You didn’t like 2007? OK. Then change it.
Albert Einstein really did say it: Insanity [is] doing the same thing over and over again and expecting different results.
If you don’t change something — if you don’t fix something — if you don’t try something different, you are just hoping that things will get better. And hope is not a good business plan.
Last issue I talked about things you can do in parts and service to affect change for the better. This time we will look at the sales department and your office to identify leaks that are costing you money.
In sales and F&I departments
Policy work. This is the great black hole of dealership operations. The hat, the tie downs, the flag, the quart of oil — all given away to mollify an unhappy customer — cost you money. Policy work must be approved by a manager, reviewed by the owner and must be charged to the offending department. Watch for freebies. Require explanations. And always note policy that should be charged back against the deal and reduce salesman’s commissions. Somebody must pay for policy. Nobody skates for free.
Major unit gross margin. Report this by salesperson. Look for performers on both sides of average. Reward the high-enders, and lose the low guys. Use a sliding scale pay plan.
Sales staff energy. Keep contests running. Ring the bell for sales (Don’t have a bell? Get one!). Salespeople live for competition. Don’t let them down. Use spiffs not only to move slow units, but to keep up energy and enthusiasm. Create the environment sales people thrive in. Cull low performers. Create teams and team spirit. Let them ride demos. Give them experiences they can talk about with excitement.
Events. Charity rides, community service, women’s nights, poker runs, pet shelter adoption nights — do them all, do them frequently and do them with panache. Use an events planner (That’s a person with the skills, not just a day-timer!). Become known for fun and excitement, and keep it going.
Charge backs. Make sure that delayed repair orders and sublets get deducted from salesperson’s commissions. Always adjust current payroll commissions by chargebacks appearing now from previous pay periods.
Program dollars. Everybody struggles to keep up with the OEM programs, and nobody has a foolproof method for tracking them. They are quick to change, they roll both forward and back, and it requires constant effort to stay on top of them. If you don’t keep track, you lose — big. Take one person, and make him or her the program specialist. Each deal must be reviewed by this person whose pay is linked to program dollars earned and received.
Control workman’s compensation claims. Create a working relationship with area health care providers. Negotiate discounts. Evaluate claim costs and decide whether to self insure or submit the claim to the insurer, risking a higher premium. Employee handbook should specify approved providers, and the employee must agree to use them (with necessary exceptions) or self-insure out of your organized network.
Track claims, and make sure the insurer closes claims when complete. (Closed claims are deducted from your reserve and open claims might increase your reserve requirement because of unknown, additional future charges). Audit actual losses against projected losses, and if warranted, petition for reduced premium since the initial premium was usually based on an estimated loss ratio. Constantly monitor employee reporting classifications. Steeple-jacks are expensive and clerks are not. Parts, service and sales managers might be clerical if their job descriptions are carefully written and observed.
Unemployment insurance. Rates are set by the state, but employers might contest claims. Record all warnings to any employee so that the accumulated effect can be presented as evidence in any dispute. The burden of proof usually falls on the employer, so good records are the best defense. Without them, firings for cause are difficult to defend.
Customer comfort. Note how you feel when establishment employees greet you and thank you for your business. Train your employees to do the same. They should never pass a customer without smiling and saying hello. Customers entering the store should be greeted within seconds, and upon leaving they should hear a sincere thank you. Set the example, and note employees who do this well. Buy the customer lunch if a delay is your fault. Show the customer you really care.
Other. Record and monitor discounts earned on AP invoices. Set aside a portion of savings for office staff rewards. Watch lien payoffs payable. Take odd-day interest off payoff amount if paid prior to payoff date, and penalize office staff for interest paid in excess of payoff quote. Watch free-flooring expiration dates. Shop for local flooring rates that might beat OEM rates. Control stacking of major unit crates and assembled units so that oldest units are easy to pull and sell first.
A bumper sticker spoke to me recently. It said: “You gonna cowboy up or just lie there and bleed?”
Use these ideas as a springboard for thought, then choose your spot and get busy. You have a lot to do.
Hal Ethington has been associated with the powersports industry for more than 30 years. Ethington is a senior analyst at ADP Lightspeed. He can be reached at Hal_ethington@adp.com.