Dealer Lab: December's profit largest of 2010

Publish Date: 
Mar 1, 2011
By Joe Delmont

Editor’s note: The Dealer Lab project is a joint effort between Dealernews and PowerHouse Dealer Services, a consulting firm run by former dealer Bill Shenk, detailing his efforts to return Florida Motorsports to profitability. When he took over management in July 2009, the two-store (Naples, Fla., and Punta Gorda, Fla.) network wasn’t in good shape — it lost money in 2007, 2008 and 2009. Shenk and a partner have purchased the Punta Gorda store and have renamed it Destination Powersports to break away from its poor reputation. Shenk no longer has ties to the Naples location.

The financial information in this report is taken from the dealership’s Composite Report supplied by Shenk and prepared for the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is prepared from the store’s monthly financial report. In preparing these reports, Dealernews reviews the dealership’s unaudited P&L statement and balance sheet, as well as its Composite Report.

  So, here we are at the end of 2010, the year that saw Bill Shenk and his partner purchase ownership of the Destination Powersports store in Punta Gorda, Fla., after the previous owners closed it in February. Shenk’s first full month of operations was March 2010.

For the 12 months of 2010, the store posted a net loss of $29,346 on total sales of $3,638,920. That’s an improvement of more than $254,000 in profitability over 2009 when the store lost $283,455 on total sales of $2.7 million.

If you look at the last 10 months of 2010 vs. the same period in 2009, the comparison is even better, and it more accurately reflects the turnaround made under Shenk’s leadership.

For the 2010 period of March through December, the Punta Gorda operation earned $19,263 on total sales of $3,239,378. Compare that with the loss of $252,600 posted in the same 10 months of 2009 on total sales of $2,190,503, and it’s obvious that there’s been a dramatic improvement in operations.

This return to profitability was made without any significant improvements in facilities, or without adding any new franchises — and it was made at a time when sales activity in Florida was down some 30 percent between 2009 and 2010.

How was the turnaround achieved? There were several important changes. We’ve chronicled these operational changes at Destination Powersports every month since July 2009 in Dealernews magazine, and via the Shop Talk Lab at dealernews.com, but here is a summary of the key changes Shenk made to help turn the dealership around.

ATMOSPHERE. “We keep the facility and grounds much cleaner and more organized now. I call it ‘Show it Proud!’ We didn’t spend any money on displays or facility; we just do things like mopping the floor every day and making sure all the bikes and accessories are dust-free. We even take pride in how the product is displayed in the storage area. Customers still make comments about how much better it feels when you drive up or walk in. We keep the music on the PA system upbeat and borderline loud. We had to get amplifiers for some of the phones so the team could hear while on the phone. We play family comedy [while customers are] on hold, not sales messages. We have balloons on the units every day. We grill hot dogs every Saturday for our friends.”

CUSTOMER CONTACT. “Our focus is on making a friend first, selling the lifestyle second, and selling products third. We sell fun to our friends. When we answer the phone, we begin with, ‘It’s a great day at...’ It is as much a reminder of what our mission is as it is a statement to our friends/customers.”

PROCESSES. “We continue to train on our PHD FasTrak three-step sales process in every department, as well as the TOT (transfer of trust) delivery process. We have a one-hour management team every Tuesday to begin the week focused.”

PERFORMANCE. “We measure performance in every department, every day, with our exclusive PHD FasTrak reporting system that benches our performance against other PHD client dealerships real time and tracks our performance against our budget in a daily, weekly, monthly, and YTD format. We review FasTrak every week during our management team meeting.”

F&I TRAINING. “We had Jon Anderson of Performance Consulting Group train our finance salesperson and install a much more compliant menu system, giving us a substantial increase in F&I revenues.”

PHONE TRAINING. “We began recording phone calls and reviewing [them] for training.”

FEEDBACK. “We rely heavily on the feedback from the call center operated by Victory Solutions, and have had Jose Juarez onsite for staff training on the Victory system.”

PARTICIPATION. “We began handing out coupons at bike events, and we have attended motorcycle club meetings.”

E-COMMERCE. “We developed a electronic/Web presence via a website, blog, Facebook, Twitter, daily Craigslist postings, and regular use of Cycle Trader, Boat Trader, and eBay.”

COMPENSATION. “We have strong well-paid mangers who work on 100 percent commission, helping to ensure what I refer to as ‘owner mentality.’”

A STRONG DECEMBER

December was the best month of the year in terms of net profit, total sales and gross profit. The store had a net profit of $12,690 for the month, on total sales of $341,000, and a gross profit of $107,479. The gross profit was 31.5 percent of total sales, topping the 25 percent of sales posted by our Top Gun dealers.

By comparison, in December 2009, the dealership lost $42,854 on total sales of only $152,175. Gross profit in 2009 was only $48,793.

Reduced flooring costs continued to boost profitability, dropping nearly $11,000 to the bottom line, compared to December 2009.

The big jump was in unit sales, though: the dealership sold 38 new and used units compared to only 13 in the previous year. These 2010 sales generated revenues of $241,483 compared to a weak $76,924 in December 2009. “The sales jump was caused by several things. There is no magic,” Shenk says. “The one thing I learned from racing is that the big wins come from the right combination of many small things. Dealer Lab (DPS) is a tremendous example of this.”

Shenk’s major goals for 2011 include:
Recording floor traffic. In 2010, information was gathered on 1,573 store visitors, much, much better than the 146 that were captured in 2009.

“Victory Solutions is one of the most valuable sales tools we use,” Shenk says. “I’ve said for many years that if you are going to grow, there is nothing more important to know than who did not buy and why. Few dealers ever know this information. Victory gives us this information as well as a CRM tool for our follow-up and prospecting plus the traditional after-sale info on our unit and service customers.”

Moving to a more modern facility with much better visibility. Shenk has been negotiating on an attractive facility that formerly housed an auto dealer, located on Punta Gorda’s main highway.

Obtaining additional credit to purchase more used bikes and to make capital improvements such as door swing counter, and a new phone system to track incoming and outgoing calls. “It’s important to track traffic, activity and customer response, especially since I spend more time in the powerhouse office than at the dealership ” Shenk says.


This is the full version of the report that appeared in the Dealernews March 2011 issue.