Looking Behind the Numbers

Looking Behind the Numbers

Numbers are the performance barometer—we use them to measure, monitor and compete. They define our performance and, in many instances, our prosperity. Numbers can be used as the carrot or the stick—the tool that management uses as the lever to change and hopefully improve.

Thus, numbers influence management behavior and decision making. These actions are forged by what is normally a logical interpretation of the numerical information that is available. However, there are instances where certain metrics are not tracked, but instead ignored or not even acknowledged and yet, some of this data is incredibly important because of its significant impact on the bottom line.

I ponder why these metrics are not tracked in a similar manner to say, floor ups, advertising cost per vehicle or gross per unit. I assume that in certain instances they may run below the surface and are not monitored because of the perception that they are unimportant or because it is a knowledge or comfort issue. There is the natural tendency that if we come out of the variable side of the business, then the numbers emanating out of fixed operations are not closely looked at (or understood) and vice versa for the manager who has a strong fixed operations background. It reminds me of the saying about perception by Anais Nin, “We don’t see things as they are, we see things as we are.” This perception issue may not allow the dealership to manage, monitor and be actively involved as to where other low hanging fruit could possibly be.

There is the anecdote of what you should say to a new vehicle salesperson who sells about 15 vehicles per month with average grosses and CSI, but is a little sloppy with the paperwork and may have a little of a Prima Dona attitude. It’s simple. You go up to him every couple of days and ask, “Is there is anything we can do for you, sir?”

The essence of the story is simple. Here you have a keeper, a consistent producer and you wish you had others who could emulate what he does. Retaining these successful salespeople is important, as they are not easily replaced, let alone duplicated.

What contribution does a 15-unit new vehicle salesperson make to the store? Having access to NCM’s extensive database, I am able to come up with some credible figures. We ran numbers for the following 4 categories which separates dealerships into three broad groups and a total for all the dealers.

1.    Domestic dealerships – by average and by the all domestic benchmark

2.    Regular imports – by average and by the regular import benchmark

3.    High line – by average and by the high line import benchmark

4.    All dealer – by average and by the all dealer benchmark

For this study, I opted for the all dealer composite and used its data to calculate the incremental gross contribution of a salesperson selling 15 units per month. The gross per retail unit for this group runs close to $1,700 per unit (based on activity through November 2005) and salesperson compensation is at 26 percent, which means the dealership retains about $1,260 per unit after this direct sales cost. Selling 15 units per month equates to a contribution of $18,900 for the month. I personally would like a lot more of these producers on my team, that’s for sure.

Now, let’s take a look at another category of producers that, unfortunately in many dealerships, is not tracked that closely, or is not treated with the same degree of significance as the 15-unit per month salesperson, and that is the service advisor. Question: How much do you think an average service advisor produces per month? (Please note: In this calculation, I use an average service advisor as opposed to estimating what an above-average salesperson contributes to gross.)

Here is what emerges. The average service advisor produces $33,000 in labor gross per average month. This is close to 75 percent more than a high-performing salesperson selling 15 units per month produces. If we default to reality and take into account the average—since the average salesperson sells about 10 units per month—it means that the average service advisor produces nearly 2.6 times more gross than the average salesperson!

Let me rephrase this to make the point crystal clear; the average service advisor produces the equivalent gross of approximately 26 new vehicles per month using average gross numbers, less salesperson commission. In many dealerships, the service advisor is the figurative “diamond in the rough” and it is perhaps well worth spending a little more time recognizing and nurturing this most important revenue producer.

Make sure your service advisors get their fair share of training (salespeople seem to get the training or at least the training tapes) and even a little bit of TLC. These folks coupled with the F & I producers have the greatest impact on profitability because of the leverage they have in the positions they occupy. Spending a little extra time with your service advisors could probably bring a disproportionate boost in their performance and your bottom line.

So, what do you say to a service advisor producing $33,000 gross per month? Perhaps now is the time to think about it.

This article by Jeff Sacks originally appeared in Dealer Magazine.

Jeff Sacks, president of Jeff Sacks & Associates, is an auto industry speaker, consultant and trainer and is actively involved with dealership and OEM consulting and training.
His website is www.jeffsacksauto.com and his phone number is 800-867-2160.