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Category Archive: Management

Chip Maher

The Dilemma with Your Data

Car mechanic with customer

Often dealers will refer to reports generated by their DMS, CRM, or another vendor tool to track the performance of their dealership. If they’re not careful, relying solely on these metrics can be misleading and harmful to a business. For example, if an internet lead response time metric boasts a 95% response rate within 10 minutes, are those quick responses of a quality value? Do they satisfy customer needs? Or, if a Multi-Point Inspection (MPI) completion rate metric hits 95% on all repair orders, are they, in fact, being presented to the customer?

Let me reassure you that these performance metrics are critical and should be monitored and tracked. Both will drive performance and results, but only if the processes they track are executed properly. The metrics do not rate the effectiveness of the entire process, just one task within it. We need to make sure we’re tracking more than just the metrics. Monitor the processes, improve them, edit them, and your dealership will profit.

Response time for internet leads is a crucial metric for a dealership’s e-commerce performance. The industry has established guidelines suggesting “the quicker the response time, the more likely a consumer will engage, resulting in a higher closing rate.” Unfortunately, what the response time metric does not show is the quality of the reply. Also, this metric can be manipulated to show a response was sent simply to “stop the clock.” For instance, a manager could choose to have the system send an auto-reply which has nothing to do with the inquiry from the consumer. The manager’s goal is to record a quick response time, so the report is accurate, but the quality of the reply is rendered irrelevant and is counterproductive to engaging the customer.

The MPI is another process that drives great results if executed correctly. Of course, we want to track the performance of the MPI and accurately complete an MPI on all repair orders in the service department. However, the most critical portion of the MPI process is the presentation to the client of any additional services recommended after inspection.

If your dealership completes an MPI on 100% of its repair orders but doesn’t present the results to customers, you will not achieve the desired result. I have seen many stores that refer to their MPI completion as being in the 90-95% range, but upon closer evaluation of their processes, and observing their customer/employee interactions, the entire process is only being used effectively 20% of the time! This has become a larger issue as many stores have moved to digital versions of MPIs. Of course, you get 100% completion when you send the consumer an email or text of the MPI results; however, the presentation to the client, either in the service lane or during delivery with a paper copy, is the most impactful step to generate results. Some dealerships have reinstated the use of handwritten paper reports to encourage employees to present the MPI recommendations and make the additional sale.

MPI best practices to execute today:

  • Periodically audit your MPI process. Verify all steps are completed each time.
  • Check the cashier’s office randomly to see if copies of the MPI are attached to the repair order.
  • Staple the completed MPI to the top of the Consumer Repair Order at the cashier’s office. This ensures the customer sees it before leaving your store.
  • Keep laminated samples of the MPI at the write-up station so the consumer can see what it looks like and can anticipate a completed inspection summary upon departure.

Reports are great tools and certainly have their place in the dealership, but more importantly, audit your processes to ensure your dealership is achieving the results you need to succeed.

Learn more about analyzing your dealership’s business practices by enrolling in the NCM Institute’s General Management Executive Program. You’ll dive your existing processes and procedures, create new ones, and learn how to make the numbers work for you. Or, join an NCM 20 Group to review your metrics monthly and share best practices with fellow non-competing peers to gain great industry-specific ideas!

Permanent link to this article: http://blog.ncm20.com/2017/08/the-dilemma-with-your-data/

Kendall Rawls

Think Like an Owner

Car salesman

Ownership, as defined by Merriam-Webster, is the state, relation, or fact of being an owner. Often, those who feel ownership of something take special care and feel great responsibility for it. If we dissect the definition of ownership a little more, it does not necessarily mean that one must “own,” but rather, there is a mindset of being or acting like an owner.

This “ownership attitude,” or lack thereof, can be seen in many dealerships. Some leaders may not own stock in the dealership but have ownership in areas of strategic initiatives, team motivation and collaboration, and show emotional investment in the achievement of the dealership’s mission. On the other hand, some leaders show up, fulfill their responsibilities, and get the job done. However, if a better gig presents itself across the street, they don’t hesitate to take the opportunity.

An ownership mentality, whether the actual owner or leader, is a great attitude. It is the state of mind or the accountability we put on ourselves to put care and action into what we own.

Imagine if all key managers and influencers in the dealership had a dealer-minded attitude and made decisions that were always for the betterment of the whole and not just the individual? Take a moment and analyze each leadership role in the organization and identify their level of engagement. Does it appear they lead from a place of “ownership”—meaning, in a way that promotes the organization’s mission, vision, and core values, and nurtures team synergy? Or, are they just performing the duties of the role? Also, it is essential to determine if the key managers think and act as if they have an ownership stake in the dealership. Have they bought into the dealership’s mission, strategic vision, and view the business as their own? When management leads from a place of ownership, the attitude becomes contagious throughout the organization and profitability, performance, growth, and fulfilling long-term strategic plans can become a reality.

So then, how do dealer principals/owners create an owner-centric mindset in those that are not actual owners? Here are a few areas that, if executed with intention, can be game changers:

People Development

Offer learning and training to your people. Providing access to operational training is one area to ensure your people are equipped to succeed. Also, a new and growing area is in the development of soft skills that are focused on self-awareness. Providing access to training cultivates a feeling of loyalty amongst your people. Investing in their success motivates people to want to invest in the dealership’s success.

Leadership Development

Rather than a culture where managers lead from positional power—“I’m your boss, so do what I say”—invest in leadership development to create an accountability culture based on coaching. Leadership influences others’ choices, priorities, and behavior. Power and position may create compliance in your organization, but it will also create challenges in nurturing a sense of buy-in to your organization’s mission and vision, thus ultimately demotivating employee loyalty and their drive to go above and beyond the call of duty. As our industry evolves due to technological advancements, changing consumer behavior and demographic shifts, position, and power fall short of inspiring people. There are too many competitors recruiting for good talent which is making it harder to retain the movers and shakers in the organization. As such, it’s imperative to foster an environment where people are inspired, respected, and empowered which helps them want to stick around.

Self-Awareness

Understanding one’s own personality/management style and how it interacts with others is one of the biggest leadership game changers out there. Be willing to do a self-assessment and provide the same assessment to your key leaders and teams to create an understanding of natural leadership and communication qualities and traits. Go a step further and provide coaching to key leaders and rising stars to develop flexibility in how to work with a diverse team.

People development, self-awareness, and development of leadership soft-skills are game changers for current and future leaders. Enabling and empowering managers to build a foundation for future growth, sustainability, and a culture of ownership throughout the organization. To do this, managers and the dealer principal/owner need to learn how to think differently in this changing industry.

Learn more about the NCM-Rawls Dealer Executive Program and how it can prepare you and your successors to lead your dealership into the future.

Permanent link to this article: http://blog.ncm20.com/2017/06/think-like-an-owner/

Doug Austin

Profit Drain – How many dollars are slipping away from your operation?

auto mechanic with clipboard at car workshop

If you keep up on recent automotive news, you have probably come to the conclusion that new car sales in 2017 are forecasted to plateau. Sales will flatten out, and margins are likely to continue on the same trajectory—flat or shrinking. These realities will challenge most of the dealerships who try to improve profits by only selling more new vehicles as their primary profit driver. That top-line sales strategy has worked well for many dealers since the downturn, but many have successfully focused on working both sales and expenses to enhance profitability issues when sales flatten out. In fact, many dealers have realized the untapped potential for big profits right in their own dealerships that are available today.

In the spend management space, we are accustomed to working with dealership spend data, supplier pricing for supplies and services, and multitudes of benchmarks. The following was true eight years ago and according to our internal calculations, it is still true today, though the data has changed slightly:

  • Dealerships spend money in up to 130 expense categories every month.
  • Single-point dealerships average 400+ suppliers to support those 130 expense categories.
  • Multiple-point dealerships can have 800+ suppliers supporting the organization.
  • Dealerships will spend between 4.5% of sales to 9% of annual sales on services and supplies.
  • 94% of dealerships do not have a formal purchasing department.
  • Aberdeen Group (procurement authority) says that if you centralize sourcing and purchasing, you can save up to 25% of your spend in new found savings through leverage and focus.
  • Our internal metrics demonstrate 23% cost savings to validate Aberdeen research in the dealer space.
  • Supplier reductions of 45% of total suppliers are quite common—reducing back office support.

What does this all mean?

  • Dealerships are spending too much on supplies and services.
  • Supplier pricing is generally too high, which accounts for the 23% savings opportunity year-after-year.
  • Dealers are using too many suppliers, impacting price and back office administrative costs.
  • The de-centralized purchasing strategy—using managers to fill the role of purchasing—is not working.
  • Unless dealerships re-think and alter their current purchasing strategy, they will continue to pour money down the drain every day and lose a great source of new profitability.

New profit opportunities.

Based on the data and benchmarks available, dealerships can get a pretty good idea of new potential profits—or lost savings—by reviewing the data in the chart below:

 

Annual Revenues

$25MM

$50MM

$75MM

$100MM

$150MM

Supply/Service Spend as % of Sales

 

8.0%

7.5%

7.0%

6.5%

6.0%

Annual Spend for Supplies & Services

 

$2,000,000

$3,750,000

$5,250,000

$6,500,000

$9,000,000

*Savings Opportunity at 20% – Year One

 

$400,000

$750,000

$1,050,000

$1,300,000

$1,800,000

*Savings Opportunity at 20% – Year Two

 

$400,000

$750,000

$1,050,000

$1,300,000

$1,800,000

Total Savings Opportunity

 

$800,000

$1,500,000

$2,100,000

$2,600,000

$3,600,000

*Year One and Year Two savings are achieved by negotiating a competitive price, then locking those rates in for 24 months or more. Contracts are not necessarily required to achieve this.

Reasons for doing nothing.

I have scratched my head over the years wondering why only 5% of dealerships centralize their procurement and 95% of them still do nothing. As best as I can tell, dealerships do not change their approach for the following reasons:

  1. Owners and management do not realize the potential benefits of changing their approach.
  2. Not enough time to attack their expenses in a methodical manner.
  3. Unsure of where to begin—expense management can be complex with many moving parts.
  4. Too focused on top line sales to drive profits—sales-driven companies are not comfortable in the operations space.
  5. Perceived internal threat—if new savings are generated, those responsible might appear as ineffective managers.

Reasons for taking action, now!

  1. Margins are being compressed and profits are or will be shrinking, therefore it is the obligation of management to be proactive and move.
  2. Taking action today will protect the business when the next downturn occurs—and it will occur.
  3. The cost savings achieved are not transitory; they can be sustainable if approached correctly.
  4. The cost savings dollars are significant, as demonstrated above, and can have a positive impact on the business.

Suggested next steps.

If you and your management team are ready and serious about generating new profitability and stemming the loss of profits, consider the following actions:

  • Leadership: Meeting of the minds. Gather your management team together and get some consensus around your objective of improving profitability and how you can achieve the results outlined above.
  • Assess your spend. Identify how much you spend annually for supplies and services (see above) from your DMS data and then determine who in your organization is managing that spend.
  • Gap analysis. Review your processes and controls today. Do you have purchasing policies? Do you track contracts? Do you have a list of preferred suppliers for each category? If not, you need those tools in place to guide the organization.
  • Develop a plan. You are not going to manage 130 expense categories effectively and generate the profit potential without a plan—let’s be honest. You need to centralize your procurement function; either hire someone—or some group—to assist you in organizing your internal resources so that they have matrix responsibility for generating cost savings. Assign each category to someone on your team and assign a due date to get your resources aligned and your plan established.
  • Execute the plan. Business school taught us the fundamentals of management: Plan, Organize, Direct, and Control; you do this every day in other parts of your business. Now might be a good time to do the same thing with your expenses.

Expenses: The last business goldmine.

Based on the research of outside consultants and what we see in our spend management practice, that statement is true. If you are serious about driving new profitability in your business, now might be a good time to do so. If it is not a good time, then just realize that you are pouring dollars down the drain every month and will continue to do so until you change your approach and strategy.

Permanent link to this article: http://blog.ncm20.com/2017/04/profit-drain-how-many-dollars-are-slipping-away-from-your-operation/

Tony Albertson

The Resilience Checklist

Car salesman

Recently, I was invited to moderate a session at a DrivingSales Conference in Miami, Fla. The topic at hand was dealer resilience. The meeting asked dealers in the room, “How would you handle a 20 percent decline in volume or a 50 to 100 basis point rise in interest rates and what about a labor shortage?” Think it can’t happen?

Increasing interest rates

The last few years, we have seen the government prop up the nation with prolonged stimulus and loose monetary policy while impairing sustainable growth. In December 2015, the Federal Reserve raised rates by 25 basis points; this was the first increase since 2006. The Fed has recently increased it another 25 basis points, and the projection is for 2 to 3 more increases next year. How will this affect your profitability, your property values, rent factor, or your ability to acquire new stores?

Changing marketplace

What of other external threats to our business, such as negligence from the manufacturers, disruptive markets, or the state of consumer finance? Internally, dealers may suffer from a poor reputation in customer experience, labor inefficiencies, and a stagnant business model that can ruin net worth. A 2015 Customer Experience Research report by DrivingSales stated that only 26 out of 4,000 consumers prefer the current car buying process. As they explain—and I agree—the Apples and Amazons of the world have trained modern shoppers to seek out a different buying experience.

Experian has reported that auto loans reached an all-time high in Q1 of 2016. The debt totaled over $1 trillion, up 10 percent from Q1 2015, and they are watching delinquencies closely. According to the Federal Reserve Bank, the average length of a new car loan is 64.6 months.

A 2015 Cox survey had some good news for dealers despite the abundance of those disruptive market sites capitalizing on direct-to-consumer transactions: 81 percent still prefer to buy in-person versus online. The customer still doesn’t like the process, but they want to deal with a real person and be able to touch and feel the vehicle.

Rising labor costs

Operationally, the automotive industry’s biggest expense is labor. According to NADA’s Chief Economist, dealers often pay 15 percent more than US averages for labor and have been increasing wages at twice the rate of comparable sectors all while experiencing turnover rates up to 3 times the US average. On the topic of expenses, David Spisak, President of ReverseRisk and one of the speakers at the conference, stated that “many dealers fail to quantify their true costs when manufacturers redistribute margin on their financial statements.” So what happens when the OEM pulls the program?

The Resilience Checklist

Despite the brilliance of the speakers at the conference, none have “THE ANSWER” to all of the questions we face in today’s car business … I don’t believe anyone truly does have all the answers. However, I think this short resilience checklist is a useful tool for your dealership:

  1. Stress test your profit and loss (P&L) and balance sheet for a 30% SAAR drop and/or interest rate increase of 3-5%.
  2. Secure long-term financing while rates are low, if possible.
  3. Develop and track a “true” P&L independent of OEM incentives and financial manipulation. Wean yourself off dependency on manufacturer programs. Operationally, modernize your labor practices. Build and implement an attractive employment ‘brand’. Culture, compensation plans, internal policies, and positive impacts of the organization externally should be optimized to attract and retain a more diverse, more cost-effective talent pool that can deliver a superior customer experience.
  4. Re-engineer inefficient departments and processes. Streamline organizational structure to provide a seamless customer experience to remove hand-offs and overhead. Used cars and fixed operations are huge areas of opportunity to recover lost margin in new cars and execute a customer retention strategy.
  5. Future proof your business by exploring how to position your dealership to benefit from changes in how consumers purchase mobility.

So many questions in so many areas. The truly great news is that—almost to a man (or woman)—car dealers can adapt and overcome challenges. Well, some faster than others. Make sure you’re one of the fast ones!

Learn more about Tony Albertson and how he and his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting.

Permanent link to this article: http://blog.ncm20.com/2017/04/the-resilience-checklist/

Adam Robinson

Employee Turnover is Killing Your Dealership

AdobeStock_128893720

The auto industry has dealt with a number of changes in recent years, largely in response to new spending habits and expectations of millennials both as consumers and employees. While dealerships have made great strides in connecting with this new generation of consumers, many businesses are still in need of significant improvement to retain their employees. In fact, the employee turnover rate within the industry is currently at an average of 67 percent according to the NADA Dealership Workforce Study, correlating to an industry loss of billions of dollars annually with the average dealership suffering an average of half a million dollars lost each year.

An issue half a decade in the making

This decline in employee retention has been steady since 2011, with the average sales position lasting a little over two years, according to the NADA, compared to nearly four years ago when the study began. Furthermore, data showed that while only 45 percent of dealerships had an average retention rate of three or more years; that number fell to about 33 percent when looking exclusively at those in sales positions. The private sector, by comparison, reported an average of 67 percent retention for the same amount of time.

Not surprisingly, the best-in-class dealerships with the highest revenue and profitability also suffer the lowest turnover rates. What’s more, dealerships across the board seem to be notably lacking at hiring and retaining women, with less than 20 percent of the workforce made up of women in 2015.

Another factor accounting for the loss in dealership employee retention is the changing landscape for consumers. Instead of going into a dealership and meeting with a salesperson when looking for a new car, customers are now spending up to 11 hours researching online and less than four hours inside a dealership speaking with a representative. With significantly fewer trips to a dealership, the salesperson has less of an opportunity to interact with, and push product on, customers. This new lack of negotiation skills, however, provides dealerships with the opportunity to hire a more diverse, and perhaps qualified, pool of candidates.

Retention issues impact sales

The employee retention rates not only cost dealerships a monetary loss in the form of search and training expenses but ultimately result in lost vehicle sales due to inexperienced sales staff and a lack of continuity with customers.

According to AlignMark Corporation, there are four main categories to help employers quantify the expense associated with employee turnover:

  • Separation – unemployment compensation, exit interview costs, etc.
  • Replacement – advertising, pre-employment testing, time, and materials
  • Training – time and effort required to bring new hires up to speed
  • Productivity – lapse in morale and production, as well as low-quality output

How to find the right employees

By 2020, millennials are expected to make up 40 percent of all new-vehicle buyers. Millennials also now form the majority of the workforce and currently account for 60 percent of new dealership hires, making it critical to maintain a focus on retaining this demographic to keep dealership floors stocked with quality salespeople. Millennials, however, dislike the conventional dealership commission-based compensation and instead prefer salaried positions with more steady income and advancement opportunities. This makes it difficult for many dealerships to retain their new hires, requiring those in hiring positions to reevaluate the interview process and hiring strategies altogether.

According to ESI Trends, common mistakes dealerships should avoid during the hiring process include:

  • Hiring quickly out of desperation
  • Hiring someone after just one interview with one person at the dealership
  • Overselling the position’s earning potential
  • Not trying to impress the recruit

Some additional best practices dealerships should consider to boost retention include:

  • Keeping job descriptions updated with the most relevant, accurate information
  • Implementing a business development center to funnel sales leads to salespeople
  • Offering creative compensation in addition to stable base wages
  • Providing a career growth and professional development plan

By switching to more base-waged positions with bonuses, dealerships make room for employees to meet customer needs versus negotiating the best price for the dealership. Dealerships that take things a step further and create a career path for their employees will significantly increase employee retention rates, especially for today’s millennial who places priority on career advancement.

The auto industry has recognized there is a problem in its employee retention and has taken steps to improve retention rates. However, there is still a long way to go in creating the industry culture and offerings to not only attract today’s top talent but to keep them there for the long haul. Until then, employee retention will continue to wage a significant toll on your dealership and the industry as a whole.

Thanks to NCM Associates’ partner, Hireology, for sharing their guidance on attracting and managing millennial employees. Learn more about Hireology and join NCM’s experts for more actionable advice on hiring the best people for your team in our Hiring Top Talent and Success-Driven Pay Plans classes.

Permanent link to this article: http://blog.ncm20.com/2017/04/employee-turnover-is-killing-your-dealership/

Alan Ram

How to Be the New England Patriots of the Car Business

Business people at work in their office

It was 2008 when it hit me.

The economy had just begun to hit the skids, and I was leaving a dealership after having done a live meeting. As I walked through the empty showroom, I noticed four managers on shift, sitting in an otherwise vacant tower waiting for salespeople to bring them a deal. There were no customers on the floor and nothing happening outside beyond the huddle of salespeople by the front door, and I realized: A lot of people in our industry that we call managers aren’t necessarily managers. They might be great on the desk—and they’re often strong closers—but they don’t all have management skills. It became clear to me that what these managers do when there are no customers in the showroom is every bit as important as what they do when they have a showroom full of customers.

How did we get to this point as an industry where we have managers

who don’t have good management skills?

It has to do with how someone becomes a manager at a dealership. We tend to take our best salespeople and make them managers. Wouldn’t taking the best salesperson on the floor and making him a manager be the equivalent of taking the best NFL player and making him a coach?

The best players don’t make the best coaches. Take Wayne Gretzky, for example. He was an amazing player and an absolute disaster as a coach. Likewise, the best coaches in NFL history have not come from the best players. The reason is this: Being a great coach is a different skillset than being a great player. Yet, what do we tend to do in the automotive industry? We take our best players off the floor, we hardly train them at all on how to manage, and then we’re surprised when they fail.

The time has come when dealerships actually have to have good management. In today’s industry, it’s not just about desking and closing deals, a manager’s most important functions have to do with preparing the team for game day.

Here are my tips for how managers can begin to master managing.

Strategic duties

A coach is responsible for a team’s overall offensive and defensive strategies. A great manager focuses on offense by honing a culture of business development at his dealership. He educates his staff on how to drive traffic to the showroom, how they can work orphan-owner bases, sold bases, social media and the service drive for repeat and referral business.

A strong manager also focuses on turning defense into offense by making sure he has given his staff the tools to convert inbound phone calls and Internet leads into customers on the showroom.

Practice makes perfect

Just know the playbook doesn’t prepare the team for the game—the best managers practice and drill plays until salespeople become reflexive and command the confidence to deliver in crunch time.

Great managers prioritize practice with their people just as football teams simulate five days a week to prepare for a game. Managers must simulate critical skills such as how to handle the phones, so everyone is practiced in “what” to say and “why” to say it to get customers walking through the front door.

Accountability is key

Finally, the best coaches hold their players accountable. Bill Belichick is an example of an incredible coach who holds accountability as a top priority. Belichick’s history demonstrates this value most memorably when Chad Ochocinco (aka Johnson), a superstar signed from Cincinnati, was cut for not knowing the playbook.

Great managers hold their salespeople accountable; for example, in order to have accountability on inbound sales calls, managers must actually listen to these calls—just as coaches review game film. When salespeople know that they are being listened to and that they will be held accountable for their performance, their effort level naturally rises.

Management must then have clear consequences. If people are not performing, if they fail to meet the standard, they need to know that there will be immediate consequences. For example, if a salesperson repeatedly mishandles calls, a consequence could be him or her losing the privilege of taking sales calls.

What do all great football teams have in common? Great coaches. Teams don’t come together and win games without strong leadership guiding them. In other words, no team will achieve greatness despite poor coaching.

Fortunately, great managers are made and not born. Check out in-person training options through NCM Associates, and discover our online platform, NCM OnDemandAlan Ram’s Management by Fire course offers additional tools for your dealership training needs.

Permanent link to this article: http://blog.ncm20.com/2017/01/how-to-be-the-new-england-patriots-of-the-car-business/

NCM Associates

#AskNCM: How can I stop my out of control shop expenses?

“Our shop supplies expense is out of control,” a service manager asks Steve Hall. “Do you have any tips or best practices for controlling it?”

Managing car dealership expenses is always a concern because of its immediate effect on the bottom line, explains Steve. Get Steve’s advice for simple steps you can take to reduce shop costs.

Have another question for Steve or the other #AskNCM experts? Email askncm@ncmassociates.com or leave a comment below!

Permanent link to this article: http://blog.ncm20.com/2016/08/askncm-how-can-i-stop-my-out-of-control-shop-expenses/

Brent Carmichael

Three Steps to Structure Profitable Car Deals

D7B_5363

Whether you are concerned about collecting or about meeting sales goals, there are good reasons to make sure the deals you do make are well-structured. Here are three tips to make that happen.

1. Choose the right term and payment

A sound deal starts with the term. Your deal has to make sense. A low ACV unit on a long-term just because we got a good down payment? That simply doesn’t work. Not because the car won’t run the note, but because the customer won’t run the note. Fewer than half the deals we put on the books in the BHPH industry go to term. Almost a third will charge off, and another 20% will pay off early either through our effective repeat programs or from our competition.

Term should be dictated by two factors: What the customer can afford, based on their verified net income, and your appetite for exposure. If the customer can afford a $300 monthly payment and you are only comfortable with a 30 month term, then that customer’s total contract can only be $9,000. So, you can sell that customer any vehicle on your lot as long as they leave owing you no more than $9,000 in principle and interest.

Obviously, because payment is an integral piece of establishing term, it’s also an important factor in a sound deal structure. What we are looking for here is the same as term. The payment date has to be logical. Payment should be due when the customer gets paid and on their next available paycheck, barring any deferred downs.

Allowing a BHPH customer to go 30 days without a car payment without a deferred down is asking for trouble. We know our customers have had issues with budgeting money in the past, why not help them budget better by starting their payment right away? And, to help them even more, have their payment scheduled for the day they get paid. It’s an easy reminder: get paid; make payment.

2. Select the right rate and add-ons.

Interest rate is the next aspect of deal structure. Now, before I get hate mail, I’m not suggesting you shouldn’t profit from your state’s usury limits. But, I am saying that you may need to adjust this expectation depending on the term and payment deal structure. Yes, interest income is our reward for the risk. However, if the overall deal structure doesn’t make sense, your ability to collect your reward will greatly diminish.

Back end or add-on products are similar to interest in the overall scheme of deal structure. While they are great profit generators, their addition to a deal can effect payment and term, not to mention cash flow.

It’s a balancing act. You have decided how you want to divide the money you collect from the customer. Will it go to principle and interest in order to reduce your risk and increase your reward? Or will it go to recoup cost in a product?

3. Use common sense to help the client pick the right vehicle.

You can’t forget the customer in the deal structure. Yes, the term, payment, rate and additions are all critical to the hard business aspects of the deal, but you need to keep an eye on what they are buying.

Let me give you an example of a deal I came across during a consulting visit. A single mother with four children, two of whom required car seats, was allowed to purchase a Chevrolet Camaro. When I asked the dealer about it, he responded that the customer could afford the payment based on his criteria and the term was within his criteria. Okay. Yes, both of those do make sense, but common sense should tell us the deal doesn’t make sense. Sure enough, the owner wanted to be traded out of the vehicle within the first year because it wasn’t big enough.

Moral to the story? The overall deal structure has to make sense not only for you the dealer, but for the customer, as well.

Bringing it all together: Make the right deal

So, let’s review three main steps you need to take to create the most profitable deal structure.

  1. Term should be dictated by your exposure comfort level.
  2.  Payment needs to fit the customer’s financial ability. Interest and add-ons need not dictate the term and payment; instead, term and payment should impact how you set up interest and add-ons.
  3.  Not only should the vehicle fit not the customer’s financial needs, but it must meet their physical and lifestyle needs, as well.

Does your dealership face challenges collecting during the holiday months? How have you addressed it? Tell us below. 

Permanent link to this article: http://blog.ncm20.com/2015/12/three-steps-to-structure-profitable-car-deals/

Richard Head

Is Story Time Causing Your Dealership Turnover? FIRO and MBWA Can Stop It

open boo

One of the biggest expenses dealerships face each year is turnover. Not only does finding a new employee take a lot of time and money, but you then have to reinvest in proper training to get that new person up to speed.

I’ve found that dealerships – like many other complex work environments – are negatively impacted by assumptions, something I like to call “story time.” Before I go into the details of how story time ruins your employer-employee relationships and leads to turnover, let’s take a second to review what motivates people in the first place.

Motivation in action: FIRO

Developed by observing well-oiled, capable teams working in high-stress situations, the Fundamental Interpersonal Relationship Orientation (FIRO) approach boils people’s fundamental behavior down to three desires:

Inclusion.  Everyone expresses or wants contact with others—to be around others and work with others.

Control. Everyone expresses or wants influence over things and people.

Openness. Everyone expresses or wants to be known, seen, appreciated—a curiosity about others and a willingness to be seen ourselves.

This chart shows how each area relates to the others:

Blog graphic

For managers who typically can’t create a team from scratch based on compatibility, we have to focus on the thing we can change. Will Schutz – the psychologist who invented the FIRO method – says that creating an environment that encourages openness is the best method. And openness is what story time is all about.

It’s story time

First, let’s address openness. I’m not talking about some touchy-feely “new-age” thing. Instead, “openness” means a willingness to consider other interpretations of behavior.

Whenever something happens to us, we almost always make up a story about it. Unfortunately, most of the time we don’t make the effort to check out our made-up story. We simply create this fantasy world about what’s going on. As time goes on, those stories get hairier and stranger.

Just think about the last time you were baffled by something your boss said. You probably found yourself thinking, “I bet they’re irritated with me,” or “They probably think that ….” In reality, you just don’t know what’s happening with your boss. But your brain doesn’t like uncertainty, so it’s compelled to make up a story that gives you some understanding. And our people do the same about us!

Story time has a huge impact on businesses. Dealerships (and all businesses) are composed of multiple, competing stories about what’s going on and why—stories that are rarely discussed openly and almost never examined in a way that could prove or disprove the stories. Left to run unchecked, story time can give your best performers misinformation, and lead them to walk out the door.

Putting story time to bed.

In work relationships, we have two choices:

  • Let people make up stories about what is going on with us
  • Tell people what’s actually going on, so that they stop making up their own stories

As a leader, you set the tone.

When you stay holed up in your office, I can guarantee that your staff is making up stories trying to understand your decisions.

“Management By Wandering Around” (MBWA) is a great way to stop story time in its tracks. And, what better way to interact with the dealership?!

When I get out into the departments, I share with my staff what’s going on in the department, what’s keeping me up at night … and, critically important, what my hopes and dreams are for the dealership and the department. As an added bonus, the employees relax a bit and tell me things they might not in more formal situations. Everybody wins! And everyone stops inventing stories.

Give it a try in your dealerships. Manage by “wandering around” and find out what’s really going on. Stop the stories and deal with facts! What do you have to lose?

Permanent link to this article: http://blog.ncm20.com/2015/08/is-story-time-causing-your-dealership-turnover-firo-and-mbwa-can-stop-it/

Dustin Kerr

Are you insane, hard-headed or just lazy?

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Insane. Hard-headed. Lazy. When it comes to the car business, I’ve probably fit into each of these categories at one time or another. And—just between you and me—I’ve definitely ticked all three boxes on a few occasions!  If you’re honest with yourself, you probably have, too.

And before you get mad: I can explain!

Old habits are hard to break …

How often do you find yourself trying to fix things by doing the same stuff you’ve done since starting in the business?

I know I have. And I do it even though I agree with Albert Einstein’s famous definition of insanity: “Doing the same thing over and over again and expecting different results.”

It’s the same problem with being hard-headed. Did you or do you still fight against change in your own dealership? Were you one of the people that kept saying this “internet thing” won’t ever catch on in the car business? Or that the internet will make it impossible for us to make a profit?

What about laziness? Do you want to train your staff, but find yourself procrastinating on seeing the process through?

… but you CAN beat them!

Here’s the thing. It’s not the end of the world if you fall into one—or more—of these categories. But you can’t let them rule you. Take a hard, honest look at yourself and your habits, then make the necessary adjustments.

Why do I bring these things up?

Well, I’ve realized there’s a common theme between poor performers: They want quick fixes.

First, let me just say that there’s no issue with wanting to solve a problem fast! Dealerships need to be swift and flexible when course correcting. But, there’s a big difference between immediate action and slapping a Band-Aid on a problem.

Quick fixes aren’t always best fixes

Unfortunately, many of the struggling dealerships I’ve seen want quick “Band-Aid” fixes.  When things are bad, they focus on seeing results improve. And demand that they improve fast! Excellent performers, though, focus on activities. They know that investment in training and examining and changing processes—while slower—will yield improved results that can be sustained.

Unless you’re strategic, quick fixes are just those bad habits acting to undermine your business. I mean, it’s easy to just fire your staff. (Ahem: laziness.) Or demand that they produce a certain number of car sales per month. (Hard-headedness and a smidge of insanity.)

Without changing what your dealership does—and how your staff handle their work—you shouldn’t expect anything different. Unless you’re crazy. And, we both know you aren’t crazy.

So, what should a successful dealer do? In my opinion, one of the quickest ways for us to increase profitability is by teaching our employees how to properly manage the activities that lead to results.

Make changes to things you and your staff can control. And be sure to clearly communicate goals associated with the change. For instance, it’s fairly easy to manage the number of confirmed appointments each salesperson has each day or the number of customer pay service vehicles that get a full walk around inspection.

There’s nothing crazy about that plan.

Do you agree with Dustin? Have business bad habits affected your ability to get the best results? Tell us what you think below. 

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Permanent link to this article: http://blog.ncm20.com/2015/08/are-you-insane-hard-headed-or-just-lazy/

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