“You can’t manage what you don’t measure” is a phrase tossed around a lot of industries, with every detail examined down to the cost of paper clips. In our business, 20 Groups track everything from the sales desk to the body shop. And these reports can be pretty sobering if you have access to them. See, without a clear understanding of what makes a department tick, it’s impossible to know whether its potential is being realized.
While channel surfing, I occasionally stop on a business makeover show where an expert comes in to analyze an operation, then proposes an action plan to correct the problems. The expert quickly gets to the root of the problem with supporting data. The TV audience can see the issues, but pride tends to blind the business owners, at least initially, to what the data reveals. Sometimes the business is saved, sometimes it isn’t.
It doesn’t matter whether it’s a restaurant, hotel or a car dealership; the problems in a business usually come down to two categories: people and process.
Listen, we all have a tendency to want to put our stamp of approval on everything that goes on in our dealership, departments, offices or work area.
And that’s OK, because it means we take ownership in what goes on. But it can also be a drawback, blinding us to the issues that exist. But if we can push our pride aside, we can begin to really examine the process we follow. Is it as effective as it once was? Have we abandoned certain aspects of it?
See, it’s important you understand the components that make up your profit per vehicle retailed, and how to maximize product sales vs. reserve. And it’s imperative you have daily access to your numbers. Most dealer management systems provide instant reports to help you measure your success. There are also report generators that allow you to drill even deeper into your numbers. If you’re unfamiliar with these programs, then ask your DMS provider for a tutorial.
What you want out of these reports is every income metric, including percentages of income distribution. They are crucial to understanding the dynamics of your store.
Take the table shown on this page. Store A sacrifices more than twice as much lender split as Store B, which touts a healthy balance of product. I’d bet next month’s commission check that Store B probably benefits from reduced chargeback exposure due to premature refinancing. And I bet that prepaid maintenance plan Store B sells is keeping customers happy and loyal to the store. I’d also bet that Store A doesn’t observe the 300 Percent Rule, or it needs to add more products to the menu.
Maybe you think it really doesn’t matter how you get there, so long as the numbers add up at the end of the month. But if you look a little closer at the table on this page, you’ll notice it doesn’t add up the same.
The F&I department in Store A has boxed itself into service contracts and GAP. What if the customer trades frequently and has no need for a VSC?
What if the customer finances 50 percent of the vehicle’s value? Then what profit opportunity is left? Sure, the store can probably make it up in reserve, but how does that benefit the customer?
Store B’s business model assures there are more opportunities to develop a lasting relationship with the customer. It also increases the store’s chances of capturing the next sale when the customer comes back to trade again.
Ultimately, you must decide if you’re willing to make changes to your process. My opinion doesn’t matter here because I don’t work in your store. I’m just suggesting you examine yourself and the way you do things in the F&I office. Can we all improve? Certainly. Is there an F&I department out there that’s doing everything right every time? I doubt it.
The best advice I can give here is to put away your pride and make the changes needed to be a better professional. Good luck and keep closing.
Marv Eleazer is a finance manager at Langdale Ford in Valdosta, Ga. E-mail him at marv.eleazer@bobit.com.
