Transform your business through benchmarking

Car dealerships that use benchmarking to measure and drive performance give themselves a competitive advantage compared to businesses that don’t use this important management tool. 

The best dealerships use benchmarking to confirm they are at the top of their game, while other dealerships rely on benchmarking to identify opportunities to fast track business improvement. 

Benchmarking provides an initial datum point, the standard to which each department within a dealership should aspire. It also provides each area with a measure to work towards so each department understands how it contributes to the overall performance of the business.

To use benchmarking appropriately it’s important to understand dealerships have five core customer profit centres that all work in tandem. These are new car sales, used car sales, the service centre, the parts centre and the finance unit. All five are interdependent given a transaction can often involve more than one of these centres.

Optimal performance across the business can only be achieved when each centre is working harmoniously with other departments. But this requires clear, aligned and separate objectives for each unit and a shared understanding about what the vision for the business is. Businesses must understand what optimal performance looks like across the sector to adequately define this vision.

For instance, one common benchmark is the productivity of staff in each of the different profit centres. The expected sales performance of the new car department will be different to that of the used car centre. This is because the sales process for new cars can take weeks, whereas the cycle is much shorter for used cars. Hence, the productivity benchmarks for staff for each unit will be very different.

Importantly, benchmarks are derived from real operational results that give relevant comparable measures for businesses of all sizes. This allows department managers to grasp the variable financial output of a department’s customer activity and point to root causes of this performance.

It is important for dealerships to understand their comparative performance to other dealership over a lengthy period of time. This is because small or consecutive changes are often hidden in monthly profit and loss statements. Being able to identify a trend gives dealerships the confidence to prioritise areas on which they need to focus, to develop a business that achieves superior staff engagement and dynamic commercial momentum.

Deloitte has been collecting data on car dealerships for more than 15 years, with 800 different businesses contributing information. This gives us a unique ability to offer critical insights to dealerships to help them improve their operations over time.

No good captain would go to sea without a compass and benchmarking offers the same tool to dealerships. It indicates whether a business is achieving its vision and what it needs to do to adjust operations to ensure it is constantly striving for optimal performance, irrespective of prevailing market conditions.

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