Tag Archive | "Business Growth Strategies"

Business Development Assessment: Presenting Your Findings and the Close

In Part 1 of our exploration of the Business Development Assessment (BDA), we highlighted the key elements necessary for conducting the BDA in preparation for the close. Our goal with the BDA is for conquest – displacing a dealer’s existing provider by front loading a comprehensive evaluation of the dealer’s business and then presenting the findings in such a way that the client is compelled to make a change.

As can be predicted during the course of an evaluation, numerous deficiencies in the dealer’s operation will be exposed. You may even find almost every department in the dealership is chronically underperforming compared to other dealerships, morale is poor, process is nonexistent, paperwork is sloppy, and the employees only familiarity with CSI is a TV show. But somehow vehicles get delivered and repaired.

Or, the place positively hums with contagious excitement and enthusiasm and it makes you wonder why you ever left retail! Such is the disparity we find every day visiting dealerships. The good news is, there is opportunity for the serious development agent in both cases.

The Presentation

For there to be any chance of displacing an existing provider when presenting the BDA’s findings, the meeting with the dealer principal must be private. You will be discussing financial statements, pay plans, and personnel. Details of the dealer’s enrollment in any sort of participation program (reinsurance) will be discussed. Packs added to F&I products, if any, may be on the agenda. For these reasons and more, it is crucial that the initial presentation be with the decision maker alone, prior to bringing in other key personnel for buy-in.

AE tapped the knowledge and experience of Jeff McHugh, VP Florida Region for The Providence Group, a Richmond, VA based agency that does business in multiple states. Jeff has conducted over fifty BDAs on behalf of OEMs and The Providence Group, and has consistently proven the ability to convert a prospective dealer into a client utilizing the BDA.

“A good place to start,” states McHugh, “is to ask the dealer what his expectations were when he agreed to the analysis.” What does he thinks are his strong points? Analysis usually shows that what the dealer thinks he is good at does not translate, nor is it backed up by facts.

Simple questions posed to his sales and management staff in surveys like, “Why should I buy a car from your dealership?” often differ greatly from how the dealer would answer that same question. Focus on what the dealer thinks is going on, the answers to survey questions which dispute that belief, and the fact that there exists a disconnect: the dealership is not on the same page. It is not uncommon that internal reporting provided to the dealer from sales and F&I are usually more favorably reported than what his own financial statements would indicate.

This is the moment when tough love comes into play and the agent tells the dealer, “Whether you like it or not, it starts with you.” Now that the dealer has had a reality check of the first magnitude, it is time to soften the landing with a clearly defined action plan custom tailored to address a particular dealership’s deficiencies.

It begins with the dealer’s strong desire for success. “You have to get the dealer’s buy-in,” firmly states McHugh. The process through which you get that commitment begins with a regimen of training, monitoring, and development.

“Since our development is typically F&I-centric, getting the communication and support from front-end management firing on all cylinders will be a major focus of our efforts. We want to create an environment where F&I can be successful, where sales and F&I are working together instead of at cross currents. This must be articulated to the dealer.”

Getting the entire sales staff to adhere to the proper solicitation process is the next area to address. Sales people, service advisors, and F&I managers should all know how to greet customers, the unique value propositions of the dealership, and a defined process to ask a customer to participate in all of the benefits the dealership has to offer.

The dealer must offer his clients an assortment of customer centered benefits. “We do not mention the word ‘products’ when referring to what is offered in finance,” confirms McHugh, “we refer to them as ownership enhancing benefits.”

Most dealers know where their weaknesses are regarding personnel. A properly selected and motivated staff is another discussion that must take place with the dealer, but recommending change at this point is counterproductive. McHugh generally offers to work with and attempt to develop an under-performing F&I manager with the dealer’s commitment to re-evaluate that personnel choice at a specific point in the future.

The findings, reports, graphs, lost profit analysis, results of surveys, proposal etc… should be organized and bound to present to the dealer with copies for each of the team members that will be involved in the deal. This document will then become a reference and a component for benchmark meetings going forward.

The lost profit analysis is a comparison of the dealer’s performance metrics compared to the “average” of the agency’s other development stores of similar size, franchise, and demographics. McHugh begins the conversation with, “To get to the average of similar development stores that we are involved with would represent an increase for you in PVR of $200, a service contract penetration increase of 20%, and a product count per delivery approaching two. Based on your average sales volume for the last twelve months, it appears you are leaving [x amount of dollars] on the table every month.”

The Close

“We are very careful here,” states McHugh, “to be conservative with our projections – we want to under promise and over deliver. We may be certain that we can dramatically affect the dealer’s business in a very short time, but with the ups and downs of month-to-month sales, we are trying to deliver positive results on an annual basis.”

McHugh goes on to say that during the presentation, the agent is not selling, just talking. More than fifty times he has asked a dealer, “Do you want to continue with the same results, or would you like to see a change?” The dealer, at this point, knows that committing to change will include switching from his current product provider in exchange for the agent’s development.

There are, however, deals where an agent charges a fee for development without displacing product, often in conjunction with an OEM service contract provider. This type of deal does not preclude the agent from installing other products that are not offered by the OEM.

How many agents have considered fee based development? It could be a viable option when displacing product is not practical for the dealer due to existing relationships and commitments, but is a very real revenue opportunity for the agent.

Wrapping up the BDA presentation is the accountability element of any serious development plan. These would include quarterly benchmark meetings, comparing actual results with pre-determined projections agreed upon by management. In addition, Instituting a daily save-a-deal meeting and making them a part of the dealership culture, and providing for product contests and rewards programs can assist with this accountability.

Some agencies, depending on dealership volume, include as part of their development package electronic tracking software (like StoneEagle’s SEcureMetrics). The ability for dealership personnel to have daily, monthly and annual sales statistics at their fingertips, plus the ability for the agent to access this data remotely, is a key factor in making any development effort more efficient and productive. Inspect what you expect.

When asked what the single most important thing an agent can do for a BDA prospect to succeed is, McHugh responded with a resounding, “The agent must deliver on his promises and commit to them, no matter the size of the deal. It is a process, not an event. Over time, if you are truly committed to the dealer’s success, the results are always positive.”

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2011…A Year of Feast or Famine

In 25 years of working in this industry, I have never seen an opportunity quite like the one that exists today for consultative agents who support income development in the retail automotive distribution channel in North America.

For the third year in a row, the manufacturers have built fewer vehicles than have been scrapped. The average age of a vehicle on the road today is quickly approaching 10 years and we are having another cold, snowy, car-killing winter.

What does this mean to our industry? I don’t have the credentials to predict the market for 2011. However, I do have 25 years of working in this industry and a common sense view of what we can expect. Early in my career we had winters like the last two and the pain of owning an older car that jars every joint in your body when hitting huge pot holes is exponentially increased when the maintenance and repair bills are realized in early spring. Quite simply, the pent-up demand that exists in our industry today is unprecedented.

As agents, do we maintain status quo and go along for the ride, or do we embrace the opportunity and become the lightning rods for change that our industry so desperately needs?

The dealers left standing are grateful to be in the business. The great news for us is that the entitlement attitude that permeated the dealer body is gone. Our dealer customers still in the game have a new attitude of gratitude and they know they have to be “in it to win it” as they approach this new market.

However, what most of our dealers don’t have is a plan that is much different from the plans that were in place prior to the upheaval we have all experienced. Therein lays the opportunity for feast in 2011.

As agents who have struggled to keep our businesses solvent and growing while doing the same for our customers, it is tempting to ride the tide of an increasing market and take some well-needed rest. Beware! This is the famine trap of 2011. Giving in to this temptation will blind you to the opportunities that are thick around us. It will also put you and your customers at risk should another industry downturn or upheaval be hiding over the horizon.

To avoid this trap and grab the brass ring of opportunity in 2011, I would suggest a few New Year’s resolutions:

1) Be the voice of optimism within your company and in your market. Albert Einstein once said; “It takes five people with positive energy to make up for one with negative energy.” The older I get, the more truth I find in that quote. In our current market, being a positive influence is essential. Our dealers need to hear “glass half full” views from us every time we see them. It is too easy to listen to the media, disgruntled suppliers or so-called experts that never seem to shut up. Our job is to set an “expect to win” mentality with everyone we come in contact with. We can change the attitude of the world, if first we change our own.

2) Commit to becoming a student of the business all over again. The changes our industry has experienced in the last 10 years have been greater than the previous 50. We can expect only more change as we move into the future. As consultative development agents, we have to recommit ourselves to learning everything there is to know about our business as it exists today. We also have to be aware of and master the major issues that have an impact on our customers today. We can no longer be content with knowledge of how we used to do things. While those lessons gave us a foundation, most are no longer applicable. Focusing on just the F&I department of a dealership is not enough to keep us viable. It is imperative to expand our expertise and understanding to include the sales departments as well as the service and parts departments. The dealers total profit picture is going to be the measuring stick used to gauge our effectiveness as development agents in the future.

3) Set goals with defined realistic objectives, combined with accountability models so you can’t forget about them. Without clearly defined goals in this new economy we risk becoming a rudderless ship cast adrift in a sea of uncertainty. Writing down clearly defined and obtainable goals for both your dealers and your own business; and then creating a plan to achieve those goals within a specified period of time is the key formula for success. The goals will need to be adjusted from time to time as your work toward them but by writing them down with a plan and scheduled review dates, you will be able to achieve what is most important.

In our agency, the single most important aspect of what we do for our sub-agents, dealers and dealer management staff is to ensure that they work this same formula. It makes all the difference in the world and is more important now than ever before.

4) Commit to reviewing all of your products from the perspective of the dealer and the F&I manager. As agents, we naturally bring products to our dealer customers because they generate a commission for us. However, now is the time to take a look at all of our products, not only from the dealer’s perspective, but also from the perspective of what’s in it for the F&I manager to market it and whether it is the best available product.

The dealer needs to be assured that the products do not create a contingent liability when creating front-end profit generated through the sale. Our products need to support more than just F&I. They need to help retain customers in sales and service as well. Finally, our products should also generate back-end revenue and provide equity-building opportunities. As agents, a total dealer profit perspective must be understood and demonstrated to our customers if we want to keep them in the future.

The F&I manager review of products has to be done through the prism of how to successfully present the product in conjunction with all of the other products. Training in real-world terms has to be done to ensure the products are viable and support the sales and presentation method. We need to drill down to feature F&I as part of the sales delivery and customer retention process in our stores.

5) Look at the dealers profit opportunity in all departments, but primarily the service department. Fixed absorption isn’t just a great industry buzz phrase; it is the key to survival in the future for our customers. We have to support this initiative. When I first started in the retail automobile business, I was hired as an F&I manager. I was familiar with credit insurance and when service contracts were explained to me they were represented as “Blue Cross/Blue Shield” coverage for your car. Of course, I never read the actual service contract and represented the product just like that to the poor customers I initially came in contact with. A very painful experience with a customer in the service department caused me to amend my presentation to be more accurate. Also, working for a forward-thinking dealer helped bring my focus back to the importance of the service department as he insisted that all managers rotate for a month in each department to see first-hand how we impacted each other.

That experience helped me understand the importance of a collective effort in dealership management. I also became aware of the value “fixed-absorption” played in the viability of the dealership. Twenty years later, we still need to pay particular attention to the real need our dealers have to generate revenue in service. We have to deliver cutting-edge processes for our customers to use to claim what is rightfully theirs; service department revenue. Make the commitment in 2011 to understand how you can help your customers increase their absorption and service retention.

6) Commit to a service mentality. Ensure you provide world-class service without ego or entitlement. One of the dangerous traps that is easy to fall into is that of entitlement, especially with mature agencies that have many long-term dealer clients. It is easy to measure the volume of work that has been done for a customer and forget to treat them as we did when we just landed the account. Familiarity breeds contempt. That call from a pushy office manager at 5:45 p.m. on a Friday could be easy to blow off and handle Monday. Resist that temptation. Every customer is a gift, treat them and everyone in that manner. You never know when that seemingly insignificant employee will be the glue to keep you in an account or will verify your value to the dealer.

Feast in 2011. Remember your success is determined by the success attained by those you serve. When something goes well in an account, deliver the credit to the people in the dealership; correspondingly, when something goes wrong, take responsibility for whatever it is and drop everything to correct it. Be the customer service standard in your market!

Because of market conditions and opportunities, the goal of growth and excellence in 2011 is more than obtainable. Resolving to have a clearly defined plan to realize that goal will separate you in the market place. Scheduling periodic progress reviews will put you on track to ultimately feast in 2011.

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