If you’ve been running a dealership for at least a few years – either as an owner or a general manager – you know that keeping track of various metrics is a must for anyone who wants their business to remain successful.
But, keeping track of metrics is not enough. For maximum profitability and efficiency, you should be able to definitively answer the following:
- What is a metric, exactly?
- Which metrics matter and which ones don’t?
- How do I track the necessary metrics effectively?
Though those may seem simple, you’d be surprised how many business owners fail to provide concrete answers to them.
That’s why we’ve consulted with dealership expert Bob Clements to help us put together an article that conclusively answers all three. If you’d like to be better at tracking your metrics, we urge you to read on.
Defining a Metric
What’s a business metric? Most would simply describe it as a number for measuring stuff. Someone more thorough would define it as a value that indicates the performance level of an organization or an activity. Both definitions are correct.
What isn’t correct, however, is assuming that any value or number can be a metric.
For example: you discover that your year-to-date recovery rate is at 90%. At a glance, that may look pretty good, but you can’t tell for sure. So, you go back to look at your recovery for the same period of time last year and discover that, shockingly, it was at 100%. Suddenly, 90% no longer looks all that impressive.
Should you panic? Not yet. If you go a few years further back in time and then compare the recovery rates from each year, you might find out that your recovery rates tend to fluctuate between 90% and 100%, on occasion. In other words, you’ll see a trend, which should allow you to determine more definitively whether 90% is a “bad” or “good” number.
The moral of the story is this – a value is not a metric unless you can compare it to another value within proper context.
Metrics That Matter
Instead of letting you fumble about trying to figure out which metrics matter and which ones don’t, we’ve kindly asked Mr. Clements to give us the answer.
His first advice was that, as an owner or general manager, you should receive business reports on a daily, weekly and monthly basis. He recommends making it your accountant’s or bookkeeper’s responsibility to send you those regularly.
With that in mind, here are the key metrics you should be tracking:
- Sales by department: The number of dollars produced within each department, such as parts, service, rental and so on.
- Customer count: The number of customers that walk into the store.
- Average sale by department: The total number of sales divided by the total number of transactions.
- Composite of daily reports: All your daily reports in a single package.
- Labor costs as a percentage of sales: The number of dollars you pay your employees this week versus the number of dollars you’ve earned through sales.
- Composite of weekly reports: All your weekly reports in a single package.
- Total cost of goods: The number of dollars you spend to sell your products.
- Total operating costs: The number of dollars you spend on your employees, insurance and other non-overhead expenses.
- Gross profit: The number of dollars you make after deducting the costs associated with selling your products and providing your services.
- Operating profit: The number of dollars you make from your business operations before various deductions.
- Sales overview for your top-10 customers: A list of the in-store activities conducted by your top-10 customers. As a dealership owner or general manager, you should stay on top of this information, not just your sales manager.
Tracking Your Key Metrics the Right Way
To keep track of all the key metrics more easily, Clements recommends that you automate your reports using a dealership management system like Ideal.
For example, in Ideal, you can set up a dashboard composed strictly of the metrics and reports you’re interested in and get a high-level overview of your entire business without pouring over multiple lengthy reports. This is what such a dashboard looks like:
Depending on your preferences, the key performance indicators (KPIs) you can view include:
- Total Invoice Revenue per Day
- Total Invoice Gross Profit per Day
- Total Invoice Gross Percentage per Day
- New Customers per Day
- Customer Payments Made per Day
- Total Number of Invoices per Day
- Inventory Adjustments per Day
- Average Revenue per Invoice per Day
- Average Profit per Invoice per Day
Make Sure Your Team is Good at Tracking Too!
Once you get the hang of tracking all your metrics and KPIs, your next step should be to pass on the knowledge to the rest of your team, particularly the managers. To get started, be sure to download this guide.