19 Nov
Are You Measuring These Key Metrics in Your Dealership?

Businesses are all about numbers. However, that doesnโ€™t mean that looking at numbers makes you a good business person. Thatโ€™s because numbers arenโ€™t always metrics and metrics arenโ€™t always numbers!

Hereโ€™s an example โ€“ you notice that your year-to-date recovery rate is at 90%. Itโ€™s a relatively high number, so all must be great, right? Maybe notโ€ฆ Look at your recovery rate for the same period of time last year first โ€“ because you might discover that it was at 100%, which would make that 90% look a little less impressive.

But, hang on โ€“ what 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, which makes your year-to-date recovery rate reasonable. On the flipside, you might discover that youโ€™ve been trending downward for the last few years, which may mean that something is wrong.

The moral of the story is simple. A metric is more than a number โ€“ itโ€™s a combination of numbers that tells a story of how your business is doing. To make sure that story always has a happy ending, you need to be able to make adjustments on a regular basis, which is why itโ€™s so important to track your key metrics regularly. It will also help you keep up with the latest trends.

So, if youโ€™d like to know which key metrics you and your managers should be looking at, check out the recommendations from dealership expert Bob Clements.

1. If Youโ€™re an Owner or General Managerโ€ฆ

Owner or General ManagerWhether you are a dealership owner or a general manager, one of your biggest duties should be keeping track of your dealershipโ€™s key metrics. After all, youโ€™re the one responsible for the entire dealership, so if it fails to make money, the blame will ultimately be on you.

That said, you donโ€™t always have to take the blame if you have the right numbers behind you! And the best way to do that is to track whatโ€™s what. We already wrote an article on how to do that, so be sure to give it a look.

Here are some snippets from it:
 
Daily metricsย  Daily metrics

  • 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.

 
Weekly Metricsย  Weekly metrics

  • Labor costs as a percentage of sales: The number of dollars you pay your employees this week versus the number of dollars youโ€™ve earned through sales.

 
Monthly Metricsย  Monthly metrics

  • 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.
2. If Youโ€™re a Service Managerโ€ฆ

Service ManagerJust like you, your service manager has to be able to track whatโ€™s going on at their department. This will not only make it easier for them to report whatโ€™s happening back to you but also make their department more efficient.

To help your service manager become more effective at tracking various key metrics, make sure your dealership management system gives them everything they need.

Here are the metrics Bob Clements recommends for your service managers to track:
 
Daily metricsย  Daily metrics

  • Total labor sales: The number of dollars you earn from all your work orders.
  • Recovery rate: The number of hours you buy, which is usually eight per tech per day, versus the number of hours you sell.

 
Weekly Metricsย  Weekly metrics

  • Average tech efficiency: The number of hours spent on work orders versus billable time.
  • Average completion time: The average number of hours completed per work order. By multiplying this number by the total number of work orders, you can determine the number of hours you still have to complete for all your outstanding work orders.
  • Aging of open work orders: The amount of time a work order stayed open. Monitor this to ensure you donโ€™t have work orders that have been open for 60 days or longer.
  • Unfiled warranty claim dollars: The number of dollars you need to retrieve on your unfiled warranty claims. According to Clements, some dealers have $100,000 in unfiled warranty claims!

 
Monthly Metricsย  Monthly metrics

  • Efficiency and recovery by technician: The actual percentage of the time each tech has recovered.
3. If Youโ€™re a Parts Managerโ€ฆ

Parts ManagerGiven how a big role parts sales play within a dealership, having a superb parts manager is a must. Whatโ€™s even more important is for the parts manager to understand what they need to look at to ensure high sales numbers. This will not only help them sell more but fix any potential inventory issues.

Hereโ€™s what Bob Clements recommends:
 
Daily metricsย  Daily metrics

  • Total parts sales: The number of dollars you earn from all your parts sales โ€“ across the counter and to the service department.
  • Total transactions (for counter and service sales): The number of transactions that take place each day.
  • Average transaction value: The total value of all transactions divided by the number of transactions or sales.

 
Weekly Metricsย  Weekly metrics

  • Total back orders: The number of orders that have not been fulfilled yet.
  • Total lost sales: The number of times a product was not available when a customer wanted to buy it.
  • Total emergency orders: The number of times you had to order an out-of-stock product to meet customer demand.

 
Monthly Metricsย  Monthly metrics

  • Average sales by parts person: The total number of parts sales divided by the total number of transactions per person.
  • Average gross profit margin: The average number of dollars you make after deducting the costs associated with selling your parts.
  • Average transaction time: The number of hours, on average, it takes your people to close a transaction โ€“ from the moment the customer approaches the counter to the moment they leave the store. This metric is important because it tells you how optimized your parts department is for serving customers.
4. If Youโ€™re a Sales Managerโ€ฆ

Sales ManagerYour sales team is what moves your products out of your store into your customersโ€™ hands, so if your sales team isnโ€™t up to it, then your business is in trouble. Thatโ€™s why itโ€™s absolutely vital to have a sales manager who can keep your sales team on track and ensure a good closing ratio.

Here are some of the key metrics Bob Clements recommends for your sales managers to look at:
 
Daily metricsย  Daily metrics

  • Total sales: The number of dollars you earn from all wholegood sales.
  • Total transactions: The number of transactions that take place each day.
  • Average transaction value: The total value of all transactions divided by the number of transactions or sales.

 
Weekly Metricsย  Weekly metrics

  • Overview of trade-ins and their cost to the dealership: The number of trade-ins on your lot and their overall cost to your dealership.

 
Monthly Metricsย  Monthly metrics

  • Average sales by person: The total number of wholegood sales divided by the total number of transactions per person.
  • Average gross profit margin by category: The average number of dollars you make after deducting the costs associated with selling each wholegood, categorized by wholegood type.
  • Total marketing cost: The number of dollars spent on marketing.
  • Customer acquisition cost: The number of dollars it costs to acquire customers.
Final Word: Get the Right Tools

One of the biggest reasons why dealers donโ€™t keep track of their key metrics is because they donโ€™t have the necessary tools. Pulling data for reports is a lot of time-consuming work, particularly if the process isnโ€™t properly automated. So, if you donโ€™t have a software system that does all the work for you, you may not be tracking everything you should!

Be sure to watch Bob Clementsโ€™ webinar to find out how exactly a dealership management system can help you track all your key metrics.