Issue link: https://read.dmtmag.com/i/536070
SOLUTIONS 32 • July 13, 2015 • Powersports Business www.PowersportsBusiness.com "Do I have the right number of people in my parts, sales and service departments?" This is a really common question we hear from dealers. Your employees are con- tinually asking you to hire more people, right? Since personnel expenses are a huge part of your overhead, how do you tell if you have enough (or too many) people working in a particular department? How can you deter- mine if your payroll expenses are in line? It may seem like you don't have as many as you need because the staff is always too busy to get all their tasks completed. But is it because they are that busy… or because they are not productive enough? It's difficult to pro- vide a definitive answer without having more details, but I can provide some data that might help you make some decisions. Knowing the gross profit dollars per employee and payroll expense as a percent of department sales, gross profit or per vehicle sold can sometimes help you make decisions. The nice thing is these numbers are compa- rable regardless of the size of your dealership. If you're tracking these numbers accurately, it doesn't matter if you sell 100 units or 1,000. Here are some current (YTD through May 2015) averages from our metric 20-groups. Keep in mind this is the average number — not the top dealers (DGP = Department Gross Profit). OVERALL STORE These are pretty straightforward. For the overall store, we prefer to look at personnel expense as a percent of total sales. Gross profit $ per store employee: $54,777 Personnel expense as a percentage of total sales: 9.4 percent SALES DEPARTMENT The gross profit dollars per employee is going to be influenced by your store's business philosophy regarding working every deal for maximum gross profit. Your sales manager has a critical role in this. In sales, we prefer to mea- sure personnel expense per vehicle sold (PVS) as the comparative number. Gross profit $ per sales dept. employee: $84,887 Sales personnel expense PVS: $261 F&I If you are not pursuing F&I, you are not only doing a disservice to your customers (since almost every customer has a need for these products), you are really hurting your bottom line. In many cases it is worth spending a bit more here just to ensure that you have some- one who really knows how to make it happen. Gross profit $ per F&I dept. employee: $118,803 Personnel expense as a percent of DGP$: 18.8 percent P&A These folks generate a sizable chunk of your total store gross profit since the margins are high when compared with other products. However, P&A generally requires more staff to run the department effectively because of the variety of jobs they must do — parts-to- service, inventory monitoring and control, ordering/shipping/receiving, counter sales, accessory and apparel displays and sales, mer- chandising and rotating display stock, etc. Gross profit $ per P&A dept. employee: $48,630 Personnel expense as a percent of DGP$: 36.4 percent SERVICE Although the dollars per employee seems low, you can't place a dollar figure on how much this department contributes to customer sat- isfaction that leads to additional sales for your dealership. Tech compensation has to stay below 35 percent, since it represents the cost of sales for labor. You need to achieve close to a 70 percent gross profit on labor sales if you are to pay the bills and make a profit in this department. The personnel expense would represent the service manager, service advisor, shop foreman, lot porter — anyone who is not a tech. If you have a service manager/tech, you need to fractionalize his or her personnel expense and tech compensation in order to compare with national averages. Gross profit $ per service dept. employee: $23,740 Tech compensation (less benefits) per- cent of labor sales: 30.8 percent Personnel expense (non-tech) as a per- cent of DGP$: 42.4 percent I hope these numbers provide you with some useful guidelines you can use when making your determinations for staffing levels. How- ever, there will always be variables that you cannot control that could affect these numbers, such as local wage scales and product lines that require specific staffing demands. PSB Steve Jones is senior projects manager at Gart Sutton & Associates. He has worked in the powersports industry for more than 30 years, for dealerships and manufacturers, and as a consultant and trainer. Contact him at steve@ gartsutton.com. Looking at department staffing numbers RETAIL REMEDIES STEVE JONES