Several team members from our Auto Dealer Advisors Group recently attended the 2014 AICPA National Auto Dealer Conference in Las Vegas, Nevada. To kick-off the conference, we listened to Jeff Sacks, a premier industry expert, as he discussed new, used, F&I and fixed operations growth and profit opportunities. We likened Jeff’s industry statistics and opportunities to those prevalent in auto dealerships in our marketplace.
The prevailing sentiment was the correlation of departmental revenues versus gross profit. As an example, industry statistics show that new vehicle sales represent 67% of a dealership’s total revenues, but only 21% of its gross profits, and used vehicle sales represent 27% of total revenues, but only 14% of gross profits. On the flip side, F&I sales represent only 4% of revenues, but 23% of gross profits, and fixed operations sales represent 12% of revenues and an astounding 42% of gross profits.
So, for any dealership that is concerned with the well-being of its operations, emphasis should be applied to those areas with the highest levels of profits that will drop to the bottom line. Accordingly, these statistics will direct the importance of personnel decisions to those positions that generate the highest level of gross profit per employee – the service advisors and the F&I manager. In order to convey the emphasis of the importance of these profit centers, pay plans should be reviewed and most likely tweaked to reward these individuals for the value they bring to your dealership. There were several reward and incentive ideas discussed by Mr. Sacks to enhance pay plans, such as bonuses for bringing in repeat customers, for a first appointment kept, for service hours produced, and CSI and team bonuses, to name a few. If you would like to hear more about what we learned at this valuable industry conference, please contact me at firstname.lastname@example.org.
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