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I have a small, rural dealership (Chevy) that sells 45-50 retail a month and looking to grow to at least 75.  I have a younger brother as a sales manager and I need to give him a base + incentive pay plan.  I am looking for ideas on how to structure one. 

If you have a few minutes, just jot down the basics of how a sales manager should be paid....I would appreciate it.  He responds to incentives that compensate him for reaching certain goals.

Thanks for considering to help...

Tom Hawkins

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Comment by Tom Hawkins on November 18, 2012 at 3:18pm

Does anyone know if there is a typical guideline percentage that a sales manager's pay should be as compared to the monthly gross profit?  Answer if you know off the top of your head...thanks.

Tom

Comment by Tom Hawkins on October 31, 2012 at 10:29am

Thanks so much for the suggestions so far.  I like the simplicity of Ben's suggestions...although I think there should be component that includes net profit.  Don't want to blow the budget just to get gross up.  Although, he is my brother and is a better expense "hawk" than I am. 

Thanks also to Ralph for the detail you provided.  I could integrate some of those and he would manage the profit of F&I better than now if that was part of his plan.  He already manages our Everyday Hero program and has the trust of all the employees.  Long range plan is to make him GM after we get our volume up to support it.  Everything we are doing for growth is aimed at building a new dealership...we cannot upgrade our current building.  So we need to grow to do it.

Thanks again...

Tom

Comment by Jim Boldebook on October 31, 2012 at 9:38am

Tom, I like Ben's comment below.  for the size of your dealership at present, you should keep it as simple as possible...so both you and your brother clearly know the ground rules with clarity.

the bottom line to all of this is..either your brother has an aggressive capitalist mindset and is going to blow the doors off.. or he will be happy to hit the 75 mark and enjoy life.  If it were my brother and my dealership, I'd give him additional bonuses and perks if he really digs in and exceeds expectations.  Does he have equity options?  While you shouldnt be punishing him for the bottom line on expenses beyond his control, this is the time to really educate him on the process...sharing the P&L and getting buy in on not only controlling expenses, but spending money when and where it pumps up the ebitda.  Don't forget, its not only money that motivates success... it's praise when deserved.  Be generous in the latter.

Comment by Ben Misra ( Secondarypro) on October 31, 2012 at 3:31am

Easy answer.

$ 500 a week and 3% of the gross profit sales/finance.

50 cars @ 2K = 100000 gross = $3,000 plus $2,000 base = $5,000 a month for 50 cars

All he has to do to get a raise is sell more cars or make more profit.

The accounting for this is very simple to forcast and budget.

Comment by Ralph Paglia on October 30, 2012 at 10:37pm

For a Chevy dealership - Decide on your targeted annual salary range, min-max and adjust following components:

1. Base Salary Paid twice a month ($2,000 to $4,000 max)

2. % of Adjusted Net Profit (front and back, after commission expense, doc fees added back in)

3. 3 Level Unit Volume Bonus - 100% of objective, 125% of Objective, 150% of Objective

4. SFE or GM Brand Standards Bonus (if your store participates)

5. Internet Lead Close Rate Bonus: Kicks in at 10% overall

6. Sales Team GM Training Certified Bonus: Based on improving current percentage of sales people who are registered and have completed their GM recommended training.

7. Quarterly Retention Bonus - If you have any sales turnover issues, this can be a great way to ensure the sales manager knows that retaining sales associates is part of his pay plan and performance evaluations.

In General: I recommend that full line domestic brand dealerships create sales management pay plans that include a base salary, plus variable that is determined by both gross profits and total unit volume.  Unit Volume bonuses should never differentiate between new and used units. Sales Managers should be driven by a desire to make a sale, especially when that sale is facilitated by switching a new car shopper to a used car or vice versa.

After the three base components; Salary, Profit and Unit Volume, it is highly effective to add several bonus components designed to drive both the manager's ability to earn more income by achieving specific objectives, but to also clearly establish those objectives as part of how you, the dealer, will evaluate the sales manager's performance beyond unit sales and gross.

Many Chevy Dealers create bonuses for achieving SFE and the payments associated with the program. Other OEM measurement standards that are highly effective for sales manager bonus programs, and which leave the determination of yes or no in achieving to the OEM include sales associate training and certification levels, which in many cases support SFE.  Likewise, establishing bonus payments for all sales managers on Internet Close Rates is a great way to get them to not only pay attention to the sales associates assigned to incoming leads, but also encourages sales managers to take a turn and follow up directly on unsold and un-appointmented leads.

Other bonus items I have seen used successfully are average age of new and used inventory, Sales Compensation not exceeding a percentage level off the financial statements and when there has been a historical problem, reduced sales associate turnover rates.

Knowing that the desk sets up Finance and Insurance income, I also recommend sales manager bonus plans for non-financial sales penetration rates (VSC, Gap, Sealants, etc.) and then there is the business of accessories.  The dealerships I have seen drive successful implementation of accessory sales programs and major levels of incremental profits have launched with a fast start big bonus payouts to sales managers for success, then back down to a more sustainable percentage to sales managers after the initial program launch period, usually 90 days to 6 months.

 

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