You Manage What You Measure

Dealers today are sitting on a mountain of data, and many don't even realize it. They're closing up at a rapid pace, and they don't know why. The market is not shrinking, but dealer attrition is at an all-time high. They're working hard and selling a lot of stuff, but they don't seem to be making money. Why is that? As the old adage goes, the devil is in the details. At least 1/3 of dealers do not even have a dealership management software suite, and for any dealers reading this article that do not have a DMS, let me suggest that if you want your dealership to survive over the next 5-10 years, and ever plan to sell your business, you absolutely must make this investment. You cannot run your business without it!

Even those of us with a DMS are not exempt from the dealer network atrophy. If we aren't monitoring the health of our dealerships by living in that DMS day in and day out, we may as well not even have it. We've heard from business consultants that we need to be measuring by the numbers, but we don't have universally accepted baselines in the OPE space, the way that ag, powersports, automotive, and other mature industries operate. Further, our business management software systems usually don't offer some of the most fundamental reports we need to be looking at in order to really scale our businesses, or even just manage them well.

For instance, a report showing what percentage of deals include trades. Or perhaps a report showing which trades are worth keeping and which need to go immediately to a wholesaler/auction, and which should never be allowed to come in at all. What is our average transaction time? What is our profit on a per-unit basis after interest? What percentage of our customer base are the most loyal, which are repeat buyers, which have only purchased once? What are our retails by line, segmented by county?

We could drive ourselves nuts finding flaws in our existing software, or we could leverage the data we can see, data many now-defunct dealers were not monitoring, and supplement those built-in reports with the custom reports and metrics our consultants are teaching us to monitor.

Unfortunately, most dealership programs are terrific repositories of data, but we are not disciplined enough to look at certain reports on a regular basis, our software will allow us to run ourselves into the ground. No alarm bells go off when warranty receivables cross the 30 and 60 day age. No warning emails or text messages are sent to managers and principals when profit margin dips below the 3-year average. It's high time we take matters into our own hands and build this functionality ourselves, which some DMS platforms allow.

Many DMS platforms are built in SQL, a common database platform, and allow for SQL Data Views, a read-only window into the mountain of gold that is our data. SQL Data Views can be consumed by data analytics tools such as Tableau, Periscope, Grow.com, Chartio, and many other reporting and dashboard platforms. A data agency or even a developer from Upwork.com could do the footwork for you, and often times, perhaps for a small fee or a commitment to an annual contract, one of these software providers will deploy it for you.

These tools are updated constantly (usually, every 5-15 minutes), and connect with automation platforms like Zapier, so a daily digest email report tailored to a specific job function, such as a service manager, is not difficult to set up. That email report could even include a few key metrics, such as repair order cycle time (also conspicuously missing from DMS reporting), labor recovery rate, overtime, freight recovery rate, and warranty claim aging. He could also have a dashboard through Databox, Grow, Chartio, and so forth on a TV on the wall with each of these metrics, and perhaps that dashboard rotates to a view with cameras in the shop. Side note, but a great free Google Chrome tab rotater extension is called "Revolver", and it rotates between different open tabs, such as dashboards, cameras, news, weather, calendar, or whatever else you would like to monitor, cycling at whatever interval you like. A good rule of thumb is 120 seconds per view, but it can be paused, for instance, if you were having a meeting around the dashboard, which is a fantastic habit of successful dealers.

It's been said that you manage what you measure. If you are not measuring these and other important areas in the dealership, you simply cannot manage them. And would you rather spend time gathering data, when you even remember to scrounge for it, or would you rather have it staring you in the face all day every day, so you then can focus on doing something about it? I contend that every department needs one or more dashboards with key data metrics, and it is not expensive or complicated to build.

Tools needed:

• LCD TV. I like 36-42", but bigger is better, if you have space. Amazon and Walmart have great buys on refurbished/open-box screens, usually under $200. Especially after the holiday season.
• Swivel TV wall mount - $15-20
• A Google Chromebit or Intel Compute Stick will get you basic computing power with a browser - $50-100
• Logitech keyboard/trackpad combo - $25
• Zapier subscription. www.zapier.com - free (subscription can be upgraded for premium features)
• A port in your firewall
• A business intelligence tool ($0-500/mo)

Marketing could have a dashboard with Google Analytics. Sales could have a dashboard with average margins and the top ten slowest moving models. Perhaps even monthly sales vs goal (also conspicuously missing from our DMSes). Parts could have margins and fill rate widgets, and even break down parts sales by line in a donut chart. At least whichever metrics are most crucial to your business at whatever state of maturity. Accounting could have a weekly cash requirements widget, percentage deviation from budget, average AP aging, average receivable aging, just to name a few.

When you first start doing major data analysis, such as profit by product line, sales and profitability by salesperson, and so forth, the results could be a little scary in some areas. Don't be afraid to make major changes! But before you clean house, make sure your compensation plans reflect your goals to improve problem areas. Eliminate incentives based on revenue in favor of incentives based on margin. Reward the employees who put in the extra 5-10 hours a week who are improving these goals. Make sure they get something out of the deal, and they will work harder to meet these goals than we ever could.

There is never a better time than today to take action and dig into the data. Consider appointing a board to help digest the data and craft a course of action to improve metrics. Whether you choose to appoint a board, or monitor metrics and KPIs with your management team, committing to managing by the numbers is critical. In the grand scheme of things, it may just be the most important decision you will make.