A significant number of dealers these days are becoming more and more aggressive in selling used vehicles. Some have even lost their new car franchises and now rely solely on used vehicle sales along with parts and service sales to pay the overhead and hopefully provide them with a significant Return On Investment (ROI).
I’m confident you will agree that it is critically important for all dealers to earn the highest possible ROI on every single investment they make, right?
Now, in order to increase sales in any department you have to start doing things differently and/or do different things. If not, then you simply continue to do what you’ve always done as stated so clearly by Zig Ziglar: “You have the perfect processes in place to get you exactly what you got last year.”
I’m talking about training here in order to positively affect change. Some of your dealerships will take the approach of “saving their way into profitability” by vowing not to increase their expenses, yet remain willing to make investments every day of their business lives. Let’s consider some examples.National Auto Dealers Association (NADA) research shows that the average used car cost (investment) is about $13,300 and sells for around $15,000 resulting in a gross profit of $1700 which is a ROI of 13 percent. ($1700 divided by $13,300 = 13 percent). Assume you can turn that inventory investment of $13,300 every 30 days (great job) that would be 12 turns per year at $1700 gross per retail unit (PRU) for a total gross profit of $20,400 resulting in a ROI of 153 percent!
My guess is none of your dealerships would hesitate to invest $13,300 in a used car knowing that you will realize a 153 percent ROI over the next 12 months. As a matter of fact, many wouldn’t hesitate to make multiple investments: 50, 75 or even 100 of those $13,300 cars to earn that kind of an ROI. Makes perfect sense to me!
Research also shows that a Service Advisor servicing 12 customers per day (four Warranty and eight Customer Pay) and averaging 1.5 Hours Per Repair Order (HPRO) at NADA benchmark’s will produce about $1637 in Gross Profit per day, $36,016 in Gross Profit per month, and a total of $432,194 in Gross Profit per year.
Let’s assume the dealer diverted just one of those $13,300 used car inventory investments into a $13,300 training investment in their Service Advisor, and that training produced an extra .5 HPRO (33 percent Improvement). This would result in a Gross Profit increase of about $12,000 per month, or $144,000 over the next 12 months resulting in a ROI of 1082 percent! (If your stock broker can do that for you please send me his name and number).
Let’s finish the math here by adding the additional gross profit of $144,000 to the $432,194 and you have a total gross profit of $576,194 produced by one employee—The Service Advisor. Now I ask you, how many employees do you have producing over $576,000 a year in Gross Profit at your dealerships? Maybe your F&I Producers. How many salespeople are producing that kind of gross?
This is the equivalent of selling 28 used cars a month at $1700 PRU. How many sales people are selling an average of 28 cars a month to match the performance of a 2.0 HPRO Service Advisor? How’s that $13,300 training investment working out now? Is it an expense or an investment?
Maybe you should ask your broker to answer that one for you?
Let’s continue on with this logic and consider the following:
- Who gets the most incoming Sales Calls per day—Salesperson or Service Advisor?
- Who meets and greets the most Sales Opportunities per day—Salesperson or Service Advisor?
- Who has the greatest impact on Owner Retention—Salesperson or Service Advisor?
- Who has the greatest impact on Brand Loyalty—Salesperson or Service Advisor?
- Who needs Telephone & Sales Training—Salesperson or Service Advisor?
The answer to questions 1, 2, 3, and 4 is the Service Advisor. The answer to question number 5 is both the Salesperson and the Service Advisor. The simple fact is that anyone in your dealership who comes in contact with your customers, as well as your potential customers, must be professionally trained on how to effectively communicate (sell).
I’m sure far too many Dealers, General Managers and Service Directors will continue to try and “save their way into profitability” versus being proactive and commit to re-allocating some of their inventory investment into a training investment. For those Dealers, General Managers and Service Directors who “get it,” they can look forward to record profits in the Service and Parts departments, but it’s your choice to help them get there.
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