I know many dealers who are “battening down the hatches.” They think 2020 will be worse than 2019, so they are cutting as many expenses as possible. This is a good practice to do when times are good too, knowing that our business has its shares of ups and downs, and as sure as business is good, it will be just as bad sometime in the future.
But That’s Not a Plan
If you are smart about cutting costs so it doesn’t affect your operations, that’s a good thing. But it’s not a plan.
So what’s the best plan to have for 2020?
Let’s take a dealer selling 100 new and used vehicles a month at an average gross profit of $1,850.
If you are to believe industry sooth-sayers, your business could drop by as much as 10% next year — there’s so much uncertainty. In this example, it would be like losing 10 deals a month, and you will make $18,500 a month less. Some dealers will accept that, and find a way of saving that money each month (reduce advertising, cut personnel etc.) so they will continue to get the results they had in 2019.
Let’s take that same dealer, and instead of cutting expenses, we make the plan to implement and follow proven sales processes. I know a few dealers who have done this successfully, and they are sitting very pretty right now.
Improve Process & Performance
Don’t worry too much on volume and gross with your goals, concentrate on how well your sales team follows the processes. If you focus on closing ratio for example, your sales manager and team will increase that number. However, more often than not they have increased the closing ratio by logging fewer customers. If everyone is following the processes correctly, the closing ratio will take care of itself.
First things first — a proper meet and greet, followed by a meaningful interview will set the correct tone for more customers to want to do business with you. Remember, it is a business, treat your customers in a business-like fashion.
A proper meet and greet should start with the word “welcome,” and your salespeople should introduce themselves so customers know who they are dealing with. Eye contact is imperative — if the customer can’t establish eye contact with your salesperson, they won’t trust them and probably will do not do business with them. A firm, professional handshake and a genuine smile should be natural ingredients in the meet and greet — your salespeople should easily obtain your customers’ names if this is all done correctly.
The meet and greet is designed to ease professionally into the interview. The ideal place for the interview is inside, either at the salesperson’s desk or at a round table in the showroom. Your team needs to remember that this is to be a conversation, not an interrogation, so make sure they conduct the interview appropriately.
Building rapport is key, and one of the best ways for your salespeople to do this is get the customer talking about themselves. They do this by asking open-ended questions — who, what, why, how, when, tell me about — the kind of questions that talk show hosts will ask their guests.
Growing the Relationship
After the meet and greet, your salesperson should go to the desk and get your sales manager involved. I recommend that your sales managers introduce themselves to customers. I have to believe that sales managers have the position because they have excellent communication skills.
Let’s put these skills to work with your most important asset — your customer — and do it early on in the process. It is not conducive to selling if your salesperson introduces your customer to your sales manager at the end of the process, either to “glad hand” him on his way out, or to try and hammer into a deal that he is not comfortable with. Let’s get the management involved early, making sure that one process happens with every customer will increase your closing ratio immensely.
Once your salesperson and sales manager have decided which vehicle to show your customer, have your salesperson bring the vehicle to the showroom instead of taking the customer to the vehicle. This will show professionalism, great customer care and will allow the customer to focus on one vehicle instead of cruising the lot. A full feature benefit presentation is key to build value — remember that your customers buy the benefits — make sure your salespeople describe the benefits of each feature.
Expanding the Experience
The demo drive is when your customers’ feelings and emotions will be at their highest peak, so have your salespeople drive the vehicle first, then switch drivers at a safe, halfway point. If your salespeople asked every customer at the halfway point “where will you be going on your first trip in your new car?” it will help each customer take mental ownership of the vehicle, so closing the deal should be a snap.
Before negotiations start, every customer needs to be shown the service and parts departments and be introduced to key personnel in these departments — this step will help sell the dealership — then have your salespeople lead them back to the showroom.
I am not going to talk about negotiations at this time, but just think about the simple process I have described. If every one of your salespeople followed this process 100% of the time with 100% of your customers, and your sales manager got involved with every customer early in the deal, what will happen to your sales and profits?
More from Less
The dealer selling 100 cars a month probably sees 500 customers a month (20% closing ratio). As discussed earlier, if the industry drops by 10%, this dealer will have 10% fewer customers, so only 450 a month.
I know that by following the processes I described, you will increase your closing ratio to at least 25% (more likely to 30%). That means instead of selling 100 vehicles off 500 customers, you will now sell 112 off 450. So instead of losing $18,500 a month and searching for ways to cut expenses, you now will make $22,500 more (12 extra deals @ $1,850 each). That is over a quarter of a million dollars extra gross profit in 2020 — a year that some people think will be worse than 2019. Not to mention the extra gross profit per vehicle you will enjoy with everyone following the processes. If I am wrong by 50%, is $133,000 extra profit a good number for you?