The real driver of vehicle sales isn’t your closing questions, or that new online buying web-app, it’s access to credit. So, if your dealerships only goal for 2017 is to “sell more cars,” you might as well just tell your marketing company your goal is to “spend more money on digital ads.”

With so many things out of dealers control, even if you do sell more cars you’re not guaranteed to make more money. Just for fun, how about 3 things dealers have no control over that impact sales:

1. Interest Rates – Until we understand the impact the end of QE and the Fed's December rate hike will have on auto loans, there is no way of knowing if we’ll continue to see 0.9% interest rates. Rates have been low for so long, at this point even 3.9% seems high.
2. Consumer Confidence – I had a Honda dealer tell me the #1 predictor of Honda sales YOY is Consumer Confidence. It might be solid now (up 4.3 points in December 2016), but we all know confidence levels rise and fall with the tide. We’re only starting to understand Millennial consumers, although one thins clear, they're not going to spend more than they have to.
3. Whatever Stunt the OE’s have for 2017 – Emissions, ignition switches, Trump Tweets. You get the idea.

If selling more cars is a terrible goal, what are good goals? Let’s stick with the theme and pick 3:

1. Take One Less Loser Deal Per-Month – Think about the impact to your bottom line if you took 1 less loser deal of -$1,000 or more per month. It’s not just the $12,000, it’s the $200 in commission per-deal you pay your sales people for losing you money, and the loss of income from selling the car at a profit! If one less deal a month keeps you from your OE bonus, you need a new GSM.
2. Make More Money – This is a no-brainer. Do you care if you sell 1,000 new cars, or 500 new cars if you could make more money doing it? The OE’s might not be too happy about it, but it’s not like they asked dealers when they started investing in all that Ride-Sharing technology.
3. Eliminate Waste – I’ll give you a place to start: ask your controller how many LAW forms you purchased in 2016, then subtract your total vehicle sales, and see how many extra forms you paid for. At $2.50+ per form, it adds up quick with all the miss-aligned documents, re-prints, and re-signs, and that’s just one document. How many FEET of documents do your customers sign again?

The point is, having a goal that you can’t fully control is only going to get you as far as you would have gotten anyway. Your sales team should be selling as many cars as they can, it’s the whole reason they exist.

A goal should be something to strive for, something to achieve above and beyond your normal day-to-day. Not what you’re supposed to do anyway.

And who knows what could happen? Maybe interest rates will remain low, Consumer Confidence will sky rocket, and Trump will send enough Tweets to create 2 million new jobs and the SAAR will hit 25 Million. Then when everyone is trumpeting their achievement of “selling more cars,” it won’t matter because everyone sold more cars. You’ll have made more money while doing it.

Trying to hire salespeople is the worst. Finding good people is hard, finding great people is nearly impossible.

The pressure on sales managers to have a “fully-staffed” sales team is incredible: They need to have enough people on staff so they’re not missing deals, but they can’t spend too much time hiring and not enough time managing their current employees, and often they don’t even know how many people they need.

Using data to determine staffing levels is not so much an art, as it is a science. There are several influencing factors that go into determining when to hire, and what types of people work best in each environment.

With that in mind, we’ll look at a couple examples that illustrate two considerations we use when helping dealers determine the optimal size of their sales team:

1 – How consistent is your sales team’s performance? (Image 1)
Image 1: Consistency vs. Hitting an All-Time High

This sales manager was prioritizing the store’s highest volume month, to justify a smaller sales team. His philosophy was, “Our best month had 12 sales people, so our perfect sales team is 12!”

For this dealer, we pointed out that while they had their best month with 12 people, it was over two years ago, and sales are exactly expected to increase in 2017. This dealer is more than 2X as likely to sell 100+ units per-month with 13 or 14 sales people, as they are with only 12.

Not only that, but they are equally as likely to have an under 100-unit month at 12 sales people as they are a 100+ unit month. And if they lose one person, the potential to hit 100+ units with 11 or fewer people is nearly zero.

2 – Volume vs. Cost (Image 2)
Image 2: Sales Volume vs. Cost of Sales

Adding additional people to increase sales isn’t always the answer. In our second example, this dealer has 24 salespeople on staff and was looking to hire 3 or 4 more. His justification? He felt like they sold more cars when they had more people.

“Gut feeling” is not something I ever advocate for, so we made sure to illustrate to this dealer that staffing over 24 sales people was only going to result in an increased cost. When they had more than 24 people, they didn’t sell more cars. In fact, when they had 26 or more they averaged less sales per-month!

Even if they lost a salesperson over the course of a month, they are still likely to have a high performing month with 23 sales people. Ultimately, our recommendation to increase sales had nothing to do with staffing. Where they are, is where they need to be.

Further Consideration:
There are several things that can impact how successful your sales people are, and when trying to determine future staffing levels there is a great deal that needs to be considered.

While analyzing Consistency, and measuring Volume vs. Cost are great places start, they can’t be the only things taken into consideration.

The whole point of this, and similar exercises, is to spend the time analyzing your business today so you can be ready tomorrow. Like I said before, hiring is not so much an art, as it is a science. Without a method, your gut will only get you so far.

I feel like I need to start this post with a joke about “Captain Obvious,” but since I’ve had this discussion with several dealers in recent months I’m not so sure.

Regardless of what your short-term goals are (better inventory management, improving lead conversion, reducing operating costs, etc.), the real goal is to improve how much cash you put in your pocket at the end of the day.

So, in that vein here are 3 ideas to improve cash flow:

1 – Tighten Up Your eContracting Process
The more efficient your F&I office is with processing deals via eContracting, the faster you get paid (in theory anyway). Improving the efficiency of eContracting can be as simple as reviewing what forms are available in your local market, to more complex process changes like who is responsible for sending wet-ink forms to lenders each day.

2 – Monitor Floorplan Effectiveness
Do you know how many vehicles on your lot qualify for Floorplan that are sitting unleveraged? With highly favorable Floorplan interest rates and payment terms available from both captive and non-captive lenders, there’s no reason not to leverage your inventory for cash. Because your inventory is always moving, consistent attention is required to take advantage of favorable floorplan rates without letting aged inventory eat away at your profitability.

3 – Stop Rolling Un-Funded Deals
Yes, we’re talking about you Florida*. And yes, you can still hit 40% service contract penetration on 250 new cars a month without playing some paper-shell-game. You might find some resistance from your F&I managers, but if they can’t sell product to qualified buyers on a funded deal, let them know Verizon is hiring.

More so than any other process, how you manage cash has an incredible impact on your business. Implementing a new process will help plug leaks, but without ongoing review and improvements new leaks will always spring up.

If you have a better way to improve Cash flow, or a reason why you’ve seen efforts like these fail in the past, leave a comment below. I don’t know everything, just ask my wife.

*(Something about states with SEC Schools seem to be the biggest culprits here.)

I don’t sell CRM anymore, but since I work with data I’m a little bias when it comes to over-input. Yes, dealers are creating a tremendous amount of data. The problem is, most of it is junk. Data is like a 1958 Tops Baseball Card Complete Set. You have it all, or you don’t and no one cares.

Dealers need their people to use CRM (obviously), more importantly they need their people to use it well. Here are four reasons to improve your CRM utilization in 2017:

1. It Works
   • I get that a “roll-a-dex” was once a valuable piece of business equipment, but if a sales person says “CRM doesn’t work” ask them what they know Salesforce.com doesn’t. With 288% gains in the past 5 years, the idea that a powerful CRM can’t help small business went out the window with 4 squares and VW Diesel.
2. It Keeps Your People Honest
   • Even today, there are dealers out there who don’t have their employees making phone calls that integrate with their CRM. It’s easy to spot, because half the sales people tend to “make” their phone calls between 11 and 11:15AM. Phone call reporting at the time the call was made is immensely valuable: if your prospect isn’t available at 11AM, have the follow up call scheduled for 2PM the next day. I’ll bet even your off-brand CRM’s can schedule follow up based on time-of-day.
3. You’re Guessing Without Data
   • You'll need facts to make decisions in 2017. If your people don’t enter every single phone call into your CRM, you’ll never know how effective your sales people are on the phone (I can’t believe I have to say that). If you don’t want to pay for texting-integration with your CRM, at least give your sales people the option to use “Text” as a lead source, or “Closed via Text” so you can track how texting impacts your sales.
4. They Don’t Come Cheap
   • If you improve your CRM utilization for no other reason than you’re paying for it, well that is as good a reason as any. CRM decisions take months. Demos from potential vendors, then demos of the “new” platform from your current vendor, then NADA demos of the same thing one more time. Then you finally decide and you wait 3 months for your first day of training. More effort is put into trying to save $100 a month on a CRM bill than ever goes into making sure your people are using it. Be better than that.

One word of caution: if you push your sales team to enter every interaction into your CRM, you may need to define new performance metrics. If you have a closing ratio of 30%, but your sales people don’t enter every up or lead they receive, you should expect that closing ratio to go down when you start getting all the information.

If you’re team’s productivity is tied to their comp plan, you may need to evaluate their pay structure after you begin the new process. Your team’s output won’t change, the reports simply haven’t been reflecting their real productivity, and it can take some adjustments to get it right.

If you would like to see how ƒrogdata uses analytics to help dealers analyze and improve performance and profitability, check out frogdata.com for more info.