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A Way to Increase Profitability That Many Dealerships Overlook

We all know that margins are shrinking for dealerships and that it’s a trend that is likely to continue. With that in mind, it’s important to look for ways to preserve your dealership’s profits. Where should you start? The smart money’s on employee retention.

Let’s take a look at some numbers from the Cox Automotive Dealership Staffing Study to understand why this is so important:

  • The average dealership with fewer than 100 employees spends about $10,000 hiring an employee.

  • That dealership spends an average of $2,000 to train each new employee.

  • The average turnover rate for dealership salespeople is 67%.


Here’s the math on that: $10,000 average cost per new hire, multiplied by 67% average annual turnover rate for sales, multiplied by 30 salespeople in a dealership, tallies up to a $201,000 loss per year. That’s money going out the back door just because employees are dissatisfied.

When you take into account that more than half of dealership gross profit margin goes to payroll, look what all that turnover does to your overall profitability!

You should examine all aspects of your dealership when you begin to strategically plan improvements, including hours, pay plan changes, staffing structure, processes and goals. Here are some of the larger considerations that can make a noticeable impact.

Create a workplace culture that makes employees want to stay

A proactive dealership will look for ways to make sure that everyone on staff has what they need to be successful and stay engaged. Employees who are engaged are 59% less likely to look for a job with a different organization in the next 12 months than disengaged employees.

Cultural changes start with surveying your employees and asking what can be done to make things better. Designate a culture champion for your dealership who will take charge of the process and make sure these changes are ongoing, effective and flexible.

Proactive dealers foresee and influence change, teach their team to be self-reliant and understand that empowering staff to make good business decisions yields the best outcomes. They consciously create a company culture driven by employees.

A proactive dealership will look for ways to make sure that everyone on staff has what they need to be successful and stay engaged.

Provide the right tools for the job

Does your technology truly drive success by providing opportunity and saving time? Or is it holding you back due to its limitations?

63% of managers say the pace of technological change in their workplaces is too slow. Every 6-12 months, you should be reviewing the products available to you. If your technology is making it more difficult for your salespeople to do their jobs and provide a good customer experience, they will be less engaged and more likely to go elsewhere. For example, if your salespeople have to type in a customer’s name seven or eight times in one deal because none of your systems are integrated, both the salespeople and the customers are likely to get frustrated.

Train to build retention because retention builds culture

Training – and particularly CRM and technology training – is non-negotiable. You need it to make everyone’s lives easier. It's like oil changes: if you don't change your oil, your engine will explode. If you don't train on your technology, your dealership will explode.

To establish an effective training program, start by understanding where you are: set a baseline. Effective training must be owned by all players. If someone is reluctant, get them to own some of the training by making them part of the process.

Last, but not least, constantly evolve the training. It needs to stay fresh and new and based on the needs of your dealership.

Don’t wait to make these changes because your competitors are making these adjustments now. Don’t let your top talent slip away. Implement employee retention strategies and preserve your dealership’s profitability.

Learn more about employee retention and profitability in Chase’s recent interview with CBT News.

See more Resources on Management and Culture

Chase Abbott

Vice President, Sales

Chase Abbott is Vice President of Sales at VinSolutions and Dealertrack F&I, where he is responsible for leading and managing the sales team and its efforts. Prior to joining VinSolutions in 2008, Chase spent seven years with an automotive group, holding multiple titles from Internet Director to Finance Director to GSM. Chase brings strong leadership qualities combined with a tenacious desire to build efficiency, process and culture within the VinSolutions sales teams.

Connect with Chase Abbott on Linkedin or shoot them a note.

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