If I Were Building a Dealership Today, Here's What I'd Do Differently

Seven decisions dealers need to rethink before 2027

By David Spisak

I ran a Mercedes-Benz dealership in San Jose that generated $29 million in annual profit. If I were starting from scratch, I wouldn't rebuild the dealership I operated in 1999. Not even close.

The automotive industry has changed dramatically over the past 28 years, but I see dealers across the country still operating the same way they did 10, 20, or even 30 years ago. They’ve added technology, hired additional staff, and even invested millions in their facilities, but at their core, they’re running the same business.

Consider: If you were starting from scratch today, would you build the same dealership you're operating right now?

I wouldn't.

Here's what I'd do differently.

Choose the Franchise Carefully

If I were to buy a dealership today, I would focus on the franchise. Each franchise has either a headwind or a tailwind. Generally speaking, Toyota, Lexus, Porsche, Honda, and others have a tailwind. Other franchises, like Lincoln, Acura, Genesis, Volvo, Stellantis, and Volkswagen, have headwinds. Ultimately, though, the franchise doesn't dictate whether you end up with a highly successful business. It's the operator. Leadership, people, and processes determine your success.

My goal, regardless of the franchise, would be to become the #1 dealer in my market. If I am the fifth- or sixth-best-performing dealer for my franchise, I have a serious problem.

Why? Because new-car volume creates opportunities throughout the dealership, from trade-ins and F&I products to manufacturer incentives, accessories, and future service revenue. My ability to cover all of my dealership's fixed expenses depends on new-car demand.

Start With a Zero-Based Budget

Most dealers approach financial planning through the lens of last year's financial statement. They ask where they can reduce expenses by 5% or increase revenue by 10%. That's not how I'd do it.

I can't reinvent my business by making incremental adjustments to an outdated operating model. Instead? I'd start with a blank financial statement. Forget what my dealership currently spends. What should it spend? How much service revenue should we generate? How many employees should we have? What should our operating expenses be?

I'd build the financial model for the dealership I want to operate, then compare it to the dealership I have. The difference between those two financial statements would tell me where to focus.

Build Around the Real Profit Opportunity

New cars will never be the same again, no matter the franchise. I'd build my operation around the departments with the greatest opportunity to generate sustainable profit: used vehicles, parts, service, and finance.

For decades, dealerships have operated on the assumption that selling one used car for every new car is the gold standard. It’s time to discard that outdated advice. My goal would be to sell two or three used vehicles for every new vehicle.

Not only that. Let’s say I own a Ford dealership. A customer brings his F-150 in for a brake job. His wife drives a Nissan Pathfinder that's out of warranty. Why shouldn't I service her vehicle, too?

My technicians already work on other manufacturers' vehicles when we recondition used-car inventory. Why wouldn't I extend that capability to customers? I'd make it a strategic priority to compete for business with independent repair shops, tire stores, and quick-lube facilities.

Put Leadership Attention Where the Profit Is

I recently reviewed a dealership where approximately 65% of its profit came from parts and service. Yet leadership spent most of its time on vehicle sales. That makes absolutely no sense. Management’s attention should go to departments that currently generate, or have the potential to generate, the majority of the store’s profit.

I'd also reconsider the traditional path to becoming a general manager. Most GMs come up through the sales department. If fixed operations represents the majority of my dealership's sustainable profit opportunity, wouldn't it make sense to consider a leader who came up through parts, service, or the business office?

Staff for the Process, Not for Tradition

Between 2008 and 2018, the average dealership grew from around 53 employees to roughly 66. During that same period, dealerships invested millions in technology promising to make their operations faster, more efficient, and more productive. Yet the average dealership added approximately 13 employees. If technology is making us more efficient, why did we need more people to do the work?

In too many cases, we added people to accommodate inefficient processes rather than fixing the processes themselves. If I were building a dealership today, I'd start by designing the most efficient operating processes possible. Then I'd determine how many people I need to execute them. Not the other way around.

My dealership would look more like a Silicon Valley company than a traditional car dealership. It would be data-centric, process-driven, and disciplined. I'd value my employees' experience and judgment, but I wouldn't run the business based on somebody's gut feeling. Data would lead our decisions.

Let Customers Design Their Buying Experience

Customers can buy almost anything they want, whenever and wherever they want. Why should buying a car be different? At my dealership, customers could purchase a vehicle online or in person, at the store or from their living room. They could choose how much of the process they want to complete themselves and when they want assistance. I'd make the experience transparent, convenient, and consistent across every channel.

Importantly, I understand that you cannot create a frictionless customer experience with a friction-filled employee experience. If my employees have to navigate disconnected software, duplicate data entry, and unnecessary administrative tasks, that friction eventually reaches the customer. So I’d invest in technology that works together, eliminates unnecessary work, and lets employees spend more time building relationships. I would also regularly audit our technology stack to ensure that each product is (and continues to be) an asset, not a liability.

Rethink My Approach to Capital

Every dollar invested in my dealership needs a purpose, whether it's inventory, facilities, employees, or technology. I'd evaluate each capital decision through the same lens: What return am I generating?

If I'm carrying vehicles that aren't selling, that's capital tied up in depreciating inventory. If I'm investing in technology that doesn't improve productivity or profitability, that's money I could have deployed elsewhere. If I'm building a multimillion-dollar facility that doesn't generate a corresponding return, I'm creating an unnecessary financial burden.

I'd be a great partner to my manufacturer, but I wouldn't blindly accept inventory or make investments that jeopardize my dealership's financial health. My responsibility is to operate a sustainable, profitable business. That means understanding the economics of every major decision.

The Bottom Line

The Choice Is Yours

Dealers, you have a choice… you can continue making small adjustments to the dealership you've always operated OR you can challenge the assumptions that shaped that dealership to begin with.

The objective isn't to preserve the dealership that made you successful yesterday.

It's to build the dealership that will make you successful tomorrow.

Is Your Showroom Still Where the Decision Gets Made?

Jens Monsees, CEO of Infomedia, writes that ten years ago the average car buyer visited 4.5 dealerships before purchasing, and today visits 1.4. The customer arrives already informed, with the decision largely made. His argument: the sales floor's skill set, staffing model and conversion metrics were all designed for a customer who came in to compare. The dealers performing well treat the digital experience as the showroom and the physical store as the closing room.

Source: LinkedIn • Jens Monsees | Read More

Bill Cariss: How to Grow Your Dealership Without Hiring More

October 22 • 21m

Bill Cariss of Holman Ventures invests in AI, robotics and emerging automotive technology, which gives him a firsthand view of which innovations are gaining traction, where investors are placing their bets, and what dealerships need to prepare for before the industry catches up.

Recorded at the Presidio Group's Automotive Technology Summit, the conversation covers Holman Robotics, which puts autonomous robots to work moving parts through dealership service departments and has been selected by a major publicly traded dealer group as its robotics supplier, and why the next competitive advantage may depend less on adopting more technology than on how intelligently dealers connect their systems, protect their data and deploy AI.

Why it belongs in this issue: this issue asks why dealerships kept adding people while they kept adding technology. Bill's answer is that the advantage comes from connecting systems, protecting data and deploying AI where it removes work. That is how I would staff a dealership built today: design the process first, then decide how many people it takes.

Listen or watch the full episode on:
Apple Podcasts  |  Spotify  |  YouTube