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Tag Archive: Accountability

Steven Banks

A Beginner’s Guide to Managing Data

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We all have our inadequacies, both as individuals and as businesses. And it’s no coincidence that a business’ shortcomings often parallel the shortcomings of the individuals behind it. For instance, a business atmosphere that is too fast paced and rushed is often the result of an impatient dealer or manager. (When my wife recently accused me of this unfortunate quality, I explained that I have more patience than anyone because I never use any. She didn’t buy it, in case you were wondering.)

On the flip-side, a carefree and lackadaisical business atmosphere could be the result of an unorganized and unenthused manager. To the same effect, strengths tend to overlap as well, and we often forget that our personal fortes can make a positive impact in the day-to-day operations of our dealership.

One strength that can always be improved upon in dealerships is Data Management. It is very easy to become intimidated by newer nomenclature, and in the automotive world, “data management” absolutely fits that description. It is new, it is intangible, and it is constantly changing. BUT, the dealerships that are embracing data management, and effectively using it, are reaping the benefits.

So what’s in it for you?

Here are three reasons you can benefit from improved data management.

1. Turning numbers into actionable intelligence:

Properly analyzing and managing relevant information can transition your CFO and team of controllers from the mindset of accountants to that of trusted business advisors.

According to a USA Today/Gallup poll, accountants are considered the most trusted business professionals over any other position. If one of your mechanics needs a wrench to perform a specific repair, a hammer in hand would be useless if not dangerous. Similarly, data is the tool that your accounting team needs to ensure they are performing at maximum efficiency, and without the right kind, things can become extremely difficult. When you combine the right data with a high level of trust, it enables them to move beyond traditional accountants and solidifies their role as trusted advisors.

2. Deepening the understanding of cause and effect:

How do you figure out the meaning behind poor performance or even revenue that seems to suddenly vanish? Knowing where to derive data and accurately dissecting it can literally make the difference between driving profit and losing revenue.

Example: Turn wholesales into a profit center by focusing on more than just the number of units sold and whether or not you made money from them. Instead, monitor how those deals impacted BOTH front and back end gross. If your actual comp percentage shows different from commission percentage, giving attention to this could explain why. If you pay 25% commission on front end gross but lose money on the wholesale, you could potentially be paying commission on a deal that already is costing you. If you use the right data, you can properly analyze each wholesale deal and adjust commission accordingly, which guarantees you aren’t throwing away additional cash.I would recommend that your dealership invest in a data management platform, as I’m willing to bet that your DMS system doesn’t provide data reporting this granularly.

3. Knowing what to improve at all times:

The most powerful data available, arguably, is having up-to-date industry trends. You should be monitoring your dealership’s pulse and comparing that with the beat of the industry. Leveraging this method is a great way to provide fast and easy dealership comparisons so you know where you need to improve and where you are maintaining a competitive advantage.

Data management is extremely powerful, but knowing what to look for and when to look for it can be overwhelming, so remember to keep it simple! Look at the big picture before diving into the details. As you can see, the question isn’t whether or not data management can be beneficial, but rather how it can benefit you. And hopefully this lays a foundation on where to start.


Learn More:

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Permanent link to this article: http://blog.ncm20.com/2015/07/a-beginners-guide-to-managing-data/

Alan Ram

Education, Simulation, Accountability

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For training to be effective three elements need to be present; you need to have:

1. Education

2. Simulation

3. Accountability

Education, simulation, and accountability! Let me just expand on this. If I want to train in golf, I don’t just watch golf on TV. While watching golf on TV I may become educated in golf, but then I need to train through simulation. I would need to go out and hit bucket after bucket after bucket of balls to get good and stay good. The day I stop practicing (simulating) is the day my performance starts to suffer. But then where am I held accountable? On the scorecard!

How many statistical categories are golfers held accountable? Obviously, there’s your score but there’s also putting average, greens in regulation, and driving distance. How many statistical categories are baseball players held accountable? If I’m a position player, obviously batting average, fielding percentage, slugging percentage, and many more. As the dealer I also need to hold my people accountable. While most dealers can tell you how many cars they sold last month, how many new cars, how many used cars, how many certified, it’s surprising how many dealers can’t tell you how many overall opportunities they had. The way we improve is not by looking at how many cars we sold last month; it’s by focusing on what we didn’t sell!

Let’s talk about phone-ups for example.

Do you know exactly how many fresh sales calls your dealership received last month? Of those callers, how many actually visited the dealership at least once? Many of you (and it should be all of you) have call monitoring, that’s great, but make sure that there are no holes or gaps in your recordings with customers calling on your local number. Those calls need to be switched over to a recorded line. Everything needs to be recorded! Recording 80% of your calls is not sufficient! We live in a day and age of incredible accountability and we need to be making sure that we are taking advantage of it.

Let’s talk about the role your switchboard operator plays.

Your switchboard operator is an integral part in your dealership’s accountability when it comes to handling inbound sales calls. No CRM or automated system alone can get it done. What I’m going to go over now are just a few pointers and tips to help you hold your people accountable. First off, logging is mandatory. Some dealers will tell me that they ask their people to log calls for protection. In other words, if the call is logged under a specific salespersons name, that sales person is protected for 72 to 96 hours or whatever time frame is designated by yourself, or the dealership.

Let me run through a quick scenario: Bill takes a sales call. The caller asks about a 2011 Honda Accord that you have listed on Auto Trader. Bill promptly informs the caller that it is sold, and the call ends. Bill could not care less about protection and he knows that the caller he just spoke with won’t be coming in… Actually, he’s insured that. At the end of the day Bill is only going to log the callers that he thinks that he has a chance of showing up. In other words, your sales people are only going to log their successes. That would be the equivalent of having baseball players track their own batting averages, but if they strike out or fly out, they probably won’t count that one.

Every call gets counted. Not by the sales people, but by the switchboard operator. I guarantee you, your switchboard operator can and needs to do this. If Disneyland can tell you exactly how many people came to see Mickey on a daily basis, you should be able to tell how many people called you on Explorers today.

It all boils down to training and more than that, proper training!

  1. Education
  2. Simulation
  3. Accountability

Make sure these three elements are present in your training game plan in order to be effective. Training isn’t something you did, it’s something you do!

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Permanent link to this article: http://blog.ncm20.com/2015/05/education-simulation-accountability/

Robin Cunningham

Are Better Than Banker’s Hours Possible in the Car Business?

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Is that a crazy title to a blog article, or what? Recently, I had the opportunity to accompany one of our 20 Group Moderators to one of his meetings. The plan was for the groups to each bring one of their Variable Managers to the meeting, and I would work with them separately from the dealer meeting. Then, I would report back to the dealers the next morning on how our breakout meeting went.

Before any of that started, the group met at one of the member’s dealership on Sunday evening, shortly after the dealership had closed. Many of the staff members were there to interact with us, show us around to the various departments, and answer any questions we might have about their operation. It really was a great experience. We knew this was a large, successful, and very profitable dealership. It is a rare opportunity to visit a dealership after hours and see it from that perspective. All the dealership staff seemed relaxed and yet confident about themselves and their respective positions in the dealership. We had a wonderful meal catered on a portion of the showroom floor. Incidentally, there were no cars on the showroom floor. Instead, on the floor there were only couches, chairs, tables and plants. It was more like a nice hotel lobby.

The next evening at dinner, I happened to be sitting next to the dealer whose store we had visited the previous evening. By now, I was very familiar with their financial data to match the more personal experience with him and his staff the night before. I must have said something about what an ongoing challenge it must be to keep that level of culture and profitability maintained month after month, year after year. He agreed it was and then said that he only worked from 10:00AM to 3:00PM each day. As you might imagine, I was a bit stunned by that comment. Then, I half-kiddingly said, “And you probably go out to lunch as well right?” He looked at me and said that he certainly did go out to lunch each day with one of his staff members.

What I haven’t said yet, is this person is the Managing Partner in the store from a large dealership group. So technically, he is the General Manager; and the night before, I found out there really isn’t a General Sales Manager either. So we are not talking about a place that has all those roles covered by other people with those bigger titles.

My head was kind of spinning with how this was possible. He looked over at me and said, “Robin, the reason this is now possible is that I spent years and years and years training all my people on exactly what they needed to be doing and why.”

As some of you know, I am a full-time instructor at the NCM Institute so training and coaching is what I do. To actually hear someone talk about his years and years of training his people, and to have actually been in that store and met his people, is essentially unheard of. By the way, I have never met a more humble, low-key person in his position.

The next morning, when I was debriefing the dealers about the time I spent with their Variable Managers, I could not restrain myself from retelling this story to this person’s fellow Members. Maybe they already knew this. They certainly knew how profitable the store was.

So going back to the audacious title of this blog about whether “better than banker’s hours” are possible in the retail automobile industry, I can now tell you the answer is yes. It just takes years and years of training your people to know exactly what they need to be doing and why.

Accountability management is essential. At the NCM Institute, we work with the six primary elements of effective accountably management as our starting point for everything.

There is so much more upside opportunity available to us in the retail automobile business than we likely believe is possible. Consistent, long-term training for all of our people is apparently the key.

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Permanent link to this article: http://blog.ncm20.com/2015/05/are-better-than-bankers-hours-possible-in-the-car-business/

Tom Hopkins

Setting Realistic Sales Goals

Success conceptAchieving sales volume goals is one of the biggest challenges any automotive salesperson faces. This is a pretty straight forward industry. If you’re not making the cut, you can quickly find yourself cut from the team.

There are so many factors that can affect that final number, that you have to stay on top of every aspect of your sales activities and keep making client contacts.

Hopefully, you are dedicated, professional, and motivated to achieve your auto sales career goals. If you are not, read no further. Instead, start looking for another product to market, something that lights a fire in your belly, something you truly believe in.

If you aren’t truly excited about the product you are offering, it will show in your demeanor or in some little thing you say or do while with potential clients. They’ll sense it, and little doubts and fears will arise in them about purchasing your vehicle. So, first and foremost, in order to achieve anything in this business, you have to believe in your line of vehicles, in the company you represent, and in your own ability to excite others about them.

Let’s assume for now, though, that you do have the knowledge, the belief and the right attitude in place. How do you set and achieve the sales goals? Start, by setting a financial goal for yourself for the year. Break it down into quarters and months. Is the monthly goal realistic? If not, you either need to downsize your goal or super-size your skills. You decide.

Next, consider the average amount you earn on a typical automobile sale. Divide that into your monthly earning goal to see how many vehicles you need to move this month. Consider your gut reaction and first thoughts when you see that number. Is it one of “Hey, I can do that”? Or, is it, “Wow! How am I going to do that?”

If it seems easy, consider increasing your sales goal. If it seems like it will be a challenge, good. Your goal should be something that both excites you and makes you stretch a bit each month.

When you’re in stretch-mode:

  • You’ll be open to learning new ways of connecting with people.
  • You’ll look forward to making follow up calls and contacting those who are referred to you.
  • You’ll get out of bed in the morning with excitement to face the day and accomplish something positive.

This next step in achieving your goals is critical: Multiply your sales ratio by the number of vehicles determined above to learn how many people you need to connect with this month. Do you typically sell every fourth client you meet at your dealership? If so, your ratio is 1:4. If you need to get people happily involved in 10 vehicles to achieve your earnings goal, you’ll need to meet 40 of them in order to do so. That’s when you’re working with the law of averages.

Is it realistic for you to meet 40 people this month? If not, again, you either downsize your goals or learn new and better ways to meet people, put them at ease, and get them to like you, trust you, and want to listen to you.

That’s the bottom line of what selling is all about. People buy from people they like.

  • If you’re not like-able, you’re out of luck.
  • If you’re not knowledgeable, they won’t trust you.
  • If you want people to listen to you and take your advice about vehicle ownership, you have to learn to listen to them.
  • If you ask questions and get them talking, they’ll tell you exactly what they want to own…not just the make and model of the vehicle, but the features, the economy, the cool color, whatever it is that will make them say, “Yes, that’s the car for me.”

So, in getting back to these 40 people you need to meet this month, where are you going to connect with them? Hopefully, you’re not one of those salespeople who waits in the lot, hoping the company advertising campaign will bring ‘em in droves. To achieve your automotive selling goals, you have to invest time in reaching out to people all on your own.

Call your past clients to see if they’re still happy with their vehicles. These calls shouldn’t take more than two minutes each. It’s just a way of touching base, making them feel important and giving them an opportunity to tell you once again how happy they are. If they’re happy, you have the right to ask them for referral business. If they’re not, you need to know about it because their unhappiness can cost you a lot of future business.

Knowing your target for meeting people is the way to achieve the sales goals you’re reaching for.

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Permanent link to this article: http://blog.ncm20.com/2015/02/setting-realistic-sales-goals/

Lee Michaelson

Process Disappearance

Lee Michaelson is an NCM Associates Retail Operations Consulting coach specializing in total dealership operations process and profit improvement and one-day departmental evaluations to identify and correct process evaporation. To reach Lee, email lmichaelson@ncm20.com or call 910.713.3623.


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Now is the time for a process checkup in every department. Over a period of time many of the processes that we installed and we think are in place have somehow disappeared and are no longer utilized. We often times do not discover this until an out-of-line condition appears on the financial statement, a customer complaint is received, or general productivity declines and then we discover too late that many of the great processes we implemented are no longer in place or have been modified. The modifications or elimination of processes usually comes from a new manager or a feeling of, “we did it so well we do not have to do it any longer.”

This is a great time of year to review the processes you implemented and you think are being followed. It is possible a process has been modified over time, possibly for the better, but it may no longer be serving its original intent. Employees will sometimes just go through the motions of following the process, not accomplishing the intended goal. The beginning of the year is a great time to verify the established processes are being followed or modified as appropriate, and establish new processes where applicable. Here’s an example of classic “process evaporation”:

Have you ever called a dealership and the person answering the phone speaks so fast and has shortened the name of the dealership to “ABC,” that you don’t know if you are calling ABC Motors or ABC Lumber Yard? What happened to the professional first impression we thought was implemented? Instead of a polite, eloquent greeting that was the original intent of the process and the script we provided, the process was modified. In this case it is often because somebody decided the telephone receptionist wasn’t busy enough so it was decided to give her more responsibility while she is “just sitting there answering the phone.”

Many dealerships have direct dial phone numbers to each department or person in the dealership. Have we given each individual a process and training on answering the telephone? Try it – call your Parts department. If the phone is answered in any manner other than, the famous mumbled, “Parts Hold,” consider yourself lucky. Many dealerships have the sales staff provide their mobile phone number on their business card. What is the process for answering those phone calls and what does the voicemail message sound like on an employee’s personal phone that she is providing to the dealership customers?

Emails and instant messaging dominate communication today, but the phone in a car dealership must also be viewed as the face of the dealership and requires politeness and professionalism.

Below is a checklist of a few thought-starter processes from each department. Review it and determine if each process is still in place or if it has been modified. There are many processes in each department; add your own to the list and do a comprehensive, objective evaluation.

Still in Place               Modified

New Vehicle Department

  • 100% Management T.O.
  • Introduction of new customers to Service
  • Introduction of new customers to Body Shop
  • Consistent training of sales staff

Used Vehicle Department

  • Two managers appraise every trade
  • Appraisal forms fully completed
  • Usage of the OEM merchandising materials
  • Reconditioning completed in 3 days

F&I Department

  • Interview the customers
  • 100% menu presentation
  • Declined products acknowledged by customer
  • Chargebacks verified for accuracy

Business Development Center

  • Follow up incoming sales calls
  • Follow up internet leads
  • Follow up unsold prospects from the CRM
  • Follow up service customers

Service Department

  • History preprinted on every repair orders
  • Walk around every vehicle during write-up
  • Multi-point inspection on every vehicle
  • Menu presentation on every vehicle

Parts Department

  • Track lost sales
  • Good, Better, Best display of common maintenance items
  • Daily review of exception report
  • Price matrix utilization

Body Shop

  • Complete, accurate estimates
  • Supplements accounted for properly
  • Work paid to techs equals work completed
  • Appropriate approval or money prior to vehicle release

Administrative

  • Accounts receivable review
  • Bank statement reconciliation
  • Incoming mail process
  • Statements and supplements submitted to NCM timely

Add your own processes to the list in each department and review your dealership operation to determine what you absolutely have to fix immediately for improved profit performance in 2014.

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Permanent link to this article: http://blog.ncm20.com/2014/01/process-disappearance/

Scott Norman

What Should My Controller Be Doing?

calculator-plusThat is a question that arises frequently in NCM 20 group discussions. To answer completely would take several articles; however, the first and most important answer to that question is, “Monthly reconciliation of your Balance Sheet accounts.”

Your Balance Sheet, the front page of your operating statement, shows accounts listed as either Current Assets or Current Liabilities as well as Long Term versions of Assets and Liabilities. The Current portions should be supported with documentation that supports the balances they contain, thus verifying each account’s accuracy. There is no reason you should not have a schedule to verify accuracy or timeliness of each of these accounts. Monthly reconciliation of each account may require you to physically touch each asset or you settle it with a simple reconciliation form.

Following is a quick checklist of Current Assets and Liabilities that should be corroborated at the end of the month.

CASH – Starting at the top, everyone should reconcile their Bank statements monthly. For internal control purposes the dealer should physically receive the statement and the reconciliation should be done by someone other than the person making deposits and writing checks. Currently many clients perform a daily reconciliation using “positive pay” and a download from their bank. Using a schedule, you can quickly see which checks have cleared and if there are any problems with deposits.

CONTRACTS IN TRANSIT – As a scheduled account, this should be easy – Either the contracts have been sent for collection or they are still in the office. Can you verify where each contract is? Are there any contracts over seven days old? Do you log any returned contracts?

VEHICLE & FACTORY RECEIVABLES – These schedules are aged for a reason!  Are there amounts due that are so old as to be uncollectible? Even though this account is scheduled, your assets may be inaccurately stated if they contain uncollectible balances. Is there documentation on all balances?

SERVICE, PARTS & BODY SHOP RECEIVABLES – Do you have separate accounts for each Department so the Managers can track and collect their responsibilities? Are past due receivables being reviewed and a reserved set up for their potential un-collectability? The ONLY Body Shop Receivables should be from Insurance Companies with which you have a DRP or Pro Shop Agreement!  All other Customers need to pay by Cash or Credit Card BEFORE Release! If you do write-off a balance in a vendor’s account, do you keep track of that amount? Consider a zero-balance schedule, controlled by the vendor number and the offset control number is the year written off or Department written off against.

WARRANTY/SERVICE CONTRACT RECEIVABLES – A warranty schedule will help you quickly review this account. Do you have any claims with an outstanding balance where only partial payments were made? What about the remainder? Are there claims over 30 days? Can they all be supported and justified?

HOLDBACK RECEIVABLES – Again, as a scheduled account this should be easy. Depending on when the holdback payment is due the balance will fluctuate, but there should never be any holdback receivable older than the last payment. Since the factory pays you by VIN, shouldn’t this schedule be controlled by VIN? Is yours controlled by stock number?

FINANCE RESERVES RECEIVABLES – Side-by-side schedules are useful when you have numerous finance sources. This of course implies that you have a separate GL account for each finance source that pays you a reserve, and you should. If your bank notifies you about the reserve amount when the deal is funded, adjustments should be made at that time by the appropriate office personnel, not F & I staff. Shortages/overages should be reviewed with the Finance Manager to determine why the difference between bank and book.

VEHICLE INVENTORIES – Are both new and used inventories verified by physically touching each vehicle?  No cheating by handing the manager a list. They should start with a blank sheet of paper and list each stock number as they come to the vehicle. Also, this is the perfect time to verify that all proper labels are affixed. Do you verify for each vehicle on the inventory schedule that you either have for new inventory a MSO/CSO, or for used inventory a title or copy of a current payoff check? Are Dealer Exchanges/Trades in inventory floored? See Floorplan Notes Payable below.

PARTS, TIRES AND ACCESSORIES – Here, a schedule won’t do, so utilize a monthly reconciliation form to track variances. Your Parts Management Report will never reflect the same balance as the General Ledger. There are too many variables – work-in-process, parts returns, un-posted invoices, etc.  To account for the variance each month complete a reconciliation form. If you need a form, please call the NCM Institute at 866.756.2620. Use your system’s management reports to track aging or inactive inventory.  A low days supply may not necessarily mean your inventory is clean and usable. What about your Special Order parts bins, are they filling up?

SUBLET INVENTORY – The schedule should be compared to your Open Repair Order report. Any discrepancy should be handled immediately. If you have credit balances, determine why you are not receiving or posting the vendor’s invoices on a timely basis.

WORK IN PROCESS –  This account can either be scheduled and compared to the Open Repair Order report, with variances being researched and adjusted, or a simple reconciliation form can be completed and variances researched and written off, with the Manager’s approval. The Service Open R.O. list should be reviewed weekly with no R.O. over three days without explanation, none over five days without “family history.” In Body Shop, five days, two weeks. A Work-in-Process schedule is recommended if you frequently have to write off large balances and it cannot be determined what is causing the discrepancy.

BODY SHOP MATERIALS – A physical of the Body Shop Materials should be done on a monthly basis by the Manager. To reconcile to the General Ledger Balance you must estimate the material used on Open Repair Orders, add that to the physical balance and reconcile the number to the General Ledger Balance.

PREPAID EXPENSES – Documentation should always be available to corroborate the balance in these accounts. Only those expenses where the benefit extends over more than one month should be set up in this account.

FIXED ASSETS – Annually, you should physically inventory your capital assets to verify the equipment/furniture is still in use and can be accounted for.

ACCOUNTS PAYABLE – All debit balances on this schedule should be researched. One useful way of monitoring this schedule is not to post current month’s invoices until you’ve paid most vendors. When the schedule only has a few balances from the previous month it is easy to spot irregularities.

FLOORPLAN NOTES PAYABLE – This account should be on a side-by-side schedule with the appropriate inventory. Any time there is a balance in one column and not the other, the discrepancy must be researched. Either you have unfloored inventory or a floorplan payoff has been missed.

MISC. PAYABLES – Tag, Vehicle Payoffs, Service Contracts, etc. should all be scheduled, current and verifiable.

TAXES – All taxes should be sufficient to cover the liabilities and paid in a timely manner. Verify by comparing any return or payments to the month end balance.

ACCRUED PAYROLL – This account should reflect payroll due for unpaid time at the end of the month and is usually reversed at the beginning of the next month. Accruals for monthly commissions should have documentation to confirm the appropriate amount is being accrued.

Verifying all Balance Sheet Accounts involves cooperation from all departments and should be taken seriously every month. Dealers and managers often do not grasp the significance of the balances in these accounts. The question we should be asking ourselves when we see a balance in an account is, “Is that a reasonable number?”

One last thing, does your CFO prepare for you each month a Cash Flow Statement? In Accounting classes this goes by several names such as Sources and Uses of Cash. It is a report that verifies the change in your cash balance for an accounting period by showing you where cash was used or cash was generated as it shows you the changes in the balances of the accounts on your balance sheet.

Historically there has been little training in the understanding of not only the Balance Sheet, but the rest of the operating statement itself. NCM holds Principles of Financial Analysis training where all of these accounts and topics are covered. Click or call the NCM Institute for more information at 866.756.2620.

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Permanent link to this article: http://blog.ncm20.com/2013/09/what-should-my-controller-be-doing/

Garry House

The Importance of the MPI-ASR Process

wrenchesBack in May of this year, I published a blog article focused on the difference between good and great automobile dealers and I promised to follow that up by discussing what we, at the NCM Institute Center for Automotive Retail Excellence, have learned about the differences between some of the good and great processes employed by these dealers. This is the second of those follow-up articles.

What is the MPI-ASR process? “MPI” is an acronym for Multi-Point Inspection. “ASR” is an acronym for Additional Service Recommendation or Additional Service Request. The two together make up The Process. By definition, an ASR is necessary work discovered by the technician, in his stall or on his lift, during the performance of a Multi-Point Inspection, which has nothing whatsoever to do with the customer’s primary concerns. It is therefore often referred to in the dealership as the technician up-sell process.

Most every experienced fixed ops director and service manager that we work with at NCMi recognizes and admits that a well-designed, habitually-performed, and flawlessly-executed MPI-ASR process will provide more fixed gross than any other available service department opportunity. One of the exercises in NCMi’s Principles of Service Management I class continually demonstrates that a well-managed MPI-ASR process in a 15-technician shop will produce an incremental net profit of at least $250,000 per year.

Both the good and great dealership fixed operations professionals understand the need for a sound MPI-ASR process, however, very few (only the “great” ones) know that their MPI-ASR activities must be continually trained, monitored, reinforced, and enhanced in order to avoid process evaporation.” Following are the 10 components of what the NCMi faculty believes to be a great MPI-ASR process.

  1. Ensuring that a sound MPI-ASR process is anchored within the culture of the service department. Strict adherence to the requirements of this process must become conditions of employment for service advisors, service technicians, service support personnel, and service management.
  2. Performing Multi-Point Inspections on 100% of the vehicles accessing the dealership service operations (including express service), beginning with the first service visit following vehicle delivery.
  3. Continually educating the customer as to the value of the Multi-Point Inspection process and consistently obtaining the customer’s permission to perform the MPI.
  4. Ensuring 100% documented feedback to the customer of the results of the Multi-Point Inspection, even if no out-of-line conditions were discovered.
  5. Conducting regular technician training sessions (a) on how to perform a “quality” MPI, (b) on understanding the standards relating to “within-line,” “marginal,” and “out-of-line” MPI line items, and (c) on clearly and effectively communicating the results of the MPI. Conducting regular service advisor training sessions on how to advise the customer of ASRs and on how to overcome objections in closing the sale of these ASRs.
  6. Based on valid industry data for vehicle age and mileage, defining and communicating expectations to technicians for:
    • Ratio of ASRs to MPIs
    • Number of Line Items per ASR
    • Number of Flat Rate Hours per ASR
  7. Based on valid industry data for sales effectiveness, defining and communicating expectations to service advisors for sales closing rate on ASR hours requested by technicians.
  8. Ensuring that there is a disciplined “second effort++” program to sell declined ASR work is employed, both with the customer when he/she is still in the dealership and/or after the customer has exited the dealership.
  9. Developing and implementing a system to measure and report the results of the MPI-ASR process on an accurate and timely basis. Without the availability of current procedural technology, this step is, without question, the most difficult and painful in the overall process.
  10. Installing and instilling a highly-visible score-boarding discipline to internally display, on a month-to-date basis, the most current MPI-ASR recommendation frequency and quantity by technician and sales results by service advisor.

And, yes, you guessed it! Within the NCMi Service Management training curriculum, we do teach the details of each of the above 10 MPI-ASR Process components.

Training Solutions for Service Managers sept oct

Permanent link to this article: http://blog.ncm20.com/2013/08/the-importance-of-the-mpi-asr-process/

Robin Cunningham

Are Your Managers Guaranteeing Profitability at Your Dealership?

guaranteeHi again from the training room floor…this is Robin Cunningham from the NCM Institute.  That’s a pretty strong word, GUARANTEE, but our participants do it every day in our NCMi® classes.  After initial introductions and within the first half hour each Monday morning, we introduce them to the Guarantee of Action (GOA) process.  Accountability Management is one of the cornerstones of our curriculum and PLAN YOUR WORK, AND WORK YOUR PLAN is the first of The Six Primary Elements of Effective Accountability Management.

So we show them a sample completed template of a GOA that describes how a dealership intends to put daily work plans into place for the salespeople and how that is going to help them sell more cars.  A GOA has several components in order to help GUARANTEE the success of the idea.

We ask that the idea be described and then quantified.  We have all heard the saying that “ideas are a dime a dozen.”  And we certainly agree.  So the quantification part is where our students initially struggle and require some extra coaching.

In the Salespeople’s Work Plan idea, the quantification scenario was as follows:  they would produce no less than 21 incremental units per month, which, at no less than a $2,750 PVR “all in” gross, and an overall incremental expense of no more than 35%, will result in a monthly Net Profit Improvement (NPI) of $37,537 (21 x $2,750 x 65.0%).

Then we asked them to continue with the Three-Point Detailed Corrective Action Plan which starts with identifying the responsible parties involved in guaranteeing the plan.  In this case it was the GM, GSM, Sales Managers, BDC/CRM Manager, and Sales Consultants.

Then the plan is further detailed with planning elements:

Planning Element 1:  BDC/CRM Manager Accountability.  Generate work plans each morning (Monday-Friday), and issue them to the salespeople at the start of their shift.  Collect all work plans at the end of the shift.  Verify that a manager has signed off on each assigned task, update all the tasks in the CRM, and transfer all “out-of-market” and “bought elsewhere” prospects to the GM’s work plan.

Planning Element 2:  Sales Consultant Accountability. Complete all tasks on the work plan before the end of the daily shift, and turn completed work plan in to the sales manager.

Planning Element 3: Sales Manager Accountability.  Review each task on the work plans of each sales consultant on his/her shift, and sign off when completed; list and confirm all the appointments set on the Appointment Log and the Customer Welcome board.

Each participant creates approximately two GOAs per day per 2½ – to 4½-day class.  They keep a copy, NCM keeps a copy and most importantly, the sponsoring dealer or GM gets a copy sent to them to help ensure the most efficient transfer of all of critical ideas the participants learn, so they have the highest possible chance of being fully integrated into the dealership culture.

Each of these GOAs has the potential to add very significant increases to dealership profitability, and yet we make sure they are conservative and very well thought out.

Earlier in the year we were working with a large dealership group focusing on their used vehicle departments.  It came to light that they were wholesaling a very high percentage of older used cars that were very definitely “retailable” if they expanded their comfort zone on keeping some older, higher-mileage cars.  Going from wholesaling 43% of total used vehicles sold down to 25% (which is an NCMi Best Practice) at one of the stores resulted in retailing an additional eight units per month.  So the quantification was something like this:  We will retail eight additional used vehicles per month (rather than wholesaling them).  8 x $2,800 front/back per month = $22,400 per month/$268,800 per year.  Plus that extra 72 vehicles reconditioning at $825 per car @ 50% fixed gross added an additional $3,300 per month/$39,600 per year, not including additional Doc. Fee income.  So, they could generate $308,400 additional gross profit, just from keeping an additional eight wholesale vehicles per month (that were going to some other source) for them to retail.

So when our students leave our NCM Institute classes, they truly are in a position to realistically GUARANTEE their dealerships’ increased profitability.  Relatively small ideas done well can make dramatic improvements in your bottom line.

So the next time you are talking with your managers about improving profitability and they tell you it’s going to get better…ask them if they can GUARANTEE it!

Service_Man_Courses

Permanent link to this article: http://blog.ncm20.com/2013/07/are-your-managers-guaranteeing-profitability-at-your-dealership/

Dennis Kane

Dealer Beware: Pitfalls of Selecting the Wrong Contractor or Subcontractor

paper_stacksmedI have seen a significant number of high value claims as a result of contractors or subcontractors not carrying insurance or inadequate limits of insurance.

Examples of high value claims against dealerships include:

  • Claim against a dealership’s workers’ compensation carrier or general liability carriers due to an injury of a subcontractor’s employee and the subcontractor doesn’t carry workers’ compensation insurance.
  • Claim against a dealership’s property insurance carrier because a roofing contractor started a fire repairing the roof and didn’t have adequate insurance.
  • Claim against a dealership arising out of work performed by a subcontractor to modify or perform specialty services on a vehicle.  The work performed was later determined to be faulty or negligent resulting in serious injuries and the subcontractor was out of business with no insurance.
  • Claim against a dealership’s liability carrier arising out of a contractor’s negligence for services performed while removing snow and the contractor didn’t carry insurance.

Here’s what you need to know:  You can be held liable for injuries to employees of, and the negligent work of, contractors and subcontractors. The good news is there are relatively simple steps you can take to reduce your exposures to high value losses.  Use this checklist for selecting contractors or subcontractors:

  1. Require the contractor/subcontractor to provide a certificate of insurance as evidence of coverage for Workers’ Compensation, General Liability and Umbrella Liability. It’s very important the limits of liability insurance are adequate. A good minimum standard for establishing the limit of insurance is requiring the same limits as your business liability insurance. This is effective to address inadequate limits by contractors and subcontractors. Review the effective dates of insurance to confirm the insurance is valid.Certificates need to be mailed directly from the contractor’s agency or carrier, not the contractor. This prevents contractors from issuing their own certificates to satisfy the insurance requirements and secure the winning bid without proper insurance.
  2. Require your company to be added as an “additional insured” on the contractor’s General Liability policy. You should require a copy of the endorsement from the carrier or the agency of the contractor.
  3. Ask your attorney to draft a “hold harmless and indemnifications agreement” that contains absolute defense and indemnification language and repayment of any expenses incurred in accordance with your state law to insulate you for any type of claim due to any inference of negligence. This agreement needs to be executed before work or services begin.
  4. Do not use “friends” or a friend of a friend to do any type of work, use only certified licensed contractors.

As you bid out work for your dealership, make the steps outlined above a required part of the selection process. You will find many legitimate contractors/subcontractors with excellent reputations for quality service and work willing to comply with these standards.  If any of the steps above can’t be provided by your contractors or subcontractors, it’s definitely an early warning of potential problems that need to be investigated further.

GMEPbanner

Permanent link to this article: http://blog.ncm20.com/2013/06/dealer-beware-pitfalls-of-selecting-the-wrong-contractor-or-subcontractor/

Jeff Faulkner

Business Structuring and Family Harmony

passingthetorchBusiness Structuring is a critical component of succession planning that can have a huge impact on family harmony.

Throughout the course of this article, I’m going to describe three different family business situations that I’m currently involved with where Business Structuring is causing havoc.

Situation 1: Active and Inactive Shareholders

The first story is a highly complex third Generation Family-Owned business which consists of a real estate and a separate investment business with four family shareholders.  Two shareholders, father and son, are active in the operating businesses and two shareholders, sister and a sister-in-law, are not active but are financially dependent upon the business. The ownership of the separate entities add even further complexity to the situation in that, the operating businesses own a piece of the real estate,  numerous trusts own a piece of the real estate and investment businesses, and the operating businesses have multiple owners consisting of other entities that the family shareholders control. I have done my best to explain this situation as simple as possible, but due to the bizarre nature of ownership, I have likely confused you.

When we got involved, none of the family members, or any of the family’s advisors for that matter, completely understood the structure.  And for a simple family, it didn’t make sense and was causing relationship stress. The two inactive family shareholders were growing increasingly frustrated because they could not predict their income stream with any reasonable accuracy and consequently, could not plan their lives accordingly. The son was growing increasingly concerned about his fiduciary liability with his siblings.

This structure has worked under the father’s leadership because the daughter and daughter-in-law have believed that things are being done in their best interest. However, nothing could be further from the truth. To create dependence in any human being is never in their best interest. If these issues are not worked out with a new, simpler structure, the likelihood of the next generation living under these conditions is highly speculative at best, and more likely pointing toward volcanic explosiveness.

Fortunately, all family members have come to understand the issues and are cooperatively working toward a straightforward structure that is easy to understand and that creates predictable and meaningful sources of income. The initiation of the process towards an uncomplicated structure, in and of itself, has created a more harmonious family environment. The inactive family members’ frustration levels have subsided, and the son’s fiduciary liabilities have been reduced, as they all see movement and growth toward independence.

Situation 2: Blended Family Business

The next situation involves a blended family business that has two children from each side.  Two of the four children are actively involved in the business, one from the dad’s side and one from the mom’s side. Both active kids want to be able to run the business at some point, but the entire family has strongly suggested, if not warned, against the two active kids working together.

Here’s the problem, the business is made up of five different franchises underneath one corporate umbrella. That’s right; all five businesses are inside the same corporation.  And, the bulk of the family’s net worth is the operating business. What’s a family to do?

Well, you could start by forcing the kids to grow up and learn to cooperate with each other, so they could work together. On the other hand, if the family is right in that there is absolutely no way to make this happen, we’d then be setting them up for failure and family disharmony. So, why not build in some flexibility? An IRS Section 355 divisive re-organization, or tax-free spin-off, of the separate businesses is in order.

While this will most certainly be a costly initiative that is dependent on IRS approval, it will create the flexibility for the active kids to remain in business together if they show that they can mature beyond their sibling rivalry issues. In the event they cannot, well, we then have the flexibility to divide the businesses up and allocate one or more to one child and one or more to the other child.

Further, we will also segregate the real estate that each business is sitting on into separate entities to provide additional planning flexibility, not to mention, much needed additional liability protection. While this environment is not perfect by any stretch of the imagination, it most assuredly creates an environment that is more conducive to the maintenance of family harmony in the long run.

Situation 3: Good tax planning but not necessarily good succession goals.

The tax-driven planning accomplished in this case is particular to the client’s state of residence. Similar to the situation in situation number two, this one involves an operating family business and business related real estate, with two children active in the business and one not. The typical structure is to have a lease agreement between the operating business and the entity that owns the real estate, thereby generating a long term and reasonably dependable source of income for the owners of the real estate. Many business owners establish such a structure to provide them with retirement income once they decide to leave the business. Others, as in this case, use this type of structure as a way to create equality between their children, with those active in the operating business paying rent to those not active in the business, and giving the actives the option to buy the real estate. Not perfect, but it works in a lot of cases.

In this particular case, however, the owner did not set up a lease agreement between the two entities; rather, he established a joint venture between the operating business and the underlying real estate to avoid paying sales tax on the rent transaction. The way this works is that the real estate and the operating business share the net profit of the business. Makes sense, huh?  Except that in this most recent economic downturn, the operating business lost money a couple of years in a row, thereby generating no profit to share with the real estate. Rather, the operating business, which thankfully was well capitalized, loaned money to the real estate to pay its share of the income taxes. Now, the real estate (inactive child) owes money to the operating business, with no other source of income to pay the loan. The actives could buy the real estate, but then it would be a reduced figure due to the loan that would be due them.

Obviously, this is not a great deal for the inactive child. Unwinding the joint venture is not going to be an easy thing to undo. But for the sake of family harmony in the long run, that’s what this family has chosen to do.

In sum, when structuring your business and your acquisitions of other businesses, real estate, etc. that you make along the way, please keep in mind that someday you will likely be in a position of leaving it all to your kids. Always ask yourself, “What impact will the decisions I’m making now have on the long term continuity of the ‘golden goose’ and the maintenance of family harmony?” You owe it to yourself and your family to make these decisions as wisely and with as much foresight as possible. It impacts more than just today.

Permanent link to this article: http://blog.ncm20.com/2013/06/business-structuring-and-family-harmony/

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