The Five MUST HAVES for Creating a Successful Automotive BDC – PART 3
The 5 Must Haves for Creating a Successful Automotive BDC – PART 3
TRANSCRIPT: So, what’s ‘must have’ number 2? Number two is BDC’s MUST use sustainable pay plans. If you want your BDC to grow and provide you with incremental sales today and in the future, all while maintaining the integrity of your overall sales compensation; then you need to create a sustainable pay plan. Simply put, this is a pay plan that allows you to grow your BDC without killing your net profit.
First, we’re going to pay the BDC on appointments that show. We’re not going to pay them on sold units and I’ll get to that in a minute. We’re also not going to pay them just an hourly wage, though there generally is an hourly component to the base that a BDC agent will make. For most markets, a solid pay plan for an appointment coordinator (that’s what I call a BDC agent), looks like this: first there’s an hourly component, ten, twelve, maybe even fifteen dollars an hour, depending on your market. That is not a base pay. That is a draw against commission. In order to have a successful BDC they must have 100% “at risk” compensation. You cannot set them up with this base pay and a little ‘spiff’ for each appointment because they will start living off this base hourly wage. They will start to work their pay plan and they drive no appointments for your dealership.
Now, after the hourly wage, we’re going to pay them a flat commission for every VALID (we’ll discuss this later) appointment that shows. I generally like to pay about $50 for every appointment that shows, although every market will be different.
The third component to their pay plan is a volume bonus. This is generally about $100 extra for every ten valid appointments that show. So, we’re going to pay them an extra $100 at ten, twenty, thirty, forty, all the way up to however many that show.
Now, the second component to a sustainable pay plan is what we pay the floor salespeople. We need to pay the floor salespeople who close a BDC appointment a reduced commission. Now, generally, this is half the commission with a full or half mark towards their volume bonus. I can live with either. I cannot live with giving them a full commission. They simply do not deserve it.
Now, this second point is hard for sales managers to deal with. Sales managers like to argue with me with something nonsensical like, “My sales rep closed the deal. He did all the work. He deserves a full commission.”
No, he didn’t and no, he doesn’t.
He barely deserves half the commission you’re awarding him. He didn’t do all the work. He barely did half the work. See, appointments today close at an extraordinarily high rate, generally 50 to 80%. Appointments that show close at 50 to 80% depending on your dealership. So, the most your floor salesperson can argue for is that he did half the work. Moreover, the minute your floor salespeople are ready to make the calls and set the appointments for themselves, then we can talk about giving them the entire deal. Until then, realize this – we cannot sell an empty seat. Somebody has to bring that customer into the dealership and that person needs to be paid fairly.
But, let’s look at this another way. Let’s say that one of your floor salespeople, Bob, sets an appointment for a prospect for tomorrow at 9:15 in the morning. Now, let’s say that overnight Bob gets sick and decides to stay home. He calls Joe, another floor salesperson on your team and he says, “Hey, Joe, can you take my 9:15 appointment this morning? I’m feeling sick and probably won’t be in until this afternoon.”
Joe says, “Yeah”, and he sells the car. Now, how much of this deal does Joe think he deserves? I’ll give you a second.
Joe sold an appointment that Bob set. Bob wasn’t at the dealership. It should have been an open floor, right? How much does Joe think he deserves?
Half. You and I both know that Joe thinks he deserves exactly half of this deal. Not a penny more and not a penny less.
Bob set the appointment, Joe sold the car. Joe thinks he deserves half. Joe looks at this as a true split deal with Bob. After all, Bob set the appointment, didn’t he? Now, why would Joe think he deserves MORE than half when the appointment is set by a BDC? See, he thinks he deserves only half when Bob sets the appointment but suddenly, he deserves the whole deal when it’s a 22 year old young woman upstairs with a headset on that set the appointment? It doesn’t make sense.
You need to pay a split commission on appointments set from the BDC or your BDC simply will not survive.
October 25, 2014 @ 5:32 pm
I just wanted to make sure I understood you about your ideas on sustainable pay plans. I have been in BDC departments for years but am a little new to the management side, and usually in my market it is a $2000 base pay plus $10 per shown appt and $25 per sold. If I am correct, the pay plan you suggest is $2000 base pay but if they make more than the $2000 for the month by showing more appointments then anything they make past $2000 off appointments is bonus. Basically like a commission salesperson who makes more off of commission then their minimum wage. Correct?
October 26, 2014 @ 2:26 am
You are correct. The key for the BDC pay plan is to have 100% of their pay “at risk.” This means that you can pay them any base that makes sense, though all of that is a draw against their commissions. The commissions (in my opinion) should be roughly $50 per appointment that shows (within 45 minutes of the scheduled appointment time) plus volume bonuses of $100 for every ten appointments shown. (This would pay someone $3,000 on 50 appointments shown in a month.)
Of course, your market will determine the exact pay, but this plan fits for most markets. (If it helps, I posted the actual pay plan on LinkedIn recently here: https://www.linkedin.com/today/post/article/20141013153345-4321131-the-five-absolute-musts-for-a-successful-automotive-sales-bdc.)