Jun. 30, 2008 – Getting a better, daily grasp of dealership operations
June 26, 2008
Filed under Features
By Neil Pascale
One of the first steps a New Mexico dealer has taken to improve his store’s profitability is adopting a system that tracks daily department sales, expenses and gross profit margins.
The system, referred to as Daily Operating Control or DOCs, allows the dealer and their department managers to be immediately versed on how the day’s operations went plus how they’re performing for that specific month.
“It’s a scorecard,” RPM Group President Sam Dantzler said of DOCs, a system the RPM Group helped install at P.J.’s Motorcycles. The Albuquerque, N.M., dealership is involved in the “Italian Job,” a more than year-long effort by Ducati North America and the RPM Group, the industry’s largest 20 group provider, to improve the profitability of a dealership. The program’s goal is to install best practices and then examine how those affect the dealership’s bottom line.
Certainly sales have not been the problem at P.J.’s Motorcycles, a European dealership that has seen a significant increase in new unit sales and overall revenue during its five-year history. The increased sales, however, have not always translated to increased profitability but definitely have increased management stress levels.
“Outwardly there’s a lot of success at the store,” dealer principal P.J. LaMariana said at the beginning of the program, which started this spring. “We’re a great dealership that sells a lot of bikes. We have a great reputation. It looks good, but on the inside it’s a nightmare.”
Part of turning that around requires pinpointing exactly where the profit leaks are occurring and ensuring department managers are aware of those leaks. The DOCs system seeks to accomplish both.
“It’s a good one for anyone who is stepping into accountability,” Dantzler said. “You first have to figure out Point A, where you are now.”
The RPM Group has created DOCs for the sales, service and PG&A departments. Each follows a similar pattern where department sales, expenses and gross profit are measured.
In fact, Dantzler believes dealer principals should take it a step further, ensuring that not only that it’s reported, but it’s hand-written by each department manager.
“That way it isn’t done by the press of a computer key,” he said, noting the importance of ensuring department managers take the time to complete the form themselves.
That’s exactly what has been happening at P.J.’s Motorcycles since February. The DOCs often later serve as discussion areas during the staff’s weekly meetings.
“It just makes all of the things we talk about with the managers a lot more real,” LaMariana said of the DOCs system. Previously, LaMariana’s department managers mostly only saw P&L statements on a monthly basis. That form of accounting had its drawbacks, however.
“It didn’t give us the whole picture because we didn’t have a good handle on the expense side,” LaMariana said. “We could look at the gross sales and cost of sales and those would be accurate, but once we got past there, there wasn’t a lot of good information for us.”
Getting that good information — and ensuring it winds up in the right column — continues to be a learning process for LaMariana and his staff. Recent DOCs have shown the store’s percent of closes — when the dealer has agreed to a consumer counteroffer — to be abnormally low compared to the number of sales department write-ups. LaMariana believes that percentage might be skewed because his staff is not fully aware of the difference between a write-up and a close.
“When you’re teaching people how to do it, you have to a clear understanding yourself, and that’s been evolving too,” LaMariana said. “As we go through it, we’re learning that maybe we didn’t know what we were doing with some pieces.”
Even as the dealership continues to fine tune its accounting practices, there is little doubt that taking the time to get a daily grasp of dealership performance is paying off for LaMariana.
“The more information you have, the better you can do the job,” he said. “The DOCs are, without question, something that are very important.”