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Filed in: New Car, General Mgt

Salespeople

By Bryant Gibby on Jan 14, 2013

We recently hired 4 salespeople within a week because us managers felt like we were short staffed and didn't have enough coverage on the sales floor. Like always, the entire sales force complained about how we were flooding the floor and they weren't going to be able to get in front of enough people to make a living. I get where they are coming from having been a sales consultant before. Nobody welcomes more salespeople and additional competition.

 

All this sparked what I thought would be a good topic to throw out there. What is the proper amount of salespeople with regard to how many cars a dealership sales?

 

I know some people think that the more sales people that you staff, the more cars you will sell. Although there is some truth to that, I think there eventually has to be a cut off. I don't agree with flooding the floor because I think it will kill moral on the sales floor and will lead to high turnover in the long run.

 

On the other hand, you could argue that if you can get a core group of a minimal amount of guys that know what they are doing, then that would work as well. I think the 2 drawbacks to that approach are coverage and finding that core group of guys. I think you would regret this approach when it comes to vacations, days off, and excessively busy days. Also, it is really hard to staff a team where everyone knows what they are doing. I also think this approach will promote laziness because the guys wouldn't have to work hard and fight for every deal in order to make a living.

 

Anyway, what is the right number? Is there a magic formula based on how many deals your dealership does? Maybe I shouldn't worry about it and just ignore my sales guys:)

Comments

I don't know if there is a 'magic formula', but if customers aren't being taken care of and ups are being missed, it is time to add another person or two. I think if you want o get to 100 cars, you should have about 10 sales consultants. An average of 10 per person is a reasonable amount.

Jan 15, 2013

Establishing goals for the dealership based on realistic expectations of achievable market share plus providing resources sufficient to accomplish said goals is a senior manager responsibility. Adequate inventory, marketing, support services in get ready and service, F&I and office staff are critical but none more so than having a trained sales staff ready willing and able to not only process your existing traffic but to contribute their own network of customers.

One sales consultant for every sale and one sales manager for every five salespeople has become an accepted formula to achieve realistic sales goals, however, if your objective is to maximize the ROI from your dealership then technically there is no limit. A properly managed sales consultant with sufficient inventory and support should be self sufficient and not depend solely on your natural showroom traffic. Hire professional self motivated sales consultants and the size of your staff becomes irrelevant since their performance will only be limited by your ability to support them with product and processes.

Jan 15, 2013

Agree with both Jim and Phil, there is no actual formula,lots of "experts" will tell you there is,but alas they are just opinions...and here is mine.
"The Decision"
"I'll be taking my talents to South Beach"….oh, sorry, wrong decision [Clevelander joke]
The way many dealerships make the decision when to bring on more salespeople and how many or replace under-performing salespeople has always baffled me. I have seen countless "formulas, statistical data, seasonal hiring decisions, you name it. We have had managers tell us they need 4 salespeople, we ask them why 4?" That's how many desk we have open" Really, hiring due to number of desks? New manager starts at store and brings his "team" with him. This one is very exact "Salesperson can properly "wait on" 2.25 clients per day x 6 day work week =13.5 clients a week X 4.2 weeks per month = 56.7 clients per month, so we are "logging" 425 clients a month which would mean we need 7.49 salespeople on our floor??? "It's the first of the year, in with the new, out with the old" I know none of you make your decisions these ways, but you know what I'm saying.
Law of Diminishing Return
The reasoning behind The Law of Diminishing Returns from a Dealers point-of-view in terms of hiring employees can be simplified into three stages:
• In the first stage, the addition of more salespeople allows for specialization of job responsibilities and increased production efficiency. The result is a larger output return for each additional unit of input.
• The second stage is where inputs equal outputs. Each new salesperson added will continue to increase production, but only at the same rate as the increased input of labor.
• The third stage is when additional salespeople will start to decrease production efficiency because the work environment is fixed in the short-run. This results in returns that are less than the labor input.
• Imagine this situation. You have hired a teenager to tend to your garden. He plants 4 saplings in an area of 10 square feet in 4 hours. The next day, he brings another friend along and you decide to hire him as well. The time and the area don't increase, but the number of saplings planted increases to 8. Another boy comes along and is hired by you. Again the area and the time limit is the same. But the number of boys is now 3. And the number of total saplings planted is now 9. If you hire another boy and maintain the same condition, you will notice that the number of saplings planted may increase overall, but the number of saplings planted by each boy will reduce, until eventually it will be 0. The above explained situation is a classic law of diminishing returns example.
My question is, do we have any idea where that third stage is? We are in the car business, our outcome should be to have as many people as possible buy our products and services at the highest possible profit margins we can with 100% customer satisfaction. We can't do that unless we have pushed the envelope with a quantity of quality, properly recruited, screened, interviewed and trained salespeople.
"I don't want to flood my floor"
That's admiral and I applaud your moral judgment in trying to make sure your salespeople all make a good living, but how many times have you invested in having a special sale or event, or your product is super hot and huge new incentives came out or you invested millions in your facility and you look around and several of your salespeople decided to come in late, stay home or move on to the next "Hot Store?"
The law of diminishing return is a bit different in our business. How many hours are your salespeople currently scheduled to be at the dealership? Wouldn't an additional sift or shifts or teams allow them to work less hours, be more effective and in turn more productive and actually have lives outside of work as well? Couldn't that also help the talented person at your store that has "Manageritis" and if you don't move him or her up, make them a team captain, they are going to leave you?
How much real time do your salespeople have to actually truly prospect, develop their own client base, properly handle all the internet leads, take vehicles to people's homes or businesses ,be involved in the community to create more business when they are at the dealership bell to bell?
Simple question did you or did you not sell more cars when you had more salespeople? Why are some dealers that are in the middle of nowhere selling 5 to 10 times the number of cars dealers in major metro areas selling? Marketing, proper use of the internet for sure, but remember in this point in time in our industry our property goes well beyond the amount of acreage you own, take advantage of that opportunity and dominate your competition .To do that, you need better recruited and trained people. Now of course at some point to many really is to many and moral goes down and productivity would suffer, but I'll bet very few if any have ever come close to that point that are reading this.
Judy B. Margolis, writes:
"Employees who grow too comfortable and complacent lose their edge. The more they know, or think they know about how their particular slice of the business world works, the less likely they are to challenge their old tried-and-true methodologies and to innovate. The same holds true for companies that fail to embrace change and, instead, have it foisted upon them, often when it is too late."
Bryant,one last thought..if your current staff has an issue with adding people,chances are that's a very sure sign you don't have enough!

Jan 15, 2013

I've got stores that have both large sales staffs and minimal crews. The managers style and concept in gaining the most out of his staff has a lot to do with what works or doesn't. With that said I agree with Jim, you can't count on much more of an average of 10 per guy. In which case don't set your standard at 100 and only have 6 sales guys. As far as your sales guys being disrupt about the situation, there is no way around it. I remember when I first got in the business and every sales floor was flooded because it was up to you make deals NOT the dealership to make sure their is enough to go around.

Jan 16, 2013

I don't think I'm processing one of Philip's comments properly. "One sales consultant for every sale and one sales manager for every five salespeople has become an accepted formula to achieve realistic sales goals" Is that saying that if we forecast to sell 100 cars we need 100 sales consultants?

Also, I subscribe to the adage, "Don't let the inmates run the asylum."

Fun topic to discuss.

Jan 16, 2013

Sorry Ron, TYPO! One consultant for every ten units. That, but again, there really is no need to set the goals for a professional sales consultant since the right ones will set their own.

Jan 17, 2013

Well, I'm about to make a bunch of people mad...

Let's get this straight... The days of backing in to the number of sales people as a ratio of sales is over. Seriously! There is ZERO direct correlation between the number of cars sold and the number of sales people on staff...

"Hi, I'm 1980 and want my pointy toe heels back!"

Craig is closest to bringing this conversation into reality, but really? We are going to choose staffing levels based on how many cars we sell? Really?

With apologies to certain people, there is NO WAY you staff your sales departments on the number of cars you sell. First of all, the days of backing in to the average sales person sells a total over 10 cars a month are over. The national average depending on what data you use is between 11.5 and 13 cars per sales salesperson. That's reality and I'm happy to email anyone the actual numbers. My stores run closer to the 13...

Interesting that there is no mention of closing ratios. "1980" says I want my 20% of closed to upps represented. Industry average? Well, I don't want to be average. I'm helping manage stores with solid processes that close near 30%.

Bottom line... Traffic counts... Period!

Your sales people can effectively work on average 75 upps/opps a month. So you staff based on traffic... Some salespeople will be higher, and some will be lower. But you staff based on traffic and then work on your processes to get you closing rates in the 23% to 30% range.

With all due respect to everyone posting, my goal is to get you to think about your business differently. Phil quotes average numbers (which I disagree with), but I'm hoping the people that read this are not satisfied with average.

You staff your stores based on the number of people that walk in/call in/email in/send leads in - and NOT how many cars you sell. Anyone that tells you differently isn't really engaged on the "new" car business.

It's 2013... Let's build and run our businesses with this in mind...

just sayin'

Jan 17, 2013

  • "know it all"...my boss says that I am suppose to know it all
  • dScore: 0

Back in the 80 or 90's, I asked my dealer (and friend) why we were putting on so many more salespeople (5 I think) to our staff. He told me, that Chrysler says that every salesperson will produce 10 sales, and this move would help the store sell more cars. I asked if he really believed that crap? If that was true, why isn't every dealer in the country hiring 1,000 to 2,000 salespeople and backing up a Brinks truck three times a day to make the deposits ???

He looked at me...and walked away....Myth Busters ....#1...I worked for him for 15 years, too.

You have to be "certified" to get the bonus money from Chrysler. (Craig has met me, he knows that I am certifiable...lol) Dealers are spending a lot of money for these programs for each individual. That doesn't include any other training investments, vacation and benefits, to add to the cost of each person. Would you rather have eight well trained and loyal salespeople or have 15 that half of them spin on a revolving door? We have only one person with less than ten years on our floor. Our customers walks in and sees familiar faces in our dealership. This makes a great reputation for us. Perhaps the number of salespeople isn't the issue, perhaps it could be the sales process, too.

Does your process drag the salesperson off the floor for hours? Could some of the process be handled by another person? Do you train your salespeople to "sell" or be masters of bureaucracy??? Be sure to check your processes from appraisals, pencils, wait times from sales to F&I to delivery. Keep it easy and quick for both the customer and the salesperson....hope this helps...

Jan 18, 2013

I agree with Tom. The notion of one salesperson for every 10 sales is archaic. Traffic is the real issue. How many customers can one salesperson handle per day. At my store, I feel 2/day is the right number.
One of the big changes over the past 5 years is that traffic is declining while closing ratios are increasing. Basically, customers are doing most of their work at home on the internet before they every come into your dealership. They used to shop 4 -5 stores before deciding.
This translated into low closing ratios and took a lot more time to close a deal. There is no such thing as a "tire kicker" any more as the average customer now physically shops less than 2 dealers before purchasing.
The good news for both salespeople and dealers is that we can sell more cars with less salespeople. Potentially allowing the dealer to have more efficient, higher quality staff, and allowing the salespeople greater earning potential.

Jan 18, 2013

You start with an accurate "Up Count." Without that you are shooting in the dark. A sales person can professionally handle about 60 - 75 OTDBs (Opportunities To Do Busness) per month. If you aren't running a proper rotation system you really don't know what your true traffic count is. You are relying on your sales people and managers to tel it like is, which they are NOT going to do. Why? The more prospects logged, the lower the closing percentage looks.

Yes, when hiring sales people most dealers will probably hire more than the expect to end up with. AND you can count on your "experienced" sales people to run off as many as they can.

Jan 18, 2013

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