Rushing to close out the month with a flurry of vehicle sales is akin to an Olympic athlete in last place trying to sprint to win a gold medal.
It typically doesn't work. It has a demoralizing effect on the athlete, the team and the coaching staff. It can result in injury.
Consider the impact the end of the month rush has on your dealership. Through experience and word of mouth, customers have learned when they can get the best deal. They often wait until dealerships are trying to meet their goals.
Sales people work harder in the last five days than they do throughout the month, as they strive to make their numbers and maximize commissions or bonuses.
The finance and insurance department has an inordinate amount of work to complete at the last minute. That causes frustration, missed information and delays in month-end.
Management never gets an accurate picture of collective or individual sales performances until well into the next month. When the numbers do come in, they usually show a high number of vehicles sold a month's end, yet with per-vehicle gross profits — the true measure of success — on the low side.
And salespeople, with cash in their pockets, lose their motivation and settle into a less aggressive routine until, with five days left in the next month, the process starts anew.
The injured parties are the dealers and those customers who may not have received full attention in the early weeks of the month. Consider this recent example:
A young man went to purchase his first truck. He knew what he wanted. He knew it would have to be ordered, making delivery about 12 weeks out. Despite knowing this, the salesperson pushed the current incentive programs.
The youth's father asked, “Do you have this exact truck in stock? Will the incentives be the same in 12 weeks?” The answers were “No” and “I don't know.”
The salesperson risked losing a customer and the higher per vehicle gross of a custom order because he was focused on making month-end goals.
Yet, we continue to close only at month end, creating an unnecessary urgency. The lesson for dealers is: Close the month every day.
That requires changes in attitude and approach, but it can deliver enormous gains in morale, performance and profit.
First, set and communicate measurable goals. Look at your monthly gross revenue goal. If the goal is $500,000 per month and the dealership is open 31 days, then the team needs to deliver $16,129 per day in gross.
Dealers who close the month every day know their progress against the goal at any given time. With that information, they can develop attainable plans on how to reach the final goal.
Second, eliminate employee incentives. Compensate salespeople only for the cars they've sold. Pay their salaries and commissions weekly. This motivates them to perform at their highest levels all the time.
Closing the month every day has tremendous benefits:
All customers get the red-carpet treatment. Sales people's work is consistent. They get paid when the paperwork is complete providing instant gratification and motivation.
The dealer gets paid during the entire month instead of the following month. They can count their money today with fewer problems tomorrow.
Paperwork is completed every day eliminating a crush of work at month-end and reducing the potential for errors. Managers get a clear picture of performance every day and can adjust strategies accordingly.
Selling every day at a higher per vehicle gross, fewer cars need to be kept in stock, reducing expenses exponentially.
When this new mindset sinks in, everyone gets the gold: customers, employees, managers and the dealership as a whole.
Richard F. Libin is president of APB, Automotive Profit Builders Inc., with more than 40 years experience helping dealership sales and service departments increase customer satisfaction and maximize profits. He is at [email protected] or 508-626-9200.
Questions or comments about this column?
Send us an e-mail at [email protected].