4 Strategies for Improving Truck Dealership Profitability

Staying profitable is essential for your heavy truck dealership's survival. However, maintaining that profitability can be elusive, since new truck sales depend on the economy, regulatory changes and other factors outside your control. One of the best ways to stay profitable quarter after quarter is to focus on your entire operation, not just new truck sales. 

Here are four strategies that can help you reach your profitability goals.

1. Watch Operational Costs

Profitability isn't just about how much money you bring in. It's also about how much you spend. Remember, dealership profitability is total revenue minus total expenses. When business is booming, it's easy for managers to relax their focus on spending, which can have serious consequences when the market turns and profits drop. 

Put clear procedures in place to identify who's authorized to spend money. You might even develop a preferred vendor list and require purchases go through them. Many group buying programs offer rebates or discounts when you reach certain spending thresholds. Veering from your vendor list can increase costs and, therefore, reduce profitability.

Establish key performance indicators that connect to specific goals for each department, including financial targets. In addition, conduct regular audits to monitor each department’s spending and confirm they're following purchasing protocols. 

Review your processes and procedures regularly to find opportunities to streamline them. The goal is to eliminate waste and redundancy across departments. Automating certain tasks should increase efficiency and free up staff time. 

2. Manage Your Inventory Through Data

Managing your truck and part inventory will have a positive impact on profitability. The longer a truck sits on your lot unsold or a part languishes on the shelf, the more it costs you. Fortunately, you can use data to help you optimize your inventory. 

Real-time tracking tools can monitor stocking levels and help you with both overstocking and understocking inventory. The goal is to strike the proper balance: enough inventory to meet customer demand without letting parts sit on the shelves for months. The right inventory management tool lets you set minimum and maximum stocking levels and account for seasonal parts demands. 

3. The Right Used Trucks Matter

The used truck market often feels like a roller coaster, with supply and pricing constantly fluctuating. But it’s still a basic supply and demand equation: When used truck inventory is high, prices are low and vice versa. The key to success is having the right mix of trucks on your lot. That starts with understanding your market area and the types of trucks that buyers are likely to want. 

Condition and appearance are key factors in how quickly a used truck sells and how much it sells for. But weigh the cost of reconditioning against the anticipated sales price. When the cost of refurnishing cuts too far into your margins, it may make more sense to dispose of the asset at an auction or through wholesale channels. If the math works, though, refurbishing the truck can help you sell it at a profit. 

4. Customer Satisfaction Equals Repeat Sales

Send out customer satisfaction surveys after every interaction and then use their responses to identify ways to improve your operations. According to Preferred CFO, “Profitability and customer satisfaction are two sides of the same coin in modern business.” Satisfied customers are more likely to return to your dealership to purchase additional trucks and other dealership offerings. In addition to that, “they are also likely to recommend your business, leading to a natural and organic boost in revenue.”

One way to improve customer relationships is by personalizing your interactions. Train your Sales staff to focus on building relationships and understanding customer needs, not just closing the deal. Build a strong rapport with customers to increase the likelihood of repeat business and referrals. In addition, always respond quickly when customers have a concern, question or need advice. Stay accessible and responsive to their needs. 

There's no single tactic that will magically improve your dealership’s profitability. Instead, it'll take a dealershipwide effort to reduce operating costs, improve inventory management, and provide top-notch customer service to see more dollars drop to the bottom line.