April 2012, Auto Dealer Today - WebXclusive
You had a great 2011! Is time to buy another dealership? Before making another purchase, let’s consider the opportunities in your current dealership.
First, does your store make 30 percent net-to-gross? If not, how do you get your current store to 30 percent net-to-gross? Do you need more gross? What expenses need to be cut? Are pay plans promoting performance?
In my opinion, there has never been an easier time to get to 30 percent net-to-gross. Yes, the economy could be better; however, there are currently three factors that should be contributing to amazing profit opportunities. What are those three factors?
1. Exceedingly low interest rates. You should be making big money on your floor plan. How will we be affected if the prime rate goes to 8 percent?
2. Factory building initiatives. Granted, not all the factories are paying you to build a new facility, and many times they are not paying you enough money. However, it still should go to the bottom line, and if you are a GM dealer, the EBE Program can produce some outstanding quarterly money.
3. Quarterly volume bonuses. The new vehicle business is up quite a bit, and this should be affording you the opportunity to take advantage of these programs.
Ok, so you are hitting 30 percent net-to-gross. However, are you taking full advantage of your volume opportunities? Do you have a BDC? Now is an outstanding time to grow your business. There is huge pent-up demand. Are you ready for the increase in business? How are your people handling the incoming calls? Are they making appointments so you get to see as many customers as possible, or are they trying to pre-qualify them over the phone?
In other words, have you ever had a salesperson convince a future customer to not come to the store right now? Here are some of the usual reasons: “You are too upside-down;” “Your credit is not good enough;” “Your payment will be too high.” A BDC can get the customers in the door so they fall in love with a vehicle, rather than give them a reason as to why they cannot buy before setting foot in the dealership.
Do you have a special finance department, or are you just relying on all those perfect-credit people? Which segment of the business do you think is growing? Do you think that more people have better credit or more people have worse credit? If you do not do special finance, how many deals are you missing? I do not care what size of store you have; if you do not do special finance, you are missing a minimum of 30 deals per month. That is the absolute minimum.
Let’s say you are making 30 percent net-to-gross and have a special finance department. Do you have an accessory department? According to SEMA, aftermarket accessories make up a $28-billion industry. Why let the guy down the street take your cut? Let’s put that money towards the bottom line and keep it in-house. There are so many opportunities in this department.
How about outside vendors? Do you have vendors doing paintless dent removal, touch-ups, interiors, etc. on your used vehicles? If you look at those bills, how much are they making off your used vehicles? You can keep that money in-house by having your own people do this work. How much will that add to the bottom line?
Finally, business is growing. Are you prepared personnel-wise? Do you have enough salespeople, or are they waiting on multiple people at a time? Do you have enough F&I and desk managers to maximize the additional traffic? Hire additional people and watch your volume and per-unit gross increase substantially.
Finally, if you have all this mastered, look for additional rooftops to purchase. If not, be excited about the opportunities right in front of you because with a few tweaks, you can create big increases. How nice would it be to make an additional $500,000, $1 million or $1.5 million without increasing debt or adding a different location? It’s 2012. It’s time to make 30 percent or more net-to-gross, maximize your BDC opportunities, increase special finance business, add an accessories department, get the vendors out of the store, increase your staff and take full advantage of the very big profit opportunity that is under your one roof!
Vol. 9, Issue 2