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Garry House

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The Difference Between ‘Good’ and ‘Great’ Auto Dealers

good_to_greatIn the first couple of paragraphs in his book, Good to Great, author Jim Collins makes several interesting statements:

Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies never become great, precisely because the vast majority become quite good – and that is their main problem.

Although I’ve worked with a lot of “good” dealers during my professional career, I’ve never been privileged to work with a “great” dealer. That is not to say there aren’t great dealers; there are a number of great dealers, they’ve just not needed my help! Not surprisingly, all of the good dealers with whom I’ve been associated wanted to be better, but most never seriously aspired to greatness. In fact, one of my good client-dealers recently said, “Garry, you wouldn’t believe how difficult it is getting my team focused on performance improvement when we’re making a million dollars a month!”

What does “great” mean at the dealership level? In my personal opinion, as a dealership resources professional, a dealer can claim “great” or “world class” status when he/she achieves ALL of the following:

  1. 100%+ of assigned market share for each new vehicle franchise represented
  2. Retail Used to New Sales ratio of 1.00 to 1.00 or higher
  3. 80%+ share of calculated Service market potential
  4. Net-to-Gross (pure) of 30%+ and/or Net-to-Sales of 4.5%+
  5. Annualized ROI of 25%+ against true projected liquidation value
  6. Measurable best practices guidelines in each inventory and receivables category
  7. Measurable highest levels of employee engagement, satisfaction, productivity and retention
  8. Measurable highest levels of customer loyalty, retention and satisfaction
  9. Measurable highest levels of recognition for community service and for service to the retail automotive industry in general

By comparison, what does “good” mean to me when looking at the dealership level? This is tougher, and certainly more subjective, but here’s my take:

  1. 80% – 90% of assigned market share for each new vehicle franchise represented
  2. Retail Used to New Sales ratio of at least 0.75 to 1.00
  3. At least 60% Share of calculated Service market potential
  4. Net-to-Gross (pure) of 22.5%+ and/or Net-to-Sales of 3.5%+
  5. Annualized ROI of 15%+ against true projected liquidation value
  6. Measurable best practices guidelines in most inventory and receivables categories
  7. Measurable average levels of employee engagement, satisfaction, productivity and retention
  8. Measurable average levels of customer loyalty, retention, and satisfaction
  9. Measurable average levels of recognition for community service and for service to the retail automotive industry in general

As you’ve probably guessed, this article, unlike Jim Collins’ book, is not about how to transition from good to great, but rather it is concentrated on differentiating good from great. At the NCM Institute Center for Automotive Retail Excellence (NCMi), we don’t spend a lot of time focusing on becoming a “great” dealership; that is a challenge that would involve a long-term commitment and relationship between the NCMi faculty and a dealer’s entire employee body. NCMi does not have the resources to undertake that challenge, nor has it ever been our mission to do so. That is a challenge that is best undertaken by the NCM Retail Operations team.

The NCMi mission, and challenge, is to help transition the managers of a dealership, one or two at a time, from good to great. We do this by focusing on world-class (great) department processes…what they are, why they’re critical, how to implement them, and how to execute them. Part two of this article series will select one or more department processes, and I’ll show you the difference between good and great. Remember, great processes that become disciplined habits produce great and predictable results!

About the author

Garry House

Garry House

Garry House is a dealership resources professional, providing consulting and training services in financial and operational areas.

Permanent link to this article: http://blog.ncm20.com/2013/05/the-difference-between-good-and-great-auto-dealers/

2 comments

  1. Steve Richards

    Gary, well put and so very true. Car dealers suffer from the “good prevents great” syndrome more so than most other businesses for several reasons.
    1. The automobile is arguably the most popular product in the history of mankind. So almost everyone needs one and most people want one.
    2. There is little discernible difference between dealers in any given market and almost all use a sales process is little changed from the ’50′s. Consequently consumer have a choice as to “where” to buy, but not “how” to buy.
    3. By law, franchise law, new vehicles can only be purchased from franchised dealers.
    4. “Good” makes most owners, GM’s, and upper management rich.

    Ergo, this is little incentive to go from “good” to “great”. Thank you for sharing your thoughts.

    1. Steve Richards

      Gary, well put and so very true. Car dealers suffer from the “good prevents great” syndrome more so than most other businesses for several reasons.
      1. The automobile is arguably the most popular product in the history of mankind. So almost everyone needs one and most people want one.
      2. There is little discernible difference between dealers in any given market and almost all use a sales process that is little changed from the ’50′s. Consequently consumers have a choice as to “where” to buy, but not “how” to buy.
      3. By law, franchise laws in every state, new vehicles can only be purchased from franchised dealers.
      4. “Good” makes most owners, GM’s, and upper management rich.

      Ergo, this is little incentive to go from “good” to “great”. Thank you for sharing your thoughts.

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