Editor’s note: The Dealer LAB is a joint editorial project between Dealernews and PowerHouse Dealer Services, a consulting firm operated by Bill Shenk who is also owner of Destination Powersports in Punta Gorda, Fla. Financial information in this report is sourced from Destination Powersports’ Composite Report (prepared from the dealership’s monthly financial report) which is supplied to Dealernews by Shenk under an exclusive agreement. Shenk also provides Dealernews contributing editor Joe Delmont with exclusive access to select store and team meetings and other updates; Delmont uses this information as well as interviews with Shenk to develop the monthly Lab report in Dealernews and on Dealernews.com.
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.
Destination Powersports of Punta Gorda, Fla., our Dealer Lab dealership, hit a speed bump in August 2011, and posted its first monthly loss of the year, dropping $9,001. While revenues in service, parts, and accessories increased against August 2010, showroom revenues dropped by more than $62,000 or 27.7 percent.
Meanwhile, service increased YoY by 54.9 percent, parts, by 19.2 percent, and accessories, by 27 percent.
The primary cause of the weak showroom performance in August, Bill Shenk says, was personnel and poorly applied procedures. The problems started in June. At that time, there were indications of problems on the horizon even though the June numbers looked great. Revenues were up 10 percent YoY, even though unit sales were flat.
“In August we saw that we weren’t spending enough time making friends or building the desire for bike ownership,” Shenk says. “For sure, from June forward we were not making friends and creating desire with our internal parts and service customers and previous units customers.
“The showroom people weren’t making friends with our service customers or our parts and accessories customers. There wasn’t the intensity we needed. We are doing better today, but still need to improve to get to a ‘Shenk’ level. “It was the classic example of good being the No. 1 enemy of great. When things are good, people don’t want to go through the risk and pain of changing to get to be great.”
In June, Shenk put the management team on notice that improvements had to be made. In July, when things had not improved sufficiently, the management team was put on probation. “We sat down and went over a list of about 20 items that had to be improved,” Shenk recalls. “Things like how we answer the phone, how we track salesperson performance, how our email newsletter was being handled, what was happening with our product merchandising in front of the store, how actively were we reaching out to our customer base by calling our customers. We have to call our customers four times each year. We have to make friends of those customers.”
Shenk cut the payroll of the showroom management team (two guys) by 15 percent, beginning in July, a cut that would continue until they did things his way. “That’s pretty harsh,” Shenk says. “But it was necessary.”
For example, Shenk wanted balloons strung from motorcycles in the showroom to show visitors that every day is a party. But over time, the number of balloons declined. “’What don’t you understand about my wanting balloons on the bikes?’ I asked them. That’s a simple thing, but they have to do it my way.”
In August, Shenk fired the manager who handled F&I. That’s why August F&I performance faltered. It was a good time to make the move, Shenk says. “If you’re going to be dead in the water, make it the worst month of the year. That’s what we did.”
While the dealership was having its internal personnel problems, Florida was having record bad weather, the stock market dropped and consumer confidence continued to slide. It was the perfect storm to dampen unit sales. Today, the remaining sales manager still is on probation. “The lesson here is this: By every number in June, it looked like we were doing a good job, and the sales manager I have right now probably would work out well for most dealers, but it’s not enough today.
“It used to be that a good sales manager was really good at negotiating with people who wanted to buy something. Today, you can’t make it on that. You have to go out and create buyers. That was our problem: we stopped creating buyers and we just negotiated with people.
“You have to make people hungry, you have to get them excited, you have to show them how easy it is to upgrade. Those are the things you have to do to sell machines today.”
Here’s another problem that comes back to one of Shenk’s key principles: You have to know who didn’t buy and why they didn’t buy. “We were collecting the data, but our managers didn’t immerse themselves in this data and use it effectively,” he says.
In another dramatic move, Shenk fired his service manager at the end of August because he was not a team player, and because he caused stress in other departments. Shenk made the move even though service numbers were very strong this year. “Even though we went from $20,000 to $30,000 in service revenue, I let the service manager go. There, again, the No. 1 enemy of great is good.”
The cost of payroll for Sales declined from $19,288 last August to only $10,710 in August this year. But that number is not as good as it looks, since sales payroll this year was 42.6 percent of showroom’s gross profit, compared to only 33.6 percent in August of 2010. “In other words it looks like the dealership saved money, but it really paid a much larger percentage of its departmental gross profit for the month,” Shenk points out. “It really was an increase. Many dealers make this mistake.”
On the flip side, the service department continued to perform well, generating revenues of $30,641, up from $19,786 last year and up from the $29,705 posted in July. As a percentage of total dollars, service was 12.6 percent compared to a Top Gun average of 7 percent.
Parts and accessories was a mixed picture in August. Combined revenue was $44,337 up from $39,403 last August, but off from $56,162 in July this year.
This story originally appeared in the Dealernews November 2011 issue.