There are a number of factors that go into achieving a better gross profit than what your store is currently producing.
None are more important than how you price your units and how you pay your staff. We often price units that we have the greatest profit potential too low and price units with a lesser profit potential too high.
There’s no disagreement that pricing plays a role in the equation. There’s another hidden element that’s often ignored and it’s what kind of a deal that you’re willing to take.
And that’s where pay plans have the greatest influence.
I will give you a couple of examples:
You have a nice trade.
It has a wide cost to market in your favor.
It has a low market days’ supply.
It’s 12 days old.
You have it listed with a gross of $2700.
After some negotiating the salesman and you are staring at a $1500 deal.
You take the deal.
How can you not? You’re both being paid on gross. You just gave away $1200 that maybe you shouldn’t have.
Here’s the flip side:
You have an auction purchase unit.
You have a cost to market not in your favor.
High market days’ supply.
It’s 56 days old.
At 56 days of age you still have it listed with a $1500 gross profit.
After some negotiating the salesperson brings you a deal that’s a $500 loser.
You don’t want to take the deal because there’s nothing in it for you or the salesperson. (Actually, there may be for the salesperson because you have a $500 bonus on the unit to make it go away.)
You take the deal and moan all day about how Internet pricing is killing your grosses.
The reality is your pricing was off from jump street.
If you find yourself holding on to some of these low-profit potential cars longer than you’d like, you might find that you’re letting what you paid for vehicles influence what you are listing them for.
You priced it wrong because you wanted a certain margin going in. You may have priced the unit with the same margins as you would with a nice trade.
Both of these examples add to your gross profit woes.
If you want to improve your gross profit you need to change your thinking when it comes to pricing, paying on gross and the deals you’re willing to take. That’s all I’m gonna say, Tommy Gibbs