays and focal points in the showroom. They have too much of a warehouse appearance to support higher pricing on the units.

Action Items
Develop and maintain a five profit-center standardized accounting system.
Become familiar with all state laws that affect dealership operations.
Implement weekly manager meetings. Use these to track progress on action items and department performance. Issues should only be presented if there are solutions provided. Issues without solutions should be discussed outside of the meeting environment.
Develop monthly sales goals for all departments. Department managers should share these goals with their department and break them into individual goals where applicable.
Restructure sales manager compensation to include a commission based on a percentage of gross profit and incentives for F&I sales.
Install a door swing counter on the main entrance.
Put all processes in writing and assemble written department processes into your P&P manual.
Continue to seek alternative new unit flooring sources to reduce interest costs on units coming off of OE flooring.
Complete job descriptions for all positions, incorporate non-negotiable standards.
Incorporate raised platforms and theme displays in the window displays. Consider highlighting with spotlights.