My Leadfoot Could Improve Your Dealership

Oct 31, 2012 | | 12270 |

My Leadfoot Could Improve Your Dealership

By Adam Shiflett

I admit it, I’m a speeder. Nothing serious—just five to ten miles over the posted sign. But, there is one time I am always below the speed limit.

Around my neighborhood, the city has installed electric radar signs that show my current speed. They show how fast I’m going for the whole world, or my nosey neighbors, to see. Every time I see one, I instinctively slow down to the appropriate speed.

So why do those electric speed signs work so well? It’s not like I have to wait for a sign to tell me that I’m speeding. I have a speedometer. I know that I am going over the speed limit. It’s also not like it takes my picture and posts it around the block saying “this man speeds … BEWARE.” I’m not getting ticketed for what the sign reads out. Yet, the sign always works.

No, it’s not magic. It’s the publicity. Yes I speed, but I assume no one else knows about it. As soon as one of these signs comes into view, I know that the whole world can see that I’m a speeder.

Making speed public helps people govern themselves. It is human nature that when we see something is tracked, displayed and public, we focus on improving performance. This principle applies to your dealership, too.

Taking it public

I’m not suggesting that you install speed limit signs, but you should track, display and publicize Key Performance Indicators (KPIs). If you want to improve individual and overall performance in your business, you need to:

  1. Identify what is meaningful to your success (KPIs).
  2. Create ways to track those items.
  3. Make it easy for everyone to see progress.

Figuring out what will make you profitable can be tricky, but a good place to start is a break-even point analysis:

Break-even identifies when sales are equal to expenses. There are two types of expenses: variable and fixed. Variable are expenses that only occur when you have sales (i.e. commissions, hourly-paid service technicians), while fixed are expenses that happen even if sales do not, (i.e. lights, mortgage).

Once these expenses have been identified, you plug them into the formula to determine how much revenue it takes to break even. Here it is:

Break-Even Point = Fixed Costs / (Per Unit Revenue – Per Unit Variable Expenses)

This formula can help you in every department to know at what level your sales are equal to your expenses. Of course the goal is to make more money than just break-even, but if you are going to get over a mountain, it is good to know the elevation at the top. Every one of the factors in the break-even formula is a good potential KPI.

False negatives

Why is it important to go through the break-even and other calculation exercises? Isn’t it easy to know when you are making money? As long as I’m busy, I’m making money, right?

Wrong. A lot of businesses fail because they equate activity with profit. Your ability to understand the truly critical factors for your business performance and affect them will determine the long-term success of your business.

It comes down to your ability to identify the Key Performance Indicators in your specific operations, then making them trackable and public. Give everyone in your dealership something to work towards, and they’ll achieve it.

If it takes stealing one of those big speed limit signs. Do it. You can even come take the one off my street, I won’t mind.

Adam Shiflett