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Aug. 9, 2010 – Ways to build gross profit margin in new unit sales

August 9, 2010
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These articles recap some of the opportunities uncovered by our GSA powersports consultants during actual consulting visits. These are followed by recommended actions that address these opportunities. Our goal is to provide you with ideas to help improve your dealership.
The first part of this series is an analysis of the overall dealership. This second part delves into the dealership’s sales department.

Dealership

This facility has existed as a powersports dealership for more than 30 years. During that time, it has carried many different brands and had several owners. There has been a recent buy-out, resulting in an absentee owner with multiple dealerships.
The facility is comprised of several, loosely connected older buildings that have been remodeled numerous times. They are planning to move to a newer facility with freeway exposure as soon as possible.
They carry three major product lines and have access to other lines through their other stores. This store sold more than 500 units last year — at a loss. Their market area (30-mile radius) has a population of more than 250,000.
The sales manager (Bob) and the controller (Jean) are acting as a general management team until a new general manager can be hired. A corporate, multi-store parts director does most of the P&A purchasing and parts management functions remotely.

Sales Department

Bob, the sales manager, came from the automotive side. He has more than 15 years of sales experience and also has worked F&I. He understands the processes necessary for sales department operation and is working to adapt this learning from automotive to powersports. This includes recognition that we are selling fun, not needed transportation. The sales staff is knowledgeable and experienced. They follow a structured selling process. There are no daily huddles, but they are provided with daily task lists from Bob. They also have a weekly sales meeting. Since Bob is handling multiple management tasks as well as F&I, he is not on the sales floor the majority of the time. As a result, there is little coaching, training and counseling taking place.
There is no log tracking of walk-in, phone-in or Web-in customers. Bob is aware of the importance of doing this.
There are no electronic door swing or manual traffic counters. As a result, there are no ratio measurements of write-ups, closes or deliveries relative to log entries or door swings. There are no individual prospect forms or goals for prospect calls and appointments.
There are inconsistent follow-up calls being made to purchasers. The use of the 48-hour follow-up log and the importance of asking for referrals on these calls were discussed.
Bob has designed appraisal forms for each product line, and they are using them to justify trade value. They do mention they take trades and buy bikes on their Web site. They want to grow this area of the business, but funding is limited at this time.
There are no stimulating theme displays of units and accessories, and very few units are displayed with accessories. They were encouraged to expand on this as soon as possible.

Sales Action Items

  • Monitor gross profit on all unit sales. Raise new unit profitability by at least 3 percent. Continue working with the sales staff to ensure they are following the sales process and not just laying down on price.
  • Implement logs for all walk-in, Web-in and phone-in customers and inspect them daily. They will only be maintained as long as they are important to the sales manager.
  • Begin conducting daily huddles with the sales team — what happened yesterday, what is happening today and tomorrow.
  • Provide prospect tracking forms to the sales team. Review them on a regular basis. Provide them with goals for prospect calls and appointments. Reward success.
  • Contact every purchaser within 48 hours of the sale. Solve problems and ask for referrals.
  • Measure write-ups, closes and deliveries against log entries and door swings (if applicable).
  • Implement a departmental path where customers are introduced to the P&A and service departments following the close of the unit sale. Consider using the Poker Run program to drive the process.
  • Develop highlighted window displays with units and P&A to take greater advantage of the traffic after hours.
  • Get involved in all rider training programs. Forty percent of these participants will purchase. Pursue these customers.
  • The preowned to new ratio is only .24. Increasing this to .4 as the existing margins will significantly improve sales profitability. psb
    Gart Sutton has been a leading provider of on-site dealer consulting, dealer 20-groups, online financial composites, accounting rescue services, and OEM and dealership training solutions for nearly 30 years. For additional information on these services, visit www.gartsutton.com

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