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Six traits of successful retail dealers

Despite the tremendous number of dealers, and the push by manufacturers to achieve uniformity among their franchises, no two dealers have exactly the same management style. Yet profitable dealers usually possess some common characteristics.

1. Solid business plan

It is important to clearly define your goals. To understand how to achieve them, the creation of a business plan is almost a necessity. A strong business plan should contain a market analysis, including sales and marketing strategies and opportunities. Additionally, it should answer the questions: Who is the target market? How fast is the segment growing? What are the opportunities and threats, and how will you deal with them? And ultimately, how is the plan going to get executed?

A dealer must know what qualifications and accomplishments employees need to bring to the table to bring the plan to fruition, and how to retain those employees. Competitive pay plans and other incentives can aid in retaining the best employees.

Employees need to know how the dealership fits within its geographic market and understand what’s expected of them to help achieve the stated goals defined in the business plan (such as becoming a service leader or a "volume king") within set time frames.

2. Strong leadership

Probably the most obvious and important characteristic all successful dealers share is an aptitude for business. Truly effective leadership entails getting into the details, most of which is readily accessible from the manufacturer National Auto Dealer Association (NADA), or your local association. Leaders must view the situation as a whole, but also possess the ability to break it down into sub parts for closer inspection, and more manageable pieces to help employees progress toward their goals.

Leaders must possess a clear vision, a vivid picture of where to go, achievements to aim for, the discipline to work toward his or her vision and the ability to lead others toward the vision.

3. Inventory management

A good manager knows their inventory at all times and how much is in the pipeline. Studying demand and movement patterns and cycles is important to have suitable inventory ‘normals’. Parts department inventory should be reviewed periodically and stocking patterns and minimums should be adjusted as needed to keep inventories as lean as possible while still promptly serving customers. Excess inventories are frozen cash. The dealer is incurring the opportunity cost of investing into other areas of the business that could provide better returns.

4. Well-managed receivables 

Successful dealers keep receivables under control. If you were presented with a list of all of your customers, could you identify them as current, slow-pay, or over-120-days?

Are there any old, outstanding factory receivables for rebates or incentives? Are these receivables from salesmen thinking the dealership would qualify for a rebate on a vehicle sale, but later did not? Is the company collecting promptly on warranty receivables? Receivables are cash that the dealership has earned, but not yet received. It is important to stay up-to-date on receivables and turn them into cash that can be invested into other areas to help grow the business.

5. Strong departmental performance

Reviewing department performance is essential to gauging a dealership’s strengths and weaknesses. Good practice is putting together a one-page daily performance report for each department with key metrics that a manager can control and improve upon. It’s important to keep these reports simple and concise, as well as focused on areas of improvement. If these reports are too lengthy, contain metrics that aren’t important, or cannot be controlled by management, they lose relevance.

6. Effective reporting

Information must be current and relevant in order to be valuable. Are your financial documents accurate and timely? This is an area that is essential for the effective management of your operation. Your financial statements should be sent to the manufacturer within 10 business days at the latest. Sometimes it requires a outside view of your processes to streamline your operations to hit this benchmark. Contact a Baker Tilly representative if you need assistance in determining where you can gain some efficiencies in your operations.

Do you have all 6 characteristics?

As the economy is turning around, this is a great time to honestly assess your organization, review what needs to be improved, and act. Most dealers learn to be successful through observation and trial and error. You don’t have to take the bumpy road to success—move ahead smoothly and swiftly by taking the highway others have paved with their experience.

We would welcome the opportunity to help your dealership put together a strong game plan and implement it with effective management techniques. Please contact a Baker Tilly representative to talk about ways to put your dealership on the highway to greater success.

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