The Gross-Volume Balancing Act

GSM offers six ways to ensure you’re making the right moves.

December 2015, Auto Dealer Today - Feature

by Jason Heard

If you’re a sales manager, balancing volume and gross is the question that keeps you up at night. When you have a good volume month, you get questioned on gross. Put up big gross, and you’re told you should have sold more cars. Owners always want it both ways. Is it possible to choose between the two?

Let’s evaluate some factors that may help you make that decision. There’s no perfect answer, but these are discussion points that each store needs to consider.

  • Deal structure: Do you use a one-price strategy? Do you start at MSRP on every deal? Do you take advantage of early turns by management? The way you structure your deals is essential because it determines how efficiently and quickly you can process deals from start to finish. There are only so many hours in the day, after all.
  • Pre-owned flow: How many pre-owned units do you sell? How quickly can you move trade-ins to the lot? If you’re a great used-car operator, using new-car volume to get trades is of utmost importance.
  • Sales comp: How do you pay? Do you pay on volume only or gross only? Is your sales comp percentage in line? You must design pay plans around your goals.
  • Reputation management: Managing one’s reputation is not the same as managing CSI. Most of us now ask for customers to “like” us on Facebook. We invite them to go to third-party sites and rate us. Customers understand the power that this type of media has. We also know that when you get a bad review, the only thing you can do is bury it with good ones. This tactic requires volume.
  • Other fees: What is your administrative or documentation fee? What other fees do you have that come into a deal? Are these fees income?
  • Packs: Do you pack your cars? What do you use the packs for? Are they rolled into income monthly, quarterly or annually?

Use these ideas to have a discussion with your team on which direction your store wants to go in. Some stores have incredibly strong finance numbers, which allows them to consistently take short and even loser deals to increase their volume. Many stores have reinsured warranties and other finance products that have tremendous value to the ownership, so a high volume of those products is key. Some stores are spectacular used-car operators, and the new-car department serves up trade-ins on a consistent basis. Every store is unique, but they should all be evaluated and have directives in place to accomplish their goals.

Remember, there are fewer dealerships now then there were 10 years ago, and our volume is back to where it needs to be. Virtually everyone should be up on volume, simply as a result of the market. What we’re discussing here is market share. How do you want your store to perform? In an article last year, I touched on owners making decisions on what type of store they wanted to have: a local community-based dealership, an urban monstrosity or somewhere in between?

These are the same questions. There isn’t a simple answer, and no answer will be true forever. The important things are to stick to defined core values, stay nimble and efficient so you can react quicker, and keep evaluating and questioning your goals. Best of luck.

Jason Heard is the general sales manager at Gerald Jones Honda in Martinez, Ga. He is a 20-year industry veteran with extensive sales and sales management experience. [email protected]

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