As dealers, you were mostly beat up, knocked down and trampled by the economy throughout 2008. Few dealers made money and there were many who lost more money in 2008 than they had lost in all the previous years combined. Some dealers did not survive 2008 and some may not survive to see the end of 2009.
Conversely, some dealers really and truly made money in 2008. And, they will probably make money in 2009. What are they doing differently? Do they have the magic potion? Where can we order some?
I have noticed over the years, there are certain areas in the country that seem to always survive better than others. For example, Texas dealers appeared to keep selling trucks and SUVs far longer than the rest of the country. Some dealers are still doing well in the subprime market. Their sales might have slowed down, but they are still selling enough cars to make a profit each month.
If you are a domestic new car dealer, 2008 was probably a big disappointment. Sales were down, profits were down, and it was tough to cut expenses and keep realizing savings after you had already reduced expenses the first time you reviewed them. You have come to realize you can’t save your way to a profit if the sales and the gross profit are not enough to cover your reduced expense structure.
You may not be able to control the new car market, the economy in general or the finance companies that don’t seem to have money for your customers to borrow unless their credit score is unusually high. However, what you can do is take another hard look at your business and figure out what is working for you. Meet with your managers weekly to review what happened last week and discuss what you can do to increase your sales and gross profits.
Think outside the box. You need to explore what makes other dealers with the same franchises and similar customer base show a profit when you can’t. Schedule a meeting with each of your finance companies. Find out what kinds of cars, credit scores, etc. they will loan money on today. Then make sure you have those cars available on your lot. Next, advertise to your customers, as economically as possible, that you have finance companies lined up and inventory they will finance.
Review not only what advertising other dealers are doing in your selling area, but also look at different dealers’ advertising across the country. Look at other industries to find out what may be working for other retailers, whether they are selling cheap or expensive items. Even though business is down in most areas of the economy, businesses are still selling some products.
Take a look at your service, parts and body shop departments. Review your historical sales over the past three to four years. What type of service has increased and what has decreased? Review each one in detail with your managers and discuss ways to increase all areas of your sales. If there are independent repair shops and oil change facilities in your area and they still have business, then you still have room to increase your sales.
Call up all those customers and offer them a coupon to visit your dealership for their next service needs. Yes, call them. With business being what it is, there should be time to make some phone calls to say hi, thank them for their past business and ask them for their future business. What have you got to lose? Sales you haven’t had? You can only increase your sales by doing this.
Take an offensive position. You have tried defense by reducing costs throughout each department already. To obtain profitability, you will need to sell your way there. You can’t just sit around hoping to wait out this downturn. You need to be structured, ready and already hitting it hard from all angles when the economy does start to recover.
The car industry has always had its ups and downs, and it will continue to do so. It is inevitable, as history has shown us. Remember the dot-com industry? It was flying high and then crashed and burned. What did come out of it were stronger companies with better products and increased profits. Only the strong and determined companies survived. They reduced expenses, rediscovered and redesigned current products, came up with new methods of marketing all of them, and eliminated unprofitable products.
Think as if you were buying your dealership today. What would you do differently? What would you improve? What would you change cosmetically? What training would you need to accomplish? What personnel changes would you need to make? What expense structure would you set up? What would your budget look like?
If you don’t have a budget, then take this time to put one down on paper with the help of all your managers. Arrive at the number of units and minimum gross profit it will take to cover all your expenses and break even. Once you know these break-even numbers, plan how you are going to increase your sales and with what type of product. It should consist of increases in new, used, service, parts and body shop departments.
Try to go back to the basics of simple, good operational business procedures and policies. Clean up your balance sheet and don’t carry over any grief into 2009. Get all dealership personnel involved in this project to gear your operations for increased profits in 2009.
Vol 6, Issue 2
In a move billed as an industry first, DealerPolicy will showcase an all-inclusive dealer auto insurance solution at NADA 2019.