Selling vehicles and service is every dealer’s first concern, but to truly accomplish your goal of maximizing net profit, you must finish the job by controlling expenses. As with selling, controlling expenses is best accomplished by concentrating on one problem at a time. That does not mean that you must first fix your sales problems before starting on expense control. It means you must set priorities for each department and assign each manager his top issues.

Cost controls do not necessarily mean the slash-and-burn practices of cutting advertising and payroll. This practice is just a knee-jerk matter of expediency. Controlling costs is also not just a matter of cutting expenses. Real cost control is the consistent elimination of waste and inefficiencies. It is also spending money wisely so that your production benefits meet or exceed your cost.

Successful cost control starts with an item-by-item analysis of every expense in your store. The questions to ask are: Is it wasteful, unnecessary, or inefficient? Is it producing the desired gross?
 
As a matter of practice, even before completing the analysis of all expenses, first pick the low-hanging fruit. Make the easy changes that produce an immediate benefit. If you make a change today, with an effect seen on tomorrow’s DOC, this will motivate you and your employees to stay focused on your goals.

The following questions are to help jump-start the process. These are not the only questions to ask. You probably have hundreds of your own.

• Are job descriptions used to make sure you need each employee, or do you use each employee to determine job descriptions?
• Do you have enough cooperation among department managers?
• Would programmable thermostats help in controlling utilities?
• To whom do you provide cell phones?
• Are expenses allocated properly to determine real costs and department profits?
• Are competitive bids received for services, i.e., insurance, telephone, computers and supplies?
• Does someone in management always talk with each customer before he or she leaves?
• Are you spending too much time waiting for new customers and ignoring old customers?
• When were reconditioning procedures last checked for efficiency and cost?
• Are you retailing good, cheap vehicles rather than wholesaling?
• Are you planning your own advertising or just taking what the ad salesman gives you?
• Are you promoting the sale of parts overages?

Wipfli’s auto dealership experts can assist you in this process. Please contact your local Wipfli dealership representative for more information.