Right now, dealers are making money hand over fist. There is no revenue or profit problem. However, the market will reset and lots will be full of vehicles again. Does your future business model include adding or expanding internal sales and/or service BDC to nurture prospects when customers are no longer lining up to buy vehicles?
The BDC is supposed to be a profit center within the dealership. However, BDC-flation is skewing revenue – and that’s if you can find qualified candidates to hire. If your business model over the next few years includes an internal BDC, the following previously unrealized expenses must be taken into consideration.
Hiring Costs. Previously, you could post a job listing, receive 100 applications within three to five days, and have a fully staffed BDC within three weeks. That large applicant pool no longer exists. The number of people working and looking for work has not returned to pre-pandemic levels.
Today, it takes 65 to 75 days to receive enough qualified applicants to begin the screening process. That means it can take two to three months to go from job listing to functioning BDC team. Time is money. When your managers are distracted with the time, effort, and energy it takes to complete the hiring process, they’re not contributing to your bottom-line.
Training Costs. Even when you do hire, there is significantly less longevity and return on investment. It’s typical to spend two to four weeks training an agent only to have that person quit within months. It’s worth noting that the job of a BDC agent isn’t glamorous. It’s long hours of calling people who can be rude and dismissive. The reason many don’t stick around is because what dealers are offering – in pay, benefits, hours, or other conditions of the job – simply doesn’t compensate for the sometimes grueling work.
Compensation Costs. To be competitive, many dealers are taking a hard look at pay plans. Historically, a BDC pay model is a flat hourly rate and then bonuses based on certain criteria such as appointment shows and vehicle deliveries. I’d argue that model doesn’t work when there’s no inventory for customers to test-drive and deliveries are four to six weeks out. Sticking to the old model delays income opportunities for the agents who need to see immediate income to make ends meet.
A new model that eliminates bonuses and raises the flat hourly rate also has pitfalls. You may get more qualified candidates, but stepping up and paying more doesn’t naturally equate to an increase in activity, production, and performance of the employees. So now you’re getting the same result from the $20 an hour employee as the $15 an hour employee (who’s still earning bonuses). That means you still have to carry more people to hit the necessary production numbers.
Management Costs. The salary-only model will work, but only if agents are properly managed and trained. A good manager who can properly clarify, define, and reinforce the activities and performance points expected is worth his or her weight in gold. The best strategy is to invest in a great manager, raise agent salaries, and commit to thorough training, to give agents stability and reduce attrition. The more actively involved or engaged your manager and the more you train your agents, the higher your productivity. There has to be consistent, positive reinforcement of what to say and how to say it and why to say it.
The truths about BDC-flation may have you considering going back to the traditional model in which salespeople and service advisors nurture leads. I would caution against this. Historically, salespeople struggle to do the basics of good lead management and proper CRM usage. Service advisors are in a no-win situation because they are belly-to-belly with customers in the drive and struggle to answer inbound calls, let alone make revenue-producing outbound calls.
An internal BDC can absolutely be a profit center. Many dealerships are proving that today. I’d argue that a strong manager and management team is the linchpin. If you don’t have that, an outsourced solution is your best bet to mitigate the pitfalls. Put the burden on a third party and pay for the convenience.
This Article was Featured on WardsAuto
To hear more about this topic check out our episode of PDS On The Rocks: Tackling BDC-Flation