For decades now, dealerships have gotten by with ‘self-reporting’ their financial performance, using very subjective methods and rarely adopting automation. I call this 'fake news.' I say this as it is similar to what has become somewhat of a buzzword of late for the type of yellow journalism that writes and publishes with the intent to mislead in order to gain financially, politically or to grab attention. 

It's often said that history is written by the victors. Perhaps that's true, but I think that history is written by the people who wrote it down first and then had the means to distribute that information widely.   

The same is true in business. In retail automotive, department managers report to their GM, GM’s report to owners or principals, and in many cases individual stores are reporting to a larger dealership group infrastructure.  

But what, exactly, are they reporting? Currently the methodology of reporting of data is a fiercely debated topic.  

When managers ‘self report’ on their performance, whether it be in a weekly meeting, or a month end report or quarterly review, there are far too many data elements that can be swayed one way or another to paint a picture that the 'self reporter' wants to portray.  

We see this time and again with weekly reviews that are a bit too rosy; for example, when the self-reporter counts deals that are in pending status as final, and the projection of sales is based off of fuzzy logic. 

The goal of the “self reporting” manager is to make himself or herself look good at that moment. But the true strength of data analytics and business intelligence lies in its ability to help leaders make more informed, effective, and insight driven business decisions. These two goals often conflict. Do you really want to make important projections based on fake news? 

When it comes to reporting on financial performance, the unvarnished truth and a plan of action is most important. The days of manually created reports and self reporting are at an end. There are a handful of systems and tools available now to all dealerships that will allow them to improve their operations through more automatic and objective reporting. These tools provide a single version of the truth!   

So don't get caught watching the paint dry. Create a business environment that promotes analytics as a core capability while fostering a culture of data driven decision making. Empower your people to change the way they do business by injecting data analytics into their decision-making process.  

Dealership reporting has finally come of age and leaders should spend their valuable time thinking about what the information means rather than spending valuable time compiling and curating it. Single version of truth reporting is here to stay!

For service managers, I have found that Thursday is a good day to do a trial close as you get ready for the end of the week. By Thursday you know pretty well where you stand and if you discover problems, you still have two days to get them cleaned up. 

A trial close starts with closing every Repair Order (RO) that can possibly be closed. Since many dealerships still pay techs and service writers weekly off of closed ROs, this process will ensure your employees are getting paid in a timely manner, which makes them happy.  

Additionally, I recommend reviewing a few Key Performance Indicators (KPIs) that can tell you if there are problems lurking in your processes. Potentially, these problems could rear their ugly heads at any time to take a big bite out of your weekly profits. Tracking these on a weekly basis will help you close out this week on a positive note, while setting up next week for maximum profitability.  

1) Open Repair Orders (ROs) Over 3 Days 

How many ROs are currently open that have been open more than three business days?  Ideally, no more than 10 percent of your total RO count have been open this long. A number higher than 10 percent indicates a problem somewhere. To find out what--or rather, who--is causing the problem, drill down. 

First, focus on the low-hanging fruit that delivers max profitability: customer-pay and internal ROs. Typically there are three reasons why these ROs stay open. 

The first reason is because the customer hasn't picked up their vehicle. Sometimes the service writer can't get hold of the customer, or they have tried and the customer has not returned their call. This can happen if the customer has gone out of town or if the loaner car they're driving happens to be nicer than their own car. They're not in too much of a hurry to pick up their vehicle. If this is the case, it's time for the service manager to get on the phone and become a little more persistent. You may want to tell the customer you'll have to start charging a daily fee for that loaner car.  

The second reason why an RO may stay open is if a service writer has placed it on the back burner to prioritize jobs that are easier or more profitable. Since the squeaky wheel gets the oil, this should be taken care of pretty quickly with a terse note from the service manager. 

Finally, the open ROs may be tied to a hoarding technician. Perhaps someone is flagging good jobs and won't let anyone else do the work. Meanwhile they're getting assigned to other jobs and the RO is sitting there. This problem is easily solved by the service manager, simply by assigning the jobs to other technicians. But you can't solve the problem if you don't know it's there. 

2) No Show Percentage 

How many service appointments were made but the customers did not show? Your no show percentage should be 15 percent or less. 

This KPI is important to track because if you're not following up on no shows, that's a lot of techs standing around doing nothing. If your no show percentage is higher than 15 percent, drill down. 

First, separate the warranty no shows from the customer pay no shows. There's no rush to follow up on the warranty work. But if it's customer pay, pick up the phone. Call the customer directly to see what happened and try to re-schedule. 

If your no show percentage is consistently higher than 15 percent, you may want to think about implementing an appointment confirmation process in your service department. It works in your sales department, why not service? 

3) Special Order Parts on Shelf 

Many times a customer needs a special order part to have a repair done, but their car is fine to drive in the meantime. The part comes in, someone leaves a voice mail for the customer telling them that their part is in...and nothing happens.  

There should be zero special orders parts over a week old. Daily calls and/or emails may be necessary to get the customer's appointment scheduled. 

Reviewing these KPIs will help keep your service department cash flow healthy and your shop scheduled to maximum capacity. What service KPIs do you like to review on a weekly basis? What other tips do you have to ensure that your week ends on a positive note? 

If you're in auto sales, the term "TGIF" - Thank God It's Friday! - probably has little meaning to you. In this industry, Fridays are spent gearing up for the weekend. Speaking of which, do you know what your weekend is looking like? 

To answer this all-important question, it's a good idea for General Sales Managers to sit down on Friday morning and review a few Key Performance Indicators (KPIs). Either that or you can try looking into a crystal ball, which I have personally found to be very ineffective.  

If these KPIs look good on Friday morning, the likelihood is high that your weekend will be positive. If these numbers don't look good, there is still time to take some corrective action. 

1) Appointments Set 

First and foremost on Friday morning I want to see that every salesperson has at least two appointments set per day for Friday, Saturday and Sunday. If anyone is slacking on their appointments, it's time to give them a little motivation speech.  

From there I want to make sure that at least 70 percent of those appointments have been confirmed by a manager. If it's lower than 70 percent there's no time to waste. Hop on the phone and start confirming those appointments!  

2) Used Vehicle Inventory VDPs Complete 

The next KPI to check is how complete your used vehicle VDPs are. At a minimum, every VDP should have a minimum of three photos, a description and a price. The percentage on this should be 100. Meaning, you should have ZERO vehicles online without pictures, descriptions and prices! 

How do you expect to sell a vehicle if a car shopper can't see it, can't read about it and doesn't have any idea how much it costs? Every vehicle sitting out on your lot has a cost associated with it, every day. Since your dealership is paying for 100 percent of your inventory, you should be marketing 100 percent of your inventory online. 

3) Email Click-Through Rates (CTRs) 

Are your recent marketing offers generating enough interest and excitement to draw people to your dealership? Check the CTRs on all email campaigns sent out in the last week. What's considered a good CTR varies depending on the type of offer, but generally speaking you want at least 5 percent and preferably 8 to 10 percent. If your CTRs are lower than that, you may want to consider creating an exciting last-minute offer or incentive to draw some weekend visitors. 

4) Used Car Acquisitions 

What percent of used car acquisitions out of the service drive have you achieved for the month? Ideally it's somewhere between 15 to 30 percent. So for every 10 appraisals given, one to three of them have turned into a deal or car purchase. 

One way to ensure this percentage stays in this range is to offer no obligation, free appraisals to every service customer. This is done by simply asking your customers, "Would you like to find out what your vehicle is worth in today's market?" Let them know you'll have their free appraisal ready for them when they pick up their car. Along with the appraisal, include an offer for purchase, along with what it would cost to upgrade to a newer model. 

To do this effectively, there should always be a dedicated salesperson in the service drive. The GSM should meet with this person on a daily basis to review the appraisals. 

The best appraisal opportunities are those where the customer can upgrade their vehicle without having to put down a lot of money, and their monthly payment wouldn't be much more than they're paying now. On Friday, identify the best opportunities and reach out to those service customers to see if they want to come in for a test drive over the weekend. 

So, General Sales Managers, what's your weekend looking like? Don't rely on a crystal ball or leave it up to chance to determine whether your weekend is good or not. Reviewing these KPIs will give you a pretty good idea of how the weekend is shaping up, and the knowledge to take action so it can be even better!

If you're in dealership management you're probably familiar with the routine. No matter how great your intentions are to keep a steady sales pace all month, it’s month-end and you're playing catch up. Even worse, sometimes you believe it's going to be a great month until a nasty number shows up on your balance sheet during the last week.

Ultimately it's the General Sales Manager who is responsible for making sure there are no nasty end-of-the-month surprises. Fortunately, these days it's pretty easy to track Key Performance Indicators (KPIs) to avoid last minute scrambles.

I suggest you review the following KPIs on a daily basis, not just to see where you are, but to find out ‘why’ you're there. Knowing the ‘why’ behind the where allows the GSM to take immediate action, bringing greater consistency into the sales process and departmental success.

1) Units Sold to Budget

When you wake up in the morning, this is your basic scoreboard. Where are you pacing with both new and used? If you are behind more than your three-day, red alert. For example, if your goal is to sell 100 units per month, that means your average is 3.33 units per day. If at any given time you fall more than 10 units behind it's going to be very difficult to catch up to goal.

If this KPI signals a problem it's time to light a fire under someone's behind. To find out who's behind, drill down to the following:

• Salesperson activities. Is there a salesperson that hasn't delivered a car in the last three days? If so, are they doing what they're supposed to be doing? If not, they may need a friendly counseling session.

• Total appointments. Is the store averaging two appointments per day, per salesperson? That's a reasonable goal for any sales team.

• Confirmed appointments. How many appointments were confirmed by a manager one day prior? This metric has been proven to increase shows and the goal should be at least 50 to 75 percent of appointments confirmed by managers.

• 3-day ‘no sale.’ Which Salesperson has gone 3 working days without a delivery? Identify this individual and sit down for a one-on-one review of his/her CRM. The strongest move is to cull the CRM with the Salesperson and call active clients to get an appointment. Nothing is more motivating.

2) Gross Profit

Similar to units sold, this KPI should never fall behind your three-day average. So, if your monthly goal is $100K gross profit and you're down over $10K at any given time, there's an issue. To find out where the issue lies, drill down to the following:

• Is the first pencil at maximum gross profit? Review your last 25 deals, see what the initial offers or counter-offers to your customers were. You may have a manager or salesperson who feels compelled to discount.

• Is your trade appraisal process being followed? A lot of gross profit can be lost in trade appraisals, with missed opportunities in both under or over allowance. It's very easy for salespeople to shortcut this process, especially if they are behind. Nine times out of ten if there's a problem it's only going to get worse. Dig in and watch an appraisal. Or, better yet, do an appraisal yourself.

• At what point are managers getting involved in the deal? The earlier the introduction, the more likely the deal will close. Ideally the manager gets involved just prior to the demo/test drive, or just after. This should be recorded in the CRM, but if it's not, it can be discovered by talking to the sales team, or by observation. Believe 80% of what you see, only 20% of what you hear.

3) F&I Reconciliation

If this KPI is greater than five percent less than your gross profit goal, someone is making some serious mistakes. For example, if you believe that you have $100K in gross profit but the F&I reconciliation comes in at $85K, that's $15K in errors somewhere.

To find out where these errors are occurring, take a closer look at what your finance managers, salespeople and accounts receivable/payables are doing:

• Is the finance and sales manager including items such as shipping and other chargebacks? If these aren't added right away it can lead to large discrepancies when they are finally reconciled.

• Are your sales managers submitting capped deals with all ‘We Owe’ items accounted for? Make sure all the "We Owes" and reconditioning charges have been included in the paperwork.

• Is your AR/AP person posting all expenses on a daily basis? Two or three days of delays can make a big difference to your current gross profit.

Keeping a close eye on these KPIs helps General Sales Managers take care of problems as they arise so they can avoid nasty end-of-the-month surprises. As a result, your sales team won't have to frantically play catch up to meet goals.

Which sales KPIs do you review on a regular basis, and how do they help your team stay on target?

In auto dealerships when managers hear the question "How's your week going?" they know it's not always a personal question. Someone--usually the General Manager--wants to know whether they're on track to hit goals.

The most reliable source to find out how it's going is to drill down into Key Performance Indicators (KPIs). We all know the usual; gross profit, retail unit gross profit, service gross profit, new car inventory, receivables, etc. These are all good to check on a daily or weekly basis to see how you're trending.

But knowing how you are trending isn't always enough. A General Manager also wants to know if there are potential problems looming on the horizon. That's why it's good to look at these two KPIs every Wednesday: Contracts in Transit and Open Repair Orders. These two "cause and effect" KPIs can help spot problems before they happen, leading to additional gross profit.

Why Wednesday? It's not too late to correct and early enough to have a positive effect on the weekend.

Contracts In Transit

It's Wednesday and you have CITs over five days. Most likely you're running into a potential cash flow problem. Today's lenders will fund clean deals within 48 hours, so a CIT over five days means it's still on someone's desk or you've sold a car that was never approved. Either way you've got a car on the street and you haven't been paid.

DRILL DOWN:

Deal Type. Was it a retail or cash deal? If it's a cash deal it may not have cleared yet and it's a simple matter of checking with the customer's financial institution. Or you may have a contract that was not properly signed or agreed upon by all parties.

Finance Manager. Is there someone who is holding deals? Or perhaps the customer's information was not verified before entering it into the DMS, or a finance manager submitted the deal without the necessary supporting documentation.

A best practice is to have your finance managers review CITs every day and expalin why the contract hasn't been sent to accounting or hasn't been funded by a bank. Have them note explanations in either the finance portal or dealership dashboard.

Lender. Are they slow walking your funding? A phone call may correct the problem.

As every GM knows, cash flow is king and CIT represent cash in hand. Keeping a close eye on this KPI ensures you won't run into any problems.

Open Repair Orders (ROs)

Open ROs happen. It's inevitable to have a few ROs that have been open more than three days. The key word there is few. Every dealership's threshold is different, but generally no more than 10 to 15 percent of ROs should be open more than three days. If it's Wednesday and 20 to 40 percent of your open ROs are over three days, alert Houston because you've got a problem.

Bad CSI, bad tech productivity, bad service writer productivity, bad factory relations, increased unapplied time and increased rental car expense are just a few of aging open RO ‘side effects.'

DRILL DOWN:

Service Advisor. You'll know there's a problem if you see a person who has more open ROs over three days than they can potentially write in one day. For example, if an advisor typically writes 20 ROs in a day, and they've got more than 20 ROs that have been open more than three days, it's time to start asking questions. Is there a dispatching problem, a booking problem or an upsell problem? Consider removing them from the drive until the situation is resolved.

RO Type. Internal, customer pay or warranty? Internal ROs could signal that inventory isn’t ‘ready for retail’ fast enough, too many customer pay ROs leads to CSI or Lemon Law issues, and excess warranty ROs may be due to lack of training or skill, ‘back burner’ dispatching, or poor communication within the team.

Send the service manager a ‘Top Ten’ list. Ask them to comment on why the ROs are aging and when they will close. Note the response in your internal comments section.

Checking these two KPIs and drilling down into the reasons behind the number helps to identify a number of opportunities in the dealership that have a wide systemic effect on the dealership's overall performance. Conversely, when these two KPIs are in line, your dealership runs more efficiently.

Creating this habit every Wednesday allows you to take corrective action, turning a potentially bad week into a good week.

The election of Donald Trump has created a mixture of hope and trepidation amongst dealers, automotive manufacturers, parts suppliers, and in the whole automotive ecosystem in general. 

Will the Trump administration lower taxes, deregulate the industry and usher in an economic boom time? Or, will the auto industry be subject to massive upheavals in terms of its manufacturing centers, tariffs, and tax policy creating a period of instability?

I could speculate on what will occur, but that would be a fruitless enterprise.

Instead, I’d like to focus on chickens. Yes, chickens -- And not just regular chickens, but American chickens with a ticket to ride to Germany.

One of the great truths about history is that it is indeed stranger than fiction. How does our modern day political and economic situation in the auto industry relate to chickens? Well, as it turns out, there is a direct and integral link between the modern automotive industry and chickens.

For the past couple of decades, up until the emergence of Donald Trump, industry insiders had thought that this automotive ‘chicken’ connection was no longer a factor in our modern world.  They were wrong. 

Ok, so what’s the deal with the chickens?

To know, you have to get into a little history. Back in the 1960’s, Germans (West) found themselves in a sudden and deep love affair with American chickens. After World War II meat was scarce in Germany, and even by the early 1960’s widely available and affordable meat in the German marketplace was a foreign concept. Enter the world of the American chicken industry. Starting in the late 1950’s American chicken exporters began to flood the German market with cheap, American-raised Chickens. Other European countries also got into importing American chickens en masse, such as France, Netherlands, etc.  

German families were ecstatic to finally have an affordable every day protein available and this seemed to be a perfect economic win-win. Except it wasn’t. German chicken farmers who were boxed out and outpriced by the American chicken glut complained to the West German government. In 1961, along with their allies in France, Netherlands, and other Common Market countries in Europe, they imposed sudden and steep tariffs on American chicken exports. 

This reduced the American chicken export market by nearly a quarter overnight and ignited a mini-trade war between the U.S and many European countries. At the same time as the chicken fight in Europe, Volkswagen, along with a few other notable European automotive manufacturers, had begun exporting pickup trucks and other cargo vehicles into the U.S, and they were becoming extremely popular. 

In 1963, after a breakdown in negotiations, the government of Lyndon Johnson decided to penalize European truck exports and imposed “The Chicken Tax.” The American Chicken Tax wasn’t actually targeted at chickens of course, but instead was aimed at vehicles that could be used to transport goods. This meant pickup trucks, commercial trucks -- anything with a flat bed or cargo storage capability. Worse than that, it was a massive tariff -- 25%!  And beyond the retaliation to the German/European Chicken Tariff, the new Chicken Tax was aimed at all vehicles not produced in the United States.

In effect, the U.S government took the European chicken trade war as an opportunity to protect American vehicle manufacturers from all worldwide competitors in the pickup truck sector. The Chicken Tax had a wide-ranging effect in the U.S auto industry. American trucks had a clear advantage for nearly 30 years, allowing them to dominate the space in the 1980’s, not having to compete with lower cost Asian exports. The Chicken Tax provided a cocoon in which the U.S truck market flourished. In the late 1980’s and 1990’s, Japanese and other manufacturers were able to avoid the Chicken Tax by assembling and building vehicles within the United States, but this was considered a victory for the U.S economy as it brought jobs and resources to the country. 

After NAFTA was passed in the mid 1990’s, the Chicken Tax was suspended for vehicles manufactured in Canada and Mexico. This set the stage for the huge influx and production boom of truck assembly plants in Mexico from automakers all over the world, including U.S. manufacturers.

Indeed, much of the political rancor related to the automotive industry from the 2016 election was centered around the concept of American manufacturers who’d moved production to Mexico (seeking lower cost production), potentially being penalized by the Trump Administration for doing so. In fact, many U.S plants would likely have never moved if it were not for NAFTA extending protection against the Chicken Tax for companies operating out of Mexico. 

What a tangled web we weave! An American tariff law that helped build the U.S dominated pickup truck industry which was voided in the case of NAFTA countries, is now the primary mechanism and threat to U.S manufacturers should the Trump Administration remove the NAFTA provisions altogether.

Truly, the long term decision making moves from some of the world’s largest vehicle manufacturers could be severely disrupted should NAFTA be canceled. 

It would seem that the Chicken Tax, in all its glory, has returned to relevancy after several decades of loopholes rendered it inert. Could it be that Donald Trump and his administration are rabid Chicken Tax supporters? 

Have the chickens come home to roost?

Is data your best friend or your worst enemy?

Why do I ask? Well, if you work in a dealership, chances are good that you either review or are responsible for creating reports on a regular basis. For principals and managers, reports reveal important information such as how many units your dealership has sold this month, how many customer-pay ROs you've completed, or whether you're on track to hit quarterly revenue goals.

But knowing these numbers doesn't necessarily lead to improved operations or more revenue. Are you leveraging your business intelligence to increase ROI for your dealership?

In auto dealerships, business intelligence is defined as the analysis of data gathered from reporting applications, and the subsequent application of that knowledge to improve best practices and make better decisions.

Here are three ways that accurate business intelligence can deliver immediate ROI to your dealership:

1) Process Improvement

Business intelligence has proved time and time again, with many different dealerships, that when processes are followed you make money. Not only that, but the more adherence there is to established processes, the more money you will make.

If your Key Performance Indicators (KPIs) are set up correctly and your data shows that certain departments or individuals are not operating within those KPIs, then you know your processes are not being followed. It's as simple as that.

The nice thing about using KPIs as a process-checker is that you'll know beforehand if revenue goals are in trouble. So instead of having to go to your sales director and ask why your sales team had such a terrible month last month, you'll be able to approach them proactively. Halfway through the month you can say "these salespeople are not making enough phone calls," which gives the team time to correct their actions and play catch up so you don't get a nasty surprise at the end of the month.

2) Transparency

I’m sure that just about all of you have had a department manager and a GM look at the same numbers and come up with different projections, it’s a pretty common occurrence in dealerships. That's because often there isn't consistency or accountability in the reporting process.

One of the main benefits of business intelligence is that it can be harnessed into a format so everyone is looking at the same data in the same way. For example, if a service advisor provides a weekly report in an Excel spreadsheet, and one week sees an unusually high number of open ROs, he may be tempted to fudge that number. But when reports are generated in a consistent template using the data in your DMS, it becomes difficult to fudge the numbers. This creates transparency; everyone is looking at the same data, which can then be used to improve accountability and to apply discipline where necessary. Additionally, increased transparency often leads to increased motivation by employees, because it becomes impossible to hide poor performance.

When it comes to data, transparency is either your best friend or your worst enemy. If it's your worst enemy, chances are you like to procrastinate or don't like to follow processes. However for a dealer, transparency is in fact always your best friend because it gives you a more accurate picture of where you are, how you got there and how you can get to where you want to be next month, quarter or year.

3) Increased Productivity

The most accurate business intelligence is gathered from reports pulled from your DMS or from an enterprise reporting system that's integrated with your DMS. A side benefit of using this these types of reports for business intelligence is that they can be run quickly, which significantly increases staff productivity.

Do you really want each of your Internet Managers spending four hours a week creating reports in an Excel spreadsheet? Or would you rather have them spend that four hours following up with leads? Same with your service advisors; wouldn't their time better be spent training techs or following up on declined repairs?

Taking the extra time to dig into KPIs and glean business intelligence from them will deliver increased ROI in the form of process improvements, transparency and more productivity.

What story are your reports telling you? Focusing on rear view numbers tells you where you've been. Business intelligence can help you navigate to where you want to go.