Three Entrepreneurial Lessons for the Auto Industry

If you study the principles of entrepreneurship and the individuals who find the greatest success as entrepreneurs, there’s a universal truth: Successful entrepreneurs are driven and resilient. They are scrappier than most because, in a lot of instances, they don’t have any choice but to move past failure and keep going.

At this unprecedented time in the auto industry with used-car inventory at an all-time low, leaders at dealerships around the country are taking an entrepreneurial approach to vehicle acquisitions, turning to customer inventory as a new source of used-car inventory.

In many cases, dealerships recognize this mindset is becoming the new normal as they weather the inevitable ups and downs that will continue in the industry. There are three principles of entrepreneurship that are particularly important for dealerships to follow on this new journey:

Pivot and Improve

For dealers who pivoted to acquire more cars from customers during the pandemic, the shift wasn’t always easy, and it often challenged their thinking about customer vehicle acquisition. The industry was used to relying on auctions and trade-ins – but what happened when the auction lanes were empty or new-car inventory didn’t bring in the used-car trades it used to?

Instead of sticking with “the way we’ve always done things,” some dealers turned to consumer cars and found ways to get those vehicles on their lots. They began to see dozens of vehicles lining up outside the doors to their service departments or rolling along the road in front of their dealerships as new acquisition opportunities.

If you think about it, this pivot to customer inventory is nothing short of extraordinary. In a matter of weeks and days, dealers turned their acquisition efforts upside down and found a new and profitable source of used-car inventory.

Manage the Endowment Effect

There’s an economic and psychological principle called the Endowment Effect that describes the tendency of people to value an object they own higher than its true market value. There’s no doubt this effect applies to customer vehicles, especially in a market where some digital retailers are making offers that reinforce what consumers believe about the value of their vehicles.

This presents an opportunity for dealers to better understand why consumers believe what they believe about the value of their cars to help them grasp, in the most transparent way possible, what their vehicle is actually worth.

Try Something Different and When it Works, Scale Your Success

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As authors Anders Ericsson and Robert Pool discuss in the book Peak, there are two factors that contribute to mastery: hours of repetition and more importantly, deliberate practice. We see this translating with dealers who are building teams to achieve mastery of customer inventory acquisition even faster by creating new processes, training new people and having a willingness to fix whatever falls short whenever it falls short. 

Most importantly, as any entrepreneur knows, when in doubt or you’re getting stuck in “analysis paralysis,” just get out there and do it.

Randy Kobat (pictured, above left) is vice president-operations and inventory management solutions for vAuto, Rebates & Incentives, and Kelley Blue Book Instant Cash Offer at Cox Automotive.