Pub. 15 2016-2017 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 3 , 2 0 1 6 10 new jersey auto retailer A s a Controller, I was confused by Dealers. They had a lot of money but they weren’t happy. When I asked one of my favorite dealers why he wasn’t happier, he pulled out the financial statements. He took the total expenses for each dealership and wrote that amount down. “This is what I worry about at the start of every month. What if we don’t sell any cars? What if all the techs walked out and we couldn’t do any service work?” I had to admit it was a big number. He continued, “How long until I’m broke?” I looked at the financial statement and realized that after paying off debt, and paying the expenses each month, it wouldn’t take long to run out of money if times were bad. Each month, the Dealer or GM sees those total expenses as a huge rock that they must push up a steep mountain to break even. As a Controller, I had the tendency to make their job harder by either making the rock heavier or slowing down their progress. The type of person that it takes to be a great dealer or GM is different than a Controller. They have healthy egos (that is what makes them suc- cessful) and one of their biggest fears (other than losing their money) is being wrong and having one of his or her employees point that out to them. For that reason, they are slow to make changes. It was at that moment while looking at the financial statements, with my Dealer, that I realized his challenge. From that point on, I became a profit-focused Controller. Up till then, I thought if I sent out a report pointing out all the mistakes of my fellow manag- ers in parts, service, and sales my dealer or GM would act upon it and start firing people. Not only is this costly for the dealership, but the next manager will probably make the same mistakes as the last one. I needed to create profit-focused reports that showed my dealer and managers the “why” of things that were wrong. For example, instead of a report of technicians with low productivity, which is a “what” report, I’d create reports that show the reasons “why.” I’d drill down into the problems with parts availability, training, dispatching, skill levels, favoritism, lack of tools, etc. Another “what” report is a list of deals with low gross profit. A better “why” report is a grouping of the deals; vehicles that were trade-ins from new or used, days in stock when sold, make and model, howmuch reconditioning was done, appraised value when brought into stock, which bank financed the deal, F&I Manager etc. There are specific reasons why we sell a deal at a low gross profit, but it means a lot of digging to find those reasons. Usingmy accounting background, I developed a break-even analysis customized for our industry. I studied how we made money and found the five key profit areas and then the dozens of profit points that branch off of those key areas. I developed metrics and reports that help managers improve their profit points and gave them the “why” when financial performance didn’t meet the metrics. I compared operational reports to the financial reports and found variances, and then developed methods to prevent chargebacks and adjustments. I ended up becoming part of the operational team and a true contributor to profit. A lot of Controllers may be thinking, “Who has the time to do all this?” Some Controllers are horribly overworked because their staff isn’t busy enough. I had a tendency of doing too much myself, in- stead of training others. Your staff doesn’t let you know when they have free time, because office reductions over the past decade make them fear for their job. When training Controllers, I talk about the One Minute Manager and the “Monkey on your Back” problem. How to be a Profit-Focused Controller BY SANDI JEROME