Oct. 5, 2009 – Six pieces of the profit puzzle

INDIANAPOLIS — Sales. PG&A. Service. Preowned. F&I. The seminars held during the Powersports Business Conference and Expo covered tips, tactics and benchmarks for each of these key dealership profit centers.

Here are just a few key points and processes for those profit centers from six of the more than 16 seminars and panels held at Powersports Business Conference and Expo, a first-ever event.

Understanding a customer’s buying signs

When someone crosses their arms in front of them, it often means they’re feeling guarded. But what does it mean when a consumer puts his or her leg on a vehicle or they scratch behind their ear?

Glenn Roller of Glenn Roller Institute says there are many verbal and non-verbal signs consumers give during the sales process to help determine whether it’s going well.”People don’t even realize they’re doing it,” Roller said referring to the gestures.Besides noting the signs, there are other tactics salespeople must take to be successful in their positions.There are seven levels that measure the salesperson’s technique throughout his or her selling process, says Roller. The bottom level salesperson focuses on themselves rather than the customer. A salesperson at the second level probes the customer for information and the third level is a salesperson who’s manipulative, all of which can make the shopper uncomfortable. Roller said, “Eighty-five percent of salespeople fit into the bottom three levels. Until they watch themselves on video or see someone else make the mistakes, they don’t recognize more successful ways to sell.”

Cashing in on the preowned market

What is a benchmark to target in this challenging economy for the amount of preowned motorcycles a dealership should be selling?

Longtime dealer consulant and trainer Gart Sutton said the current benchmark in his 20 groups is 0.6 used bikes for every one new bike sold (or said in another way, two new bikes for every one used) for metric dealerships and 0.8 for every one new in Harley-Davidson dealerships.

Sutton discussed “The profitability potential of preowned units” in a seminar at the Powersports Business Expo and Conference.

To improve profitability for used inventory, Sutton advised dealerships to create plans for their aging inventory. Dealers should have a process laid out that identifies what happens to the unit after it has sat on the showroom floor for 30, 60 or 90 days. Part of that process could be identifying when a used unit should be sent to auction to be turned into cash.

Using auctions as a source to build used inventory also was discussed. One dealer at the seminar who frequently buys used units at auctions said they routinely have a 20 percent profit margin on those vehicle sales.

How to thrive in a down economy

According to John Spader of Spader Business Management, there are four focuses and development levels of a dealership’s operations: survive, stabilize, growth and maximize.

Through a series of examples given to an audience at this year’s Powersports Business Conference and Expo, Spader outlined how businesses evolve in their life span just as people evolve, and those four stages represent the bulk of the evolution.

“The problem with most dealers, today, is that we’ve spent the last few years on growth and maximize,” Spader told the audience. “Now they’re focused back on survive and stabilize.”

To help dealerships survive and move to stability, Spader provided a checklist for dealers to follow to ensure they’re covering the basics. The list covered everything from non-verbal communication to forecasting and expense management and from inventory management and sales opportunities to effective leadership. The checklist served to underscore Spader’s message of managing with proper systems and scorekeeping.

“Without those in place,” he says, “most of us miss the small things that are so important.”

The keys to improving your lending approvals

If you don’t currently have a process in place to ensure you’re moving every unit sale across the F&I desk, you’re way behind the curve to begin with, according to Mike Boolos, dealer development specialist at Assurant Solutions.

“If you don’t have a process, get a process,” he told an audience of Powersports Business Conference and Expo attendees. “You’ve got to write the process down and give your sales people a box to play in. They can’t get out of that box, and they can’t cross the lines without a penalty.”

Getting customers approved for financing is more challenging today than perhaps ever before. And according to Boolos, increasing approvals requires focus throughout the entire process — from inventory knowledge, through the sale process, from lender relations to “desking the deal.”

The single most important factor, though, for ensuring success with your approvals goes back to the process that Boolos emphatically recommends. Most dealers don’t have a sales process, he says. But to succeed, you must have one, you must train on it every day, you must expect it to be followed through every sale, and there must be consequences for short-cutting the process.

Boolos’ presentation covered the details of the process and how to implement it into your dealership.

Eliminating and avoiding the discounting culture

How can you avoid going down the discounting path or how can you end the discounting culture if you’re already there?

Tory Hornsby, general manager of Dealership University, addressed the discounting dilemma so many dealers face. He explained that the majority of dealers are looking for quality and value rather than just low price points.

“Don’t assume that all of your customers feel that price is most important,” he said. About 80 percent of powersports consumers are looking for value. “Don’t spend 80 percent of your time focusing on the 20 percent of your bad business.”

Hornsby says there are numerous ways to turn discount buyers into profitable sales by building value in your dealership, staff and product. If your sales process effectively focuses on the values your store offers, then you can turn approximately 50 percent of discount buyers into profitable sales.

“Remember,” Hornsby stated, “you have something they want.”

What do you do with the remaining 10 percent of customers who can’t get past the price point? “Fire them,” said Hornsby said. “They’re wasting your time. They bring negativity into the dealership, and they’re not good repeat customers. There’s no good reason to keep them around.”

Managing for performance

The importance of managing a dealership through the proper systems and processes was a consistent theme throughout the ‘09 Powersports Business Conference and Expo (PSBCE), including one mentioned repeatedly by John Spader of Spader Business Management.

Through Spader’s two educational sessions at this summer’s conference, he underscored the need for dealers to manage with the right processes. His second session — Solving the Performance Puzzle — built off of his first (see How To Thrive in a Down Economy above) as he explained the benefits of using the right systems to get the performance dealers need for success.

“A good management system takes an average person off of the street and makes them an above average employee,” he told the audience at PSBCE. “You need a good management system in place so you don’t have to learn through bad judgment.”

Most people learn from mistakes or the bad judgment, Spader explained. He backed the statement with examples of how children learn to complete what we consider simple tasks.

When it comes to business, oftentimes owners don’t know how to explain how to be successful, he said. And now that there are three generations in the workforce for the first time in history, creating systems and process, as opposed to using vague explanations, is what it takes to succeed.