AUTOMOBILE DEALERSHIPS

Where There’s A Will, There’s A Way!

Kevin J. Carnes Principal, CPA, CVA

26 June 2019

Here we are over half way through 2019.  It’s a good time to ask, “How is this year going?”. It may not have been a stellar start or might have been tougher than expected. But it is not the time to throw up your arms and wave the white flag; instead refocus and find a way to make things better. So how do you do that?

First and foremost, you need a positive attitude. Now I am not a touchy-feely kind of person but if you focus on how impossible it is to get technicians or good used vehicles to sell or how bad the grosses are on new vehicle sales -how will your employees believe change is possible? Attitude is everything!

Once you have the right attitude to succeed then it’s time to focus on the business.  Set the dealership up based upon real expectations. If you are selling 90 vehicles a month consistently don’t set a goal to sell 120 vehicles. You can get there but build up to it. Don’t set false expectations ~ business is not a “Field of Dreams”. Also, look at what is not working for you and change what you are doing. For example, if you are selling used vehicles with an average cost of $18,000 but you cannot get enough of them to sell, then maybe it is time to change your price point. This is risky to change but you don’t need to jump in with both feet. Continue to try and find what worked for you in the past and buy a few higher priced vehicles or lower end vehicles. Begin advertising the new mix of vehicles and see if there is a market. The automobile industry is changing every day and your business will need to change with it.

Expense control is also crucial in times like these. When business is great and 17,000,000 vehicles are being sold each year, the expense control, although important, is not a priority, However, with a drop-in volume along with the drop in gross profit, expenses will need to be controlled in order to be profitable.  I suggest that you review your employee count for each department. See where there is an extra person or position that was created but not really necessary.  Also, make sure your managers are managing the people; from making sure they do their job to watching the hours worked to limit the overtime.  The cost of employees, with the increases in minimum wage and recent developments in overtime rules, has increased overall so this needs to be monitored closely.

Also, review paid bills, whether you go online and review canceled checks or go through invoices monthly to see what you are paying.  It is amazing how expenses can creep up and it is up to you to see this. Do not rely on your payables clerk to analyze bills. It seems like everyone in a dealership can sign up for services or purchase items. How many times do you hear: “But it is only $200 per month.”? All of these “$200s” add up, so you need to get a handle on what is being purchased.

The overall objective here is to generate hope that, although things are tough, there are steps you can take to overcome this blip. I have all types of clients, some have great franchises, while others, not so much.  It always amazes me how some clients always make money and in observing them, they always look at what they can do better rather than dwell on the things that are not working. They work to fix those things but they also refocus on other areas that can make the business better. So, don’t give up because “Where there’s a will there’s a way!”

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