The Profit Centers of a Dealership

by: Jeff Sellers

Exactly what are the “Profit Centers” of a typical dealership? This might differ depending upon the size, complexity, and make up of the dealership. However, there is an accepted format for this, and without structure, how can the managing staff properly assign responsibility and accountability?

When visiting many dealerships, it is apparent that confusion exists in this area. Some dealership staffs are not exactly sure what their “true” job classification is and this creates problems, as well as a potential loss of income.

Here are the generally accepted profit centers of a typical dealership:

Sales Profit Center: This incorporates the profits generated from each RV sale.

F&I Profit Center: This includes all the profits generated by sales of F&I products. This includes the sale of service contracts, environmental protection products, sealant products, GAP insurance, credit life and disability insurance, wheel and tire coverage, and even the reserve garnered from interest rate mark-ups.

Service Department: The service department should be a stand-alone profit center that is accountable for the profits generated from repairs, upgrades, and maintenance work.

Parts Department: The parts department should be a stand-alone profit center that is accountable for the profits generated from sales of parts and accessories.

It is important to have each of these departments have their own manager, or senior staff leader, that is in charge of ensuring that each employee is properly trained, educated, and aware of the importance that each respective profit center brings to the dealership.

Naturally, the size of the dealership determines if having one person in charge of several departments is reasonable. If one person is working in more than one profit center, make sure they are trained and aware of the compliance issues with each department. Regardless of the size, the dealership needs these departments to be individual profit centers.

PROPERLY FUNCTIONING PROFIT CENTERS
Every dealership needs to stress the importance of each of these departments being a working member of the overall dealership. The service, parts, and F&I departments must understand that the most profitable and largest supplier of business to their departments is the sales department. The sales department must recognize that the other departments are their best allies in reassuring the customer that they made a wise decision purchasing their RV from your dealership. A properly functioning dealership allows each department to understand the value that each profit center adds to the dealership.

The sales department should encourage the purchasing of products and services that the other departments offer, and the other departments should provide strong leads, and increase overall customer satisfaction, for the sales department.

This is why it is vital to outline the importance of the “Team Concept” and how each department must work individually as a profit center, while cooperating with the other departments. Bring in an outside consultant, trainer, or coach to conduct a dealership meeting from time to time. The key here is to know that there are individual profit centers in the dealership and to outline the importance of each department’s responsibilities.

The very existence of many dealerships in today’s economic climate depends upon the cohesive and collective efforts of each of these respective profit centers working together for the greater good and financial survival of the dealership.

Even as business continues to pick up in the coming months, winter is generally a slower time of year at many dealerships. Now is a perfect time to start addressing this matter and put into place a program whereby each department recognizes the various profit centers of the dealership.

Jeff Sellers is the director of sales and promotions for the Professional Dealership Alliance (PDA). Staff members of PDA write industry articles and, speak at local, state, and national conventions and seminars on various topics relating to the retail sales industry. You may reach Jeff at jeff@pda401.com.