By Desiree Homer
Strengthening the Resiliency of Your Dealership in a Pandemic
When dealers originally shuttered their showroom doors, no one knew for sure how long the shelter in place would last, nor what kind of effect the mitigation efforts would have on the industry. Fast forward to the present day, and dealers, while still in the dark about predicting some outcomes, feel they have at least some footing. Dealer owners took necessary steps to keep the operations afloat, whether it be leveraging the Paycheck Protection Program or driving online customer engagements. Many took time to review the expenses and knew the key to weathering the storm would lie in the ability to stay lean. Some experts suggest that staying lean through the rest of the year may be the best advice. It also demonstrates how a crisis can make dealership operations even stronger.
Reviewing Expenses & Trimming the Fat
You may have sat down with your expense reports before. But some experts are suggesting dealers should sit down with the data again. Serial entrepreneur, Mike Michalowitz, outlines one way to prioritize operational profits, replaceable expenses, and unnecessary expenses. He talks about first identifying and labeling each operational line item as a ‘P,’ ‘R,’ and ‘U’ accordingly. This first step will then help you organize which expenses generate profit, and which can be replaced by more affordable solutions.
Identifying Profit Centers & Emerging Revenue Generators
Once you have labeled each expense and revenue channel on paper, you can then begin to review your strategy to grow those ROI opportunities and trim those expenses that no longer contribute to the long-term sustainability. Some of the solutions you have in place now were initiated in an effort to survive the shutdowns. But now, taking a closer look at those short-term strategies will help you lay in a plan for long-term execution. You can then carve out more realistic financial projections through the end of the year. According to Mike Michalowitz’s book and entrepreneurial suggestions, dealers should aim for a goal of expenses that are 10% below where they need to be.
Great Entrepreneurs Recognize Strength in Crisis
Staying lean during the shutdown was smart business. But the great entrepreneurs and dealer owners also recognize the importance of riding out the storm for the long term. Continuous reworking of operational expenses and a review of revenue channels is a best practice during any economic condition. It makes even more sense now, as dealers still face uncertainty in the demand, inventory, and consumer confidence in the months to come. Legendary businessman, Andy Grove, said that poorly led companies tend to be “destroyed by crisis.” But he also said, “good companies survive them, and great companies are improved by them.” How your dealership emerges from the pandemic crisis will depend on how you plan for the now and the later.
Streamlining business, connecting with car buyers and the community, and improving operations along the way is what you do best. Like Mark Barnes, Volkswagen of America’s COO said in a recent Dealer News Today podcast, “car dealers are the last great entrepreneurs.”