Wednesday, May 8, 2013

Dave's Top 10 Indicators: "Number Three: Sales & Gross Per Employee"

Welcome to May "Smart Parts" Readers as we continue on up the ladder of our Top Ten Indicators that will lead us to higher success and profitability!

This month, we will will "drill down" our Number Three Indicator which is "Sales & Gross Per Employee". This category is one of the most important as it lays down the foundation to our Parts Department operations.

Having the right amount of employees to carry out the daily operations and to achieve proper sales and gross numbers goes beyond just this one guideline.

Depending on which franchise or manufacturer, the guideline for "Sales & Gross Per Employee" is approximately $38,000.00 in sales per employee and $14,000.00 in gross per employee.

Gross per employee should be approximately one third of the sales number as overall parts gross profit to sales should be in the vicinity of 33% to 35%.

Overall, this is is a good measurement to the total amount of parts staff that we should employ, but it really doesn't break it down enough. The "Sales & Gross Per Employee" guideline includes ALL parts employees, but in order to maintain a proper "bottom line", we have to have the right amount of employees in the right position as well.

Technically, we could achieve the proper "Sales & Gross Per Employee" guidelines, but still NOT achieve the overall personnel expense to gross guideline on the balance sheet.

The amount of overall parts employee compensation for specific positions within the department has to be addressed as well.

This is where the Parts Department "staffing metrics" comes into play. In order to attain the "Sales & Gross Per Employee" guideline AND achieve the proper personnel expense to gross guideline, we have a few questions to consider:

  • How many "total" parts employees should I have on staff based on current sales and gross numbers?
  • How many of these staff members should be front and back sales counters?
  • How many drivers should we have on staff?
  • How many shipper/ receivers do we need?....or do I need any?
  • Do I need to have an inventory clerk and/or stock person?
  • Do I need an assistant manager? 

All these questions should come into play when we are trying to achieve and maintain the proper staffing.  It will allow us to not only hit our target on the "Sales & Gross Per Employee" guideline as well as maintain the proper expense to gross numbers on personnel expense management.

Keep in mind that in most dealerships, personnel expense represents over 40% of the total expense each month in the Parts Department.

So!...How do we do this?

Proper "staffing metrics" begins with one simple item and that is our "sales to support" ratio. Just as we measure "sales to support" ratio in service and sales, the same applies in the parts department. The "sales to support" ratio in parts is 2:1, just as it is in the service department. 

That being said and using a little basic math, each counter "salesperson" should achieve one and a half  times the sales and gross numbers to account for one half the expense of support staff. Also, "support staff" employees usually earn about half as much as "sales staff" employees with the exception of management.

Here's an example Parts Department "Staffing Metrics" based on an average parts department sales & gross numbers:

Average Month's Sales: $200,000.00
Average Month's Gross: $70,000.00

Total Parts Employees Based on "Sales & Gross Per Employee" Guideline: 5

Staffing Metrics:  Parts Manager: (1)  Sales Staff: (3)  Support Staff: (1)

This example could also have a little "shift" within itself as some "support" staff members may play duel roles in working the front and/or back counters during peak times.

Parts Managers may also play in this scenario as well playing multiple roles. The most important part of this example is the proper "sales" staffing is crucial to meeting ALL the guidelines and net profit expectations.

Achieving the proper "Sales & Gross Per Employee" guideline is just a piece of the puzzle. Building the proper "people" foundation in the Parts Department is critical and proper "staffing metrics" have to implemented in order to achieve "predictable results" on the bottom line. 

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTMThe only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at Vist our Website at