Hopefully you’re going in the door of your dealership today with some objectives like more service business, higher used gross profit, and better new closing ratios. Make a wish list of these items based on a breakeven analysis and then determine the reports you need to monitor your objectives.
Let’s say that one of your major goals is more service business. The reports you’ll need daily are how many hours sold in the shop yesterday, appointments for today and hours per repair order – all by advisor name. If you want to increase service gross profit, you’ll need technician productivity, effective labor rate, and a list of repair orders with labor gross profit percentage under 70% – again by advisor name.
I’d prefer you have only three main objectives each month and no more than 10 reports to look at daily that help you understand how to reach these objectives. If you’re at a loss of where to start, here are my three favorite ideas that applies to every dealership.
1. Vendor list
Get a list of your vendors from your DMS with the amount paid last year, the account number it was charged to, a summary of the items purchased (tires, shop supplies, etc.) and who authorizes the payments (user who normally writes the purchase orders.) Put this in Microsoft Excel, and sort these from high to low.
We normally only think about expense accounts, but everything is an expense! Even if we buy tires to put on used vehicles and resell that amount, what if you can get them for less? I realize that sales managers sell from cost up, but what happens when you get buried in a vehicle? A year-end write down or wholesale loss is an expense even though it looks like a cost of sale.
When you grasp the concept that a high cost of sale hurts your bottom line, then you’ll find ways to buy everything for less. The only vendors that you would not be interested in are “trust vendors.” These are vendors that you hold money for “in trust” for your customers and merely forward to a vendor like payroll taxes, sales taxes, and payoffs.
2. Know my lenders
Spend a moment in your DMS F&I system and get a list of all the lender contract forms that you have. Now ask for a rate chart for each lender in the list. Put all these in Microsoft Excel on a tab and now get a report of all the deals for last year by lender and put on another tab. Get the buy rate, sell rate, months, and reserve amount. If you can get information that was used in tier placement like FICO scores, get that too.
Are your F&I managers placing paper where the maximum reserve can be earned? Sit down with your F&I managers and ask them how lenders are selected. What software do they use? What is the process for submitting and selecting? Does your captive lender have reductions in floor plan interest based on the percent of loans submitted? When you have this information, make a policy for the placement of paper that maximized total dealership profit, not just the pay plan of your F&I manager.
3. Expenses – a whole new look
Hopefully by now you’ve either attended one of my workshops on item expense analysis, have read my Super Controller II book on expenses, or use our product Expense Master. These tools give you a different look than the vendor analysis above. Item expense analysis means that instead of being concerned about the whole R+R bill, you look at the items on the bill instead.
For example, if there a charge for service invoices work only on that item this month. Where are they stored? Get a sample of the form and look at it. Does it have too many copies or artwork? Can you get it produced for less locally? Could you consider printing on blank paper with a lighter weight? Consider my Super Controller II – Employees and Expenses to get training in this new way to look at expenses.
A typical dealership has about 70 expense accounts but thousands of items. It is overwhelming but you have to start somewhere and today is a perfect time to get started on hitting your profit target.