How to Make Good General Managers Great General Managers Presented by: Jeff Sacks Jeff Sacks Auto The views and opinions presented in the workshop and any accompanying handout material are those of the speakers and do not necessarily represent the views or opinions of NADA. The speakers are not NADA representatives and their presence on the program is not an NADA endorsement or sponsorship of the speaker or the speaker’s company, product or services. Nothing that is presented during this workshop is intended as legal advice, and this workshop may not address all federal, state, or local regulatory or other legal issues raised by the subject matter it addresses. The purpose of the workshop program is to help dealers improve the effectiveness of their business practices. The information presented is also not intended to urge or suggest that dealers adopt any specific practices or policies for their dealerships, nor is it intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service. Each dealership must make an individual decision, based on its unique facts and circumstances, to adopt or implement specific practices, policies, techniques, or methods of doing business. Consult your attorney regarding the legality of any policy or procedures that your dealership adopts, and any legal or regulatory obligations it may raise. All convention workshops are copyright 2011 by NADA and may not be used without prior written permission. Participants may not audio-record or video-record the workshops. Learning Objectives Share with you: • How to retain more of your customers • How to effectively manage cycle time • What are the important metrics a GM should monitor and manage • How to gain buy in and successfully execute on your game plan A GM’s Journey to Achieve Operational Excellence Needed: Impressive dealership performance in the following areas • • • • Personnel productivity Customer management Asset management Expense control Personal Attributes of a Great General Manager Wanted: A GM possessing the following skills and attributes 1.Vision 2.Work ethic and governance 3.Management and leadership skills 4.Commitment to the process 5.Financial analytical skills and financial discipline 6.A 360⁰ dealership perspective Vision Work Ethic & Governance • Align the organization with the appropriate codes, values and principles • Lead by example • “Manage your shadow” • “Manage the footprint of the dealership” Management & Leadership Skills • There is a difference between management and leadership • The two important people types who work at the dealership • “If you are not producing gross…” • Dealership Imperative: Making people who produce gross produce additional gross Management & Leadership Skills The lack of teamwork in the dealership: A huge productivity and transactional impediment • Continuously work to eliminate inter department rivalry • Create inter department teamwork and synergy • Thought: Design pay plans that encourage teamwork and overcome transactional roadblocks Low Hanging Fruit • The process of customer retention should be a dealership wide obligation and commitment • The belief that customer retention is vital to sustained profitability and operational excellence There is a significant opportunity cost due to low customer retention! Impact of Customer Retention 90% 80% 70% 60% Repeat 50% Buyers 40% 30% 20% 10% 0% 86% 46% 9% 19% Service Visits Source: CNW Marketing Research / Automotive News Never Seldom Occasional Regular Repeat Business – Service 80 70 60 Visits % 50 40 30 20 10 0 1 2 3 4 Years 5 6 Maintenance Revenue per Vehicle 800 700 600 Dollars 500 Revenue 400 300 200 100 0 1 2 3 4 Years 5 6 The Service Riddle 700 Dollars 80 Revenue Visits 70 600 60 500 50 400 40 300 30 200 20 100 10 0 0 1 2 3 4 Years [INSTRUCTOR MATERIALS ONLY] 5 6 % 800 Making that First Service Appointment Should this be a salesperson’s function? • Active delivery: Encourage customers to set their first service reminder at the time of delivery • Orientate customers with the physical location and access to the service department • Track salesperson’s first time show rate – Reward salespeople who achieve more than 80% – Mentor salespeople below 80% • Consider using a competitive pricing sheet every time Competitive Pricing Sheet Customer Contact Strategy Does your dealership have an active and viable customer contact blueprint? • Dealership imperative: Reach out consistently to your customers • Have a dealership contact template that includes the following: • Who to contact • When to contact • The content of that contact • Accountability of the agreed upon procedures Customer Contact Strategy HIGH Equity Customer Contact Likelihood to Trade LOW 1st week 1st month 1st year 2nd year 3rd year 4th year 5th year 6th year Financial Analytical Skills and Discipline • Know what levers to pull that will improve financial performance • Form a strong operating partnership with your controller The Financial Management Disciplines ASSET MANAGEMENT PROFIT MANAGEMENT INVENTORIES GROSS PROFIT RECEIVABLES EXPENSE CASH NET PROFIT Asset Management Focus • Cycle Time • Turnaround Time Cycle Time Management Funding Received Transaction Consummated OPPORTUNITY Turnaround Time DAYS Best-in-Class Metrics – Cycle Time • Used Vehicles and Days’ Supply: – Daily trade walk – Daily inventory walk • Reconditioning: – Less than 72 hours – Pay plan consideration – ‘Rush’ to market • Contracts in Transit: – Book to deliver – “Cash a deal” meeting AutoNation: (Stock Quote AN) Salient Data Source: Company Report 3Q 2010 [INSTRUCTOR MATERIALS ONLY] 34,208 42,904 $16,330 $17,073 $1,690 $1,583 48 days 46 days $1,071 $1,130 0.63 0.76 Used Vehicles Inventory Days’ Supply Used Vehicles Sonic Automotive Group 1 Automotive Penske Auto Group Asbury Automotive AutoNation Lithia Motors Source: Stephens, Inc. – 3Q10 Auto Ranking [INSTRUCTOR MATERIALS ONLY] 29 30 36 37 46 N/A [INSTRUCTOR MATERIALS ONLY] Gross Margins Used Gross Margin (Used Veh. - % of Rev.) Lithia Motors 14.7% Asbury Automotive 10.5% AutoNation 9.3% Group 1 Automotive 9.0% Sonic Automotive 7.8% Penske Auto Group 7.4% Source: Stephens, Inc. – 3Q10 Auto Ranking [INSTRUCTOR MATERIALS ONLY] Sales Probability – Used Vehicles Days Probability of Average Gross Sale % per Unit 0 – 30 Days 65 – 75% $2,000 31 – 60 Days 20 – 25% $1,400 >60 Days 10 – 15% < $500 Inventory Aging Challenges • If we start with 100 units and apply these percentages, what will happen? Days Stock Units Sold Units Left 0 – 30 Days 100 (70) 30 31 – 60 Days 30 (6) 24 >60 Days 24 (3) 21 over 60 • We will have to wholesale some inventory that was made ready for retail! [INSTRUCTOR MATERIALS ONLY] Cycle Time: Contracts in Transit— Book to Deliver Book to Deliver Percentage Row Transaction Element 1 Number of Vehicle Delivered Month to Date 100 2 Number of Vehicles Booked into Accounting 68 3 Book to Deliver Percentage 68% Metrics – Personnel Productivity and Personnel Productivity • Gross per Employee: – Productive to supportive: More than 55% productive • Salesperson Productivity: – Over 10 vehicles per month – Internet capable, active and successful • F & I Producers: – Between 75 and 100 contracts per month – Back end gross of above $900 per retail Finance & Insurance Finance & Insurance per Retail Vehicle ($) AutoNation Asbury Automotive Group 1 Automotive Lithia Motors Sonic Automotive Penske Auto Group Source: Stephens, Inc. – 3Q10 Auto Ranking [INSTRUCTOR MATERIALS ONLY] 1,130 1,016 1,006 1,000 972 953 Metrics (Continued) • Service Department: – Hours produced per technician: Over 200 hours per month – Ratio of tech. to service advisors between 3.5:1 and 5:1 – Technicians comprise of more than 50% of the service staff Improving the Customer Transaction Experience • Overcoming the customer transactional bottlenecks – Sales: • The transaction process • Finance & Insurance – Service: • Morning • Afternoon Improving Operational Excellence • Develop people, create teamwork • Track the essential financial performance metrics • Implement the structure to drive results Structure: Protocols in Place — The “Forced March” • “Cash a deal” meeting • “Save a deal” meeting • Trade walk • Inventory walk • “One-on-one” with service advisors Pay Plan Considerations • Customer Retention – Salespeople: – First service appointment – Repeat customers – Customer pay labor • Customer Retention – Sales Managers: – First service appointment – Customer pay labor Leadership Executables • Understand the issues and share with managers • Invite input on how to overcome the issues and the impediments • Reach agreement and buy in • Communicate to front line people on issues/impediments/solutions • Share on tracking mechanism to be used • Micromanage for 45 days Additional Information • You can access the virtual training modules on the NADA University website • Other inquiries: [email protected] www.jeffsacksauto.com