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Leo Hart

Leo Hart

Author's details

Name: Leo Hart
Date registered: April 8, 2013
URL: http://www.ncm20.com

Biography

40 years of automotive experience: five years with Ford Motor Company, 13 years as CFO for 2 General Motors Dealers and 22 years as a NCM 20 Group moderator. Leo joined NCM in 1986.

Latest posts

  1. From the 20 Group: Old School Cool — November 1, 2016
  2. Seven Tips for Better Dealership Parts Management and Profitability — April 23, 2013
  3. Successful Auto Dealership Forecasting — December 13, 2012

Most commented posts

  1. Seven Tips for Better Dealership Parts Management and Profitability — 2 comments

Author's posts listings

Leo Hart

From the 20 Group: Old School Cool

,,,,

My NCM 20 Group members have submitted some refreshing ideas recently that I want to share with you. They weren’t necessarily new ideas but refreshing because the ideas reminded me of days gone by. Our members promoted some old school practices but with a current-day twist!

Getting to the source

One suggestion, capturing customer source data, was presented by a member who was adamant about taking a few minutes with each client in the F&I office to discover what brought them in to purchase a vehicle. As I recall, he had a weekly recap sheet recording the information. Certainly, he had the usual categories like referral of a neighbor, television or direct mail, but he also had modern-day options such as Google, CarGuRu and Facebook.

His message to the group was to train their F&I reps to dig down for what actually triggered the buyer to come to their store. Don’t accept the first answer just to complete the delivery, he urged, but have the rep ask probing questions to get down to the best answer. Of course, the dealer felt that his weekly recap sheet helped him focus his advertising investments. And, I agree.

It calls to mind for me a similar presentation made many years ago, the early nineties, by a dealer in Tampa who likewise was adamant about sourcing buying customers. He focused intensely on finding out from the customer what part of his advertising— what radio, TV or newspaper ad— had actually triggered customers to come into his store. His records went back years. He credited a lot of his success to this daily exercise; and, he was a very profitable dealer.

Starting at the right deal

The second idea was “starting the deal” at suggested list price+++, no matter which medium brought the client into the store. The dealer even had a worksheet made up which helped the manager/closer detail the difference between the advertised price and the starting price on the deal sheet. The customer would be asked to sign both worksheets.

A good number of dealers seem to shy away from asking for gross profit. This presenting dealer advertised his vehicles less all possible rebates and less the dealer prep. Also, the first pencil would include a package of products that most clients purchase at delivery. I have been fortunate to know a good number of dealers who are unafraid to ask for profit on the first pencil. Of course, their personnel are skilled in negotiating to the final price that works for both the client and the dealership.

Sounds “old school,” don’t you think? Must be why I like it.

Need more new—or even old—ideas for your dealership? See how Leo Hurt and his NCM colleagues can help your dealership with 20 Groups and in-dealership consulting

 

Permanent link to this article: http://blog.ncm20.com/2016/11/from-the-20-group-old-school-cool/

Leo Hart

Seven Tips for Better Dealership Parts Management and Profitability

auto mechanic or smith with tablet pc at workshop

NCM has just completed another cycle of 20 Group meetings, each focusing primarily on the parts department. Truth be told, we had not focused on this discipline for a number of years, being more concerned about the variable sales and expense management areas of our auto retail business.

As a result of the discussions, a few crises became apparent. One wake-up call for me was the manufacturer continuing to increase its control of inventory investment, effectively siphoning cash out of stores. My second revelation was that the dealer isn’t being informed of or conversant about current inventory purchasing and returns programs. Third was the discomforting old problem of a long-term, trusted parts manager taking advantage of his tenure, resting on his laurels, and allowing the departmental profitability to evaporate.

All of the above issues come down to one problem: leadership has taken its eye off the “parts ball” and have not demanded discipline of their parts manager to meet certain standards and achieve net profit levels.

Here are my most important takeaways from these parts discussions:

  1. Define a day’s supply number you can live by. One dealer had $200,000 in parts with no sale over 12 months. He also had $500,000 in excess inventory day’s supply. I can live with 45 days supply, but many dealers are beating the 30 day supply mark with daily stock order availability. Numerous dealers were purchasing, on an emergency basis, 60% of the parts they were selling each month. The inventory they owned was stagnant.
  2. Separate the wholesale operation from the retail service support operation. One dealer’s parts manager, a big wholesaler, based most inventory purchase decisions on wholesale marketing strategies, not the demands for customer repair order parts. It seemed the purchase decisions were made based on what could be made on the purchase discounts, not on customer demand. Be mindful that manufacturers are reducing the return allowances.
  3. Be aware of why your customer repair order parts margins are what they are. One member had an 18% margin on customer repair parts and he didn’t know why. This can be monitored each day through your DMS and by your service advisor. Matrix pricing still works, allowing the repair parts margins to compensate for the competitive parts margins. I still like to see an overall customer repair order parts margin in excess of 42%.
  4. Do an annual parts inventory with the help of an outside consulting or auditing firm. At the very least, check the bins on a rotational basis throughout the year, correcting counts and locations. Some dealers work a cycle count allowing for a complete inventory check each quarter. Can you imagine an error rate of nearly 30% in your bins? It happened, and it’s happening now. One dealer, having asked his parts manager what an inventory reconciliation looked like, found that the manager did not know. Hard to believe? I believe it.
  5. Net profit is for parts departments too. Prior to the recession, I always looked for parts departments to be easily profitable at 30% of gross on up to 45% of gross profit produced, depending on the franchise. Lately, I have seen parts departments only break even, not to mention the excess personnel attributed to parts. Get the expenses in line with the parts gross you are currently developing. This is not brain surgery, and your DMS does most of the counting work for your personnel, not to mention the help the manufacturer contributes to the ordering process.
  6. Know your manufacturer programs, how you earn purchase discounts, and how to protect yourself through the return process. I heard one confession in the meeting room where a parts manager had purchased another truckload of engines to build his return allowance credits, telling the dealer that was what he had to do. However, upon further investigation, the dealer found that the $65,000 purchase did not increase his return allowance, which further depleted the cash in the store. I also heard that General Motors is expanding the number of part numbers that dealers should carry to be RIM compliant, further siphoning cash from the dealers. We are talking about thousands of newly-recommended parts numbers, as RIM will demand 85% compliance and as much as 100% compliance on many more parts numbers that are newly classified as “Service Drive Required” parts. OUCH! Other manufacturers may be doing these same things under their customer retention banners.
  7. Know the specific criteria and process for returning parts, as well as cores and warranty parts for review. You probably cannot even return a special order part. It is usually most important that the packaging of the returned part be submitted with the defective part. We heard one story where a parts manager decided that warranty return parts were not his concern and threw out all the warranty parts to be returned, putting the dealer at risk of losing the value of all those claims.

In conclusion, get involved in your parts investment. For some dealers, this is a large bank account on its own. If it is not in perfect order, you probably need to get outside help for your manager, or you may need new parts department management.

Learn more about parts department management by joining a 20 Group or attending an NCM Institute Parts and Accessories Management course!

Permanent link to this article: http://blog.ncm20.com/2013/04/seven-tips-for-better-parts-management-and-profitability/

Leo Hart

Successful Auto Dealership Forecasting

measureThe other day, I started weighing myself each morning. Because of that, and because I have had a long-time goal of losing about 20 pounds, I realized that I was subconsciously altering the amount of food I was eating each day. And with that reminder each morning (the scale), I was either encouraged or recommitted.

That experience has brought to mind what happened a few years ago when I produced a forecast meeting for one of my 20 Group members and his management team. The results of that meeting were ultimately awesome. If memory serves me correctly, the dealership’s actual net profit for the forecasted year exceeded the dealer’s pre-forecast expectations by 50%. The team had forecasted with me $2.3 million net profit. The dealer was only expecting to make $1.5 million. They made their forecast.

The main reason for the store’s success that year was two-fold. First, throughout the forecast meeting all participants would collaborate on what our expectations were for each account or line item on the financial statement, developing some commitments or plans of action as we went. My goal was to create a short form financial statement for the upcoming year. This short form was to include unit sales volumes, gross per unit, F&I, and each parts and service sales account along with number of R.O.’s and the targeted gross profit margins on labor and parts. After the sales and gross profit production numbers, we then forecasted an expense budget for each department, deriving a forecasted net profit for an average month and total year.

This was good, setting a track for us to run on. But the real key product of our forecasting activity were all the action plans we had noted to accomplish in the coming year, along with some how-to ideas to accomplish them. Those notes and action plans were the Real Forecast.

The second reason for the store’s success was the dealer’s own self-discipline to daily and weekly review with his management team their actual performance against the forecast. And, though we gave him a detailed annual forecast, he sat down with his computer spreadsheet and broke it down to a monthly forecast, taking into account the store’s history of sales activity, creating a sales volume and expense budget for each department by month. Then—and this may be another important ingredient for their success—he would review, daily or weekly, the team’s progress and offer his help to a manager individually, and/or the team, to keep them on track with their overall goals. Adding his own infectious energy to the process, from my perspective, was so very important to their success that year. It was the manager’s forecast, but the dealer was engaged to help the department managers along their way.

There’s no doubt that with good measurement tools, a structured and collaborative process to define goals, and a commitment to execute agreed-upon action plans, your dealership’s forecasting efforts will be rewarded. And speaking of good measurement tools, I was recently introduced to NCM’s new web-based software product, axcessa™ and I saw built into the programming the above disciplines—forecasting and daily review. I believe the axcessa tool’s forecasting features will facilitate this disciplined process in any dealership. To learn more about axcessa, I encourage you to visit www.ncmaxcessa.com.

Of course, a software program cannot interject the passion and leadership of the dealer. That, you have to supply.

Leo HartLeo Hart is an executive conference moderator for a number of NCM Associates 20 Groups, including franchised and multi-store dealership operations. You can reach Leo at 913.649.7830 or email lhart@ncm20.com.

 

 

 

 

 

Permanent link to this article: http://blog.ncm20.com/2012/12/successful-auto-dealership-forecasting/