8 Tips on How to Run a Car Dealership Successfully

It takes more than flashy signs and business cards to run a profitable dealership

Once upon a time, you worked in a busy, urban car dealership with tons of foot traffic. You were a successful salesperson, but you didn’t have to try too hard. Customers weren’t hard to come by, and your lot always seemed to have what people were looking for. You didn’t know anything about what was happening “behind the curtain” with the dealership management team, and you just focused on selling those cars.

Now, though? You moved to a different state in a suburban area because you were offered a great sales manager position at a new car dealership business. You were excited at first, but then you realized the truth: customers weren’t coming in—and you had no idea how to get them in.

News flash: A car dealership isn’t the type of “if you build it, they will come” business. Yes, that applies to some customers, but if you want a steady stream of prospects walking through your door, there’s much more work to do.

Position your car dealership business for success

The good news is that there are tons of profitable dealerships all over the country that you can learn from—no need to reinvent the wheel. You already know the basics of running a car dealership business, but the most successful businesses drill down to the nitty gritty to truly understand their markets.

1. Dig into your market

Running a car dealership in Fairfield, Connecticut, is different from owning one in Detroit, Michigan. They are completely different markets, so if you don’t know anything about your market, it’s time to find out. Research your area’s demographics and learn about your region’s car-buying seasons. If you live in a cold area, right before winter could be your prime time to stock up on trucks and sturdy 4-wheel-drive vehicles for a big sale.

2. Get very clear on your current sales goals

You may say, “My car dealership business does have goals! We want to make more money and sell more cars!” That’s not sufficient. Your goals should be S.M.A.R.T: specific, measurable, attainable, realistic, and time-based. For example, a S.M.A.R.T. goal could be, “Between May 1 to May 31, increase the number of up sheets completed in April by 5%.”

3. Be able to name the most popular makes and models you sell

You should always know what makes and models your customer base is buying because it will influence the cars you decide to place on your lot. If you want to move all your cars within 60 days, you better have what people want.

4. Know who is buying from your dealership

It’s one thing to understand the broader demographics of your dealership’s market, but you must also grasp who most of your customers are. Are your customers more often blue-collar or white-collar? Single people or families? Younger buyers or older?

The people currently buying from you can clue you into the types of vehicles you should sell, the services your dealership should offer, and how you should target these groups in your marketing efforts.

5. Learn which forms of advertising work for you

Advertising is essential, but don’t keep doing what you’ve always done just because it’s easy. Look at any and all current advertising efforts you have going on—TV, radio, print ads, pay-per-click advertising, Facebook ads—and see if you’re getting a decent return on your investment. Do you spend thousands of dollars on monthly print ads, but no one comes in to redeem your coupons or ask about offers you’ve advertised? It may be time to redirect your dollars to other forms of advertising.

6. Monitor sales rep performance

Pull numbers from your CRM every month to get the full picture on how your sales reps are performing. If you notice that one of your consistent performers had a bad month, you can use the opportunity to meet with them and nip any problems in the bud quickly. Conversely, if you have someone who is consistently underperforming, that may be your cue to boost your training program.

7. Implement formal talent management practices

McKinsey & Company took a close look at top auto dealerships in the U.S. and what was separating them from the rest of the pack. It turns out that consistent talent management practices, like structured recruiting, multiple interviews for each candidate, formal training, and long-term incentives, were significant differentiators in an industry where high turnover rates are common. The dealerships with better talent management had turnover rates that were 17 percent lower than dealers in the bottom quarter.

8. Prioritize service and customer loyalty

Once you work hard to win people over in your market, don’t let them go. Keep your customers engaged with e-newsletters, and coupons, and even offer tours of your service department to make them more comfortable.

The most important thing to remember is that conquering the market in which your car dealership business is located isn’t a one-off thing. If you want to stay on top, you must constantly integrate all of the steps above and change your strategy or approach as the market dictates.