Best PracticesDealership Operations & Processes

From Hire to Profit: Analyzing How Long It Takes a New Salesperson to Become Profitable

When you hire a new salesperson at your dealership, you are investing in the future.

Just like with any investment, you can predict when this investment will break even and, eventually, when it will become profitable. In fact, the cost of a new salesperson starts to negatively impact your bottom line the minute you hire them. Employees often take quite a bit of time to get themselves out of the red. The truth is that while your sales department is a major source of revenue for your dealership, the individuals in that department are a drain on your resources before they ever start becoming profitable.

To better understand where your money is going and if a new hire is on track to break even… it’s critical to analyze a new salesperson’s time-to-profitability.

Calculating Employee Profitability

In order to accurately calculate when a particular employee will become profitable, you need to begin figuring out the cost of your salesperson and compare it against their future profits. Be sure you are factoring the total monthly cost of an employee not just their base salary. Don’t forget to add in incentives like:

  • Benefits
  • Commission
  • Training

After you finish calculating the total monthly cost of your salesperson, subtract that amount from the employee’s expected future profits. Armed with this information, you can begin figuring out how many months it will take for the employee to break even in terms of salary and total monthly costs to your dealership.

By analyzing these key metrics, you will have a pretty good idea of what kind of standard to hold your employees up against. Outside of new hires, this calculation method can also help managers identify top sales people and understand the total profit potential of those that are underperforming.

Keeping Track Of Employee Progress

Dealerships that have a fully integrated Applicant Tracking System (ATS) in their Human Resources (HR) software can track and monitor an employee’s results and profitability fairly easily. Just like you were able to use your ATS to find and recruit salespeople, you can also use that same system once they’ve been hired to track and evaluate their progress and benchmarks.

If you’re working with an HR stack that includes an ATS with integrated payroll, your ATS will work hand-in-hand with your payroll software to monitor your salesperson’s time to profitability. You can use the data collected to compare your employee’s performance and see what methods of training, onboarding and incentives have been effective and which could use some re-tooling. This approach can be useful for dealerships looking to help their employees reach profitability faster.

Onboarding Process

The quickest way to have your employees reach profitability is to move them from new job applicant to “on the showroom floor selling cars” in as short a time frame as possible. The more efficient your hiring process, the quicker you can have salespeople out there generating revenue.

An efficient hiring process is not complete without a clearly defined new hire onboarding process. If your dealership is all over the place with its onboarding process, your new employees will be less likely to make an impact right away – extending their time-to-profitability. Without proper onboarding, new hires won’t get the training and tools to excel quickly in their new role. They will struggle initially and continue to feel like they are always playing catchup. If your dealership doesn’t invest the time and effort to get new hires fully integrated into your operations, it will be reflected in their ability, or lack thereof, to produce.

A formal onboarding program gives your dealership a way to track progress and jump in earlier if a salesperson is having trouble meeting goals and benchmarks. Onboarding ensures that there is communication with the employees until they feel comfortable in their sales role. Regular check-ins from your management and training team can fix any issues that arise early in the process and get employees comfortable and profitable and a faster rate.

By calculating your employees profitably, integrating your ATS into your HR software and creating a well-defined onboarding process, you can optimize your dealerships resources and decrease the time it takes to make your employees profitable. Constant measuring and retooling of training and incentives based on employee performance can ensure a favorable time-to-profitability.

What’s stopping your employees from achieving the results you wish to see for your dealership?