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Nov. 29, 2010 – Becoming profitable with a small unit sales volume

November 29, 2010
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These articles recap some of the opportunities uncovered by 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.
In this first part of a series on this dealership, GSA consultants provide an analysis on the overall dealership.
Dealership
The owner recently purchased this dealership and was approved for the two major product lines they carried. The original dealership had no computers and no financials. They were underperforming and held very poor market share for this area. They also had a poor reputation with the local customers. The new owner feels there is a good potential for growth due to the dealership’s past history. Since they acquired this dealership, they have increased the market share by more than 60 percent for one of the lines. However, most of their unit sales have been for very low margins as they have had to clean out noncurrent inventory (some up to six years old).
The local town has only about 10,000 people. However, the market area has a population of more than 300,000. They have purchased a new facility with frontage on a major highway. It is currently under remodeling construction. They plan to move in the next few months.
The owner’s background is in agri-business and wholesale distribution. He has considerable business experience and is well capitalized. Although he has a passion for the sport, he plans to be an absentee owner with little involvement in day-to-day dealership operations.
Analysis
They have a lot of work to do in order to make this into a profitable dealership. Their sales volume is small (well below 300 units). There are poor or negative margins in nearly all departments, no inventory management and no personnel management structure. It is recommended that the owner assume the GM duties until a suitable replacement can be found. Other highlights:

  • Written job descriptions: They do not have written job descriptions or uniforms. Job descriptions are necessary in order to hold staff accountable.
  • Organization charts: They do not have an organization chart. At this time, they are still some time away from having a functional operating management structure.
  • Employee surveys summary: The surveys revealed a lack of direction for the staff and little in the way of goals. There is a lack of branding for the dealership and they need to develop a shared mission and vision. There are lots of opportunities for improvement. The staff did feel that the dealership offered excellent service, friendly employees and quality products.
  • General manager: Given the current needs of this dealership, it was recommended the current GM be moved into the service manager position. It is vital that someone take over these duties in order to improve the technician efficiency and productivity. There are also issues with RO flow and warranty filing and follow-up that need to be addressed quickly. It is recommended that the owner assume the GM duties until a suitable replacement can be found.
    Action Items
    Note: Due to the impending move to another facility, most issues with the existing facility are not addressed in these action Items.

  • Place the server in a secure location where it is not easily accessible to customers or staff. Lock the door.
  • All departments must be billing each other at retail in order to get a true picture of department profitability.
  • Become familiar with state laws that impact dealership operations, including requirements for OE warranty reimbursements, doc fees, authorized RO signatures and phone authorizations.
  • Prior to moving to the new location, branding should be identified and mission and vision statements prepared. The store identity must be consistent in all marketing and become a part of the store culture.
  • Establish weekly manager meetings. Initially, these should focus on the action items. In the future, they should focus on the numbers for each department. Do not accept complaints without solutions.
  • Develop a telephone answering script and enforce its use. Include your dealership name, department and staff member name.
  • Develop job descriptions for all staff positions. Base them around non-negotiable standards.
  • Put all processes in writing. Include in a P&P Guide for all employees. This will reduce the training required for new staff as well as improve accountability.
  • Seek alternative flooring sources for new units. 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 more than 30 years. For additional information on these services, visit www.gartsutton.com

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