March 2016, Auto Dealer Today - WebXclusive
Champion Motors’ new SF department hit a couple speed bumps in Month Four but continued to show progress in setting appointments and making sales. Photo by Michael Coghlan
This is the fifth article in a six-part series chronicling the launch of a special finance operation at an established independent dealership located on the fringe of a major metro market. Names and locations have been changed to protect the company’s privacy. Our end goal for the new department is to reach a monthly sales volume of 70 deals at over $230,000 total gross by the end of the six-month launch period.
At the two-thirds mark, the “Red Team,” as they are known, was certainly excelling and growing. We had been waiting for the inevitable speed bump or hiccup (whatever you want to call it) and it finally showed during Month Four. That’s the bad news. The good news is that it didn’t impact gross profits and we managed to achieve our goal for sales volume, so certainly, in the body of work, we still won’t complain. Here is a summary of what we experienced in month four.
With DealerStrong’s executive trainer, Shawn Foster, onsite a couple of times this month, the sales management team continued to gel. During the month, there might have been a few more personality clashes between the two Type-As working together, but with Foster being onsite less and the team having to work things out between themselves, that was not unexpected.
Nonetheless, they appeared to be solid and the department closed 40 sales out of 125 total showroom visits for a 31% closing ratio. While the closing ratio was down from the previous month, it remained at 3% over benchmark. We were still happy, as the month was the beginning of the holiday season in which down payment always dwindles.
The sales personnel team had stabilized and was maturing well. With four Red Team employees and no turnover, the group had really gotten the hang of not only the sales process and overcoming objections, but they had also done a very good job of logging their traffic and activities in ProMax, which enhanced our ability to measure and make good decisions.
One of the surprises of this project has been the sales of near-luxury and luxury vehicles to SF customers. A surprising number of BMWs, Lexuses, Mercedes-Benzes and Volvos have been delivered, many of them at very good gross profits. While they are certainly older and have a bit higher mileage, the customers are willing to come up with the needed down payment when they are buying something they can get excited about driving.
Payment-to-income (PTI) ratios become important here, so as you read this, don’t go buy a bunch of highline vehicles without a way to finance them at affordable monthly payments.
It was another strong month for the Nation’s Premier Auto Dealer direct response program. While we trimmed the budget a tad in this month, because the BDC performance wasn’t as high as we wanted, we were still able to hit 399 unique calls, and the BDC did manage to increase their show rate as well. We will be continuing this through the completion of the six-month stint, and know the results will continue to improve.
Craigslist has remained a terrific lead source. Posting about 500 vehicles with credit focused ads, we received 94 leads, got 32 dealership visits with 11 sales. Total cost was $3,250 for just $295 per sale.
The team is really using their ProMax CRM and desking system well. The Instant Screen feature has allowed an easy hand-off of credit-challenged walk-in customers to the Red Team. This certainly is providing an incremental increase in sales for the company. The Green Team would have worked the customer on the wrong vehicle where an approval could never take place. I would say by now this team would rank among the top 20% of skilled users for the product. Their proper use of the system allows DealerStrong to continue to help make suggestions for improvements, even while not onsite in the store.
The best news is that, through the first four months of this project and after calculating all special finance-related expenses, including personnel, advertising and credit bureaus, the dealership has averaged an incremental increase in profit to the bottom line of $63,037, which would annualize at over $750,000 in increased net per year.
Let’s start with the website. Our website to this point has been a dismal failure. Even though they have excelled with a large number of our other clients, and even though at their suggestion we paid a premium for the URL, [city name]autoloans.com, organic search is nonexistent. We were counting on it to be a major factor, and with all of our other dealer clients it is, but we were 400 website leads short through the month.
Typing the URL into the search was not of any value. The pay-per-click (PPC) campaign we ramped up provided essentially the only traffic to the site. The vendor is trying to make necessary changes, and we are hoping it will finally bear some fruit in Month Five.
Ultimately, our internal Achilles heel remains the BDC. We have proven why, when DealerStrong conducts BDC training with dealers, we always stress the importance of a full-time BDC manager and that someone in sales management both trains and coaches that manager on how to manage every day.
The BDRs (we added a fourth late in the month) are all new to a BDC. Daily training and call review is paramount for success with a lightly tenured staff. Unfortunately, we hired and fired two hopeful BDC managers suggested by the new management team during the month, causing our BDC trainer, Wendy Reeves, to have to assume the role of remote BDC manager. It just is not the same. BDRs were simply not following the process or using the call guides, but without onsite oversight, there is little we can do to ensure change. The BDC was getting roughly 37% of the appointments into the store, and that was well below our expectations.
The owners and buyers still struggle with getting inventory in and ready. Rapid Recon is helping, but something the Red Team can’t control is a bottleneck in the service department, where they are one service advisor short at the desk. Dispatching and parts sourcing are slowing the reconditioning process immensely. Additionally, there has been a reluctance to provide the inventory specified, and while the highline inventory has been a pleasant surprise, the bread-and-butter SF inventory must get better.
The Bottom Line
This startup department had gone so well out of the box, we just knew issues had to surface, and of course they did.
The great news is, even with those challenges and the month being one of the two slowest months nationally for the special finance segment, we are still well ahead of the four-month SF volume, gross profit and net department profit goals. After washing out all of our startup costs in Month One (ahead of schedule) we have generated an additional $137,820 in net profit the last three. With December and January as the final months of the project, we know we will finish strong and set the store up well to takeover on their own for the strong February tax season.
In the meantime, stay tuned and we will be reporting again next month. Until then, great selling!
Greg Goebel is the CEO of DealerStrong and the industry’s leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker, author and consultant. GGoebel@AutoDealerMonthly.com