Anatomy of a High-Performing Dealership

Published with the express permission of RV Business.

Almost any dealership can have profitable months or even years given a strong retail market – the proverbial right place, right time. A growing economy, low unemployment, and historically low interest rates have created a great atmosphere for RV dealers.

But what separates the accidentally successful from the deliberately high performing dealers – that is to say, the dealers that minimize losses in bad years and truly thrive in business climates like that today? In this article, we’ll briefly look at four attributes of consistently high-performing dealerships.

Inventory Management

For high performing dealers, inventory management is a deliberate, ongoing process that delivers higher than average turnover and deals with old age inventory systematically. Particularly when times are good and rates are low, many dealers tend to lose focus on inventory management until they realize they have a significant problem. Excellent inventory management is not an accident or a matter of making a great buy from a manufacturer – it is the result of a process that includes purchasing management, actively inspecting and staging of inventory, proper pricing and sales incentive policies, and effective strategies to eliminate aging inventory before they become critical problems.

The upfront benefits of clean inventory are clear: lower flooring costs, improved cash flow, and better margins. But the benefits don’t end there: dealers with higher turns are able to sell more of the best sellers, are always in a position to take advantage of a special purchase program, and – critically – can swiftly make adjustments should the market correct suddenly.

The highest performing dealers are very active with their inventory management processes, aggressively pursuing turns and continually monitoring and cleaning out old inventory. It is a mandatory discussion at management meetings and typically plays a part in sales compensation programs. And the results show: for the full year ended December 31, 2017 our industry trends report shows that the highest performing dealers turned their total inventory 50% faster than the lowest performers, earning almost twice the return on the average inventory dollar. Inventory management is a vital metric that predicts a dealership’s profitability now and into the future.

Key Questions:

  • Do you monitor inventory turns on a monthly basis and actively plan for an annual turn rate of 3.0 or higher?
  • Do you have a process in place to automatically manage old age inventory?
  • Do you actively analyze manufacturer purchase programs and IR programs to ensure they make sense for our business? (Especially when taking inventory months before normal to get the program.)
  • Are the oldest ten units in your inventory cleaned, decorated, and ready to sell today?  Do your salespeople know what and where they are?


Sales Process

Another hallmark of consistent high net profit dealers is a well defined sales process that is known to all and regularly reinforced through training and meetings. Many dealers allow a lot of variance in how the sales process works – salespeople are allowed to effectively create their own rules around selling so long as they meet some minimum standard of sales. The problem with this approach, of course, is that the business itself has no defined process that it can introduce new hires into with any kind of predictable result. It is all dependent on the salespeople themselves.

At the end of the day, one of the keys for the most successful businesses – especially larger businesses – are those with the best and most repeatable processes for getting work done. The RV business is no different yet it is astonishing how many dealers leave the sales process – the most important revenue generator in the dealership – to chance. The highest performance dealers own their sales processes. They mandate the way the CRM works, how the leads are followed up, and how the process flow of a sale works. None of it is left to chance and no one is allowed to opt out of the system – no matter what their sales volume is.

Key Questions:

  • Do your sales people follow a sales system and process designed and trained by the dealership or do they make it up as they go along?
  • Is your CRM actively managed by your sales management team and is it used by all salespeople?
  • Do your sales managers have a real sales training plan that is implemented with regularly scheduled meetings with the salespeople as well as one on one coaching sessions?

F & I and Aftermarket Sales Process

gxAs we all know, there is increasing pressure on front end margins in our industry – and this is not likely to change. Whether it is from the low margin dealer down the street or the internet sales operation across the state, customers have more pricing information and purchase options than ever before. Dealers, however, still have all the same overhead costs and need to maintain total company gross margin in spite of pressure on unit sales.

Thriving dealers have learned to maximize the value of every sale by being very diligent in the way they manage the customer experience not only through the F & I department but then onto a quality introduction to the accessories and service departments. Menu selling is a key F & I selling tool, but it is also very successful for accessory packaging and installation as well. Do you have a defined process offering your customer the opportunity to fully accessorize their new purchase at your store? Yes, it takes more time but it also works to bring in needed extra margin as well as introducing the customer to your other products and services.

Key Questions:

  • Are all of your salespeople required to introduce their customers to the Finance Department following a specific process?
  • Do you use menu selling in F & I? Do you use it for aftermarket accessories sales as well?
  • Are your F & I gross margin dollars at least 6% of unit sales?


When a dealer experiences high unit volume growth it is not uncommon for the sales department to overwhelm the service department. Between PDI, needed warranty work, and aftermarket installations the shop is in continual scramble mode trying to keep up with the volume, particularly in the summer when you also have a lot of cash customers wanting service. From a 20,000 foot elevation dealerships like this appear to be a big sales operation with a small veneer of service wrapped around it. While this can work in the short term it is not a recipe for consistent, long term success.   The most consistently profitable dealerships have the available technician time to become the service center of choice for their customers, not just a place to make a single purchase.

A thriving service department can become the solid core of a dealership, bringing in consistent revenue and maintaining customer relationships. However, this is only possible if the resources are allocated to break out of the emergency operations mode described above. The most consistent high performing dealers have paid the price in terms of service facilities for sure, but they have also taken the time and effort needed to create the systems and processes needed for a high functioning (and profitable) service department.

There is nothing easy about delivering high quality service, profitably, to a demanding public. But it can be done, and those who have figured it out have not only reaped the benefit in terms of happy customers and smoother sales deliveries, but also seen consistently high net profits.

Key questions

  • Are you able to handle a majority of the retail customer requests in a reasonable amount of time?
  • Are you scrambling just to get units delivered?
  • Are you unable to complete warranty paperwork because your staff is too busy?
  • Do your customers make the majority of their aftermarket purchases at your dealership or do they go elsewhere?