Social Media

Menu presentation absolutely pays off

Brian Gallmeier, Columnist
June 23, 2014
Filed under Columns

The single step in the overall sales and finance process that impacts dealer profitability the most is an effective menu presentation.

The Business

What business are you in? A Harley dealer? Multiple brands and segments? PWC only? ATVs mainly? One majority franchise?

Are you the owner or general manager? How do much of the selling do you do? Or do you have several salespeople working the show floor? Are you the only store in town, or do you have multiple competitive dealerships?

How many units do you sell in a good month? How many in a slow month? And what is your average sale price per vehicle?

Is your dealership in the right marketplace, and does it have the resources for an F&I department? Many times the answer to most of the questions above does not even matter. Most dealers visited tell me they don’t have an F&I department or don’t use a menu because of some of the situations that result from the questions above. In actuality, the answer lies in the numbers an F&I department would generate.

Example 1:
Average units sold per month: 20
Average price per unit: $15,000
Average F&I profit with a menu: $20,000
Average F&I PVR: $1,000
Costs and commissions: $8,000
F&I net profits: $12,000 x 12 = $144,000

Example 2:
Average units sold per month: 60
Average price per unit: $6,000
Average F&I profit with a menu: $20,000
Average F&I PVR: $333
Costs and commissions: $8,000
F&I net profits: $12,000 x 12 = $144,000

In either case, using a menu presentation in your F&I department absolutely pays off, regardless of whether it averages $1,000 per vehicle retail (PVR) or $333 PVR. It’s still $12,000 in income after commissions and expenses per month. The biggest difference in the two examples above is in the price per unit — $15,000 vs. $6,000.

Without a menu presentation, most of the time, the PVR will be significantly less in either case. Without sending deals into banks for approvals using indirect lending, it’s extremely difficult to sell optional F&I products for a high PVR. Penetration rates may go from 100 percent (at least one product sold per sale on average) down to 20 percent. At an average product profit of between $300 and $800, depending on products, there’s a difference in gross profit of up to $15,000, or $750 PVR. Can your dealership afford this?

Obviously, in Example 2, if average units sold per month were 20, and the average price per unit was still $6,000 or below, F&I profit would be cut by 66 percent, making compensation for a full time F&I manager difficult. But a half-time business manager is better than no business manager.

The Business Manager

The business manager should have the following traits: outgoing personality, enough flexibility to have something in common with all buyers, attention to detail, quick with numbers, decision maker, must get along with all personalities in the dealership, integrity/character, attitude and ATTITUDE, believability and strong presentation skills.

For three to six hours per month (seven minutes per presentation), the business manager spends his/her time presenting products and options for customers. Add another three to six hours per month for handling objections.

THAT IS IT! $4,000-$12,000 per month for 6-12 hours of presentations. That’s an average of nearly $1,000 per hour for the right business manager. Of course there is much more to the job of business manager than presenting and handling objections, but that’s really where the rubber hits the road.

An office for privacy

Your customers require it, and your business manager can’t concentrate without it.

Your customers share highly confidential information with your business managers, such as social security numbers, information about credit bureaus, possibly some embarrassing chargeback. If you would like your business manager to have their customers’ full attention, put them in a private office. Make the customer feel important to you and your business manager. The show floor is just not good enough!

Equip that office with all the technology required to make expeditious decisions about each and every deal. Put a printer/copier/fax machine right in their office. Put enough chairs in that office to bring in the entire family if required. When challenged, many customers would rather sign on the bottom line than deal with unruly children.

Brian Gallmeier, founder of Income Development Partners, uses his powersports experience at the retail level to train F&I departments. He can be reached at bgallmeier@charter.net or 612/616-8611.

 

Comments

Feel free to leave a comment...
and oh, if you want a pic to show with your comment, go get a gravatar!