Busting Out of the Bad Times

Hopefully by now you've received your Cash for Clunkers payments and settled back in to a normal business routine. Normal, as in selling and servicing vehicles, and collecting vehicle receivables in a timely manner.

I, for one, am ready to swiftly end this year and begin fresh in January. But, not so fast. We still have work to do to ensure ending 2009 on a positive note.

Get a legal pad and find some quiet time where, without interruption, you will be able to review your results of this year to date. Consider whether the fourth quarter will be like the first three or different. If you believe your results will be different, why and how?

Next, compare your results for fourth quarter-2008 to what you anticipate for the same period this year. What steps should we have taken as an organization in 2008 that we didn't? Have we made those corrections this year?

Again, what's different this year? What actions should we take to ensure not only that we end 2009 on a positive note, but put ourselves in a position to take full advantage of sales and profit opportunities entering 2010?

Let me provide a few thought starters, beginning with used vehicles.

From experience, October is realistically the last month this year when you will be able to get your used-vehicle inventory in line, not only from a days' supply standpoint, but from an aging perspective.

If you fail to take action on an aging-inventory situation in October, your options are worse in November and terrible by December.

Conversely, late November through late December is a time you have the opportunity to benefit from other dealers mistakes. Historically, values decline as we enter this period. Will 2009 be different?

What about inventory mix? Are you stocking a representative sampling of what customers are buying in your market? This seems basic, but have you personally inspected and driven each used vehicle you've had for more than 45 days to ensure it's ready to sell?

Generally, new-vehicle inventories at this time are lower than normal due to late summer sales, but do you have any aging new-vehicle inventory? Have you personally examined each vehicle to ensure the vehicle hasn't been pilfered, is accessible and ready to sell?

What actions are you planning to merchandise your parts and service operations? When was the last time you hosted a service clinic? A well-planned and marketed event often results not only in prospective service customers, but new- and used-vehicle shoppers.

While performing this comparison and planning exercise, don't forget to look at your historical cash position, by month, for fourth-quarter 2008 and compare your planned results for the same period in 2009 to examine its effect on your business.

As most of you know first-hand, collecting receivables have been tougher recently. It is vital to jump on these sooner than later.

Not only do aged receivable impact your cash position, the longer you wait to address any potential issues, the more likely you will have to reserve them or possible write them off. Aged receivables negatively impact management pay plans.

Another issue: Do you have a time scheduled to take your parts inventory?

Are you tracking your personnel productivity in total and by department on a monthly basis? How much gross must we generate by individual month to move the needle up?

I highly suggest you ask two or three of your key management staff to complete this same exercise. It will not only be helpful to compare thoughts, but it will facilitate discussion and allow your organization to take full advantage of the opportunities the market place presents you.

The media, financial markets and consumer confidence continue to offer hope that business conditions are improving. Now it's up to each of us to take full advantage of this improvement.

Good selling.

Tony Noland is a veteran auto dealership consultant. He can be reached at [email protected].

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