DealersEdge Professional Forums

Good afternoon All,

I am taking over a dealer group's wholesale parts dept. I have reviewed current employees pay plans and I feel like they are a little out of alignment. They currently collect a weekly salary between $550-$700 and receive a commission bonus of .25% & 1.0% of dept overall sales (top number) depending on the employee. I also have outside sales reps paid $550 weekly salary and 2.5% of overall sales for their customer list only.
I feel this lets them care more about their own salary and not worry about dealer gross/net profits. I would like to propose a pay plan change action plan to ownership however I am having difficulty finding other wholesale parts dept pay plans to compare ours to. I am also having trouble finding dealer groups that have parts advisors solely for wholesale customers.
For context we are located in an affluent area in Northern NJ and we currently sell/stock parts for 5 nameplates. We are a decent size dept with 3 phone advisors, 6 delivery drivers, and 2 outside sales reps. Overall monthly sales around $400k and only $54K gross profit. About 13.5% overall.
Is there anyone out there that may be able to provide samples of pay plans for these types of dealership employees or are these normal for these positions?

What's your total salary/commission expense in dollars for that part of the operation including all employees?

About $28,500 monthly including commissions

What is your delivery range? Are the stores under one rooftop or town? On the surface, it seems like an unprofitable operation. Paying wholesale people off of sales vs. gross seems like it could run into problems. if you're at 13.5% before any salary expense and fuel/insurance/etc, this could be the start of those problems. In my experience, making less than 15% (min) is not profitable regardless of volume.I wonder how necessary it is to have 2 reps working the same area and customer base. I would at the very least give them a commission off gross profit, but the problem is that will upset the customers as their discount will change. How are the returns and the dept obso? Are the receivables well maintained?

Delivery territory includes a lot of north Jersey and the 5 boro's in NYC. 3 Trucks stay in NJ and 3 trucks go to NYC.
All wholesale is done through a depot location. Drivers do not have to travel between dealerships to collect daily parts deliveries.
1 salesman in NJ 1 salesman in NY.
I would like to pay them off of GP instead of overall sales because I believe it will promote profit growth however I do not want to lose my team due to lowering commissions. To keep them equal to where they are now GP% would have to be huge.
Returns are about average - try to keep all customers below 6% and dept obso is next to nothing. About 3.5% encompassing all brands.

Seems like a tough situation. I'm familiar with the area and I wonder how much worth it is worth it to deliver across those rivers nowadays. The tolls are outrageous and unfortunately the customers are often questionable and not the most ideal when it comes to relationships with vendors. I wonder if you were to analyze the NYC vs NJ separately if you would be able to determine if it is profitable and worth it to go out of state? I would think that there is more than enough customers to acquire/maintain in Northern NJ being one of the most affluent and populous areas of the country. What lines do you carry? You might have less competition than you think.

The other factor is that there are obvious costs to having a central warehouse as well. Do the manufacturers all drop ship to that depot or do you have to arrange that internally? Perhaps you can re-evaulate your customer's discounts along with the new pay plans so there won't be as much of a pay cut at first (if any.) I'd say to eliminate any customer that returns more than your manufacturers allow the dealer to return, as long as it's not your own staff causing the returns. Also, have a strict COD policy if there are any past-due after 45 days. Maybe even cut discounts, but give back that percentage for returns % staying low and paying in a timely manner? Hard to manage at first, but maybe a way to approach it. Or, charge a stiff finance fee on A/R accounts that are past due.

FOR HOWARD HUGHS?

13.5% GP?
That's absurd. Not trying to be harsh but geeeez, your ROI is not worth the liability. If competition is causing you to have to sell for that little (before expense factors), let em have it. Based on the figures provided, I can't see it being profitable at all. There has to be a better way.