September 24, 2007: Tackling a complex business with tight margins

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. The goal is to provide ideas to help improve your dealership.
Dealership Details
This multiline dealership was a recent buy-out that was moved to a large, modern facility. They are located on a high-traffic highway in a rural area that draws from a nearby city. Projected annual volume is around 400 units. The owners have no previous experience in the powersports business, but they own a successful business that features high-margin sports equipment. They are discovering that powersports is a complex business with tight margins. The goal for this engagement was to identify and establish the processes necessary for the profitable operation of each department. The following describes the findings for each of the departments.
1. Overall dealership situation
The dealership is losing money. Although they use Lightspeed for point of sale and inventory, it is not linked to their accounting system. Accurate pre-work numbers for the various departments were not available as their accounting is not departmentalized. Current benchmarks could not be established or compared with industry standards. The lack of basic processes and measurements is preventing them from becoming successful.
They have a Policies and Procedures Guide that all employees are required to read and sign. They do not have accurate job descriptions, so staff roles are not clearly defined. There has been a lot of staff turnover. Very few formal meetings are held, so departmental and interdepartmental communications are generally poor. The general manager also is acting as the sales manager. Although he is putting in a lot of hours, it is impossible for him to do justice to either position. They do not have an F&I person, so very little income is generated in this area. The parts manager is new and has no experience in this area. The experienced service manager is doing the service writing as well.
Recommended Actions

  • Develop a fully departmentalized accounting system that links with the point of sale and inventory software. New and preowned sales, F&I, P&A and service must be set up as individual business units accountable for their profitability and contribution to overall operating expenses.
  • Begin holding weekly manager meetings with an agenda and segments for each department.
  • Begin charging retail between all departments to provide for consistent measurements and enable comparisons with industry standards.
  • 2. The sales and F&I departments
    The staff is provided with an excellent inventory report listing sales spiffs, rebates and pricing for all units. They do have a structured selling process they prefer. However, most of the staff is new and has not been trained in the process. Salespeople handle the entire sales and delivery process, including accessories. They are provided with incentives for accessory sales.
    Since the GM is acting as the sales manager, he does not have the time to provide the training, monitor the floor, coach and counsel the staff, and save and approve deals on top of his other duties. He does meet with each salesperson daily. Staggered hours make holding daily huddles impractical.
    Worksheets are not utilized. There is a showroom log, but there are few entries on it. The salespeople also keep individual logs, but no prospecting activity is taking place from these logs. There are overall department sales goals, but no goals for prospect calls and appointments.
    The GM does some sales of ESCs (extended service contracts), but has little knowledge of other products. The only financing sources are OE and GE programs. There is some resistance to hiring an F&I person. Management is struggling with the concept that they are an income source, not an expense.
    Recommended Actions

  • Hire an experienced sales manager so the GM can perform his duties effectively.
  • Hire an experienced F&I person.
  • Begin holding weekly sales meetings with an agenda and incorporating recognition, motivation and training.
  • Develop a written prospecting process with goals and incentives for prospect calls and appointments.
  • Utilize the worksheet with every deal.
  • Separate sales from F&I. Salespeople should not discuss rates or payments, except in general terms.
  • Implement an F&I menu.
  • Implement the F&I log to track all sales and provide for follow-up.
  • Author, speaker and educator, Gart Sutton has been retained by every major powersport manufacturer/distributor. Visit www.gartsutton.com.

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