Increase Auto Dealership Value Through a First Class Employee Culture

Happy Employees Stay on Board, Maintain High Customer Satisfaction, Boost Profits

Auto Dealership ValueMore than half of an auto dealership gross margin goes to employee payroll and that number goes even higher every time a worker leaves and a new person needs to be screened, hired, and trained. Every time a member of the team walks out the door, the dealership loses experience and possibly relationships with existing customers.

Employees work harder when they feel they are respected. High employee turnover leads to unnecessary business risk and lower profits and business value. What are the annual turnover rates for auto dealerships? They’re high:

  • Sales                                 67%
  • Service Advisers              41%
  • F&I                                   38%
  • Service Techs                    22%

Recommendation: Track on an annual basis the number of W-2s your dealership issues. It is a crude but effective measurement.

Another major issue is the number of lawsuits brought by employees. A nightmare scenario is a lawsuit that makes it to the news media, and many of them do. What are the most common reasons for employment-related lawsuits?

Based on a one-year period, filed with the EEOC

  • Retaliation under all statutes: 37,955 (42.8 percent of all charges filed)
  • Race (including racial harassment): 31,073 (35 percent)
  • Sex (including pregnancy and sexual harassment): 26,027 (29.3 percent)
  • Disability: 25,369 (28.6 percent)
  • Age: 20,588 (23.2 percent)
  • National Origin: 9,579 (10.8 percent)
  • Religion: 3,549 (4.0 percent)
  • Color: 2,756 (3.1 percent)
  • Equal Pay Act: 938 (1.1 percent)

According to LexisNexis the cost of defending an employment discrimination case is between $75,000 and $125,000 and if the employee is awarded a summary judgement it may cost up to $250,000 to take a case to trial and then hope for a favorable outcome.

In my experience drivers of a First Class Employee Culture are:

  1. High employee accountability (effective management and pay plans)
  2. High ethical employee baseline (effective hiring)
  3. High human resources commitment (policies and procedures that are followed)
  4. Employee satisfaction measurement (annual survey that identifies trends and opportunities)

Auto Dealership ValueKirk Kleckner has consulted with dealerships across the country on matters pertaining to business valuation, succession planning, mergers and acquisitions, and dealership value enhancement. Call Kirk at 612-294-8730