Prepare to create opportunities, or beware of results

Well, the elections have been decided. At this point, it really doesn’t matter who won. What matters is how we interpret the impact on our business and what preparations we need to make.

Regrettably, my crystal ball fell off the bike and got run over by a bulldozer some time ago or I would be able to provide you with great enlightenment. What I can provide are my thoughts on how you should respond in the short term. In reality, these are the essential things you should be doing to create opportunities for growth and profitability in any given year — with a slant toward conservatism.

These seem like obvious preparations. However, many dealers were not doing this over the last few years. In some cases, it cost them their businesses. Even more tragic to me were the dealers who were monitoring the numbers, but failed to react in time. All indications are that we lost around one-third of our franchised dealers over the last five years.

Preparations List

1. Establish your 2013 performance baselines separated by department.

At a minimum, these departments should include new unit sales, used unit sales, F&I, PG&A and service.

If you had a profitable year, base the numbers off of 2012. If not, use industry guidelines to decide what they need to be to make an acceptable profit. Compare your store’s actual performance against these benchmarks on a monthly (if not weekly) basis.
This is necessary so that if there is a lack of profitability, you can quickly determine which department is underperforming and take action to correct the situation. I call it finding the holes in the dam. It is one thing to know the dam is leaking; it is another to know where the leaks are so you can fix them.

These measurements should include essentials like revenue, department gross profit margin, gross profit dollars per employee, personnel expense (and other significant department expenses) as a percentage of department gross profit and, of course, net operating profit.

2. Ramp up staffing for the coming season … but do it the right way.

What does this mean? It means that you need to ramp up with the right staff. As I have said many times in the past few years, you can’t afford to have less than the best employees. You will achieve better results with fewer people if they are the right people for the position. The right people possess the right attitude and aptitude for their job description. If they have those qualities, provide them with high-quality training so you can maximize their potential.

Doing this will help you hold down one of largest expenses — personnel. At the same time it will ensure that you are getting the optimum results for your investment. It will cost you less to pay a healthy wage to the right person than to hire two substandard employees to replace them.

3. Get rid of “dead wood” and “cancers.”

This goes along with number 2. If you have employees who are not capable of doing the job — maybe they once were, or maybe they never were — they need to find a new career somewhere else.

I can’t tell you the number of times I have observed the “dead wood” situation in dealerships. Sometimes the reasoning is: “We can’t find anyone to replace him/her.” Sorry, I’m not buying that one.

Another common response is: “They have been with us so long; I can’t fire them.” I know it is painful, but this is your livelihood, not to mention that of your other employees. It is not fair to them, you or your customers, when you retain chronic underperformers. It puts additional stress and pressure on the rest of your staff. Besides, you might be doing them a favor by allowing them to find a job that suits them better and fires up their passion.

“Cancers” are another common situation. You have all experienced an employee who spreads hate and discontent in their department. They may even be a good performer. The reality is that this level of performance won’t last. It can’t; they are not happy to be working in your dealership. In addition, they will make it more and more difficult for you to motivate the rest of your team. Cancer spreads. Get rid of it quickly.

If you follow these steps, and respond quickly if your income-to-expenses ratio gets out of whack, you can survive most economic turmoil. If the economy continues to improve, you will be set to take advantage of it.

Now go out there and be successful!

Steve Jones is senior projects manager at Gart Sutton & Associates. He has worked in the powersports industry for more than 30 years, for dealerships and manufacturers, and as a consultant and trainer. Contact him at steve@gartsutton.com.