Setting Sales KPIs for Your Truck Dealership

There's an old adage: If you don’t measure it, you can’t improve it. It’s a long-held belief in business that what gets measured gets done, but only if you measure the right things. Key Performance Indicators  help managers do just that and offer a clear path to improving the performance of the dealership's Sales team. 

Sales Offer a Good Place To Begin

The Sales department is the heart of the dealership, making it a natural place to set KPIs. Doing so provides insights into the department's overall performance and areas for improvement. 

It's important to establish a baseline before setting a KPI. If you understand where your current performance sits, you can set realistic targets and measure progress accurately. 

Here’s a look at some of the more common sales KPIs:

• Sales Conversion Ratio: This measures the percentage of leads that turn into sales, indicating the effectiveness of your Sales team. To calculate this, divide the number of sales by the number of leads, then multiply by 100. If the result isn't where you want it, set a new goal and a time frame by which to meet that goal.
• Average Profit Per Unit Sold: The Universal Marketing Dictionary defines this as "total sales revenue divided by total units sold,” and this KPI allows you to determine if your vehicle pricing is appropriate and supports profitability.
• Inventory Turnover Rate: This tracks how quickly you can sell and replace trucks in your stock inventory, which sits on floor plan financing. High turnover rates mean trucks move quickly. A lower turnover rate may prompt you to reevaluate the kinds of trucks you keep in stock. Equipment Trader notes the goal aims “to find the sweet spot between keeping enough stock to meet demand and avoiding excess that collects dust." To calculate, add your beginning and ending inventory values for the period and divide by two.
• Customer Acquisition Cost: This shows how much it costs to acquire a new customer. According to Corporate Finance Institute, you calculate CAC by dividing sales and marketing expenses by the number of new customers you acquire.
• Customer Lifetime Value: This measures the total revenue you can expect from a customer throughout your relationship. This calculation involves several steps, including knowing the average purchase value, the average purchase frequency, the customer value (the average value of a purchase times the number of times the customer makes a purchase), and the average customer lifespan. 

Implementing and Integrating KPIs

Implementing and integrating KPIs within your truck dealership requires a systematic approach that ensures these metrics become a core component of your everyday operations. Begin by clearly communicating the selected KPIs and their importance to your Sales team, ensuring everyone understands how their individual efforts contribute to broader business goals. 

Incorporate KPI tracking into regular sales meetings and performance reviews to foster a culture of accountability and continuous improvement. Utilize dealership management software to streamline data collection and reporting, thus making KPIs readily accessible for both managers and Sales representatives. Remember, integration is most effective when KPIs directly inform coaching, strategy adjustments sand resource allocation. 

As your team gains experience with these metrics, encourage feedback and refine your KPIs as necessary, so they continue to reflect evolving business objectives and market conditions. By placing KPIs at the center of your sales management processes, you make measurable progress towards higher efficiency, increased sales effectiveness, and improved profitability.

Don't Set and Forget

Once KPIs are in place, regular monitoring is essential. Make sure you collect the appropriate data and compare it against your goals. If your KPI targets fall short, dig into why. Is it an issue with training, resources or processes? Once you find the cause, take corrective action and continue to monitor performance.

In addition, continue to regularly review your KPIs to make sure they're still relevant. Business conditions change, and you may need to adjust your KPIs to reflect them. Once you've successfully achieved the goal, you can change the target or move on to another area needing improvement and develop a new KPI. However, you should continue to monitor data from the previous KPI to ensure you maintain standards and there's no backsliding.

Setting and tracking KPIs in your Sales department will provide insights into its performance and allow you to improve it.