PowerSports Business

November 27, 2017

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SOLUTIONS 30 • November 27, 2017 • Powersports Business www.PowersportsBusiness.com "It's not what you pay a man, but what he costs you that counts." — Will Rogers I don't know of any business owner who has not day- dreamed at times about not having payroll costs. Yippee! Free employees! I see the dollar signs in your eyes right now! Those types of thoughts generally come up on paydays. The nirvana is always short-lived, though, as you look at your payroll costs, shaking your head and thinking, "Am I getting what I'm paying for?" It's like going to the grocery store, where we all shake our heads a lot. Standing in the "15 items or less" line with 32 items, we start contemplating what we're paying and what we're getting. The two just don't seem to add up at times. You look at a few bags of groceries and think, shouldn't I be getting more? Out the door you push your shopping cart, feeling a bit put out. How does this apply to employee costs? Maybe the right pay plans would do the same thing — get you more. Think about this as you're signing all those payroll checks this month: production-based pay plans. Your single biggest expense and the one you have the most control over is your payroll cost. How you compensate — and what you compensate for — is where the "I'm paying for what?" thought comes into play. You wouldn't buy a couple of bags of groceries and leave a bag behind would you? Nope, you want what you're paying for. No different with your team members — you want what you're paying for. It's up to you if you want to put a team together that gives you that. What are you paying for? Production? Effi- ciency? Professionalism? Consistency in fol- lowing your dealership's practices? Standards? Expectations? Goals? What's on your list of expectations? How about this: If you make, everyone makes. The more you make, the more everyone makes. Production-based pay plans — don't go to the store without them. Expectations with accountability make underachievers nervous. Underachievers are the ones who complain to others the loudest when production is tied to compensation. It's never fair; they should be compensated for their knowledge. It's never fair; they work hard and should get paid for it. Activity does not mean accomplishment, by the way. The payroll battle is won when perfor- mance and production are the guiding factors for an individual's compensation. For example, here's something I see all the time: Technicians on an hourly wage instead of flat rate produc- ing less than a flat rate technician. You can see it in the metrics, and numbers don't lie. Let's use $28 an hour as an example. If you pay a tech a flat hourly rate of $28 an hour, no matter what they produce, where's the incentive to produce? They get $28 an hour no matter what; yahoo for them. Now, if you took that hourly rate and cut it in half to $14 dollars an hour and paid them an additional $14 per flagged hour produced, you might get a tech realizing that they've got to produce if they're going to make any money. The more they produce, the more they make, and they're not capped at a $28 per hour wage. They make what they make based on their own produc- tion. Think about this hard — you can't pay what you're not making if you want to stay in business over the long haul. Rule of thumb, folks: It becomes very difficult to be profitable when your employee payroll expenses are around, or start to exceed, 50 percent of your gross profit. Simple. Production-based pay plans have to be real and attainable. The better the plans are, the more you'll make, not less. Telling salespeople that you'll give them an additional $25 per bike if they hit a certain number, who cares? They certainly don't. It's not enough to get someone fired up. If you were to put them on a graduated commission schedule based on retail goals that are realistic to attain, now you're talking a salesperson's language. You want realistic goals, not pie-in-the-sky goals. You start with a commission percentage that escalates based on production. I used a three-tier commission base for my sales folks with the following caveats. I never paid on hold back; I had a 1 percent pack on new units and 2 percent on previously owned. I started commissions at 15 percent, which escalated to 18 percent based on their individual unit sales, and then to 22 percent. I stressed every deal on its own merit as well. I wanted them to roll units, move the iron, and I gave them pay plans to reinforce it. I wanted them to make money, and lots of it. If they were making, I was making a lot more. Production-based pay plans do not work if the expected individual production is not attainable. Then they do the opposite — folks don't even try to achieve what they know can't be achieved. For service advisors and parts counter sales associates, offer a lower base wage and higher commission structure. If you want more lines on service or parts counter tickets, give your team reasons to increase them. Make it worth their while, and you'll be more profitable. Your pay plans should make you money, and you should be getting what you're paying for. PSB Mark Mooney is the principal of Mark Mooney Powersports Consulting, a Santa Cruz, Calif.-based company that works with OEMs and powersports dealers to strengthen dealership performance. A former dealer principal, Mooney has 35 years of industry experience. Contact him at mooneypowersportsconsulting@gmail.com. Are your dealership's pay plans all Piggly Wiggly? THINK ABOUT THIS… MARK MOONEY

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