CALL US AT 1.866.756.2620

Tag Archive: Financial Management

Wayne George

Five Tips to Build Your Most Successful Forecast Ever

Take Notes

There are many dealerships every year that embark on forecasting exercises. There are many that do not because their past experience has not been that productive. Let’s explore some techniques and tips that can help you come up with numbers for 2015 that will make your goals much more achievable.

Tip #1: Start with the end in mind.

By working backwards when building a forecast, you will be forced to address some issues that normally are overlooked. If we start with the desired Net Profit for the store, we can work backwards from there. If 2014 will result in net profits of $1.5 million dollars, the first approach to forecasting 2015 will be to dissect how we got to $1.5 million. Here are some questions that will need to be answered very honestly and candidly:

What percent of the gross produced did we retain? Were we a 30% net to gross store or did the $1.5 million come to the bottom line after we spent 85% of the gross (15% net to gross)?

Is any sub-par retention of gross an expense control issue or is it a result of sales and service volumes and lagging gross production?  (Hint – we all know it is usually a little of both).

If you are already netting out at 35 – 40% net-to-gross, then how much more can be produced? Small increases in sales and service volumes will produce huge increases in net dollars.

Did your management team have any input in setting the 2014 goals? Were all of the goals reasonable or was there some “fantasy” in the numbers?

Tip #2: Determine the total store net profit that should be produced before all “other Income” is accounted for. This becomes the objective for all departments in total.

Once you have decided on a reasonable Departmental (Operational) Net Profit number, assign each department their share of profit they will be responsible for generating. Now it’s time for the hard work. Each department head should be tasked with an exercise that has them identify any expenses that can be eliminated or reduced from this year’s operations. This will create your operating budget for 2015.  Now that you have that expense budget, you can start forecasting for sales and gross numbers. Then, run a test and see if the sales and budget will reach the desired net.

This is now the critical stage. Be very suspect of any increases in sales volumes, sales grosses, service volumes and gross, etc. If those numbers were that easy to do, why would you not already  be hitting them? Be relentless in your questions. Make the team develop action plans with timelines that will support their numbers. If the 2015 market is similar to this year, we know we can’t get better by just continuing to do the things we are currently doing; some things will need to change.

Tip #3: Give the forecast enough time.

Start this process well before December 31st. Be prepared to meet with your team over a few weeks. Break it up in steps that can be digested and allow time for buy-in. Defensive postures will diminish with time. Be sure their action plans are reasonable and measurable.

Tip #4: Set some stretch goals.

The forecast should not be the destination, but just a stop along the way. Ask your team for some stretch goals after the forecast is done. Don’t mention this until the last meeting when the numbers are finalized (this will help prevent sandbagging). Then reward them for achieving both sets of numbers.

Tip #5:  Review and adjust accordingly.

Once every three months there needs to be a formal “Forecast Meeting” where all of the agreed to objectives are reviewed. Adjustments are OK if warranted by a sudden shift in the market. But, if it is due to poor execution of their plan, it will require a separate conversation.

Make the numbers crystal clear, create the plans to reach them, execute the plan, and then hold everyone accountable.

Good selling.

Permanent link to this article:

Scott Norman

Today’s Hot Topic: Expense Control

Hot topics for Twenty Groups change as much as the seasons change. Recently, the hot topic has been expense control. I decided to recap some ideas that have been discussed over the past few years at some of my meetings in hopes they might refresh your memory or provide you with a different approach to expense control.

As we all (should) know, at a profit to sales percentage of 3%, $1 saved is worth $33 in sales. For instance, if you spend $25 on a policy adjustment the dealership must sell $833 to cover that expense.  The table below shows this impact at several levels of expense:


   Expense Dollars      To Cover Expense  
$5 $166
$50 $1,667
$100 $3,333
$250 $8,333
$500 $16,666

Payables Meetings

Pick one day a month for your meeting with all department heads. Have the payables clerk provide you with the payables folders or invoices for all the checks you will sign during the meeting. As you sign each check, discuss whether the expense is a necessary one and if so, would another vendor be able to provide the same service at a better price.

Vendor Book

Create a book of all approved vendors and establish the policy that any purchase of supplies or services covered in the book are purchased from only those vendors. You also want your payables personnel to review all invoices to be sure the approved vendors continue to use the pricing they quoted when the original bids were taken.

Charitable Request Form

Create a form that each solicitor for a donation must complete for their request to be considered. Only the serious solicitors will take the time and effort to complete the form and return it, thus discouraging “drop-bys.”

Expense control begins with being aware of what goes on in your dealership. For example:

  • Open your mail. Frequent questioning of payables will reveal some “sweetheart” purchases. Review all invoices.
  • Review petty cash receipts.
  • Get bids on everything. (See Approved Vendor Book above.)
  • Invest all excess earnings into new vehicle inventories through your cash management account.
  • Don’t give up on fixed expenses. Simple water, compressed air and heat leaks can
    be plugged. Ask your insurance carrier for a print out showing your reserves for past liabilities.  These liabilities may be obsolete and costing you premium dollars. Review all of the “named perils: for which you are covered to determine if there are any from which you may be virtually risk free.
  • Review your computer hardware maintenance coverage. Is it cost effective considering the cost of replacement equipment? PS never cancel the maintenance on your computer’s CPU.
  • Never give anything away. Charge something for everything. It may surprise you to know that a customer who is clamoring for a 100% adjustment will pay 25% and be entirely satisfied.  If you do have to give 100%, do it loudly. Let everyone know you gave something for nothing.

To involve your employees in expense control, consider taking the agreed upon forecasts and offering all employees a percentage of every profit dollar over that forecast as a bonus in equal portions to each employee. This should make everyone very profit and expense conscious.

Lastly, be consistent in your expense control awareness. Don’t make it a hot topic one month and not the next. One of the many tools available in NCM’s axcessa™ program is the ability to trend and drill down into expenses.


Permanent link to this article:

Gene Daughtry

The Sales Process in BHPH is Underwriting

BHPHIn BHPH, like any other automobile dealer, you’ll start the sales process out with a meet and greet. From there you should go in a different direction from other retail outlets. If you have been on a franchise dealer sales floor I am sure you or your sales staffs have joked about wanting a screening machine that they could walk a customer through for an instant credit reading. Since that doesn’t exist, your sales process is probably similar to: 1. “up” your customer;  2. meet-and-greet; 3. qualify; 4. land them on a rig; 5. proper walk-around; 6. trial close; 7. work the numbers; 8. ask for the sale.

In a BHPH operation, after you greet the customer, you do qualify them. Qualifying is the beginning of your underwriting process and helps your customer understand what you do. In my BHPH operations, we would ask customers to come inside and fill out a credit application before we began selling a car. Generally our salespeople would say, “Let’s go inside and see how we can help you, then we’ll look at vehicles you can drive home today.”

In BHPH, the sales process is really more of a sales outline and should be more about underwriting than selling. Frankly, selling cars is the easy part. In BHPH, information-gathering is a large part of the salesperson’s job description. No matter what the customer wants, the salesperson should go back to the outline and gather what the underwriter needs to make a decision. In BHPH, you are in the loan business and the focus is to build a successful portfolio. As a BHPH dealer the best information-gathering you will do is when your customer wants your help and is hoping for an approval.

No, every customer is not coming inside before picking a car. A few customers resist giving information until they are comfortable you have “the” vehicle they want. A few want details of your transaction before they will provide you with personal information and documents for verification. But the majority will come in, especially when your salesperson knows that selling before taking an application can be a huge waste of time.

Having this type of sales process requires flexibility and perception on the part of the salesperson. Any time you are dealing in sales, you have to be flexible. In my operations, our people were trained to understand and work with customers’ perceptions of car sales. Most customers coming to the store are uncomfortable. They are afraid of confrontation. They don’t want to tell the bad news story again, or they have a chip on their shoulder from their last experience trying to buy. Our salespeople were always working to get the customer inside so we could begin to determine what we had. Good underwriting helps you see who you are dealing with before the vehicle hits the street. The sales process is where that begins to take place.

Our basic underwriting rules were:

  1. Don’t sell them something they cannot afford.
  2. Don’t take the customer’s word for anything – always verify.
  3. Only sell to people from the surrounding area.
  4. Be honest with ourselves when underwriting.

In our operation, we filled out a detailed credit application and pulled a bureau. We required proof of income for the household (no proof, no deal). We asked for utility bills to help verify residence and we could see how they paid for the basics. Seven to 10 personal references (name, address, phone numbers and relationship) were required, and we checked them. Jobs and landlords were verified on every new customer. We used an internal score sheet as a guideline that included cash flow to help us understand the customer’s tolerance for new debt. Nobody rolled without verbal verification of full-coverage insurance. Obviously, we did not spot cars.

There are BHPH dealers that sell lower price cars and roll almost anyone that says yes. Other dealers use ignition shut-off devices or GPS units to increase confidence in their loan approvals; we did not. There are 1,000 ways to operate BHPH, so your process and underwriting should reflect your risk tolerance.

No matter what price vehicle you are selling or what your risk tolerance, your sales process should be considered an important part of underwriting and collections.

Gene Daughtry is a BHPH 20 Group moderator, trainer and consultant. To learn more about the opportunities in BHPH/LHPH, visit with Gene at the NCM open house next month at the National Alliance for Buy Here, Pay Here Dealer Conference in Las Vegas. To RSVP or email him directly at

Permanent link to this article:

Garry House

Did You Ever Look at Your Service Gross Potential THIS Way?

h--rek-pictures-blogs-man with binoculars1When I was teaching the Sonic Dealer Academy from 2001 through 2008, my co-instructor, Steve Hallock, became famous for asking each class why they thought we spend so much time talking about the service department. He would explain that it’s because, at a 75% gross profit margin on labor sales, the service department offers, by far, the greatest incentive to increase sales. “So why bother?” Steve would ask. “Because it’s only 75 cents in gross for each dollar we sell!”  At that point in time, many automotive dealership owners and managers looked at service gross potential that way.

These days, however, during our NCMi® classes for general managers, service managers, and financial management professionals, we teach the attendees to also recognize the value of the “associated gross” that is developed when we increase service labor sales. For instance, one of the “What if” exercises we perform in each class is, “What if…you could achieve small, incremental increases in sales margins on customer-paid repair order sales in your service department?”  The students quickly grasp how adding five more R.O.s per month, increasing hours per R.O. by two tenths, and increasing the labor rate by $0.50 can increase labor sales. And they are always absolutely shocked by the increased overall gross profit.

What do I mean? After performing this exercise with hundreds of NCMi attendees, the faculty can, without question, attest that when the associated gross profit from parts, tires, fluids, sublet repairs, and shop supplies is added to the labor gross, each dollar of customer-paid labor sales is worth, on average, $1.25 in fixed gross profit. I said “on average.” We’ve seen worksheets with results as low as $1.05 and as high as $1.50. Do your own calculations, unless you’ve done it before. You’ll probably be as amazed as the NCMi attendees!

This exercise has an important and even more astonishing final step. Once the overall incremental gross profit improvement (IGPI) has been calculated, we ask the attendees to think about how much of this IGPI will be retained as departmental net profit improvement (NPI). Once the attendees have considered the expense accounts that are likely to be affected by their proposed methods of increasing sales and gross, they normally predict their net profit retention to be in the 65% – 75% range. Let’s use 70% as an example. Based on everything I’ve said so far, each additional $1.00 of customer-paid labor sales will be worth, on average, $0.875 in net profit. ($1.00 in labor sales = $1.25 in fixed gross x 70% retention = $0.875 NPI.)

Last month, at a service management training program I co-instructed in Washington, D.C., a dealer-operator with an extensive background in fixed operations said to the class, “In all the years I’ve been in the business, I never looked at it this way!” Have you ever looked at it this way? Don’t you think you should?

Join us for a free web presentation entitled, “Finding the Missing Pieces for Increased Gross in Service and Parts” on May 24 at 2 p.m. Eastern and get more tips for improving the profitability of your fixed operations.  Call 866.756.2620 for details or go online to register.

Permanent link to this article: