How Do You Compare?
When visiting and analyzing dealerships and other industry businesses I am often asked, “how does our operation compare to others?” Then they follow this with questions about employee structure, sales volume, number of employees, etc.
What they are really trying to find out is if they have the most efficient mix of employees for the sales volume they are doing, or if there’s a better way to sell more and be more profitable.
Have you ever found yourself asking these questions?
- How much sales volume should my salespeople be handling?
- How much sales volume do my competitor’s salespeople handle?
- Should I have dedicated designers or other staff to support my salespeople?
- What about “inside” vs. “outside” salespeople? Should I have both?
- Should I have a “purchasing department”, or let my salespeople handle that area themselves?
- Is it wrong to have my salespeople handling service calls?
Of course, the answers to these questions depend on where the dealer is, in what I call the “3 Phases of Dealership Progression“. The ideal mix of employees and roles depends on the volume of business you are doing, the volume of business you are trying to reach, and the level of supporting technology you utilize.
This article breaks down each phase and shows a chart of the ideal structure of employees you should have at every stage. Also shown is the level of technology in each phase.
Compare your company structure to the phases to see what you should be working on to achieve the goals for your dealership. If you want to move your company to the next phase faster, start adopting the structure of the next phase earlier.
DEALER PROGRESSION PHASE 1 – $0 TO $4 MILLION IN REVENUE
I call this the “Mom & Pop Shop.” Pop sells and Mom does the books, right? To begin with, at least, this is commonly the case. Mom and Pop hire salespeople as they get bigger. At this phase, everyone wears a lot of hats. Typically the salespeople (and Pop) pretty much do everything around the sale. They design it, they sell it, they purchase it, they service it, and they might even have to collect the money. The only thing salespeople might not do in this phase is schedule and coordinate the installers.
Since salespeople do so much in this phase, the target volume per salesperson is around $1 million to $1.5 million per year (if they are doing more business with builders than retail).
Here’s a summary of what your company should typically grow to in this phase, with a focus on the front-end side of the business:
|Phase 1 Front-End Employee Summary||Phase 1 Technology Summary|
|Sales Manager (Sales/Owner) = 1||Design Software, Accounting Software|
|Salespeople = 3||Spreadsheets, Word Processor|
|Scheduling/Installation Coordinator = 1|
|Target Sales Per Salesperson $1M/Yr.|
Goal for Phase 1
Phase 1 dealers should set a structure in place as soon as possible to give their salespeople the support they need to keep them selling. Most salespeople in this phase spend too much time doing paperwork because there is no support structure. If you’re not careful, salespeople will become “Order Takers” and it becomes very difficult over time to get them back into a “selling” mentality.
PHASE 2 “GROWTH PHASE” – $4 MILLION TO $8 MILLION
Phase 2 is the “Growth Phase”. At this point the dealership has taken steps to get salespeople selling instead of handling all the paperwork for each sale. They hire a sales coordinator and allow salespeople to offload some of the pricing & paperwork process. They can do this by finding a system that brings all the purchasing together for all sales and streamlines that paperwork. They also begin to take the “service” work off the salespeople by having a true “Service Coordinator”. This begins the progression toward providing a support structure for salespeople to allow them to get out of the office and increase sales.
|Phase 2 Front-End Employee Summary||Phase 2 Technology Summary|
|Sales Manager (Sales/Owner) = 1||Design Software, Accounting Software|
|Salespeople = 5||Spreadsheets, Word Processor|
|Sales Support (Purchasing) = 1||Starts seriously looking for an order management|
|Installation/Service Coordinator = 1||software system because paperwork is|
|Target Sales Per Salesperson $1.5M/Yr.||overwhelming.|
Goals for Phase 2
The 1st goal for phase 2 is to find a system that will enable growth by minimizing all the manual paperwork. The 2nd goal is to structure salespeople to sell more and support sales less.
PHASE 3 “HYPER-GROWTH” PHASE – OVER $8 MILLION (UP TO $100M)
The jump from phase 2 (Growth Phase) to phase 3 (Hyper-Growth Phase) is the most difficult for dealers. High Growth requires shrugging off many mainstream manual processes and investing in automation that will support sales up to $100 million.
This phase is large, since it covers sales from $8M to $100M. Approaching the $8M mark the dealer or remodeling professional would have learned that their paperwork process is not able to keep up with the sales volume. So they would have found a system that enabled them to expand.
This phase introduces new roles. Salespeople are now focused on inside or outside sales. These roles, with an accompanying system in place to support them, enable the dealer to keep their ideal structure and just add resources (people and locations) to continue the growth indefinitely.
Here the salespeople do what their title says; they SELL. They have a full sales support structure in place to handle the supporting processes for all sales, including a Design / Estimation Department that does the design & pricing work for them. This structure enables them to increase volume extremely fast.
|Phase 3 Employee Summary||Phase 3 Technology Summary|
|Sales Manager (Also Sell) = 1 For Every Location||Design Software, Accounting Software,|
|Outside Salespeople = 1 For Every $3.5M in Sales||Order Management software system,|
|Sales Support (Incl. Designers) = 1 For Every $5M in Sales||Inventory System, Scheduling System|
|Inside Salespeople (Showroom) = 1 For Every $1.5M in Sales|
|Purchasing Agent = 1 For Every $18M in Sales|
|Sales Per “Outside Salesperson $3-4M
Sales Per “Inside” Salesperson $1.5-2M
Goal for Phase 3
At this advanced level, dealers have the final struggle to keep everyone in this ideal structure working at full capacity. They need to watch the mix of sales to support staff and make sure one is not overwhelming (or underwhelming) the other. Depending on the quality of people this will be a moving target. With these things in check the owners are free to focus on expanding the model into new locations and new markets.
OVERALL IDEAL EMPLOYEE MIX GRAPH
The chart below shows the ideal structure across all revenue levels. Compare your business and see how you measure up. Notice how some roles change, like the standard “Salesperson” goes away at higher volumes to become either “Inside” or “Outside.”
Now that you have compared your current staffing against the model, what do you think? Does any of what you have read surprise you? Now you should have a better clarity of when and what type of people to add to your organization.
Many dealers or other industry professionals evolve through various models to find their optimal structure. The numbers presented in this article are found at the most successful of these companies, and are based on the best practices of these model businesses. These principles, with a focus on people and systems to enable you to do so, will help you get to your optimal structure faster.
This article was originally published in the Kitchen & Bath Design News magazine in May 2007.