Dec. 24, 2007: Examining a remodeled but unprofitable dealership

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
Two years ago, the owners bought out an older, well-established dealership in a small, rural area. It has recently been moved from a small, 3,000-square-feet facility located in the downtown area to a 14,000-square-feet former supermarket building on the edge of town. The newly remodeled facility is partially visible from a main highway, but there is no direct access. The absentee owners originally left the daily operation of the business in the hands of the existing dealership staff.
The goal for this engagement was to identify and then establish the processes necessary for the profitable operation of each department along with the overall dealership. The following describes the findings for each of the dealership’s departments.
Report On The Overall Store
The flooring is unfinished concrete, and the cooling is handled (unsuccessfully) by multiple swamp coolers. The fluorescent lighting is ineffective and not color-balanced. There are numerous spotlights, but they are turned off because of the heat generated and the large amount of electricity they consume. The initial impression is of a “sea of handlebars” with no defined focal points or lifestyle displays. Clothing is mostly displayed on closely packed identical racks. The atmosphere is not conducive to impulse shopping.
Since the buyout, the entire staff has turned over except for the service manager. Also during this period, the dealership suffered six-figure losses. Prior to leaving, the previous store manager placed excessively large orders for units that are slow sellers in this area. The dealership is heavy in inventory, and the flooring charges are excessive. There was discussion of alternatives for reducing the inventory, such as selling units to other dealers, returning them to the factory, or conducting sales promotions in the closest metro area. They are also using a set-up and storage company located out of the area.
They do not have a data management (DMS) or point-of-sale (POS) system. They have terminals, but they are used to look up parts on electronic microfiche. There are no reliable records of sales or departmentalized financial information. Their accounting is done by taking the cash register “Z” tapes to the local accounting firm. The opportunity for errors or employee theft is high. There is no tracking or measurements of standard industry data being done in any department. Due to the discoveries made during the engagement, the owners are actively pursuing appropriate DMS/POS software, and plan to purchase and install a system ASAP.
There are no written job descriptions, policies and procedures manuals or organization charts as the business is in a state of reorganization. Some tools and guidelines were provided. The owners will be developing these documents in the future.
One person is acting as the general manager and sales/F&I manager. He has product knowledge but no dealership experience. He can’t be effective as the general manager because of a lack of knowledge of his job requirements, powersport dealership operations and the demands of the other positions he holds. He is trying to manage the staff, but he can only deal in generalities. None of the basic sales manager duties are being performed except for daily huddles with the staff. He is primarily functioning as the main salesperson.
Recommended actions

  • Move the saleable units from the set-up and storage company warehouse to a local warehouse to reduce delivery and storage costs.
  • Bring the set-up of all future units in-house.
  • Begin holding consistent monthly manager meetings with the goal of making them weekly in the future. Meetings should have an agenda and a specified time segment for each manager’s input.
  • Acquire data management software and equipment necessary for effective dealership operation.
  • Hire either a general manager or a sales manager. The current manager cannot effectively perform both of these functions.
  • Develop a fully departmentalized accounting system where sales, F&I, P&A and service are set up as separate business units accountable for their own profitability and contribution to overall operating expenses.
  • Review all flooring programs. Identify current rates and expiration dates. Investigate alternative sources for unit flooring to reduce monthly flooring expense.
  • Consider opening Mondays and/or opening longer hours.

    Author, speaker and educator, Gart Sutton has been retained by every major powersport manufacturer/distributor. He is a frequent keynote speaker for national motorcycle conventions and state motorcycle dealer association events. Visit www.gartsutton.com.

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