by CDK Global | 12 September 2016

6 Things To Consider When Buying a Dealer Management System

Investing in a dealer management system (DMS) can be both an exciting and stressful time for a dealership.  People generally envision a long-term benefit, but once they get into evaluating, buying and implementing a DMS, they aren’t sure if the light at the end of the tunnel was sunlight or a 250 ton locomotive!  Over the past three decades we have installed dealer management systems in thousands of dealerships and found some common threads that can make the whole process easier on everyone in the business.

1. Have a clear vision of problems to solve

First, what specific problems are you looking to solve by implementing a DMS?  Do you have a murky understanding of your financial health?  Is it unclear which departments are producing positive results and which ones are costing you money?  Does your current system cause more work than it saves?  Are you losing sales opportunities or employee hours because of inefficiencies?  Knowing the answers to these questions is good, but the more specific you can get, the better.  How is your current system causing you excess work?  Where are your biggest challenges? What would solving them mean to you and your team?

2. Empower the team and get buy-in

Employees often fight change. It’s a fact. While a stubborn employee could negatively impact the rollout of a new DMS, there are ways to stack the odds in your favor. First, as appropriate, involve key employees in evaluating a potential DMS. This allows them to get a vision of how their daily routines could improve. It also lets them voice concerns so they can be addressed in advance.

Second, give them ownership of the project. Some employees fight change because they feel like all the changes are outside of their control. But if you empower key employees during the implementation process, they recognize their stake in a smooth transition and will work to minimize disruptions.

Third, make it fun.Run some little contests like “first person to complete online training gets a free lunch”.Change is stressful, but a little fun reminds everyone that there are positives to change.

3. A successful implementation involves partnering

You know the unique needs of your dealership and team members better than anyone.Because of this, the ultimate success of DMS implementation rests on the shoulders of your business and employees.However, your DMS implementation team has helped many other dealerships through this process.So plan on partnering with them and they will be a valuable resource to you.Their goal is to make this a positive experience for your team with minimal disruptions.Keep in mind the most important secret to a smooth transition is maintaining open, honest & frequent lines of communication between the teams.This ensures that everyone is using the same map to get to the same destination.

4. Training is crucial

Over and over again, training proves to be the most critical piece to helping an implementation smoothly. Improper or insufficient training can be a catastrophe.There’s an old concept – We don’t know what we don’t know.There’s no shame in not knowing something, but there is foolishness in thinking you can wing it without regret.You’re an expert at your business, but it took training and experience to get that way.Knowing the experience you needed, would you let a brand new tech work on a complex engine if they said “I’ll bang on it a few times and figure it out along the way.” No?So why would a complex dealer management system be any different?This software is touching all aspects of your business.You want experts with years of experience to help you get started.

With the thousands of systems, Lightspeed has implemented, dealerships sometimes get frustrated because they didn’t buy enough training. Never has a dealer regretted being overtrained. Take this advice – max out your training plan!

5. Understand the Total Cost of Ownership

It goes without saying that price is an important consideration in most buying decisions.  Studies have shown that approximately 80% of buying decisions are made on factors other than initial price.  A term for all costs involved in a product over its lifespan is Total Cost of Ownership or TCO.  These costs could involve lost employee time, malfunctions, and inaccurate figures with lost sales opportunities.

Remember Yugo cars from the mid-1980’s?  They had a very attractive low price, but Yugo couldn’t deliver service or quality and Yugo was out of the U.S. within a couple years.  When the company left, what were Yugo customers left with?  A broken down car, impossible to find replacement parts, a lot of frustration, money is thrown down the drain and a high TCO.  On top of it all, they had to go buy another car much sooner than they had expected. 

How does the Yugo story relate to a DMS?  When considering a DMS, it’s easy to look at just the pricing on a proposal.  But buying a system solely on price can cause a lot of additional unplanned expenses and frustration to the store and employees.  Hidden costs can include inaccurate data, stability issues, unproductive employee time and, potentially, another DMS change after a short period of time.  While these costs can be imprecise when considered in advance, they will eventually be real expenses that contribute to the Total Cost of Ownership.

6. Long-term ROI

Price can be the short-term focus. Eventually, you come out of the train tunnel and feel the sunlight. So what is the real long-term Return on Investment that a dealer management system can offer your store? There are soft ROI items like improved efficiencies, better morale through less frustration, or late nights trying to figure out the numbers.  But basing your ROI in hard numbers does not illustrate all the benefits of a DMS.

Overall, your DMS should have your time and money while improving productivity and profits. The software system should free up time so that your employees can focus on profitable tasks. You should have tools that will help grow unit sales, increase F&I penetration rates, and promote better closing ratios or margins. Once you have a vision on how your monthly numbers will improve, forecast that out 5, 10 or 15 years. Then you’ll see the true impact of a quality dealer management system.