Depending on your results, it may be good or bad news that three quarters of 2006 have gone transpired. Either way, the good news is we still have one quarter left to make a positive difference.
Two questions. First, if we annualized your year-to-date results, where would you be in terms of your plan presented at the beginning of this year? Second, if your performance is not at the planned level, what areas are out of line? In other words, what adjustments do you need to make to change this trend?
Taking a look at your dealership's historical performance by department, what percentage of the year's total business (sales, gross and net profit) traditionally occurs during the final four months of the year? For example, following are new-vehicle and used-vehicle sales results for 2005 stated as a percentage of the total year:
| Period: | New Vehicle | Used Vehicle | My New % | My Used % |
|---|---|---|---|---|
| September | 7.82% | 10.41% | % | % |
| October | 6.75% | 7.01% | % | % |
| November | 6.86% | 7.69% | % | % |
| December | 8.73% | 7.24% | % | % |
| Four-Month Contribution | 30.17% | 32.35% | % | % |
Why is this information important? First, to ensure inventories are in line with realistic sales forecasts. Second, to ensure at the end of the year's final four-month period that you go into January of 2007 with an inventory level consistent with sales for that period (6.25% new and 5.43% used in 2005).
With inventory costs at a five-year high, the last thing we need is additional interest expense in a flat sales month.
From a used-vehicle perspective, the information above allows you to get inventory in line with the anticipated market. I have tracked this information for years, and, almost without exception, September is our “last hurrah” for a robust used-vehicle sales period for the year.
So, follow along with me. If you trade for vehicles during September and your used-vehicle aging policy is 90-days-and-out-of-inventory, this puts you squarely into the December market — which is traditionally the lowest-priced wholesale market.
Wouldn't you approach 2007 feeling better if your inventories were in line with anticipated business conditions in January and February? And by having inventory in line, you become a buyer during this traditionally lowest-priced market versus trying to eliminate inventory.
Here are other pointers for ending the year on a high note:
Much of the country has endured an extremely hot summer, causing additional wear and tear on vehicles. A service clinic or a pre-winter service special could help bring in customers and create the potential opportunity to schedule additional work.
Then, there is the expense review. Are expenses, by individual category, in line with your forecast? If not, is it a result of insufficient or low gross? Or is it actually a high expense? If it is that, what immediate steps can you take to bring it into line?
Are you properly staffed? If so, do you monitor and control overtime? Do revenue-generating employees make up at least 50% of the staff, and do they meet minimum production standards? If not, are there programs to help them do that?
Good news is that the Fed last month declined to raise interest rates. Now, if we could get some positive news on gasoline prices, things will really start looking up. Good selling!
Tony Noland is the president and CEO of NCM Associates Inc. He can be reached at [email protected].
