To summarize the automobile business in 2005, the only consistency is the seemingly inconsistency.
In spite of all the challenges, when everything is said and done and the last numbers are counted, from an overall industry sales standpoint, 2005 will rank in the top 10 all-time best automotive sales years.
And there is some positive economic news as of this writing.
Even though interest rates continue to rise and consumer confidence remains guarded, unemployment is down, fuel prices are going down and the national productivity has accelerated at a greater-than-expected pace through the third quarter.
Not unlike 2005, next year will present challenges from a sales standpoint, but there are actions you can take to help insulate yourself from the wild profit swings most dealers experienced in 2005.
First and foremost, it is important to “right-size” your business.
My definition of right-sizing is having the proper staffing level and expense structure in place to capitalize on the business you are actually doing. Base your numbers on an average of the total year-to-date months.
When determining your proper staffing level, it's important, when looking at personnel requirements, not to over-estimate your staff's ability. Let me explain what I mean by using sales personnel as an example.
If I want to sell 100 new units per month and my average sales person's monthly volume is nine units, it's going to be hard to reach my sales target with 10 sales personnel. I will probably need 11 or 12 sales people realistically. This methodology applies to your entire productive staff.
From an expense standpoint, look at your average month's gross and multiply that by an expense percentage that you are prepared to live with.
If I want my net profit as a percentage of gross to be 20%, obviously, my expense budget is 20%.
Taking that 20% budget, you must then assign each individual expense a percentage budget. Not only do you assign each expense a budget, you must monitor it monthly and be prepared to take action if you suddenly find the expense exceeding its budget.
As you know, your personnel's awareness of and compliance with this cost-control practice is critical if you hope to accomplish this.
Each departmental manager must have a working knowledge of each individual dealership expense item regardless of whether it impacts his or her department.
Meanwhile, a good trend I've seen in 2005 is the number of dealers placing more marketing emphasis on working their owner bases and the Internet.
Not only has this resulted in less total dollars spent on marketing, but in many cases unit-sales volume and customer-pay repair orders have increased.
The upcoming year can be good for all of us. But it's not just going to happen. We have to have a sound business plan, and work the plan. Most important, we must constantly monitor our results versus our plan, and be prepared to take corrective action when required.
In closing, on behalf of each associate at NCM, Dealer Service Corp. and Jeff Sacks and Associates, I want to thank our many loyal clients and friends for their continuing support in helping NCM celebrate our 58th year in business.
Collectively, we wish each of you a happy holiday season and a new year filled with success and happiness.
Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.