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Don't Let a Volume-First Culture Distract from Maximizing Gross

Chris Kahrs
Written By: Chris Kahrs
Posted on May 12, 2016

With the rising pressure to hit volume objectives in the new vehicle operations, have you developed a volume-first culture? If so, it might be leading you astray.

Now, I’m not suggesting you abandon volume. That would be absurd. However, I am suggesting that you look at your processes to maximize every opportunity while simultaneously obtaining volume objectives and inventory turn.

A volume-first culture may cause inconsistency in your deals.

On the first of the month, you have established your new vehicle target number with your management team; yet, if you are like a lot of dealerships, you work the deals differently on Day 1 than on Day 30.

At the beginning of the month, we are more focused on the gross of the deal. We tend to work each deal to the end and try to maximize every dollar that we can and no matter what, make the deal.

As the month progresses, though, we lose that focus and begin to take each deal without maximizing the opportunity. By the time the last day of the month arrives, we have now become order takers rather than deal makers. If you closely watch your monthly trend report, you’ll see that the pacing of volume and gross becomes quite different by the last few days of the month. In most cases, the volume tracks upward while the gross trends downward.

It’s not just volume—gross matters, too!

What’s the difference between Day 1 of the month and Day 30 of the month? Your focus on the bigger picture. Yes, the team is meeting the volume goals set earlier in the month, but they’ve achieved volume at the cost of revenue.

The trick to reaching volume and maximizing income is to stay true to your processes. Here are my suggestions:

Recognize that you are going to take the deal.

  • If there is a way to make the deal, you are going to take it.
  • Negotiating the deal is not a bad thing: Remember, you are going to take it anyway!

Start each deal like you have already hit the month’s volume objective.

  • No matter what day of the month it is, adopt the mindset that you have hit the number and are going to maximize each opportunity. (Remember, you are going to take the deal. We both know it.)

Stabilize the desking process.

  • Your desking process is your process and shouldn’t change, regardless of the day of the month.
  • Make sure everyone that works a deal knows the process inside and out to maintain consistency.

Don’t change your T.O. process.

  • Your manager intervention/T.O. process should remain the same no matter what.
  • Establish who is best for each situation.

Stick to your finance process.

  • You have your submission, introduction process, and reset process set. Use them 100% of the time.
  • Make sure your process is sustainable through slow and extremely busy times. There can’t be a weakness or shortcut to this process.

Volume and gross create strong margins

You already have the mindset to take every deal. And, you do that to meet volume objectives. That’s fine, but that volume-first approach doesn’t mean you have to lose the gross opportunity, too.

How much more money would you have made last month if you would have added $100, $200, $300 or more to each new vehicle you delivered? Now, look at the last ten days of the month and compare to the first ten: How do the grosses look? Are they similar or drastically different? You still took the deal on Day 1 as you did on the last day of the month. How did your processes change between the two? Most likely a lot.

You can’t afford to cultivate just a volume-first culture. Instead, adopt a philosophy that your dealership will maximize every opportunity and follow your processes to drop more money to the bottom line and still obtain your volume objective.

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