Decision Maker 101: The Car Business Success Equation

Believe it or not there is an equation, if you will, for creating a successful new or used car business. These elements are the same in almost any sales business, but in my world it’s clear. An equation, or recipe, call it what you will, but there are three core ingredients that when added up, equal success.

Occasionally you must state the obvious, because…well…while it may be obvious to you, it is not obvious to everyone. For some, they are a few letters off obvious, let’s call them oblivious. They think they can get by without one of the three basic elements of sales success. But really, they can’t, and eventually they will find that out the hard way.

So, what are the three elements to this magic equation? A quality process plus correct math plus drive equals success. That’s it. Pretty straight forward. The core of every business is its processes. Every business is a product of all its processes combined. How you do things. Whatever your business does or sells gets fed into your various processes in the hope of generating a specific result. The math? The math is everywhere. It’s on your expense line, your gross profit line, your performance metrics, and all your analytics. And of course, nothing works without drive. Motivation. The fuel that drives the engine of a business, especially a car business. You cannot survive without it. Just ask the hundreds and hundreds of “wannabe” salespeople that fail. It’s always drive.

Understanding the math in your business is how you keep everything running correctly, and how you will grow your business.

Understanding the math in your business is how you keep everything running correctly, and how you will grow your business. The more you understand the math, the greater chance you have for success, or at the very least you’ll know why you failed. Generally speaking, dealers get most of the math. They understand target commission rates. They have a handle on fixed expenses. But as they say, the devil is in the details. The analytics. All the metrics associated with staff. Salespeople’s performance metrics. Finance office metrics. Conversions to appointments, test drives, worksheets, and closes. Average grosses and so on. Understanding the performance metrics of your sales staff, in any department allows for the creation of medians and targets, points out areas that need attention and improvement, and ultimately who needs to be cut out in order for the business to remain healthy.

How about marketing? That’s all math. Especially now with the domination of the digital age. Unlike a few decades ago, now you can measure everything. Views, clicks, calls, forms; all traceable back to an ad or message allowing you to repeat the marketing that works, while dismissing the stuff that doesn’t. Gone are the days of throwing an ad in the paper and hoping it works, then counting on your staff to provide you accurate source data. Anyone who’s tried to get accurate source data from sales staff likely has a very sore head from banging it against the wall for so long. Good luck. Understanding how your marketing dollars are converting is the key to stability and growth. The cost of customer acquisition combined with commission rates and the average gross tells you how stable and scalable your business is. It’s just math.

The structure of your business is the processes that exist within it.

The process is what keeps everything together. The structure of your business is the processes that exist within it. Your sales processes in every department. The more refined your sales processes, the better your conversion rates and revenue. How about the processes in parts, accounting, administration? All of those cost money too, and paying attention to the efficiency in those processes leads to cost savings and prevents the ever present expense creep; that slow and steady growth in expenses as businesses age and people make bad decisions.

And that’s where it is. The math is the health check of your processes. If the math starts to change, grosses go down, commissions go up, expenses creep, that’s a sign you should be looking closely at your processes to find ways to correct issues and to prevent even more. But there is one more ingredient that makes the whole thing run. The fuel, if you will, that keeps products and services flowing through your processes. Drive. Motivation. The desire to succeed. There are a lot of jobs and vocations where you can hide almost indefinitely with no drive or motivation, but sales is not one of them. As the employer, it’s your responsibility to look for it in those you hire, and to create and maintain it in those that already work for you. It can’t always be wine and roses, but staying positive and providing positive reinforcement goes a long way to creating a motivated team. Maybe even build in some financial incentives for performance, and away you go.

Look at it this way. If the math measures and represents the potential for profit, and the process is the mechanism in which products and services flow through to generate that profit, then the motivation of the staff, especially those in a sales capacity in any department, is what is going to push those products and services through that process. The more motivated the staff, the more products and services you push. It’s just math. Good luck and good selling.