How Velocity Influences A Dealership’s Bottom Line

April 12, 2013

As I discuss in my latest book, Velocity Overdrive: The Road to Reinvention, the successful adoption of the Velocity Method of Management™ in a dealership requires a champion.

This individual, who is often a dealer principal or a key manager, serves as the steward of the people and processes that execute the Velocity strategy.

But this steward often doesn’t get full credit for the positive and significant improvements that Velocity-driven used vehicle operations bring to a dealership’s bottom line.

I was reminded of this reality the other day. I was talking to the Velocity steward of a six-store group in the Midwest. His concern: The dealer principal doesn’t see that Velocity benefits extend beyond the elimination of nearly $500,000 in annual wholesale losses for the group.

Part of the problem, to be sure, is the group (like many dealers) adopted Velocity principles amid the height of the economic recession. The stores sold more used cars in the past four-plus years, but the total volume has yet to return to pre-recession levels—which the dealer considers the watermark for a “good job.”

The situation has sent the Velocity steward into a “prove it” mode. He wants to demonstrate that Velocity is contributing far more to the dealership’s performance and profitability than the dealer recognizes.

The Velocity steward has begun to measure the “Influence of Velocity” throughout the dealer group. So far, he’s lined up four years of financial data for a single store.

Top-line results are, not surprisingly, pretty impressive: The store’s internal service gross profit has grown nearly 50 percent, net gross profit in used vehicles is up 31 percent, F&I gross profits for used vehicles is up 36 percent, and a nearly $200,000 wholesale loss has become a nearly $300,000 wholesale profit (which owes the group’s acquisition/disposition discipline).

I’m looking forward to seeing a more complete composite of the group’s performance, which I’ll pass along.

In the meantime, I’m wondering what other Velocity stewards might consider the best ways to measure the “Influence of Velocity” for your entire dealership. Thoughts?