how to achieve and maintain 30% net-to- · pdf filevehicle marketing to service satisfaction...

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How toAchieve and Maintain

30% Net-to-Gross

A Nickelsen Partners® webinar for DealersEdge®Steve NickelsenCEO, Nickelsen Partners, LLC

Steve ProbstPresident, Nickelsen Partners, LLC


Your Presenters Today:Steve Nickelsen and Steve Probst� Steve Nickelsen is CEO of Nickelsen Partners, LLC.

– Helping dealers improve net profit for 30 years– Has worked with more than 8,000 dealers, general

managers, and sales managers– Highest-rated speaker at NADA

� Steve Probst is President of Nickelsen Partners, LLC.– Spent 20 years consulting on topics ranging from

vehicle marketing to service satisfaction improvement for Chrysler, Ford, General Motors, Harley-Davidson, Honda, Hyundai, Isuzu, Jaguar, Land Rover, Mazda, Mercedes-Benz, Nissan, Saab, Toyota, Volkswagen, and Volvo Cars

– President of Nickelsen Partners since 2008 and lead developer of NP best-practice materials and tools

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Today’s Agenda� Measuring net-to-gross� Using case studies to

understand the three big levers– Gross profit– Expenses– Adjustments

� Cut-across principles� Putting it all together: the

checklist

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Nickelsen Partners Works with Dealers on the Big Drivers of Dealership Profitability

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Increase Dealership Profitability

IncreaseNew-Vehicle

Sales and Gross

Increase Used-Vehicle

Sales and Gross

Increase Service &

Parts Sales and Gross

Reduce Expenses

Improve Management

Skills


To Help Dealers Achieve Their Goals, Nickelsen Partners Provides Three Linked Services

Best Practices

Coach-ing

Tools

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Best Practices

Coach-ing

Tools

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■ What has worked well for other dealers?

■ What will work better as the market and technology evolve?



Best Practices

Coach-ing

Tools

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■ What simple tools can a dealership use to better manage its people and processes?



Best Practices

Coach-ing

Tools

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■ What simple tools can a dealership use to better manage its people and processes?

■ How can each executive and manager in a dealership improve their own performance?

■ How can the management team work together more effectively?

■ What does the management team need to do to sustain any improvements?


Every Dealer Is Different – But Probably 85% of Best Practices Work Well for Most Dealers� Dealerships differ in many ways:

– Geographic market– Specific location– Facility– Volume– Franchise– Business scope, focuses, and goals– Etc.

� That makes it easy for a dealer to decide that a recommended practice won’t work at that store.� Sometimes that’s true. But more often it’s a missed opportunity.

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Using This Approach, Nickelsen Partners Has Helped Clients Achieve Dramatic Profit Gains� For a pair of dealerships in the Southeast, Nickelsen Partners helped them increase retail sales 70% in the past year and a half, and increase variable gross 44%, earning an increase in net profit of over $200,000/year even after covering all NP fees.� For a small multi-line domestic store, Nickelsen Partners helped more-than-double net profit, driven primarily by a 28% increase in retail sales.� For a six-store used-car group with several service departments, Nickelsen Partners helped them achieve higher morale and record gross profits in Service within one month of starting work.� Please see www.nickelsenpartners.com for more information.

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The ACAR Report� The ACAR Report takes data from financial

statements and makes it easy for department managers to understand and act on.� Many NP clients subscribe to The ACAR

Report.� The ACAR Report team helped with this

webinar by providing benchmark data and expert opinion. Thanks!� You can learn more at www.acarreport.com.

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Measuring Net-to-GrossAmount % of Gross

Total Gross Profit $300,000 100%- Total Expenses - $225,000 75%= Operating Profit $75,000 25%+/- Adjustments + $15,000 5%= Net Profit $90,000 30%

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Note that these calculations are all before income taxes and management fees.


Measuring Net-to-GrossOur Approach Today

� Pick a group of dealers with high net-to-gross performance, close to 30%

� Pick another group of similar dealers with average performance, closer to 20% net-to-gross

� Compare those two groups to identify what the high performers do differently from the typical dealers

� Dig behind the numbers to highlight the differences in practices that drive the numbers

� Do this twice, once for domestic franchises and once for import brands

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Case Studies� Two case study comparisons from this past fall (2011):

– High-performing vs. typical domestic dealers– High-performing vs. typical non-luxury import dealers

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High-Performing TypicalNon-Luxury Domestic 31.4% 12.9%

Non-Luxury Import 31.7% 20.6%

Net-to-Gross Ratios

Note that the dealer comparisons were chosen so that the “high-performing” dealers were similar in size to the “typical” dealers, so

volume alone does not explain the performance differences.


Measuring Net-to-Gross:Three Big Levers

Amount % of GrossTotal Gross Profit $300,000 100%- Total Expenses - $225,000 75%= Operating Profit $75,000 25%+/- Adjustments + $15,000 5%= Net Profit $90,000 30%

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Increase Gross


High-Performing Dealers Generate Higher New-Vehicle Sales� Better lead generation� Better handling of incoming

phone and Internet leads� Better sales processes� Better sales management

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High-Performing Dealers Generate More Leads and Get Better Value for Their Advertising Dollars

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High-Performing Typical

% of Front Gross 18.0% 22.7%PVR $332 $304

Advertising Spending – Variable Operations(Net of Advertising Rebates)

% of Front Gross 18.2% 25.0%PVR $238 $300

Domestic Case Study

Import Case Study

Remember that a loyal customer base can also help you spend less on advertising!


High-Performing Dealers Generate More Leads and Get Better Value for Their Advertising Dollars� Appropriate mix for your market

– Direct mail– Website, SEO, and SEM– Third-party sites– Traditional media

� Measure, monitor, and manage– What traffic is each campaign and mix element driving?– What happens when you change the mix?– For example, Team Velocity Marketing (www.teamvelocitymarketing.com) is particularly good at measuring how their direct-mail targets respond to each campaign.

� Don’t waste your leads!– Once you get the call or e-mail, respond effectively!

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The 5 Most Common Mistakes in Handling Internet and Phone Leads� The metrics are not monitored.

– Appointments made– Appointments confirmed– Shows– Purchases

� Phone calls are not “scored” – someonemust listen to every call.� E-mail responses are slow and tooautomated – and they containmisspellings and grammar errors. � We don’t match behaviors to the function.� We don’t coordinate templates with “live” interaction.

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Kelley Auto Group Does a Great Job of Converting Phone Leads to Appointments� As this chart shows, they also do a great job of tracking that.

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68% of phone leads were converted to

appointments(86 out of 126)

Even with a shared BDC, performance will vary by store

because of differences in customers.






because of differences in customers and other factors.


Kelley Auto Group Performance: Phone Leads� Even with that high appointment rate, more than 60% of Kelley appointments from phone leads actually show (53 out of 86).� One key is having a dealership sales manager confirm each appointment.

– Performance differences here may reflect some differences in how consistently each store makes those confirming calls.

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62% of appointments set from phone leads

actually showed.


Kelley Auto Group Performance: Phone Leads� At Kelley, the phone prospects who show are ready to buy, and Kelley closes 42% of them.

– That gives Kelley an overall closing rate of 17% of all phone leads: 22 sales from 126 phone leads.� Part of this high closing ratio is driven by Kelley’s in-store sales process, which they focused a lot of attention on earlier.

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42% of shows from phone leads actually

bought.


Estimated Sales Performance for a Dealership Selling 70-80 Retail Units

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Typical Dealer

High Performer Your Store?

Sales per 100 Phone Leads 4 15Sales per 100 Internet Leads 3 10

Total 7 25If the Average Gross is $2,000 $14,000 $50,000

How do you think you compare?Be sure to listen to some calls and follow some e-mail threads on a regular basis.


High-Performing Dealers Have Better Sales Processes

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Easy to find parking 0.5%Nice landscaping 0.5%Friendly greeting (20 sec) 1%Discovery Seated 4%Discovery Standing 1%Drinks accepted 0.5%Summary of needs 0.5%Manager “Hi” 5%Best vehicle to showroom 1%

Start with a 10% closing ratio, and build on that from these processes:Great walk-around 4%Demo ride with salesperson 4%Demo ride without salesperson 1%Trade evaluation with customer 2%Trade evaluation without customer 0%Dealership tour 2%The “folder” 3%Manager involved in negotiation 3%Great follow-up 6-8%


High-Performing Dealers Do a Better Job in Sales Management: The Variable Manager Meeting� 8:30 a.m. is a great start time.� Review yesterdays prospects

– Rank 1-5, or Hot, warm and cold– Decide specific follow-up for each

salesperson� Review all “hots”

– Brainstorm how we are going to “sell units”� Review yesterday’s incoming phone calls� Review Internet leads� Review deals in Finance that are not

delivered� Review today’s appointments

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High-Performing Dealers Do a Better Job in Sales Management: One-on-Ones with Salespeople� 10:00 a.m. Schedule 10 minutes apart� Personal update� Yesterday’s prospects

– Process steps followed for each prospect (check Discovery sheets and CRM)– Status and next steps for each– Review Discovery sheets(if appropriate)– Call hots

� All prospects� Today’s appointments� Individual actual performance vs. goals

– Sales– Showroom sales process compliance– Prospecting activity and results


High-Performing Dealers Have Somewhat HigherFront-End Gross Profits than Typical Dealers

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$1,829 $1,678$1,274

$1,424$1,166

$1,441$1,130

$1,352

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800$2,000

New Front-End Gross

Used Front-End Gross

New Front-End Gross

Used Front-End Gross

High-PerformingTypical

Domestic Import


Techniques for Increasing New-Car Front Gross

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Range of Prospective CustomersLikely to Pay MoreLikely to Pay Less

■ Do lots of Internet research■ Believe they have good credit■ Simple transaction (outside or no

financing, easy-to-appraise trade)

■ Walk-in and drive-by prospects rather than Internet researchers

■ Unsure about ability to get financed

■ More complex transaction (includes trade-in and financing)

■ Loyal customers (to franchise and dealership)


Techniques for Increasing New-Car Front Gross

Set Up• Proper qualification of customer during sit-down discovery• Consistent process that builds value in vehicle, dealership, and sales

team• Early manager “hi”

Desk• Use proper desking tools (stand-alone or part of CRM/DMS system)• Have a really strong desk manager• Monitor results – understand what is working and what is not in

your store for your market

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Techniques for Increasing Used-Car Front Gross

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Used-Car Selling Price

Used-Car Cost

Used-Car Front Gross


Techniques for Increasing Used-Car Front Gross� Use the right appraisal tools to avoid over-valuing a trade or purchase.

– Most Nickelsen Partners clients average about 80% cost-to-market.� Use appraisal data to convince customers that an offered trade-in value is fair.� Enforce process discipline to avoid over-paying for purchases.� Align reconditioning investment to the type of vehicle.

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Used-Car Cost



Techniques for Increasing Used-Car Front Gross: Are You Spending the Right Amount on Reconditioning?

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$934 $901$818 $803

$0

$200

$400

$600

$800

$1,000

Domestic Import

Reconditioning PVR

High-PerformingTypical


Techniques for Increasing Used-Car Front Gross: Are You Spending the Right Amount on Reconditioning?� For both domestic and import dealers,

high performers spend about 10% more per vehicle than typical dealers.– Every dollar spent in reconditioning adds

to gross profits in Service and Parts.– Not spending enough on reconditioning

may increase the time to sell a vehicle or force more discounting.

– A choice: Recondition before the sale, or do policy work after the sale

� Note that differences in reported reconditioning investment may reflect pricing (retail vs. discounted) as well as quality.

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Techniques for Increasing Used-Car Front Gross

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Used-Car Cost


■ Build value in the vehicle by using a vehicle folder.

■ If you price competitively on the Internet, set expectations for your customers about “live market pricing”.

■ If you price competitively, make sure that your salespeople and desk managers understand and believe that.


Techniques for Increasing Used-Car Front Gross:Using a “Folder” to Build Value

� CarFax/AutoCheck report� Market price comparison� “Why buy here”� Internet pricing policy� Service record� MSRP

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Increasing Used-Car Front Gross: Building Value in a Competitive Used-Car Price� Communicate value to the

customer� Retain more of the advertised

price� Use as:

– Handouts– Posters– Stand-ups on desks

� Best if reviewed BEFORE vehicle selection– Like one-price

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Increasing F&I Grosses Is Also Important� Ensure that your F&I process includes

a “discovery” conversation and menu presentation� Hold your F&I managers accountable

for following the specified processes� Improve the hand-off to F&I� Measure and monitor your F&I

performance� If you’re not sure whether your F&I

Manager has the necessary skills, talk with your F&I provider about additional training

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Service Absorption Is AnotherBig Lever for Net-to-Gross� Our November 2011 webinar for DealersEdge on Service

Absorption explained how this dealer achieved these gains and is continuing to improve:

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One Year Ago Today Next YearToyota of Grand Rapids (no body shop) 87% 98% 110%Preferred Chrysler-Jeep-Dodge 75% 86% 95%Preferred Ford (no body shop) 67% 85% 98%Preferred Buick-GMC 81% 98% 108%




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Manage Expenses


High-Performing Dealers Have Lower Sales Compensation Costs� At high-performing stores, much more of the front-end gross is left after paying the sales staff.� The example below is from the domestic case study. The import case study tells the same story.

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23.6%15.1% 7.1%

45.8%38.9%23.0%

11.2%

73.1%

0%20%40%60%80%

Sales Supervision Support Total

Sales Compensation Costs as % of GrossHigh-Performing Typical


How Do the High-Performing Stores Achieve So Much Lower Sales Compensation % of Gross?� For salespeople, much higher average sales and grosses enable the dealership to both pay more and keep more.� These numbers are from the domestic case study. The import case study tells a similar story, but the differences are smaller for each factor.

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High-Performing Typical % Difference

Average Pay $5,229 $3,369 +55%Average Units Retailed 12.3 7.2 +72%Average Pay/Unit Retailed $425 $472 -10%

Average Front-End Gross $1,802 $1,235 +46%Average Pay / Average Gross 23.6% 38.9% -39%


Our September 2011 Webinar Laid Out Some Pay Plan Examples Plus This Self-Assessment Framework

Pay Plan Design

Total Monthly Pay

Expected Performance

Desired Attitudes and

Behaviors

Employee Expectations

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■ What are you spending on salespeople?

■ Are you paying the right amount (in total) to attract and retain good staff?

■ What do you want the “culture” of your store to be? How does your current pay plan influence that?

■ What bad behaviors do you see today that are driven by your current pay plan?

■ Does your current pay plan appeal to the kind of salespeople you want to hire?

■ What are the most important aspects of salesperson performance at your store?

■ How well does your pay plan encourage that performance?


Another Key to More Productive Sales Staff: Making Sure You Keep the RIGHT People� How many sales did you lose last month because the

customer spoke with a “C” salesperson instead of an “A”?

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Another Key to More Productive Sales Staff: Making Sure You Keep the RIGHT People� It’s easy to keep your “C” players. They don’t have a lot of competitive offers coming in.

– If you replace your “C” players with “A” and “B” players, you’ll sell a lot more cars at higher grosses. Unless your new hires turn out to be “C” players, too.– If you coach and train your “B” and “C” players, you can turn some of them into “A” players. And you don’t risk hiring another “C” player.– Holding people accountable and requiring them to follow the process can make some “C” players perform like “B” players.

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Another Key to More Productive Sales Staff: Making Sure You Keep the RIGHT People� “A” players like being around other “A” players.

– Success breeds success. Excitement is high when everyone is doing well.

– If some of your staff don’t perform, they may be seen as freeloaders –and that is not going to keep your“A” players happy.

� Remember that you need strongSales Managers if you don’t wantthem to be intimidated by strongsalespeople.

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High-Performing Domestic Stores Also Report Much More Productive Sales Managers� The pay and productivity differences for sales managers are similar to

those for salespeople. These numbers are from the import case study.

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High-Performing Typical % Difference

Average Pay $10,174 $8,360 +22%Average Units Retailed 55 37 +49%Average Pay/Unit Retailed $185 $227 -18%

Average Front-End Gross $1,309 $1,194 +10%Average Pay / Average Gross 14.1% 19.0% -25%


Variable Selling Gross Is What’s Left After Covering Selling Expenses

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� Start with front-end gross� Deduct direct selling expenses� What’s left is Variable Selling Gross

– Tells you how much of the gross you are spending to create it– What’s left goes to cover overhead costs and profit– Good measure of what each department manager controls, since it is

before overhead and most shared costs


High-Performing Dealers Keep More Variable Selling Gross for New and Used Vehicles

High-Performance TypicalFront-End Gross Profit 100.0% 100.0%

Less Variable Selling ExpensesDepartment Selling, Mgmt, and Support Comp. 47.4% 60.8%Advertising (Net) 18.2% 25.0%Floor Plan (Net) -12.6% -6.9% Other 6.4% 5.5%

Subtotal Variable Selling Expenses 59.6% 84.4%

Variable Selling Gross 40.6% 15.6%Page 48


High-Performing Dealers Keep Much More Variable Selling Gross for New & Used Vehicles

70.2%

94.8%

59.4%

84.4%29.8% 5.2% 40.6% 15.6%

0%10%20%30%40%50%60%70%80%90%

100%

A B C D

% o

f Fro

nt-E

nd G

ross

Pro

fit

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Variable Selling Expenses:Sales compensation (salespeople, managers, and

support), advertising (net), floor planning (net), other

Variable Selling Gross

High-Performing High-PerformingTypical TypicalDomestic Import


High-Performing Dealers Have Lower Data Processing Costs� Data processing costs are

significantly lower for high-performing dealers than for typical dealers.– This is true for both the

domestic and the import case studies.

– The differences can be over $5,000/month.

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1.5% 1.8%

2.9%2.2%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

Domestic Import

Data Processing as % of Total Gross


High-Performing Dealers Have Lower Data Processing Costs� One way to achieve lower costs is to have

fewer systems. However, we do NOT recommend saving money by cutting out your DMS, CRM, or used-car system.

� There are ways to negotiate lower costs, particularly for DMS systems.– Better match modules and specifications to

your needs– Consider lower-cost DMS providers – there

seem to be a lot of dealers leaving Reynolds & Reynolds for less expensive alternatives like DealerTrack/Arkona.

– Negotiate better – see the DealersEdge library for a webinar on this.

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High-Performing Dealers Have Lower Facility Costs

� This is true for both the domestic and import case studies, for almost every facility cost factor.� The one exception is repairs and maintenance.

– For the import case study only, high-performing dealers spend somewhat more in this category.– This category may be distorted by the large number of dealers who are remodeling facilities.

� Rent factors vary for a variety of reasons, so there is no one best approach to managing this, other than making the best of the property you have.– The same is true for property taxes.

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High-Performing Dealers Have Lower Facility Costs

� Utility costs can vary widely and are more controllable than other property costs.– The difference is close to a full 1% of

gross in both the domestic and import case studies.

– One Nickelsen Partners client invested in energy-efficient lighting and is very happy with the resulting cost savings.

– Some dealers have also installed systems that let them burn used motor oil for heat.

– Others have installed computer-controlled thermostats that automatically reduce temperatures at night.

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Managing Expenses vs. Avoiding Investment� High-performing

dealers are reluctant to spend but happy to invest.� This chart lays out one

way of analyzing your spending.

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Currently Spend a Lot Currently Spend a Little

High ROI

Importantinvestments – not

spending enough may reduce profits

May be missing

opportunity

Low ROI

Biggest opportunity to reduce spending and

increase ROIDon’t waste

your time here


Managing Expenses vs. Avoiding Investment� Here are some

examples of spending in each category.

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High ROI

DMS, CRM, and used-car information systems

Some advertisingSome staff and positions

Training and staff development

Treating customers well

Low ROI Some advertisingSome staff and positions

Office supplies


Managing Expenses vs. Avoiding Investment� If the intended purpose of that spending can make a big difference in profits, make sure you are spending enough.� If the intended purpose is not that important, then spending less is smart business.� Focus your attention on higher-dollar items.� Remember that not everything important shows up on the financial statements.

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High ROI

Importantinvestments – not

spending enough may reduce profits

May be missing

opportunity

Low ROI

Biggest opportunity to reduce spending and

increase ROIDon’t waste

your time here




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Manage Adjustments


Additions and Deductions to Income Vary Considerably Across Dealers� Other income� Other deductions� Factory payments� Fees (such as document fees)

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Other Income Is Much Higher for High-Performing Dealers in the Domestic Case Study� A common use for “other income” is reporting reserves created by using hard packs.

– For example, a dealer may pack every vehicle by several hundred dollars and record that here.

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High-Performing Typical% of Front Gross 17% 13%PVR $449 $299

Domestic Case Study: Other Income

– This can also capture over-reserving for a dealer’s used-car warranty, where the amount reserved with packs exceeds the amount actually spent on policy work on those vehicles.� In our experience, packing vehicles this way increases profits.

– Managers typically work up from their vehicle cost when they desk a deal.– This is true even when they say they are market-driven, and even when they know the cost includes a pack.


Cut-Across Principles forAchieving High Net-to-Gross� Gross vs. volume� Retention, CSI, and the “circle of life”� A culture of accountability

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These principles are not specific to any one area of the dealership. Instead, they cut across many

elements of the dealership culture and practices.


Cut-Across Principle #1:Gross vs. Volume� Too many dealers focus on maximizing AVERAGE gross profit

instead of TOTAL gross profit.� This issue shows up across the business but particularly in:

– Used cars (“velocity” strategy)– Customer-pay service– Competitive parts (e.g., tires)

� Important balancing act:– Work to get the best gross possible on each deal once the customer is

in the store– But price as competitively as necessary, and don’t walk away from

lower-gross sales

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What Is “Velocity”?� If I can sell a $10,000 car with a

$3,000 gross in 60 days, I earn $3,000 gross profit in 2 months on that $10,000 investment.

� If I can sell a $10,000 car with a $2,000 gross in 30 days, I earn that $2,000 gross twice in two months, on that same $10,000 investment.

� If I can sell a $10,000 car with a $1,500 gross in 20 days, I earn that $1,500 gross three times in two months, on that same $10,000 investment.

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$1MM inventory (100 units)$600 F&I GP + $350 internal

parts and service GP:$197,500/month GP

50 sales






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$295,000/month GP100 sales

50 sales






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$295,000/month GP

$367,500/month GP

100 sales

50 sales

150 sales






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$295,000/month GP

$367,500/month GP

100 sales

50 sales

150 sales

And don’t forget the extra trades you’ll take in, and the potential for ongoing parts and service revenue from those customers.


Service Has Similar Trade-Offs Between Average Gross and Volume

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# R.O.s Average GP Total GPx =

■ First-visit retention■ Ongoing retention■ Conquesting

■ Good upselling?■ Poor retention for

routine maintenance?■ Pricing that is too high

to attract and retain customers?

■ Manage this and expenses to increase absorption


Service Has Similar Trade-Offs Between Average Gross and Volume

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# R.O.s Average GP Total GPx =

■ First-visit retention■ Ongoing retention■ Conquesting

■ Good upselling?■ Poor retention for

routine maintenance?■ Pricing that is too high

to attract and retain customers?

■ Manage this and expenses to increase absorption


In Parts, What Happens If You Try to Maximize Gross Profits on Tires?� You sell some tires at okay gross

profits.� You lose a lot of customers to

more lower-priced competitors.� You train the customer to go

elsewhere for service.� You lose any brake or suspension

work that you might have found when you put the vehicle on the lift, since your competitor now has that selling opportunity.

� So your TOTAL gross profit drops.

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Cut-Across Principle #2:Retention, CSI, and the Circle of Life

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Showroom

Buy Or Lease Service

Vehicles

1st Service

3rd Service

6th Service

4th Service

5th Service

Last Service before repurchase

2nd Service

YesNo

Your Competitor

Your Competitor


Focus on Customer Retention� Measure the retention of your current customers – both new

and used. � When someone defects:

– Find out the reason why– Try to get them back into the family

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Focus on Customer Retention� Several OEMs have introduced prepaid maintenance to drive

customer retention.– For some, it is included in the vehicle purchase.– For several others, it is an optional package sold through F&I.

� Another option for dealers is non-OEM prepaid maintenance.– One provider that several of our clients use is Performance Administration

(www.performanceadmin.com).– They find that their clients double their service retention.

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Cut-Across Principle #3:A Culture of Accountability� Does the dealer and the management

team set clear expectations?– “Iron fist in a velvet glove” – firm

expectations, stated respectfully� When an employee does not meet

expectations, are there consequences?– When was the last time a manager or staff

member significantly failed to meet expectations?

– What did you do?– Is that person a repeat offender?

� Coach up, or coach out!

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The Leadership Star

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Care

You’re great at…

Fair

Honest

This has to improve


Make Sure That Executives and Managers Understand “Net to Gross” – And How They’re Doing� Executives and department managers are kept informed and

coached on their current state.– Measure the right things.– Compare those measurements to the right benchmarks.

� A supplemental tool such as the ACAR Report is helpful.– Many Nickelsen Partners clients use ACAR because it takes financial

statement data and makes it more meaningful for department managers.

� Make sure that manager pay plans line up properly with net profit goals.– If you pay a manager to focus on gross and ignore expenses, that’s

what he will do.

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The Key to Managing Accountability� Work ON the business, not just IN the business.� Block out the time every week to do the important tasks, not

just the urgent ones.

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Putting It All Together: The Checklist� Strong net profits come from accomplishing lots of different

things within the dealership.� These slides lay out one way of thinking about each of these

profitability drivers.� If you would like to increase net profits, try quickly grading

yourself of each of these drivers – then focus on the “C”s.– A: Solid performance, not a lot of room for improvement– B: Not great, but the benefits of being better are not enough to justify

the effort to improve– C: There would be a substantial pay-off to doing this better

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Putting It All Together: The ChecklistTop Level Objectives

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IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills


Checklist for IncreasingNew-Vehicle Sales and Gross Profit (Page 1 of 2)

Page 78


IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills1. Dealership prospects effectively from its database.2. Dealership promotes itself and its vehicles effectively.3. Internet leads are handled effectively.4. Phone leads are handled effectively.5. Sales team follows an effective sales process.6. Dealership manages price negotiations (desks deals) effectively.


Checklist for Increasing New-Vehicle Sales and Gross Profit (Page 2 of 2)

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IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills7. F&I generates high gross profits and customer satisfaction.8. Dealership sells accessories effectively.9. Sales team closes a high percentage of be-back prospects.10. Sales managers ensure open leads are managed through the process.11. Dealership has enough high-potential, highly-skilled, motivated

salespeople and Internet/BDC staff.12. Salesperson, Sales Manager, and Internet/BDC pay plans match

dealership needs and goals.


Checklist for IncreasingUsed-Vehicle Sales and Gross Profit

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IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills1. Dealer and managers understand and buy into key velocity concepts.2. Dealership finds and purchases used vehicles effectively.3. Sales managers appraise vehicles effectively.4. Dealership reconditions vehicles effectively.5. Dealership prices and reprices used vehicles effectively.6. Dealership effectively merchandises its used inventory on the Internet.7. Dealership retains adequate front-end gross profit on used vehicles.

Note that sales objectives related to both new and used vehicles are covered under “Increase New-Vehicle Sales and Gross”


Checklist for Increasing Service and Parts Sales and Gross Profit (Page 1 of 2)

Page 81


IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills1. Dealership has great service menus and offerings.2. Dealership attracts lots of service customers.3. Service advisors do great write-ups.4. Dealership provides a great experience for waiting customers.5. Service Advisors communicate effectively with customers

while the vehicle is in the shop.6. Service Department does a good job in the shop.


Checklist for Increasing Service and Parts Sales and Gross Profit (Page 2 of 2)

Page 82


IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills7. Dealership does a great “delivery” when the service is completed.8. Dealership follows up effectively after service is completed.9. Service manager monitors and manages the service business.10. Dealership has appropriate pay plans for service department.11. Dealership has enough high-potential, highly-skilled, motivated

Service Advisors and Technicians.


Checklist for Reducing Expenses

Page 83


IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills

1. Dealership headcount and staffing expenses are appropriate for dealership size and activities.

2. Dealership non-staff expenses are appropriate for dealership size and activities.


Checklist for Improving Management Skills

Page 84


IncreaseNew-Vehicle

Sales and Gross


Sales and Gross

Increase Service &


Reduce Expenses

Improve Management

Skills1. Dealership has a culture of accountability.2. Managers and staff are being groomed for

better performance in their existing roles and promotion to greater responsibilities.

3. Staff morale is high.4. Dealership has a vision for growth and a

clear set of priorities.


You Can Use This Checklist Yourself, or We Can Help� If you’d like our help:

– Call or e-mail Steve Nickelsen (330.697.3725 or [email protected])

– We’ll set up a one-hour phone conversation for you with one of our NP coaches

– We’ll go through the checklist itemstogether and offer some suggestions

– You’ll get an objective outside viewof your business

– No charge, no obligation

Page 85


Next Steps� Ask yourself now:

“What am I going to do when I leave this session?”

� Ask yourself constantly: “What’s the most productive thing I could do right now?”

Page 86


We’ll Be at NADA If You’d Like to Discuss What YOU Can Do to Get to 30% Net-to-Gross

� Call or e-mail if you’d like to meet face-to-face� You may also want to visit ACAR’s booth (#2035) to learn

about their dealership financial reporting tools.

Page 87


Page 88

Thanks for listening,and congratulations on your desire to learn!

For any additional questions,please e-mail Steve Nickelsen at [email protected],

or call his cell phone at 330.697.3725

Steve Nickelsen, CEOSteve Probst, President


how to achieve and maintain 30% net-to- · pdf filevehicle marketing to service satisfaction...

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