It is the end of the year, time for every commercial department to push the Section 179 Tax Code, get rid of old inventory and start planning for one of the most important New Years the commercial and fleet business has ever seen. Why do I make this strong statement? For the simple reason that we are probably in more commercial and fleet departments by more manufacturers than anyone in the United States. This year we have worked with Ford, Chrysler, General Motors, Nissan and Mercedes Benz dealers. We get to see what makes a commercial and fleet department successful and the major reasons for failure. This article may be one of the most important and insightful that I have ever written. Why? If you ever wanted to get into this important money maker 2017 will be the year based on what we see in the market place. Before we go to far, let’s get rid of the many misconceptions regarding commercial and fleet.
A few facts we have gathered from research we have done with dealerships across the nation:
- Upfront gross profit for commercial vehicles is two to three times higher than retail. Internet portals like TrueCar.com, cars.com, AutoTrader, Carvana and many others have helped to strip out the upfront profit on the retail side.
- Commercial vehicles are driven further and harder than retail and the average service ticket is twice the profit of retail.
- There is a much higher profit on parts for commercial vehicles.
- The average spent on advertising and marketing per unit sold on the retail side of the business is $500 to over $800. The average spent on commercial sales is less than $50 per unit sold.
- The average commercial department has 1.5 sales consultants! (Let’s get rid of the .5 and add a full person!)
- Repeat sales for commercial is five times higher than retail.
I could share five other facts that favor commercial and fleet including retail spinoffs and extremely high referral rates. With all these facts, there are two puzzling questions:
- “Why aren’t more dealerships involved with commercial and fleet sales?”
- “Why do so many dealerships jump into commercial and fleet and a year later are out of the commercial and fleet business?”
I think the main reason is very simple, a total lack of understanding how the commercial and fleet process works and a lack of guidance regarding how to create long term success. Retail sales is often an event that involves making the sale on the spot. Commercial and fleet is the opposite requiring multiple sales contacts and often six months to a year of working with a prospect. Most dealerships lack the patience or understanding of the commercial and fleet process. Here are the expectations of most dealerships and the mistakes:
- Dealerships measure the wrong thing early in the process. All the emphasis should be on “quality activity” not sales. Quality activity does not include massive “cold calling” although there is a right way to cold call.
- Most dealerships expect an immediate payoff and to make matters worse put their new commercial sales consultant on a 90-day draw. This is not a 90-day business but a long term six month to a year process to reach the right levels of success.
- Contrary to popular belief you do need a department manager to guide the process and hold the sales team accountable.
- If you want to try to make the commercial department work with one person you are in for a very rough road. It would be a much shorter road to success with two sales consultants which in truth is still not enough. We hire dozens of retail sales professional but think we can just “dip our toe in the water” on the commercial and fleet side of the business.
Think of your commercial and fleet department like buying a whole new franchise at a fraction of the cost and you might be willing to invest more into the department.
I am about to make a very strong statement based on my sixteen years of working with the commercial and fleet side of the business.
“The most profitable dealerships in the nation going forward will be the ones who embrace the commercial and fleet side of the business as an independent franchise with unlimited potential.”
2017 is “The Year of Decision.” I have many friends in this side of the business that know what it takes to be successful; the entire sales teams at McGrath Family of Dealerships. Randy Marion, Richard Cobb and Lee White, Mike Stubbs of Huffines Chevy and Chrysler, Matt and Dave Pompey at Scranton Dodge, Scott Sams of Karl Chevrolet, Billie Nimnicht, Chris Merriman and Adam Parks at Parks Chevrolet, Dan Miller, Joe and Patrick Chastang at Chastang Ford, Ken Thompson at Classic Chevrolet, Russ Baugh at Shottenkirk and many others. These people and organizations “get it.” These are dealerships that have paid the price and have been rewarded. Taking the best from each of these dealerships has allowed me to create a model for success that going forward we will recommend to each of our clients. Ready for the future? If you plan to get into the commercial and fleet game here is our “model” of the future:
- Hire a manager to run the department. Not your GM, not your GSM, not your dealer but a full time “sales manager.” Someone who understands sales management and has 100% of his or her time devoted to commercial and fleet. Brian Kerrigan at the Pompey Auto Group is a prime example of someone new to automotive but not new to leadership, motivation, passion and creating accountability in his department.
- Use a CRM that fits commercial! Don’t send the business owner endless emails or phone calls, you will lose them forever!
- Hire at least two sales consultants based on your goals and I would prefer three with one of those being an inside person. Why? Having one person becomes very demotivating over time and will be a major struggle for that person.
- Hire a full time administrative assistant whose main duty is outbound telephone prospecting to get appointments scheduled for the sales team. He or she will be worth their weight in gold. We have done this with several dealerships and it is working exceptionally well to grow sales at a faster rate. It takes very specific lists and well-structured word tracks and training but it works!
- Carry no less than three times the inventory you plan to sell in your highest month. 30% of that inventory should be upfitted. This is a minimum! Small business owners buy when they need a vehicle. If you don’t have it, they will go somewhere else. I was at Randy Marion last year and Richard Cobb showed me two locations for work trucks since they could not fit all of them on one lot!
- Conduct or sponsor at least one event per month and follow our plan on how to run an event.
- Make sure each of your sales consultants is an “active member” of at least two trade associations and one business networking group. Most sales will come from these groups if worked properly.
- Set a marketing budget of at least $200 per unit sold.
- Practice “micro” marketing which is the opposite of retail. Target specific prospects based on buying cycles and type of vehicle.
- Use one of the valuable services specifically for commercial and fleet sales like Mudlick Mail (Mudlickmail.com), Commercial Truck Trader (commercialtrucktrader.com) and Work Truck Solutions (worktrucksolutions.com). Sales are guaranteed to grow from these services, check them out.
- Leverage social media with the minimum of a Fanpage, a You Tube Channel and Linkedin. You will make more sales than you realize if done correctly.
- Have a pay plan designed for commercial sales consultants. Send for my report, “Hiring Right in Commercial Sales.”
- If you don’t have a “pickup and delivery service” with loaner vehicles for service customers you will be at an extreme disadvantage. This is a money maker that will grow your service department, keep customers loyal for life, and set you well above the competition.
- A monthly electronic newsletter that keeps each of your sales consultants in touch with customers and prospects. Your content should not be about sales but valuable articles that they will want to read. We have gotten endless calls about customers calling or quotes based on receiving the monthly newsletter. Call me for details.
- Give back! We want every commercial and fleet department to give back to the community through connected organizations like Habitat for Humanity, Salvation Army, Toys for Tots, and many others. It’s the right thing to do.
This is just a partial list but a “To Do” list that is key to commercial success. These are not options but necessities. You can grow a commercial department without some of these steps but it will not be easy. Sorry for the long article but I felt compelled to share our successes. Commercial and Fleet can be an incredible profit center if done right.
Have a wonderful holiday season and to all of you a blessed and successful New Year! We have a surprise for all our subscribers next week! Call it our holiday gift for you!
About Ken Taylor:
Ken Taylor’s training, consulting, and coaching have been used on individual, regional, and national business levels to achieve ultimate success! Known as an industry leader and as “America’s Corporate & Personal Coach,” Ken has consulted for companies like General Electric, General Motors, Fiat Chrysler, Wells Fargo, Ford, Commercial Truck Trader, and Equipment Trader.