Set Dealership Performance Standards

In order to run as efficiently and profitable as possible, a dealership must be run by the numbers. Remember the old adage, “Numbers don’t lie.” Well, this statement is certainly true. I see a great many dealerships being run with emotion instead of logic. Management needs to turn numbers into averages that can be understood. These averages will help salespeople breakdown complex ratios and equations into smaller sections or segments that are more easily understood. This allows them to more easily overcome complex objectives.

Studies have shown that over 97 percent of people in the world need someone to hold them accountable if they are to succeed. Because this is indeed the case, we must have quality systems in place to make average people become superstars. I want to caution you about how you should utilize numbers to run the dealership, though, I see too many managers using the numbers as a hammer to beat salespeople over the head instead of using these numbers as tracking data.

When management knows and understands the up count, along with all the proper closing ratios, they will know exactly where they need to focus their efforts in training to help their staff succeed. This tracking data must be kept current, as bad data is worse than no data. Management should have performance standards put into place and hold monthly evaluations.

Keep in mind that everyone can have a bad month every now and again, and if this is the case, nudge the employee along and let them know you understand where they are, but more importantly you also know where they should be. I always recommend using a 90-day rolling average to track the salesperson. If a person is below acceptable standards on a 90-day rolling scale, then they probably need to go.

We want superstar people on our sales force, but remember, most superstar salespeople are average people with exceptional systems. We must also cut any and all “cancer” out of our stores. Think about what cancer really is: a very serious and deadly disease that starts out small and spreads rapidly until the body is not able to fight the infection anymore and succumbs. Dealerships can have cancer just as a human body can. We must stay vigilant and fight any signs of “cancer” in our stores before it causes true damage.

Controlling cancer in a dealership is controlling attitudes. A bad attitude should be grounds for dismissal. It doesn’t do any good to have the dealership spend money bringing new recruits into a store and training them only to have them infected with “cancer” from some negative staff member. This is a battle that cannot be won, thus it shouldn’t be fought! Get rid of the cancer in your store before you bring in new recruits. Remember, numbers don’t lie, and we know that 97 percent of people must be held accountable if they are to succeed.

Thirty years ago, the average salesperson sold around 10 units per month. Twenty years ago the average salesperson sold about 10 units per month, and last but not least in our market today, the average salesperson sells about 10 units per month. Kind of ironic isn’t it! Know what your total sales objective for the dealership should be and staff accordingly. One way to know how many salespeople you should have is to track average gross profit per employee in their respective departments, and as long as gross profit per employee stays at your target range or higher, keep hiring. Keep this process going until this ratio falls below your target range, as this is the point where you’ll max out. You don’t want to go into the law of diminishing returns.

Numbers alone cannot run a dealership or sell cars to customers. Always remember that people are the most important asset in any organization. When a salesperson sets a goal, they must also know the importance of a written plan to achieve that goal. A goal is 25 percent of the process and the plan is 75 percent. Let the salesperson set their personal goal; however, I like management to help write the plan with the salesperson to accomplish the stated goal. Questions that can be asked as part of the planning process are:

1. How much money are you going to make next month?

2. How many ups do you need to achieve that and what closing ratios need to be met?

3. In order to close at _____ratio, what percentage of write-ups need to be done?

4. What percentage of demo drives will get you there?

5. How are you going to get _______ups to talk with next month?

Work with and use realistic numbers. If the salesperson has a 90-day rolling average of 11 units per month, they should not set a goal of 30 units for the following month.

Hesitation still exists to use numbers to run the dealership, as I mentioned before. Studies have shown time and again that dealers running by the numbers are far more profitable than the dealers who choose to “wing it.” Be confident in your people and processes by knowing and understanding the numbers!