It is a well-known philosophy for any business, but especially in retail, that what gets measured gets improved. However, due to the fast-paced nature of our business, a mistake that I see far too many used car sales operators make is not measuring enough.

Often, this dynamic leads to a situation whereby the store is managing the person, rather than the person managing the store. The most successful used car operators measure everything. This includes inventory statistics such as the number of days it takes to get a car through their shop, average front-end and back-end profits, and reconditioning expense per vehicle.

On the sales side, it includes measurements such as showroom walk-ins, test drives, number presentations, appraisals, manager introductions, closing percentages, and much more.

These dealers measure the customer’s journey from the moment they step on the parking lot and shake their hand, to the moment they drive off the lot in a vehicle — not a single step on the road to the sale is missed. It’s not just a matter of measurement for the store itself.

For best results, it is important to have a well-defined process and measure down to the individual contributor level when able. Have an ideal vision of what the customer experience should look like from the moment the customer is greeted on the lot to the moment they drive off in a new vehicle. Have all the points to the sale clearly defined, set high expectations for each stakeholder and measure execution. Keep it fun! Don’t hesitate to foster competition and make sure to keep score! In this highly competitive environment, these are some of the things that are sure to make your store stand apart from others.

Inventory: Get it presented fast

A used car’s profit window, assuming the vehicle was bought correctly, closes rapidly. The last year aside, if you leave a car unsold for too long, chances are you won't be happy with the result. Every day that a used vehicle stays in your inventory is crucial. The goal is to get the vehicle made ready for sale as quickly as possible and presented in a way that makes it stand out, both on your lot and online — and not necessarily in that order!

Ideally, the vehicle should be listed online before it is even put in the shop. If you have photos that you could use, great! If the car isn't ready for public exposure, no problem. Get that car listed online nonetheless so you can start attracting consumer eyeballs, taking inquiries, and collecting leads.

Consider offering a complimentary, basic inspection report to prospective buyers early in the process and allowing the customer to tell you what reconditioning they would be interested in and what they will pass on. This enables you to negotiate the car price and service work separately. It also allows the consumer to pay for what they value and save money on what they don't! If you take my advice, I suspect you will be pleasantly surprised by the number of people that will come in to see the vehicle in its current condition and drive it away before it has even made its way through your shop. It is a used car, after all, and your customer knows that!

Best-case scenario aside, you still need to get the vehicle reconditioned as soon as possible. Once the vehicle has gone through the shop and is fully reconditioned, you can replace the photos to make sure you are putting your best foot forward.

Key measurement metrics should include:

—How many people are viewing your inventory

—How long it takes to get a vehicle listed online

—How long it takes to get the vehicle into the shop

—Once a car makes it into the shop, how long does it take to recondition the vehicle?

—What is your average reconditioning expense?

—How long does it take to get a vehicle onto your front line?

Measure the performance of your vendors as well. To get your vehicles presented quickly, your vendors must flawlessly execute their part of the process. Analyze everything and everyone! How long does it take Joe the windshield guy to put in the windshield? How fast is the bumper spray guy? How about your technicians – are some faster than others? Do certain technicians tend to overprocess inventory? Or do they under process? Measure every little step, understanding that the goal is to get the vehicle listed online and presented as quickly and favorably as possible.

Know your inventory position

Always be aware of what your inventory is worth today. Some great tools in the market can help you see what the wholesale value of your inventory is compared to what you own the vehicles for. You can even take it a step further and see its value in your retail market. If you own inventory that costs more than what you can wholesale the vehicles for, you are underwater, which is a problem in the event you need to liquidate your inventory quickly. Likewise, if you own inventory for more than its worth in your retail market, then your store's chances at turning a profit are really at risk. It is important to stay on top of the market and your portfolio of investments (inventory) by evaluating how quickly things are selling and for what price. Not every vehicle you purchase will be a profitable investment. The key is to have the tools on hand so you KNOW and can act quickly and appropriately when an asset isn't performing.

If your inventory sells on average in thirty days, but those Corollas you have in stock sell on average in 60 days, you are either:

1. Over-supplied in that vehicle

2. Overpriced

3. There are too many similar vehicles in your market right now

4. It is just not a vehicle you sell well in your store. Either way, knowledge of market and store dynamics will help you make better inventory decisions to ensure you have the right vehicles on your lot.

The best way to make sure you maintain a favorable position in your inventory is to make sure your vehicle appraisers and buyers are dialed in. If you don’t already, I highly recommend you start measuring:

—Your number of appraisals by manager

—Appraisal closing ratio by manager

—Average front-end profit by appraiser

—Average front-end profit by used car buyer (non-trades)

—Return on investment by buyer

—Average turn rate by buyer

 You may be surprised to learn that, while the cars that Bob buys generate strong profits, Tom’s purchases have a higher return on investment on average because he uses less of your cash by buying less expensive inventory that performs well. Similarly, you may learn that Joe is burning through appraisals with a low closing ratio, costing you precious trade-in opportunities, new car sales, front-end, and back-end profits, and most importantly, growth!

Sales measurement: What gets measured gets improved

Use technology to hold you and your team accountable and to bring real-time awareness. There are several platforms on the market that help you to measure all these aspects of the business.

Some of the things that should be measured, down to the individual contributor, include:

—How many customers are walking into your showroom?

—How many do a test drive?

—After the test drive, how many people get a quick tour of the dealership?

—Of those, how many get a numbers presentation?

—How many customers meet a manager?

—What percentage had a trade-in that you appraised?

—What is your sales team’s overall closing ratio?

—What is your team’s closing ratio by producer?

—How many inbound phone calls are you taking?

—What percentage of inbound calls convert to leads, and sales, by producer?

—How many outbound phone calls are made? Are salespeople actively hunting for sales?

—What percentage of outbound calls convert to leads, and sales, by producer?

—How many leads does a particular vehicle have?

Technology is your friend

Your competition is extremely clever about using technology to up their game. For example, the largest retailers, such as CarMax, use strategically placed laser beams to count the number of people that break the beam to do appraisals, enter the showroom, and more. It is important to know just how detail-oriented the competition you are up against is. There is a real need to take a data-driven approach to win this game.

Managing a used car department is an incredibly busy job. There are so many things competing for your limited attention and so much to handle at any given time. It is easy to end up in a situation whereby the store is managing you rather than you are managing the store. To be successful it is important to measure everything, delegate the right tasks to the right people, use technology to help better manage those tasks that can be automated and have the right people in the right seats. To your success!

Nick Gerlach, one of Auto Remarketing’s “40 Under 40: Industry” honorees for 2022, is the executive vice president of operations and product strategy at CarOffer. In his role, Gerlach is responsible for transaction and revenue growth and oversees account management, vehicle fulfillment, buying matrix operations, inspection coordination, and the vehicle remarketing team. Prior to joining CarOffer, he held previous roles as director of sales and director of finance for Sewell Automotive Companies, where he oversaw sales operations, inventory acquisition/management and revenue growth for the automotive retail operation.