Do You Want to be a “HERO OR A ZERO?”

(Are You Ready For Battle)

(Part IV of A Business Model That’s Just Plain Bad For Business.)

Do you want people who are going to tell you “What You Need To Hear” or do you want people who are going to tell you want you “What You Want to Hear?” If you are the later than you might as well stop right here because I am not here to stroke your ego, I’m here to make you money and make you proud of your business and of what your accomplishing.

Have you heard the expression that you need to “Spend Money to Make Money?” Have you heard the expression that you need to “Save Money to Make Money?” Let’s Get Real!

Bottom Line Growth is not sustainable only Top Line Growth is and only Top Line Growth will get you the results that will take you where you want to go with the rewards and pride that come with it. (Tell your bean counting consultants to put that in their pipe and smoke it.)

So how can you think or where did you get the idea that you will get the best Marketing, Sales, Service or Parts minds on the cheap? These people who are on the front lines day after day “Are you Business” and are the one who are going to make or break it.

Saving Money is all well and good but Making Money means that you are doing the right things to be successful and to be successful you need to have the kind of people that can get the results and this means you need to “Pay for Performance.” If you want to save money save it on office supplies, Press your vendors for discounts, change your electric company but don’t think that a gift certificate for dinner or a pat on the back is going to recruit or retain the talent you need to be successful.

Let me ask you a question. Were you born a business owner or did you have to pay your dues and earn what you have today? Did you seek out the companies that thought people with your experience and talent were a dime a dozen and didn’t want to pay what you were worth? I think not.

I stayed at the last Dealership I worked at because they knew the value of people from Management to salespeople to every worker there and paid accordingly. I and my co-workers made more money than we could at any other place and the Dealership made even more and were consistently in the top tier of highest average front and back end grosses- A business that PROVES this all out. How can this be? It is a direct result of sharing and respecting the people who make it happen for you. It means making an investment that unlike the stock market is guaranteed to pay off. There is no complex formula here to figure out.

Do you want to attract Independent thinking people who can create value for your business? Then you need symbiotic relationships. Or do you want parasitic people who are going to attach themselves to you on the cheap because they have few or no other options?

If you are the former, send me an e-mail at billcosgrove@dealernetservicesonline.biz and I will send you a commission plan that will attract and retain the talented people you need and should want if you want to be successful and stand above the rest.

DealerNet Services

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Comment by Roger Sowers on July 1, 2013 at 9:29am: Doug Investments must pay a return. Expenses are just the cost of doing business. I fear that too many stores look at large inventories and large sales staffs as a sign of prosperity. It is wonderful to sell from a huge inventory but does it really make sense to have six months of inventory on the ground? The hidden costs of too much inventory and too many sales people can really add up.

To whom are we going to point to when we assign responsibility for managing these costs? Who in the dealership has the skills needed to deal with these issues?

The internet is a marketing and communication channel that the industry must leverage to be successful going into the future. A quick survey shows the majority of dealerships use the cookie cutter web sites and BDC's provided through their manufacturers. When they achieve minimal success they shrug their shoulders and look for someone to blame. In general there is a lack of the needed skill set in the store and little confidence that it is worth the required effort.

Lot's more to be said. Even more that needs to be done.

Comment by Doug Davis on June 30, 2013 at 11:47pm: Roger, I'm sorry but there are too many managers that think that way, it is impossible to know who is kidding and who is serious. You could look at any of the three largest variable expenses as investments. You are not going to be very successful without inventory, good people and proper advertising. Like everything else, it takes knowledge and effort to determine the proper mix. With the emergence of the internet, this should have been a major focus years ago.

Comment by Roger Sowers on June 30, 2013 at 2:00pm: Doug. I was being just a little sarcastic. Salesmen's compensation and incentives seem to be the first area that is looked to when poor management looks for areas to tinker with.

I suggest that advertising is not an expense but an investment. It should be seen as a necessary means of driving traffic into the showroom. There is some skill needed to allocate those dollars to maximize their effectiveness but what works for one may not do a well for another.

Floor plan costs while they are low right now may change without notice. Proper inventory management can turn this into a positive cash flow even when rates go back up as they must.

There is always the nuisance expenses like utilities, insurances, and taxes. These are not going down on their own but new energy efficient lighting and re-appraisals of property values are tools to deal with them.

Turn over of sales people is as you have noted very expensive. In lost productivity and additional training expenses. This goes back to Bill's point regarding poor management. Whether at the floor manager level or above a stable work force reflects the competency of the management.

Safe to say wherever we look there is room for improvement. Just a matter of deciding where to start and where we are most comfortable.

Comment by Doug Davis on June 29, 2013 at 9:00pm

I mean expenses are up and margins are down so commission levels must be changed.

Roger, I don't agree with this. Expenses are not up and at good stores, margins are fine.

Your three largest variable expenses are:

Internet floor plan
Advertising
Salesman's compensation and incentives.

Interest rates are at an all time low making floor plan expense much less. The internet has made advertising much less expensive (provided dealerships know what they are doing).

I assure you that some dealerships are doing a phenomenal business (mostly internet) and their overall margins are very good (again, you have to know what you are doing).

Dealerships, especially in the large groups don't pay their salespeople. Have you ever noticed that the large groups rarely produce stores that are market leaders? You see stores that were market leaders being purchased and turned into marginal stores.

I wrote an article on the true cost of turnover and the cost of ineffective or marginal salespeople. Like any that I have written, that discusses accounting, it was met with yawns.

Comment by Bill Cosgrove on June 28, 2013 at 1:07pm

Roger. My intention is not to make anyone feel bad but you should get your calculator back out and rethink what you said here.

This discussion is not just about salespeople but management as well and in all Departments. I know that the above average Managers and Salespeople are a much smaller percentage of the total of Salespeople available. But the more you can attract by having a good compensation plan a Dealership drive a great deal more to their bottom line.
If a salesperson is making 3-4 times the of a 30k salesperson it means that he is closing a much higher percentage of his ups. Then you must ask how many potential sales are being lost by the 30k salesperson.
You also have to figure in that an above average Salesperson is going to gross much more on the back end by either selling their customer on the back end themselves or setting them up better for the Finance manager.
If you have a mediocre manager, they are either not good at TO or are too lazy to get out from behind the desk or both. Not being good at TO may be the reason they don´t get out behind the desk.
Now between number 3 and 4 the Dealership has just left a lot of money walk out the door.
With three times the Salespeople you now have increased by three times the cost of benefits.
Also, having the right people in the BDC is going to save a higher percentage of ups that were not closed during their initial vest.
Having good sales advisors is going to keep people happy by being treated well. i.e. explaining needed repairs so that the customer understands and being prompt to respond to special needs for appointments act.
If you add all this up you have just proven the point I was making here and have helped explain this in more detail to the ones that I was targeting with this discussion.
And these are just some of the reasons. I would have to write another thread on the benefits of having the best people you can find.

Comment by Roger Sowers on June 28, 2013 at 11:30am: Bill This is just plain crazy talk. If a salesperson earns commissions of 100K and they are paid based on 25% of the gross why then the store would earn 300K. That must be bad right? I mean expenses are up and margins are down so commission levels must be changed. Imagine how bad it gets when the salesperson earns 150K. That's only 450K for the store. It must be better to have three 30K salespeople than one 100K salesperson. Three benefit packages are less costly than one right? It is a lot easier to make 30K salespeople than 100k salespeople. Not to mention how positive the attitudes of the 30K salespeople effect the dealership's reputation. I can tell you from experience how well customers react to the $50 mini commission. I know it did a lot for my self esteem.

Good thing the dealerships got rid of all those expensive demo plans. Branding of dealership employees should be limited to shirts and ball caps.

I don't say any of this is unfair because I agreed to it before I walked in the door but don't try to make me feel bad about what I'm earning. You cannot over pay a commissioned sales person. I cannot out earn the store. I get a slice the store gets the rest.

Good work