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Dec. 27, 2010 – Increasing gross profit margin in sales, F&I depts.

December 27, 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 the first part of a series on this dealership, GSA?consultants provided 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. They have a lot of work to do in order to make this into a profitable dealership. Their sales volume is small and there are poor margins in nearly all departments. They have no inventory management and no personnel management structure.
This is the second part in a series on this dealership. The first part provided an analysis of their overall operations and this second part reports on their sales and F&I departments.
Analysis
John is actually the entire sales department, so he will have to perform the sales manager duties. He has had professional sales training, experience in a large dealership and understands what this position requires. He knows what to do and how to do it. With a little help from upper management, he should be quite capable of maintaining the necessary processes.
John follows a structured sales process, completes worksheets on every deal, follows up on prospects and purchasers, etc. However, he needs to be logging prospects and tracking the ratios for write-ups, closes and deliveries. They have a door counter. These numbers can be used as a base for these measurements.
They have to start holding tight on the profitability of each deal. Developing a minimum pricing structure is important. Paying a spiff based on the profitability of the deal will help.
They have no preowned business at all. This is a huge opportunity for income and increased profitability. The important ingredient is someone who knows the market value for the trades and outright used purchases. An appraisal form is required for all trades in order to justify price and provide protection for the dealership and the customer.
They have no F&I person. John understands the basics of F&I, but he is not selling it. He will need some quality F&I training ASAP. There is too much money/profit at stake to not get involved in this business.
Credit applications are not secured. They are in a file cabinet that can be locked, but it is not. They need to take swift action to correct this.
They need to acquire sources for all of the F&I products. Every purchaser must be exposed to F&I products. The rule is 100 percent of the customers, 100 percen of the products, 100 percent of the time.
Action Items

  • Raise gross profit margins on all unit sales. Desk all deals as new salespeople are added.
  • Log all walk-in, web-in and phone-in customers. Use this to prospect for additional sales.
  • Contact every purchaser within 48-72 hours of the sale. Solve problems, ask for referrals.
  • Measure write-ups, closes and deliveries against log entries and door swings.
  • Ensure 100 percent of the wholegoods purchasers are exposed to F&I following the closing of the sale.
  • Utilize an appraisal form on all trades. This helps justify your price and provides for some legal protection.
  • Pursue the preowned market. Use a pre-set margin. This will significantly improve sales profitability.
  • Provide ongoing sales process training and coaching to all new sales staff.
  • Ensure proper security of all customer information. When an office with credit applications or deal jackets is not occupied, lock up all cabinets or offices.
  • Get serious about selling F&I products. Bring net profit on per vehicle sold up to at least $250. Attend a quality F&I training class ASAP.
  • Acquire and offer all possible F&I products to every purchaser utilizing a menu-based presentation.
  • Put all procedures in writing. 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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