IN CAR EXPERTS news & info Lump on Your Head
Sometimes you have to give a little incentive on the front end to get a new Corvette on the back end.
H
ave you ever noticed the large lump on your head that you get when you have been beating your head against a wall too long? I was speaking with a retailer
last June when I noticed a lump on his head and asked him, “Bill, what is with the large lump on your head?” and Bill said, “My sales guys have sold only $600 worth of sound deadening so far this year, and I cannot figure it out why. My sales guys are the best around.” After talking to Bill about this problem, we came to the conclusion that his guys did not make enough money when selling this category. Here’s what was happening: Employees get 7% gross profit on all items sold; and to make the math easy, we are going to say sound deadening averages 50 points of margin. So when a sales person sells a $200 sound deadening kit, the sales person makes $14, and the store makes $86. If this store was going to do a total of $1200 of sound deadening this year, the net profit would be $516. This projection is not exactly impressive. So I suggested to Bill that he raise the sound deadening com- mission to 20% of the gross sale. So the same $200 sale pays the sales person $40 and the store owner nets $60. Bill had a hard time with almost splitting the net profit with his sales person (“Why am I going to split the profit when I already pay them a good salary?”) Although Bill did not see the logic in this sce- nario initially, he decided to give it a try. I spoke to Bill about three months later, and he said he still had the large lump on his head, so I figured the 20% commis- sion idea did not work. I said to Bill, “So the lump on your head is still there, and bigger than ever? What happened?” And Bill said “Oh, that’s a different lump. I smacked my head on the roof of the new Corvette I bought as a result of my increased busi- ness. Man, these sports cars are hard to climb in and out of!” Here is what happened in Bill’s store: In the past three months, his sales staff sold $6,000 of sound deadening. His attachment rate was high, and he even caught one of his salespersons calling previous customers and pitching sound deadening! If Bill had this system in place for a year, his net profit would have been $7,200. Also, since they install most of what they sell, this sales element would have netted an
56 Mobile Electronics July 2014
additional $8,000 of profit. Last I checked, $15,200 of profit in a single minor category is a game changer for many mobile specialists. Soon after the success of the sound deadening pro-
JASON DENTON
ASSOCIATE DIRECTOR, IN CAR EXPERTS
gram, Bill changed the commission on capacitors, replacement batteries, alternators, processors (such as bass enhancement devices and equalizers) and on many other categories. His sales staff now has a higher items- per-ticket ratio, increased the average ticket price and resulted in more money for all parties. Here is a small checklist of possible warning signs that may indicate your store could benefit from stepping back, reassessing how you do busi- ness and how you can improve it:
• Has your employee compensation plan changed significantly over the past 5 years? - Should you have commission plans vs. salary? - Should you put a spiff program into play? - Should you reduce or increase store hours? - Should you examine what is or is not advertised? - Should you support certain brands over others? - Do you have sales contests? - Have you had a sales contest in the last year? • Do you run category reports (such as what Bill did with sound deadening) to identify strong/weak categories? • Do you pay for online marketing? • Do you have a minimum of 1000 valid email addresses col-
lected from your customers? • Do you have a minimum of 2000 Facebook followers that
you keep updated on why your store is so great? • Are the majority of your “push” lines in your store well pro-
tected from the Internet and loose distribution? • Have you attended Knowledgefest or other in depth busi-
ness training (not technical, not installation) in the past 2 years? While this is not a comprehensive list, the more improvement
actions you undertake (within reason), the more likely they are to impact your bottom line. To step back and look honestly at all parts of your store’s operation is difficult but necessary. The retailers I talk to who have done the best job of revaluating/ reinventing each part of their businesses are the same retailers today who are the healthiest.
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