Five tips to dealership goal-setting success in 2013
Steve Jones, Columnist
February 15, 2013
Filed under Columns
Goal setting should be an important part of your dealership plan for 2013. Unless you set goals and share them with your team, you have no targets to shoot at and no focus for your staff.
Look at it this way: if four people try to move a log out of the trail and they are each pulling in a different direction, they can pull until they are exhausted, but the log will not move. If they all pull together, they can move the log.
Oh sure, we all know this — so why don’t we do it? The reality is very few dealers will take the time to set specific goals for their dealerships for 2013. Here’s the bottom line: if you set four or five specific, realistic (achievable), measureable goals with target dates, you will have a good chance at making significant improvements in the way you do business. The results may include increased profits, growth, stability, customer satisfaction or all of the above.
Assuming you are not doing these already, here are some of my thoughts on the types of goals that you might consider:
1. Accurately measure gross profit performance for each department by a specific date. This requires that you have defined profit centers in your accounting system and that each department stands on its own. It is the department manager’s responsibility to report to the owner/GM on department gross profit and margins for specific categories within the department. Managers must be empowered to manage if you are to hold them accountable. They need to have budgets, access to department numbers and some authority to hire and fire their team.
2. Achieve gross profit of X percent on new unit sales by a specific date. A reasonable target here for a metric dealer might be 13 percent (depending on model mix). The best dealers in the Gart Sutton & Associates 20-groups are attaining more than 15 percent, so it is doable. The key here is to have a well-trained sales staff, not “order takers.”
3. Achieve gross profit of X percent on pre-owned unit sales by a specific date. For a metric dealer, 20 percent is quite realistic. Our best performers are hitting almost 25 percent. You have control over this margin. Determine your desired margin, subtract it and the reconditioning costs from the realistic market value of the trade-in, and use this as the basis for the trade allowance to the customer.
4. Achieve a parts margin of X percent and a clothing & accessories margin of X percent by a specific date. Obviously, if you haven’t already done an accurate category set up for these items, you will not be able to track them. Many suppliers do a decent job of setting these up for your DMS, but many do not. They may have hard parts categorized as accessories and vice versa. The sooner you break these out correctly so you can track the sales, the better you can control your spending in this department. You have to stock what sells and get rid of it if it doesn’t. Realistic goals might be 30-35 percent for accessories/clothing (the better dealers are at 36 percent and higher) and 34-36 percent for hard parts (more than 41 percent for the top dealers).
5. Attain a 70 percent service department gross margin by a specific date. As you know, this is calculated by taking department labor revenue and subtracting tech compensation (without benefits) and sublet labor. If you are going to make a profit in your service department, you have to get close to this margin. Everything else comes out of this gross profit number, including shop supplies, non-tech payroll, admin and facility expenses, etc. Top dealers are hitting margins up to 80 percent, so 70 percent is certainly attainable. Primary factors to consider are ensuring your techs are spending their time cranking labor and having trained service writers who are selling additional services at the write-up.
I challenge you to set some significant goals for your dealership for the coming year. Get your team involved; solicit ideas from them; let them take ownership. Make your business more successful than ever in 2013.
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 firstname.lastname@example.org.