Ed Lemco provides dealer benchmarks
February 10, 2003
Filed under Features
EDITOR’S NOTE: Ed Lemco has been in the business of training dealers for more than two decades. His composite database of benchmark financial information provided by more than 200 participating dealerships is considered by many to be the standard of dealer performance analysis.
We sat down with Lemco for several hours during the annual three-day Management Update conducted by Lemco and Associates in Denver, Colo., Jan. 18-20. More than 450 dealers representing some 200 dealerships in the U.S. and England participated. Here is a summary of his comments on himself, his company, and the powersports industry.
Lemco and Associates will be at the Dealer Expo Feb.15–17 in Booth #7133.
DENVER, Colo. — Ed Lemco is funny, shrewd, and entrepreneurial. But perhaps most of all he’s a showman and a trainer and a motivator. Given his performance over three days here, it seems unlikely that Ed ever met a microphone or a podium he didn’t like, to borrow a phrase.
Lemco began training sales people when he ran a dealership in Oregon 30 years ago. An interesting record of that period was written by Ed’s brother, Steve, in his book titled, “You Gotta-Wanna.” It talks about how Ed helped Steve change from a guy who couldn’t sell a thing into a super salesman who regularly led the dealership in monthly sales. Published in 1999, the book still is a popular seller at Lemco meetings.
Lemco trains dealers and teaches them how to make a profit through his 20-Club groups. But, says Lemco, simply because he helps dealers doesn’t mean he opposes manufacturers or distributors, a claim occasionally made.
“I’ve been unequivocal in my advocacy for dealerships,” says Lemco, “but being an advocate doesn’t make you an adversary.” Without any hesitation Lemco says he helps dealers manage their cash flow, often to the detriment of distributors and other suppliers. “Pay OEMs and taxes first; pay the people who can lock your doors. A distributor might stop shipping to you, but he’s not going to put you out of business. That doesn’t make us subversive,” he says.
One of the most interesting chapters of the Lemco saga is his attempt to organize dealers. In 1969, he was hired by Suzuki to sign up dealer members for the Motorcycle Industry Council (MIC). Lemco recalls that, in the early 1970s, dealers made up the majority of MIC membership and held two seats on the board of directors. But, he says, in 1974, dealers were dumped from the MIC, following a discussion about applying the newly-developed automotive franchise laws to motorcycle dealers.
That same year, Lemco helped found the short-lived National Motorcycle Dealers Association in Minneapolis, Minn. The group was funded initially with about $800,000 it received from MIC in pre-paid dealer dues. Lemco served as chairman of the largely volunteer operation, but the organization didn’t last long.
“We were honorable men,” he recalls, “but we didn’t know what the hell we were doing.”
The group did have one major success, though, he says. It drafted a model franchise bill and got it into every state by tying in with auto dealers.
There’s a need for a national dealer association, says Lemco, who’s been involved in the formation of three such organizations. But with the development of state associations, it’s not likely to happen. “There’s only so many bucks to go around,” he says, “and states are worried about a national association diluting their revenue streams.”
The lemco legacy
Perhaps Ed Lemco’s legacy will be the development of his 20-Club training programs and the important financial composite that he’s developed for participating dealer members.
The composite is a numerical summary of each dealer’s operations. This summary is then combined with reports from other dealers in the group and all the Lemco dealers across the U.S.
The report is compiled from numbers supplied by each dealer in each 20-Club group each month. That’s a requirement of membership. The numbers then are ground through a proprietary database and composite reports are printed for each member.
For example, Parts/Accessory managers are shown how they can deliver 25% to the bottom contribution line. A department’s contribution is defined as gross profit minus expenses that the department manager can control.
“What the composite makes clear,” notes Lemco in a recent report to dealers, “is that, at some point, gross is net. That is, every extra profit dollar or reduction in expenses flows right to the bottom line.” When managers increase gross profit by 1%, or decrease expenses by 1%, those adjustments can add 10% to the bottom line, he tells his 20-Club dealers.
Three times each year 20-Club members meet to review the performance of each dealership. Dealers are ranked by performance in each club, and nobody wants to be at the bottom. The group jumps on a member’s poor performance without hesitation. It’s one of the benefits of membership.
Lemco 20-Club memberships aren’t cheap. Annual costs are about $10,000, plus the regular financial reports, and three meetings each year. But Lemco boasts many 20-year dealers.
Lemco says that the time and money invested are worth it. “If we don’t show (dealers) how to add more than $100,000 in additional revenue,” he says, “we’re not doing our job. But it’s not only the money, they have to subject themselves to the peer review, too.” It seems to work.
“It’s the best thing I’ve ever done for my dealership,” said one Texas dealer principal who’s been a member for 20 years. “I wish I would have done it sooner; I could be rich today.”
Today, Lemco figures he works with only about 3% of the powersports market. “We’re not for everybody,” he says. If you think Lemco might be for you, visit Booth #7133.