Deluged by Key Metrics for Your Automobile Dealership?

A car dealership needs to maintain a net profit level of 10 to 20 percent of total dealership gross profits to be successful. That’s a significant amount. So, how do you reach that goal? For management to understand how to retain profitability, it is important to understand how to measure performance. Here are some key performance indicators that have an impact on your dealership’s bottom line.

• Profit per employee. How do you determine whether your employees are reaching their sales goals? Or, what other departments need to track employee performance to measure success? Being able to track  profit per employee rather than as a whole will help you determine which staff members are excelling at your dealership.
• Employee pay plans. Once you know who your top performers are, how do you reward them? Dealerships are known for their incentive plans for sales associates, so it is imperative that you are competitive within the marketplace. The employee profit metrics can help determine the pay plans you can develop.
• Advertising budget. Not all of your company’s income and expenses will be related directly to your staff. Advertising is key to your ability to bring people in your doors to review your inventory and make purchases. How much of your budget needs to be allocated to your advertising budget?
• Social media. Many dealerships are avoiding another aspect of advertising that is becoming increasingly important. Social media is simply another avenue to reach potential buyers. Many millennials, who are just now beginning their professional careers, will be in the market for cars, so targeting them could garner new customers.
• Inventory and interest expense. The cost of maintaining inventory is another problematic expense for dealerships. Cars are high-ticket items, so the longer they stay on your showroom floor or in your lot, the more you’ll have to pay to maintain their value. How do you measure the cost of these cars with the cost of doing business?
• Departmental spending. Your dealership also must account for the needs of your non-revenue-generating departments. What does it cost for these areas of your business to remain solvent and prove beneficial to the organization, rather than serve as a drain on resources? They may be necessary to your business, but they still need to follow guidelines so you can retain overall profitability.

All of this information can feel overwhelming, but it doesn’t need to be. We can help you choose and manage the appropriate metrics for your dealership. Give one of our automotive experts a call today.