By: Mark Ragsdale

Unchallengeable laws govern our world—no matter how inconvenient they may seem. For example, the law of gravity can really get in the way while mounting a transmission. So mankind goes about inventing products to cope with the reality of gravity: hoists, lifts, jacks, and pickers. We buy and use this stuff not to defeat gravity, but to deal with it. Some thinkers ponder and quantify how gravity operates in this world. Others give it little thought. But nobody denies its existence. We all know better than to go jumping off of buildings.

There are other laws however, having the same influence on our lives as gravity, but gleaning far less respect. Take mathematics for example. Since the most rudimentary calculations of man, 2 + 2 has always equaled four. No matter how you or I personally feel about this reality, the answer will always be precisely four. Yet with enough motivation, people have a tendency to deny mathematical truth. Politicians, financiers, entrepreneurs, and even car dealers dismiss mathematical law in order to escape its foregone, logical, conclusions. Some folks fear the truth so profoundly, that when they can no longer talk themselves out of it, they seek the counsel of cheerleaders to convince them.

In my book, I discuss the grand contributions dealers make to the economy, along with a rather graphic description of all the obstacles dealers face in making a profit. If there ever was a mathematical law about profits, sustainable profits equal customer satisfaction. Since Car Wreck’s publication in January, things have gotten even more difficult for dealers: fleet sales have driven the lion’s share of new vehicle sales increases over 2009, the meager retail increase has been fueled by record-high rebates, and the cash-for-clunkers effect on used vehicle supply has driven auction prices sky high. What does the law of mathematics say about this? It depends upon whom you ask. CarWreckonomics sees it this way :

                        We have record rebates.

&      We have record trade-in values.

&      We have record low interest rates.

&      We have $1 trillion in government stimulus.

               Yet Industry Sales are still DOWN by a THIRD!

Unemployment and under-employment are at record levels. Government has doubled its size with union workers and made it easier for unions to negotiate increased business costs. It has imposed increased CAFE standards and increased employer health-care costs. It will fund an entirely new Consumer Financial Protection Agency, which threatens to regulate beyond the 16 Federal Agencies already having authority over dealerships. It threatens to implement a carbon-based tax, increasing fuel, and energy costs for every American household and business. Will these policies align favorably with your business the way it stands today? Do you know what is coming next? Now that is the painful reality of math. I don’t like it. You don’t like it. We can still hear the cheerleaders spinning and flipping basic math: profiting by their influence over others. But they can’t change reality. They can’t cheer their way out of mathematical law.

Now let’s ask ourselves an important question: what rabbit are we going to pull out of our hat next? Before you answer, let’s ask ourselves another important question: are all your departments profitable? Because if we find no more rabbits or the next rabbit doesn’t do the trick, you will need more than cheerleading. You have to be on top of your business. You’re the leader. You’re the boss. So let’s choose right now to rebuke the message of the cheerleaders and get real:

·        How are your people handling incoming phone calls? (Both sales and service calls.)

·        Are you grossing 73% or higher on every labor hour? (Including “unapplied time” and open “shop-ticket” repair orders.)

·        What will a 3 percent increase in interest rates cost you in dollars? (Hint: about $2,500 per month for every million borrowed.)

You have control over these issues because you presently own them. Whats more, it doesn’t matter what anybody’s opinion is about the numbers. If competition is doing better at these things, they win. If you do a better job, you win. By no means are these the only three measurements of a well-run store. But they are visible and accessible without a lot of digging. They also have a major impact when we water them with some focus and attention.

In my 25 years working in, running, and owning stores, I know the business can be fun and profitable. But only if we keep our head out of the sand and start initiating real change in our business. Next month I will share some personal experiences in how I succeeded (and failed) in handling phone calls, service gross, and floorplan expenses at my dealerships. Until then, here’s a CarWreckonomics rule: liars figure, but figures don’t lie… starting with the cheerleaders.

Bio: Mark Ragsdale is a former multi-location dealer and author of the book Car Wreck that is available at Amazon and booksellers everywhere. For a complimentary financial statement analysis on your dealership, email Mark@CarDealerLife.com or call 508.299.7080.