How to Make Good General Managers Great General Managers Presented by:

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