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Profit-Per-Employee: What are your employees making (or costing) you?

Manage Profits
Article Highlights:

  • Use transactional reporting to better manage your dealership.
  • Easily measure how much profit each employee brings to you.

Have you ever spent half a day drowning in Excel spreadsheets, trying to use your information to get results? Data should work with you, not against you. Instead of digging through spreadsheets or questioning staff to determine why one employee’s numbers suggest they are more or less valuable than another person doing the same job, wouldn’t it be nice to have excuse-filters to prove exactly what your employees are doing?

We’ve talked about how crucial managing profit-per-customer and profit-per-vehicle are, but now let’s unpack managing your profit-per-employee. What if you could precisely measure it?

According to NADA data, new-vehicle sales are expected to remain around 16.7 million units in 2018. Similarly, Canada’s new-vehicle sales in 2018 are expected to fall short of 2017’s record. If you had to predict whether this trend will continue in the coming years, would you say yes? Gross profit margins as a percent of sales have declined for five straight years. From 2015 to 2017, the gross profit margin decreased by .7%. That might not seem like a lot, but it adds up, especially when there is a decrease every year.

It will only get harder to stabilize your business as profits continue to decline. Selling cars isn’t enough. Service appointments aren’t enough. You need to ensure your employees are maximizing profit with every opportunity.

For example, ask your bottom-performing F&I manager why they’re bringing in the least amount of profit, and you will likely hear the excuse, “I always get the cash deals.” Is it true? This is an excuse you can’t easily filter. And if you can, it takes too much time and effort with your current reporting tools. With shrinking front end grosses, F&I needs to continue to be a profit-centre. But this employee is walking into your business every day and letting profit walk out.

The average new-car F&I PVR in 2017 was $1959. How do your F&I managers stack up?

If you have three F&I managers with an average PVR of $1,959, selling 3 cars a day, that’s $5,877 per person. But, if your bottom-performer is only doing $900, that’s only $2,700. That’s a $3,177 difference in a single day. That’s $76,248 a month or $914,976 a year!

 You don’t always have a good way to determine whether the statement ‘I get all the cash deals,’ is true or false, but you need to get your facts straight. You have two options. You can leap blindly into a rabbit hole every day: digging, sifting, dissecting, and analyzing reports. This takes valuable time and you’re too swamped to get anything of significance accomplished. Or, you can assume your F&I manager is trustworthy and take their statement at face value. Are either of these a desirable option?

One dealer told me pulling reports out of his DMS was only the first step. He had to use both Google Docs and Excel spreadsheets to get to the details he needed. He knew the answers were there but he was searching for a needle in a haystack.

Without the right data, you will end up micromanaging your staff, which top-performers loathe. You’ll hate it too – you have a business to run. Top-performers are already missing out on deals you’re giving the bottom-performers. What’s worse, if you start losing them because they’re unhappy, it will cost you. Replacing an employee costs businesses on average 150% of an employee’s annual salary.

What if there was a new way to turn data into the insightful answers you need?

Here are three ways you can get the most out of your employees, whether it’s your seasoned F&I manager or your brand-new service advisor:

  1. Use reporting as a coaching tool. The reporting tool you use should provide reports that make it easy to coach your employees. Do you have a tool which allows you to quickly see which service advisors average the most open ROs at the end of the day? With a solution built with your DMS that updates in real-time, you can see averages per advisor, find out the real issue, and work to correct it.
  2. Put the right people in the right places. Use a report that shows you which used car manager is taking in the most vehicles you end up wholesaling. Look for trends with this data. Does that person work a lowly Monday afternoon shift? Consider switching them to a Saturday and see what happens to your wholesale losses.
  3. Hold people accountable. With a tool that tracks accountability, you always know where you can improve. Your reporting tool should have built-in note tracking that doesn’t delete. This way, you can easily see where your contracts-in-transit are getting held up and so you can get your money faster.

With transactional and actionable reporting, use powerful insights about your business to be sure you’re getting the most out of your employees, whether they’re long-term or brand-new.

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Former Product Planning, Reynolds and Reynolds

Gary Reinhardt is the fomer Product Planning manager for Business Office and Reporting applications at Reynolds and Reynolds.

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