There can be no arguing that most dealerships operate in silos. Typically, four exist: New Car Sales, Used Car Sales, Service and Finance. These four departments usually work independently of each other, each with its own revenue and volume goals, yet all are undeniably intertwined. And, as their goals aren’t aligned, the resulting friction costs revenue.
Frequently, to make a deal, heated discussions occur about having the used car manager step up the value of the trade, so the new car sales department can hit OEM and profitability goals. This often kills the used sales ledger and commissions paid from that department. Then used car managers argue with service directors over reconditioning charges. Salespeople are upset because they believe their commission from front-end profit is shifted to the back-end in finance, reducing their paycheck. And while the finance department typically communicates with sales managers to structure deals properly, it also has an edge, with add-ons that can make or break a skinny deal.
How then do you change the mindset and break down the silos?
One dealership in Texas seems to have found part of the answer to this and unified its departments by introducing a new process in sales: salespeople discussing F&I products with customers prior to entering the finance office to finalize the transaction.
According to Automotive News, by simply training its sales staff on available F&I products, providing brief summaries on what the finance manager will be discussing with the customer, the dealership has increased finance revenue by an average of $200 per vehicle.
Why? Because the finance manager has a limited amount of time with each customer (typically 45 minutes to an hour). While the salesperson oftentimes invests much more time in establishing the customer relationship, earning and building trust.
The sales staff, mind you, isn’t selling products, just pre-educating customers, teeing them up for the finance manager thereby creating a smoother process in finance. How does the dealership motivate the salespeople to care about this — much less complete this process? The salespeople get 5 percent of the back-end gross in commission.
I know of at least one salesperson who got a $100 bonus for every deal that went into finance with a $1,000 back-end. Do you think he was motivated to discuss finance products with his customers while waiting to go into finance — in that awkward dead-time that inevitably happens after hands are shaken and a deal is made? This seems like a perfect solution to increase gross without much effort, while also changing dealership culture away from silos and into teamwork.
While you may have a couple of star running-backs, you’ll never win the game if the offensive linemen don’t make those blocks and protect them. By breaking down silos, not only will your dealership operate more efficiently, it will also enjoy increased revenue which, by default, benefits everyone’s wallets.
Author: Ujj Nath
Ujj Nath is the Founder and CEO of myKaarma (www.mykaarma.com), the cloud-based conversational commerce software that’s revolutionizing the auto service industry. He has 25 years of experience as an entrepreneur and automotive industry executive. In 1990, prior to myKaarma, Ujj founded Syncata, a major provider of business consulting and systems integration services. In 2004 he successfully negotiated the sale of the company to ProQuest Business Solutions (NYSE: PQE), which was subsequently acquired by Snap-On Tools (NYSE:SNA). At Snap-On, Ujj was Vice President of Global Accounts and headed the Professional Services Organization for Snap-on Business Solutions. He can be reached at firstname.lastname@example.org.