MIt's time to position yourself for a profitable year-end close. November and December historically are not the best sales months. That leaves October to clean up your new- and used-vehicle inventories.
Most dealers have instituted a used-vehicle aging policy. The most common policy is 60 days and out. This is good, but let me remind you of a couple of things by asking a question. What happens each year to vehicles traded for or purchased in late August and early September by the time the 60-day period has expired?
The vehicles age by a model year, and the values may not hold. This is especially true of program vehicles. How do you protect yourself if you aren't able to retail those vehicles quickly? One proven method is by monitoring the number of times a used vehicle is shown and test driven in the first three weeks it's on the lot. If there is no action on the vehicle, dispose of it now and replace it with another vehicle that is most likely closer to actual market value.
Another item you may want to watch is your day's supply of used vehicles based on historical evidence. What may have been a 30-day supply in August and September may turn into a 45 to 60 day's supply in November and December.
Review your retail used-vehicle sales for the November-January period the past two years and then compare your current inventory level for potential overages.
Don't kid yourself unless you know something that will allow this year to be different from the past two. Get your day's supply in line now! This action will help prevent a "fire sale" and eliminate substantial wholesale losses in late December when wholesale values typically are at their lowest level.
In the past few months we have discussed new-vehicle inventory management. To reiterate a few points, identify the inventory that has been in stock for more than 75 days and get it ready to sell. With your sales managers, walk the entire new-vehicle inventory and inspect the aged units. Ensure that there is not any missing equipment and that any equipment changes have been noted with addendum stickers. Ensure that the vehicles do not have any damage.
Ensure that each vehicle will start and that is has adequate fuel. As you are aware, during this time of year, many customers are looking for a bargain so, it is up to you to make sure that these aged units are clean, ready to sell and given a prominent display area where there is maximum visibility to the customer and your sales force.
There are a few more items you might want to address in October including receivables, non-essential personnel and non-essential expenses.
Now is the time to aggressively work on bringing all past due (30 days and older) accounts current, especially your wholesale accounts. If their business slows in November and December, how quickly will your wholesale customers pay you? Addressing these accounts now might prevent having to write off substantial balances at year-end.
The next item, non-essential personnel, is self-explanatory. During your weekly staff meeting, have each manager bring a list of personnel assigned to their departments. Review this list and discuss the need. Remember the "old saying", temporary expenses have a way of becoming permanent and this is especially true as it relates to personnel.
The last item to address is expenses. If you do not hold monthly expense meetings with your departmental managers, start now. During this meeting, review each expense and see if it is essential. After identifying essential expenses and eliminating those that are classified as non-essential, start a process that, prior to year-end, will allow you to ensure that you are obtaining the best price for the service/product received. This one exercise alone can amount to tremendous savings.
By taking the time to address the items addressed here, you ensure that your operation is clean and that you have positioned yourself to maximize your net profit opportunities.