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Choose the correct CRM for your dealership OR pay dearly

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Store Metrics for Excellence in All Departments

I’m sure the first question being asked is why anybody from a CRM company would bother writing anything that doesn’t have anything to do with CRM in the first place. The answer is simple: CRM is but one component needed, in my opinion, to run a successful automotive operation today. While I believe it’s one of the most critical, there are other things necessary for a store to be successful in today’s hypercompetitive environment. Additionally, having lived and thrived in the retail automotive industry, I can; which, is in sharp contrast to that of all my counterparts.

Gross

It’s something that we’ve created and supported business after business and consultant after consultant alike to give us ideas and tactics in order to preserve. Profit isn’t a dirty word; there are some minimum metrics to which one must adhere. They are as follows:

  • 30% net to gross in each department
  • A blended average of $2,500 in gross per retail unit new and used including F&I, packs and holdback
  • Department Margins: Parts 33%, Service 70%, Body Shop 60%
  • Service and parts absorption: 85%

Expense

Total expenses should be 10% of total dollar sales or lower. What’s amazing to me is how many dealerships across the country have tremendous bureaucracy and are extremely “long” in their structure. We need to move toward flat organizations and less bureaucracy and fewer people doing non-income producing tasks. This reminds me of a scene from the movie Office Space and the character Tom Smykowski when he’s asked by Bob and Bob the management consultants what exactly he does when in fact he didn’t do anything. Here are minimum expense metrics that produce results:

  • Sales management payout shouldn’t exceed 10% of total gross in each department
  • Sales commissions shouldn’t exceed 20% of front end gross
  • Total F&I payout shouldn’t exceed 20% of the total NET F&I income
  • Total advertising notwithstanding rebates/credits should be 20% of total vehicle gross (NADA says 10%). The rule of thumb is $300 per vehicle sold before credits
  • Floor Plan expense should be a push including credits
  • Salaries and bonuses for all fixed op personnel shouldn’t exceed 30% of gross

Asset Management

This is pretty self-explanatory. Keeping in mind protecting the cash position and adding to it is the number one goal. Here are some metrics that will keep you safe:

  • New cars inventory shouldn’t exceed a 60 day supply
  • Used cars inventory shouldn’t exceed a 30 day supply
  • Used car average ACV should be ½ of average new retail invoices
  • Parts inventory should be a 60 day supply with less than 10% over 9 months and nothing over 12 months

Obviously there are other pieces, including office personnel comp, ideal staff sizes to maximize each person’s income while not compromising floor coverage (the trick is to not underpay and not flood the floor). .

 Chris Vitale is Vice President of Sales at iMagicLab.  He has over 15 years of in dealership experience and is quick to call it like he sees it.  If you want a no holds barred look into ​effective CRM deployment and use subscribe to our blog here at DrivingSales and follow Chris @thecrmgod on Twitter. 

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