When dealerships experience success and profitability, dealers and managers sometimes feel the urge to “coast” and start to believe that things couldn’t be any better. Next thing you know, stagnation creeps in and a downward cycle could be on the way. A brief look at history reveals that the best time for an army to attack is immediately following a successful battle. Skills and wits are at their sharpest, and morale and motivation is high enough to take on any challenge. A team operating in its “zone” is a team that’s ready to grow faster and accomplish more. The number one goal of an already successful dealership should be maximization of net profit.
The Net Profit X Factor
Operating at a profitable level is a very unique opportunity: the bills are paid, payroll is met, investors are receiving an ROI, debts are being paid down or eliminated. Your business has broken free of the natural gravity that drags down most businesses. Consider what effect a single vehicle sale has on incremental net profit, in this case. If your store is profitable at 100 cars a month, and you’re selling 120, what happens when you sell 121? Minus the advertising expense, sales commission and floorplan expense, the rest is almost all net profit. In fact, the dealership that is profitable at 100 cars, currently selling 120 cars, would as much as double its net profit by growing to 140 cars since this incremental growth rarely requires additional overhead expense to achieve. Yet too many dealers fail to maximize this factor, so they stay at or above their profitability level, contently feeling that “enough is enough.”
So how do you maximize this opportunity? Here are two ideas:
1) Attract a new kind of customer: When marketing to people actively shopping for a vehicle, you’re naturally limited by the number of in market shoppers. As your sales grow and you capture a greater percentage of the market share, it gets harder and harder to sell more cars. The key is in marketing to a new kind of customer—people not actively shopping. That market is nearly limitless in size and it’s ignored by most other dealerships. So incremental growth can be had very quickly and easily.
2) Mastermind with other dealers: Connecting yourself with other like-minded dealers who are committed to sharing ideas and maximizing the net profit opportunity is a rapid path to capitalizing on your own growth potential. There’s vast intelligence that exists in the minds of other people and in the space between the minds of collaborative thinkers.
Always remember: doing things the way everyone does things is a sure way to get what everyone gets. Approaching common problems from an uncommon perspective allows you to create solutions that most dealers will never experience.