Spoiler alert! There is no easy answer.
“Success is in the eye of the beholder,” said Wes McArtor, CEO of NEXERA, a service-analytics firm that shows dealers ways of achieving top performance in service operations and other aspects of their businesses. McArtor noted how some dealers favor a “lifestyle” approach that satisfies the needs of the lifestyle they desire, even though their dealership’s performance may be mediocre. On the other hand, dealers striving to expand or be great measure every aspect of performance and challenge themselves to be the best they can be. They use assorted measurements and performance metrics and become successful operations. This approach requires discipline, accountability, and hard work, and is not done as often. Yet, these dealers will be around in the future and have businesses worth more when retirement rolls around. To be fair, most dealers are somewhere in the middle.
Defining Success
The question of the day is what is success? Profitability, the number of customers or installs, sales volume, customer satisfaction, repeat business, service quality, or a happy staff? The answer is all these and more, plus the cumulative impact of these factors on an operation. One dealer interviewed for this story, who asked not to be identified, insisted profitability was the most critical measure, noting that if there is no profitability, there is no dealership. In contrast, Dawn Abbuhl, president of Repeat Business Systems in Albany, New York, cited the importance of net operating income, which, while analogous to profitability, is not the same. And it was not her most important measure of success.
For vendors, while profitability is baked into their DNA, they recognize it can be an elusive measure. “We celebrate success based on each dealer’s criteria,” explained Laura Blackmer, president of dealer sales at Konica Minolta Business Solutions U.S.A. “If they are striving for profit, we support that. If they’re striving for growth, we support that. If they strive for diversification, we support that—and so on.”
How are You Doing?
The common measure of profitability has a lot feeding into it. The standard industry model shows a loss of about 5% for equipment and sales. This is hardly news to any dealer because the idea is to get equipment into a location and make up any loss with supplies and maintenance agreements. McArtor says those usually represent a gross profit of about 55%. After all the dealing is done, and the people, vehicles, utilities, rent/mortgage, and so forth are paid for, a dealership with 14.5% overall profit is doing very well.
Still, success is not necessarily a numbers game. Repeat’s Abbuhl said a cohesive and happy culture was the most important factor. “This results in retention and is great for recruiting,” she said. “It helps deliver customer service because the team members’ happiness comes through in their behavior with customers.”
Play It Again and Again
Everyone contacted said repeat business was a key measure of success. All echoed the sentiments of Chip Miceli, president of Pulse Technology in Des Plaines, Illinois. “You always want repeat business. It’s a lot easier than finding new accounts.”
There’s an important subtlety here. Dealers need to measure customer retention and what causes a customer to leave. “You can’t be proactive if you don’t do both,’ said NEXERA’s McArtor. “You need to learn why a customer left to prevent others from leaving for the same reasons.” Suppose, for example, a couple of techs commonly require two visits to get a machine running. Are they insufficiently trained? Do they interact poorly with customers? Are they placing the blame on your company? Or maybe the techs are fine, but customer service is coming up short. Whatever the reason, it is probably something you can address to prevent other customers from bailing—out and sharing their dissatisfaction with others.
OEMs also pay close attention to customer retention. They don’t want their brand tarnished because a dealer is shedding a few customers too many. OEMs know customers leave for many reasons and often make customer retention part of their discussions with potential dealers before the dealership agreement is signed. “Customer retention is just one metric for determining how a dealer is doing overall,” noted Konica Minolta’s Blackmer. “We explore customer retention as part of our business planning discussions.”
Know Your OEM
Be sure you know the metrics that are important to your OEM. Vendors may also look at sales, gross profits, technician training levels, and other criteria. Some closely track the mix of products a dealer handles and how these fit a given market. Their targets may be set by product category, such as expanding production print capabilities or increasing end customers’ digital infrastructures. Goals may also be unique to individual dealers based on their market and experience. For instance, goals differ across urban, suburban, and rural locations, as do the types and sizes of businesses likely to be prospects or customers. Success can be measured based on how well a dealer achieves goals set by the vendor, such as the number of devices installed or the level of technician training and performance.
Naturally, OEMs still want to see more money coming into every dealership. That’s where profits, operating income, and business growth begin. While each dealer is unique, most vendors consider the impact of a dealer adding additional product lines, offering more services and solutions, and plans for hiring, acquisition, and more. To aid this, some OEMs offer marketing and support programs that target specific vertical markets such as health care. Because some verticals such as health care require third-party certification, vendors are taking the lead in helping dealers on a path to success in those verticals. OEMs also work to help dealers be more successful by helping formulate succession and business expansion plans, ways of adding new lines of business and seeking to help dealers be better providers of equipment and services.
For OEMs and dealers alike, the goal is always increased success. For some dealers, this is increasing profitability. For others, it is customer satisfaction and repeat business by ensuring service quality with a staff that like what they do and the company they work for. All of these and more are measures of success. What are yours?
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