Ways to Control Costs

Regardless of your political affiliations or preferences, now that the election is over, let's get back to the business of selling and servicing cars and trucks.

This has been a strange year, yet when the dust settles, it will rank in the top five from an all-time volume standpoint.

As an eternal optimist, I believe once we're through this holiday season, the prospects for a better year lie ahead.

Boding well for consumer confidence is that October job creations almost doubled beyond expectations, OPEC is increasing oil production which should lower gasoline prices, unemployment is stabilizing under 6% and low interest rates are low.

All that should translate into more car and truck sales. I predict we'll see the real start of those the week after Christmas, when manufacturers create a stir while jockeying for top position.

By now you should be nearing completion of your business plan for 2005. Last month, I provided measurements to formulate your plans.

Remember, a goal without a plan is only a dream. That said, I hope each member of your team has identified five critical areas to focus on. Those should enhance your chances of hitting your objectives.

Meanwhile, be sure to present your priorities for 2005 to your entire team.

What are the major priorities for a dealer operator in 2005? With the increased pressure on vehicle grosses, expense control and management must rank high on your list of priorities.

Looking at the total NCM dealership client base, this year on average total dealership gross has increased by 1.5% while the average total expenses have increased 3.7%. Obviously, this trend can't continue.

So what can you do to get a handle on the expense trend? During this month, meet with your comptroller to look over any and all expenses. A question to ask as you review each expense, is whether it is essential to your operation? If the answer is yes, then discuss how you might better manage it.

One example is vehicle inventory cost. It promises to be an issue again in 2005.

In light of that situation, have you established firm days' supply goals with regard to inventory by car and truck line?

Have you installed monitoring processes to help identify sales trends and prevent your inventory levels from being out of line?

Have you retained the exclusive authority to increase days' supply levels over and above the established guidelines?

Advertising is another expense to review. I'm not suggesting you stop advertising, but consider devoting more resources to contacting and soliciting business from your existing database of customers.

That can be done through direct mailings and a customer relationship management software system that tracks customers' buying cycles as well as their vehicle preferences.

I work with dealers who have reduced their ad spending and diverted the money to direct mailing. Most have reduced expenses while increasing per-unit gross.

Personnel cost, especially workers' benefits, continue to escalate. This is disturbing due to the fact that this year we have seen a decline in the average dealer's gross per employee. If you don't have them, you need to establish minimum performance standards for each position in the dealership. This is easy to say and hard to do, but it will be worth it.

On behalf of NCM, I want to thank our loyal clients for their continued support. I also would like to wish each of you a happy holiday season and a new year filled with success and happiness.

Good selling!

Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.