Achieving Four Percent Net-to-Sales

July 2012, Auto Dealer Today - WebXclusive

by Robert E. Lee - Also by this author

A financial road map will guide you along the way to achieving four percent net to sales, but only if you follow the directions. And, just like any road trip, it makes sense for your passengers (i.e., your managers) to study the map and act as navigators to keep you on track. Everybody involved needs the desire to go in the same direction or else the trip will be a disaster. Furthermore, it’s easy to get distracted and lose direction. Day-to-day obligations in a dealership can cause you to lose focus and veer off track, away from your destination, which is four percent net to sales or 30 percent net-to-gross.

Are your managers just along for the ride or are they active participants?

Managers who are not given road maps (or precise directions) to the four percent net to sales destination are likely to be challenged and frustrated and waste time traveling to points unknown. If your managers are typical, they will believe that all they have to worry about to make a profit is sell, and they will spend all their time focusing on more sales. Don’t get me wrong, selling more is great, but that is not the total answer. If your managers do not understand how much they spend to make a sale, then they are going from New York to Los Angeles by way of Miami. It just doesn’t make sense and they need a road map that they can understand.

If your sales meetings are all about sell, sell, sell and your managers are convinced that a 15,000-piece mailer will solve all their problems, then they do not understand what it takes to improve the bottom line. Unless your dealership is a rarity and has the perfect equation (the right location, franchise, etc.), then it is not possible to sell your way to four percent. Period. It requires a road map that your managers can understand, appreciate and participate in, along with sales. Once you understand the map, it takes less work and stress to get to four percent on sales by working it from the expenses, grosses and process, than trying to sell your way there.

These profit maps have names—forecasts and pro formas. Managers who study numbers or have a pro forma have an idea about what to pay attention to. Even better is when mangers build their own pro forma, take authorship in the numbers, believe in the goal and see how it benefits their wallet. This is not just reading performance numbers from group averages or benchmarks from other states. Usually they are only the best of the worst and the worst of the best! Although taking a lead from the better performance of other dealers can often provide insight, it’s not wise to target the $700 F&I benchmark from a current, live average when we know much better numbers are commonly achieved.

How do you explain how to map out directions with a pro forma? Using a coach to promote attention to the numbers and the need of urgency for action about the process provides encouragement and dissolves the challenge. Develop goals through a pro forma, map them out and train managers to navigate. That’s the key. Strategize with your managers and hold them accountable for the trip you expect them to take. Challenge them and review their progress each and every month. You will produce improved process through analysis. Track your managers’ processes, and follow up to ensure the processes are executed.

Plan your work and work your plan. Remember, when you review your team’s progress and learn that they are 500 miles or three percent net-to-sales off-course, then you’ve given them the wrong map, you haven’t taught them to read it properly, or you haven’t expected them to follow it to begin with.

Vol. 9, Issue 5

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