Dealer Management Software And it's Benefits

It's all about where to invest.

If you are reading this white paper more than likely you are either starting a new business or looking for a way to improve the profitability and/or control of your current business. In either case, you are on the right path.

This paper is intended to point out how technology, particularly a full-function Dealer Management System (DMS) can provide a marine business with a foundation to be as efficient, profitable, and easy to manage as possible.

The Author has spent a career in the marine industry working in nearly every position at a marine operation from the cleaning and delivery department to reception, technician, sales person, and management.

Pay special attention to the "Consider This" segments. They are intended to provide insight or ideas specifically aimed at realizing a tangible monetary return on the investment of a DMS. As with any other business tool or asset, there is a substantial cost for a DMS. However, an investment in a well-developed marine industry-specific DMS will pay for itself time and time again.

Since the advent of the fiberglass boat and recreational boating, there have been entrepreneurs' and dedicated staff selling boats. From those early beginnings the modern boat dealership has evolved. For the past few decades however, the typical boat dealership didn't change very much. Yes the products changed with technology, but the general business practices over that time period were quite stagnant. Most boat businesses went about their day-to-day activities in much the same way for nearly the last three decades. Admittedly, there was good reason for this… It worked!

Making money in the boat business used to be a fairly simple task. Open a store, apply for a floor plan account and start selling boats. Discretionary income was up, demand for recreation was up, and dealers' profits were up! Competition wasn't a huge factor in most markets due to protected dealer territories and the fact there weren't many real "mega dealers". Small mom and pops and a few medium sized dealers ruled the industry. There weren't many "state-of-the-art" show rooms. Most dealers had modest storefronts, and an outside "Display Yard" along with a service bay or two.

For a very long time something interesting happened in the marine dealership industry…NOTHING. Boat dealers and marinas were finding success relatively easily, and the general public was buying boats regardless of the dealership atmosphere.

From the beginning it has generally been accepted by the public that the typical boat dealership/marina was a much more "relaxed" business than, for example, a car dealership and therefore boat dealers weren't held to the same standards. For example, it was completely normal for a marine service customer to walk into a dealership and have to wait as the "service writer" climbed out of the boat that they were working on before they wrote up the repair order. Similarly the repair order was generally just an inexpensive, multi-part generic business form purchased from the local office supply store. Accordingly, service and sales history was at best a filing cabinet in the back office, but often just stacks of completed repair orders waiting to be filed. If you were to walk into a new car dealership today and have to wait for a technician to hand-write your repair order, you would be surprised. Even 15 years ago, when you walked into a new car dealership you expected to deal with a dedicated, professional service writer and that your repair order would be entered into a computer. The auto industry learned years ago that technology is crucial to providing the best possible level of service to their customers and that it gave them the tools to truly manage an organized business.

In the late 1990's and early 2000's things started to really change for boat dealers. The buying public started to pay more attention to their dollar. Added to this was a sharp increase in the retail price of boats in general. Another thing happened around this time - general attitudes started to shift. Consumers started to become savvier and more demanding. As a whole people started to really pay attention to the type of service they received, how they were treated, and had generally higher expectations for the sales and service on something that often cost more than their car. The large boat builders and engine manufacturers started to catch on to this, as is evident from all of the effort they put into tracking Customer Satisfaction Index (CSI) levels. To take it a step further, many of the larger builders started to take a note from the car manufacturers' book. They started implementing programs similar to a "5-star" dealer or "Certified" dealer program, where dealers are rewarded for not only sales performance but also their business process and CSI successes.

This all leads to where we are today. Larger businesses, many modeled after car dealerships are setting the bar higher and gaining market share. They can afford the expense in adopting policies to become "Certified" dealers with those state of the art showrooms and more importantly adopting better business practices guided by technology. Multi-location mega dealers are making it more difficult for medium and small business to keep up. Throw in an economic downturn and things look even more challenging for the small to medium-sized business.

One thing is for sure. Whether you are concerned about the competition, economic conditions, or just want to increase your increase your profits, the average marine dealer needs to focus on maximizing their potential, becoming as efficient as possible, and on meeting the expectations of today's demanding consumer. These tasks are almost impossible to fully accomplish without the aid of technology. It's all about the bottom line, for this reason a DMS is arguably the most valuable asset your business will purchase.

That is the basic theory of why you need a DMS. But if you are reading this, you are probably looking to know more specifically how you will benefit directly from this investment.

It would be nearly impossible to list all the benefits you will see from a DMS in a paper such as this, but read on for an overview of how each department and your business in general will benefit.

One more general item to note is in regard to training. The onsite training that should come with a full-featured integrated DMS is a great opportunity to define and or to fix your operational processes. The trainers should work with your employees to wrap the system around the processes that work, while using the system's inherent processes to fix the parts of your pre-existing habits that are a source of distraction. A properly implemented system with trained staff will ensure that your employees can execute on the business basics - the everyday blocking and tackling - freeing up the owner and managers to focus on value-added activities.

The modern parts and accessory department should be one of the most robust profit centers of any marine organization. Sadly, in all too many cases it is not. The main reason for this most of the time is pure, simple lack of organization and processes. Handling a parts department efficiently is a daunting task. Managing a modern parts department that meets the expectations and demands of today's consumer is nearly impossible without the right technology.

Even small businesses are buying parts from several if not dozens of vendors. Each of those vendors has their own unique method of placing orders, discounting items, shipping, invoicing & billing, price file updates, return authorizations etc. Combine those with technicians demanding parts, customers demanding parts and asking questions, Inventory control, monitoring your own price levels, monitoring in-stock levels, invoicing and billing your customers, keeping track of the physical location of items, and all the daily activities associated with a parts room and you can see how this can easily spiral out of control.

The parts and accessories department is also one of the most influential aspects of a marine business when it comes to keeping your existing client base happy after the sale and for the years that follow. This is something often overlooked by owners and managers. Typically they see that the parts department is either "holding its own" (though not truly a profit center) or they have come to the realization that having a parts department is a necessary evil and are willing to deal with the frustrations and losses as a cost of doing business. Aside from the actual expenses of an inefficient parts department there is the substantial cost of losing the loyalty of your customer base. Your parts department controls not only the aftermarket and replacement part aspects of your business, but also affects the ability of your service department to meet consumers' demands. When there is a breakdown in either of those areas your customers start to lose confidence in your organization. If it happens repeatedly you ultimately drive your customers to do business elsewhere.

A Dealer Management System can guide and drive nearly every aspect of the parts department, for example, setting minimum and maximum stocking levels will ensure you don't lose sales of common items while keeping your cash flow from getting tied up in slow moving inventory what will sit for years. When setup and used properly a DMS will have a positive effect across the dealership. Not only will you have better control of your inventory but you can also save dozens of man-hours per month while still satisfying both your service department, and customer's needs.

So, a DMS can save your parts department time and money. But can it make you more money? Flatly, yes. There are many ways technology can help in this area, but one of the most overlooked is through management of pricing.

The vendors that supply your parts and accessories increase their prices on a regular basis. They raise both their cost to you and their suggested retail prices. If your parts department is running with the old school "pen and pad" and distributor catalogs, or even with a simple inventory/invoicing program you bought at the local office supply store, you are losing out. You are not taking into account that the value as well as the standard retail price of your inventory increases every time they raise their prices.

If you are not updating your parts and accessories prices on a regular basis, you are leaving money on the table. And it's potentially a LOT of money! As we all know, nearly every item in our inventory costs more to buy every year. Let's assume you purchase a widget last month that had a dealer cost of $100.00 and an MSRP of $130.00. Now assume you haven't sold the widget but the manufacturer just increased its dealer cost just 5% to $105). Assuming the same retail markup of cost plus 30%, the item should have a new MSRP of $136.50. If you don't update your pricing, but instead continue to sell it at $130.00, that's $6.50 that you just "left-on-the-table." Even worse, when you replace the part for $105, and your margin looks like only 19% (($130-$105)/$130). Carry that across the entire value of your inventory, and that's a substantial amount you are leaving on the table.

If you are not regularly adjusting your price files, you are losing money on both sides. Having a software system that allows you to update your price files is the easiest way to maximize the revenue generated from your parts inventory.

Hint: As you shop for a DMS, look for one that doesn't charge for price file updates and that allows you to update as often as the vendors update their pricing. Many systems out there will "sell" you a price file update, which seems absurd. This is information that you are entitled to for free as part of your agreement with the vendors. Also, many systems only "sell" these updates once or twice a year. Some of the major vendors, like the largest marine engine manufacturer for example, update their prices weekly. You would be paying for data that is already outdated, and that is free to you anyway.

Running your parts department with an industry-specific software package will not only save you money, but it will help you to increase revenue. Furthermore, with customizable reports, owners and managers will spend less time having a better understanding of what is going on.

Each department of your dealership should be able to justify itself as a profit center. The service department is just as crucial as the parts and sales departments in generating profit. It is also one of the departments that is the easiest to mismanage.

In today's marketplace consumers expect more than ever out of your service department. Your service staff has to be efficient, timely and know the status of every unit that's under their care. To really dominate in the market you need to go beyond expectations of your clients. Wiping down the foot prints your techs left behind is what you need to do to keep customers from complaining. You need to go far beyond that to really impress them. How many times have you heard a friend or a colleague rave about service done on their car? Pay attention next time it comes up. Nine times out of ten what they rave about has nothing to do with the actual work that was done. They rave about how good the service was and talk about how they were treated, and all the "extras." For example a complete courtesy wash and wax, with interior detailing. While a software system can't wash a boat for you, it can help you to go beyond your customers expectations.

Done properly you should generate more revenue while exceeding those expectations! Here is a brief list of ways that using a DMS to run your service department can help you do both:

• Better management of time and scheduling will help you to finish jobs more timely.
• Track service history and recommend "preventative" maintenance to your customers so they don't lose valuable time on the water dealing with repairs.
• Use a Menu selling system in your Sales and F&I program (more on that later) to sell pre-sold service packages. Your clients roll their first three years of service into their loan package and never pay out of pocket for three years of service! (This also encourages customer loyalty!)
• Offer "canned" package jobs. Use this to "up-sell" your customers. For example: An oil change is "$X.00, But and oil change with full service and inspection on the trailer is only $12.00 more. They get their needed work, plus valuable additional trailer service. At the same time, you made more on the work order.
• Track the repair and service history of a particular boat, regardless of who owns it! You can offer your existing clients their entire service history when they are ready to sell their boat. And when a new owner brings in a boat you have serviced in the past, your technicians will have the history on file save your NEW client time and money with diagnostics!

Without well-developed industry-specific software to manage your service business, you'll be forced to rely on luck or too many lost evenings to succeed in the long term. Industry-specific is important because the marine industry has issues that are unique to it. Multiple engines on a single unit, transom and outdrive numbers, and specific vendors with unique ways of doing things, are just a few of the things that are specific to this industry and crucially important in a service management program.

Gone are the days when you could hire a "back-yard" mechanic as a technician. With the rising wages and scarcity of quality technicians, you need to be able to account for your technician's time and enable them to make their day as productive as it can be. A well-designed DMS provides you with the tools to manage each technician as a unique profit center. You will easily see which technicians are making the most of their time, and which ones aren't. You can track non-productive time so that it gets billed correctly internally. You may be shocked to learn the cost of some of the non-billable projects you ask of your techs. You may also be shocked when you see the actual numbers generated by each technician. Many times the tech you think is your "Superstar" isn't the most efficient and isn't generating the money that some of your less talented techs are. The value of a DMS however, is that now you will know.

Having a fully featured DMS can not only help you to track these profit centers that are your technicians, but it can also help you to use that to motivate them. This will improve your return on the investment in your technicians.

Giving your service staff the information and control that's needed to keep today's consumers satisfied and generate more revenue with less work will change the image and profitability of your organization. An orderly and efficiently run business will help lower the stress of your employees. They will have the parts, the service history, and the information necessary to do their job right the first time. This will keep them happier and more productive - better for them, for you and for your customers.

Your DMS should provide you with a way, with a simple click, to see the profitability of each repair order. With this, you can easily identify the jobs that are making you the most profit, the jobs that aren't, and ensure that you haven't overlooked parts or time on the boat that aren't on the ticket. You can run daily, weekly, and monthly reports on nearly every aspect of your service department to make the best decisions.

Dealer Management Software will help your service department satisfy customers, run smoother, and be more profitable than ever before.

One of the most exciting areas in which dealer management software is driving this industry is in the area of customer service. As noted above, today's consumers are demanding more than ever. Developing a structured customer service program by utilizing an automated software system can be one of the quickest and easiest ways to generate more cash flow and increase the professional image of your business. It is for exactly these reasons however that you must be careful and methodical when choosing a Customer Relationship Management system

Due to the recent "buzz" about customer service programs, it seems that every one that has anything to do with software has come up with their own program to handle CRM type events. The key to a successful CRM program is that it should be part of an overall strategy used by your organization. Simply having a program that directs or sends emails isn't enough.

Having a CRM system that is an integrated part of your DMS will be more efficient and will give you your highest return on investment. Customer service functions that reach across all of your departments will help to generate more sales in every department, increase your organizations professional image, and will help build customer loyalty. An integrated CRM system can span all departments.

Ideally, your system will generate the initial follow-up with all of your customers after the sale. What is often effective is an orchestrated series of letters and/or emails from the sales manager, the GM, and an introduction from the service manager. Managing this with integrated CRM software system will keep your sales staff on the floor selling, something that you, the salespeople and the prospects will be happy about. It also ensures that your customers know that your whole team are available and are paying attention to them after the sale.

Your service department is just as crucial when it comes to follow up. How nice would it be if you could ask for feedback about a service experience at your dealership, without taking large amounts of time from your service writers or managers? A well-designed DMS with an integrated customer service component will do this.

How about sending everyone that purchased a boat from you a letter two years after their purchase, letting them know that their factory warranty is about to expire and that an extended warranty is still available at a great price because they are a valued customer. Even better, what if you it was done automatically by your DMS.

Many dealers have recently paid a substantial amount of money for a separate "customer service" program. Some of them didn't want to invest in a full function DMS; others had an existing DMS that didn't handle customer service. Typically the programs have reasonably, with one major and consistent exception: Because these are stand alone systems, every bit of information must be manually re-entered into the software. Duplicating the contact info is such a time consuming process, both initially and the ongoing effort to keep them synchronized, that in most cases it requires an additional staff and additional hours. Systems should be easing your burden, not adding to it.

The underlying point to any purchase of this type is to increase efficiency and profits. Using separate pieces to handle different functions of your business will end up costing more in both the short and long run.

An integrated CRM system should be part of an overall strategy supporting the day-to-day processes at the dealership. The key to capturing all of the benefits of this strategy is to integrate and automate as much of it as possible. Done correctly, you will see tremendous results with minimal efforts.

Major unit sales are traditionally the lifeblood of any dealership. Therefore, managing, driving and understanding your sales department is essential if you want to grow and improve your business. If you sell more than just a few units a year, you will benefit from a DMS.

Selling major units is relatively straight forward. However, satisfying a customer throughout and after the sales process while maximizing profit is far from simple. Consider all the factors that affect a sale: market conditions, interest expense, sales staff knowledge, sales staff presentation & reputation, unit availability, options and configuration, prep costs, overhead expenses, manufacturer relationships, competition, customer expectations… and the list goes on. While a DMS can't solve all of these issues, it can efficiently address a large majority of them, freeing up management's time to tackle the rest.

Where do your managers spend their time now? If you're not using an effective software system, most of your sales manager's time is spent dealing with unnecessary problems created by employees that are a result of misinformation, miscommunication or misunderstanding of processes. One unnecessary distraction is answering questions of your sales staff regarding unit information. Software can fix that. A DMS should be able to easily and effectively display not just the basic info of a unit, but all specifications, options, and equipment. Your sales manager likely spends hours digging through invoices and filing cabinets, and even calling builders to inquire about specific units. That is unproductive time. Another area where your managers are probably inefficient is in dispute resolution with customers or even between sales staff. Without a DMS, it is all too easy for a salesperson to slip up and assume a unit has a feature or option that it doesn't. If they present that information to a customer you have a problem. Furthermore, there is the issue of "who sold it first?" Boat shows and busy weekends are what this industry is all about. But, without software two salespeople can mistakenly sell the same unit. The result is an upset customer, possibly upset sales staff, and your manager will spend hours to resolve unnecessary issues. A well designed software system will keep you and your sales staff well informed of the specifications as well as the true cost of every unit.

Your sales staff needs to be on the floor or on the phone. That is how the sales get made. The more time they spend away from their prospects the less productive they will be. With a proper DMS in place your sales staff will do exactly that. They won't have to go shuffling through filing cabinets to determine options on a boat that is in stock. They won't have to interrupt the Service Manager to ask about the status of a boat repair or prep. Your sales meetings will take minutes instead of hours, because your managers will have easy access to straight forward reports that can be monitored daily, weekly or monthly!

Keep your salespeople on the floor, phone, or computer communicating with prospects for more hours every week. That alone will help to increase the sales volume at your dealership. A DMS will give your sales staff the tools that they need to work more efficiently, productively, accurately, and professionally, to provide the best service to your dealerships clients.

An effective DMS should provide you with prospect tracking capability that allows salespeople to quickly and easily record contacts, results and next steps. Additionally, a DMS will provide managers with a way to easily and accurately monitor sources of leads, the makes and models generating the most inquiries, view quotes and prospect status, and easily see the last quote if a prospect calls on your salesperson's day off.

Reporting on and managing your sales department can be daunting. But, imagine the value of spending only a minute to know how many units of a particular boat model you sold this month last year, and year to date. How many prospects were quoted on that model last month? How about the profit margin on each completed deal? It could take hours to gather this information without the aid of software. How many prospects did each of your sales staff contact this week, and what is the status of each of those prospects? If you want to know that your sales staff is functioning well and closing every opportunity you need a DMS.

Give your managers the tools to actually manage. They need to spend less time dealing with non-productive issues and more time making decisions, driving, supporting, and focusing your sales department. Give them the tools, so they can produce the results.

Any simple F&I program will help you make payment calculations and print a sales contract. That isn't enough today. If you are spending money on software, it should have the potential to increase the profit margin on every deal, spur more deals, and give you the tools to manage your business more easily and accurately.

What is the value to you if you picked up just one or two percentage points of margin on every deal you made last year? Now, what if you could pick up those margin points and sell an extended service contract, insurance package, or accessory kit with each of those deals? You can see how quickly those small increases add up. An integrated menu selling system can help even your most novice or "green" salesperson easily and efficiently add dollars to every deal. Menu selling is one of the most persuasive and powerful tools you can give your sales staff.

Even without a menu selling system though, a DMS can help you add revenue to every deal. Simply being able to change the interest rate and quote a new payment in seconds will give your sales staff the ability to try for those finance reserve dollars.

The ability to analyze prior year's sales and stock the units in the highest demand with the proper options will have a dramatic effect on not just your inventory carrying costs, but also the gross margins your staff is able to attain.

Think about this fantastic of a DMS that will add to your bottom line: Identify and sell first the boats that have been in-stock the longest. Offer a sales incentive to the sales team member that sells that unit that is creeping up on 90 days in stock, and is about to lose its free floor plan. Can your sales staff easily identify those now? Without a system in place… it certainly isn't easy. A DMS will allow you to focus on issues like this easily and daily. And, not just in the Sales department, but across the dealership.

It should be obvious by now that an integrated Dealer Management System as is described here will easily pay for itself in a very short amount of time and start increasing your sales. The more time you spend without a marine industry-specific dealer management system, the more money you are leaving "on-the-table."

The ability to generate more revenue is paramount. But in order to do that effectively you need to know what is happening in your business. A simple generic off the shelf accounting program may help you pay your bills and balance your checkbook. However, that is not enough. Having the overall picture is a necessity. To identify your businesses strengths and weaknesses and react appropriately you need to know how each department is doing, independent of one another, and collectively as a whole.

A well designed DMS will have an integrated accounting program. A system like this will provide the access to the information you need quickly without duplication of effort, or opportunity for dollars to fall through the gaps. However, you need a system with some structure as well. You need a system that adheres to the generally accepted accounting practices and still provides you with the ability to do business your way, and that gives you the power to see what is truly happening in your business, and provides you with the information to drive it.

The main focus of this white paper has been to give you insight into how your organization can benefit from a Dealer Management Software system. If you are reading this as a dealer owner or principle that doesn't currently have a system in place, you should look further into the purchase of software to control your business. This paper has only skimmed the surface of the most obvious benefits of such a system.

Aside from the topics previously mentioned, there is one more that a truly great system will improve for you - your overall happiness. If you are like many people in your position, you dedicate a large portion of your life to making sure your business is running smoothly. Sometimes it runs smoothly, and sometimes it is more like "controlled chaos". While dedication to that focus is admirable, it doesn't have to be as stressful or difficult as it is now.

Using technology to drive your business will provide the structure to enable you to actually take a little time off. You will have the information you need to make decisions more easily, you will have better tracking and control tools. You will have a system with some structure to support your well-designed processes. And most importantly, you will have more time to focus on the things you want to focus on, not what you have to focus on. All that from an investment that will not only pay for itself, but that will continue to improve your business and increase your profits long after your purchase…. It really is all about where to invest.