Dealer Insights - September/October 2012 - Determine the Right Size For Your Sales Staff
August 27, 2012
New car sales are ringing in strong this year, with no signs of retreating soon. As many as 14.5 million units are expected to be sold by year end, according to LMC Automotive, which forecasts for J.D. Power and Associates. Industry forecasters see pent-up consumer demand as a leading reason for the brisk sales activity.
If your part of the country is echoing these strong trends, you may be considering a sales staff expansion. But how do you know the right size for your store?
GROSS PROFIT PER EMPLOYEE
To reach your optimal sales staffing level, there are a number of steps you can take. A good place to start is your monthly gross profit per employee.
A rule of thumb is that each employee should generate gross profit of at least $7,200 per month. To determine your average, take your December year-to-date gross profit and divide by 12. Then divide the result by your current number of sales employees. Does the average fall above $7,200? If so, you may be able to afford to hire more sales staff.
Depending on your circumstances, a $7,200 average may not be right for your business. Always compare your dealership to the market in which you’re operating — consider checking with manufacturer or group composites to see how your average stacks up.
PLANNING FOR THE PEAKS
Reaching your optimal sales staffing level isn’t a black-and-white matter. To customize your approach, you’ll need to think about the changing shades of gray at your operation. Consider, for example, how you handle staffing when sales employees take vacations or call in sick.
Also think about the staffing levels you need for key weekday and weekend hours and for special promotions. Answering these questions will help ensure you have the staffing necessary to handle all your peaks.
PREPARING FOR THE VALLEYS
Even in good times, you should have your nose to the future. A question to always keep in the back of your mind is, “Would our dealership survive a decrease in traffic?”
You must continue to work at keeping the number of sales employees in line with sales so that, if the market turns down, you’ll be better able to stay on an even keel. If you already monitor your traffic and keep tabs on trends, you’re ahead of the game.
Financial problems that arise from carrying too many sales employees can creep up on you. Be careful not to hire at a rate faster than your sales and gross are increasing. Continually adjust your headcount to match your sales, and you’ll have a better chance of maintaining your dealership’s profits during challenging periods.
SEIZE THE DAY, CAUTIOUSLY
In addition to a pent-up consumer demand for new cars, other factors point to vibrant car sales, including a desire for more fuel-efficient models, a more relaxed financing environment, and new, exciting models from the manufacturers. Make sure your sales force is staffed up for opportunities, but don’t lose sight of risks.
Dealer Insights - September/October 2012 Issue