Notifications & Messages

Jared Hamilton
From: Jared Hamilton
Hey - It’s time to join the thousands of other dealer professionals on DrivingSales. Create an account so you can get full access to the articles, discussions and people that are shaping the future of the automotive industry.
×
william cosgrove

william cosgrove COO

Exclusive Blog Posts

Audi Clearwater Among Top 86 U.S. Audi Dealers, Earns Coveted Magna Society Status

Audi Clearwater Among Top 86 U.S. Audi Dealers, Earns Coveted Magna Society Status

The Crown Automotive Group dealer was 1 of only 86 U.S. Audi dealers to qualify for the prestigious 2016 Magna Society Award. Audi Clearwater was evaluated…

How to Draw in Traffic With Video Marketing

How to Draw in Traffic With Video Marketing

After quickly rising to the top of the charts, YouTube has become one of the the most popular of any website online. It makes sense for any marketer to use…

5 Tips on Delegating Tasks to Underperforming Employees

5 Tips on Delegating Tasks to Underperforming Employees

No matter how carefully you hire or how well you manage your human resources, some employees simply don’t perform to the level you want them to. They…

Most Valuable Insight Finalist - Doug Van Sach

Most Valuable Insight Finalist - Doug Van Sach

Prioritize Your Prospects: Uncover Clues to Predict Who Will Buy Next Each year, the average customer test drives fewer vehicles. Given the fewer opport…

What to Expect as Driverless Cars Go Mainstream

What to Expect as Driverless Cars Go Mainstream

While the era of driverless vehicles is rapidly approaching, there is still a great deal of confusion and speculation regarding the full impact and the…

A Business Model that´s Just Plain Bad for Business

The traditional business model of the Automotive Dealership works against itself practically at every turn and is just plain bad for business and it is time to think about change.

With all the advances in technology over the years from Marketing to DMS, CRM and diagnostics for repairs the changes have been exponential. But yet the business model which has been flaw from the beginning has been overlooked and ignored.

There are two main points that I will touch on for this discussion but there are many other areas of concern which are fodder for other discussions to come.

1. Every department in a Dealership is a business upon itself with a budget and income expectations. This in itself causes a great deal of friction within the Dealership and most notably between the Pre-owned Department, the Service Department, the New Car Department and the BDC Departments.

A. At most Small and Medium size Dealerships any properly managed Pre-owned Department is  the Service Department´s largest customer.  

B. The Pre-owned Department pays close to the same labor rates as the average customer who has their vehicle serviced at the Dealership.

This causes constant in-fighting over costs of repairs, turnaround times and repairs that are not necessary. Also, repairs that were needed that were not performed before they were passed on to reconditioning and end up on the lot in disrepair.

C. The New Car management is constantly putting higher than called for numbers into trades (a subject for another discussion) to hit the benchmarks set by the Manufacturer to get that back end money and hit their bonus. (And yes I understand why this is done)

D. Then it is the responsibility of the pre-owned manager to sell at a loss or a small profit or eventually take it to auction to sell at a loss. This is the cause of being mandated by the Manufacturer to move vehicles by the numbers which is where this contradiction surfaces. (Inventory control - subject for another discussion).

E. The BDC department in a lot of cases thinks of the sales Department as a bunch of narrow minded Neanderthals and in turn the sales department thinks of the BDC staff as a bunch of Computer geeks that should not be engaging the leads.

All of these points in a lot of cases may be true caused, not by the lack of training, but by the lack of structure and proper management. Bottom line all of these things affect income potential resulting in loss of substantial amounts of profit. (a subject for another discussion)

2. Managements commission structure at most Dealership is based on the monthly numbers which is a big mistake but a necessary one at least for the new car Department. This propagates the undesired effect of pushes at the end of the month by management to put even more into trades and often sell vehicles way below their value and often times at losses to hit those numbers. Additionally, often times deals are back dated for days into the following month in order to hit those benchmarks set by the Dealership for the payment of bonuses.

A. You can see where this can lead to management looking out more for themselves to hit their bonuses than for the Dealership they are working for. You can also see where here again is another potential loss of profit for the Dealership.

There is a better way to structure the business model easily without having to reinvent the wheel. Dealerships simply need to take the profit from all Departments and combine them and the entire management team at the Dealership is compensated with their respective percentage.

But Dealerships also need to base the amount of managements  bonuses on the combined CSI of all Departments which will hold all accountable. This will foster more cooperation and force management to pay more attention to customer service at all levels and customer follow up.

This just covers the basic structure of the business model. There are other areas within this overall model that can be done to improve efficiencies and foster more cooperation and accountability. (Which is another subject for discussion)

http://dealernetservicesonline.biz

 Unlock all of the community & features  Join Now