Bulletproof Car Dealership in Good Times

Dealers are enjoying the good times, which makes it an opportune time to bulletproof their stores for the next downturn.

No one is sure when precisely that will occur. But because of the cyclical nature of the auto business, it inevitably will come. Also at play are changing market forces dealers face.

So they are wise to leverage current prosperity by improving their operations.

Lean times reveal weaknesses dealers promise to fix when good times return, “but usually don’t, being distracted by strong sales,” says Ed French, president of AutoProfit, a dealership inventory-management consulting firm.

He is a former Buick dealer and on the board of directors of TruWorth Auto, a used-car superstore in Indianapolis.

The clock is ticking he says. “I believe dealers have 36 months, perhaps only 24 months, to begin adjusting how they operate if they want to remain viable.”

The right adjustments should help dealers respond favorably to:

The U.S. economy is about six years into one of its most extended trough-to-trough economic cycles, a term used by the National Bureau of Economic Research to describe the last time the economy receded, rather than grew.

The average number of months the economy has gone trough-to-trough since 1854 is 56.2 months, possibly indicating that the U.S. economy is about a year overdue for another recession.

“Interest-rate increases could speed up a new recession, and if dealership consolidation heats up then the window for dealers to bulletproof their operations for leaner times could tighten up,” French says. “Now is the time to work on process improvement and use software to help drive more ROI.”

One efficiency strategy is to use data-mining software to find “unannounced ups” in the customer database. Its use can deliver surprising sales efficiencies, says Tony Rhoades, vice president-product for data-mining company AutoAlert, citing potential increases in vehicle sales and gross profits.

Management-structure changes in response to future events may also be beneficial. French recommends a new organization chart that is “more collaborative and less silo, with team-like compensation plans and shared job responsibilities.”

French and others describe an evolving sales role leaning toward a customer- success philosophy. It promotes consumer loyalty, referrals and good online reviews.

Dealers should reduce certain things, French says. Those include average lead-response time, average number of days per prospect from lead to close and the number of prospects still active from prior months.

These numbers should increase, he says: prospect contacts, appointments set, appointments kept and closed sales.