One-third boat

When it comes to moving inventory off the lot, most sales people are going to walk right past that aged unit and push hard to sell the new product. It makes sense. The product is newer and flashier, carries better features and benefits, and oh yeah, better commissions most of the time as well.

As is the case at most dealerships, Randy Kelly, owner of Kelly’s Port, struggled to find a way to move the expense-ridden older boats. And although he jokes that he hasn’t had another original idea for a number of years, his inventory-reduction idea has been a key to driving down inventory expenses.

By developing a new program that Kelly coined One-Third Boat, the owner prioritizes specific units in its aging inventory and provides a much more enticing commission structure for his sales reps.

“We call them one-third boats,” Kelly explains. “And whatever gross profits are on that boat, the sales person gets one-third of it.”

So if the invoice on an older boat was $110,000, for example, and the sales person sells that unit for $116,000, the sales person takes home one-third of the margin, or $2,000. Otherwise, Kelly explains, you’ve got a 2006 model sitting around and the guys know that no one’s going to make anything on it. And if they sold a 2008 model, they all know they would make drastically more money.

“What I like about it,” he says, “is it creates the team spirit. I keep asking them to dump all this old inventory, and with this program, I’m pitching in with you. I don’t expect you to just dump it and only make $200 commission to ‘help Randy out.’ This way, it’s a two-way street.”

And the rewards for such a program, which Kelly has used for the better part of the last 15 years, add up quickly for both the sales reps and the company overall.

“If you can wave a bone under their nose and incentivize them on a boat they’ve been walking around for a year and a half,” he concludes, “it works.”

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