Win When the Buzzer Sounds

If we were heading into the fourth quarter of a sporting event, we would look at the scoreboard, and then huddle to discuss any needed last-minute adjustments that would score another win for the team.

It is the same in auto retailing. At the year’s fourth quarter, we want to know we had a solid game plan and, most importantly, that we executed it as intended.

Our business isn’t a game, but parallels can be drawn. We need a game plan or process that is used both offensively and defensively to win. 

Our offensive plan might include special events such as Thanksgiving and Christmas weekend inventory-reduction sales. In the service department, there are opportunities to hold a service clinic featuring winter-related specials.  From personal experience, a well-planned service clinic, where all departments are involved, normally results in incremental vehicle sales.

Our defensive plan should include routine fourth-quarter management items such taking a hard look at new- and used-vehicle inventories, personnel productivity, staffing requirements, the status of receivables, total fixed overheads and internal-controls processes.

Some dealers allow parts managers to make all the arrangements regarding that department’s annual inventory. I highly recommend you outsource this and have a member of your accounting firm observe the process. 

By taking a hard look at your new and used inventories, I’m speaking of a few specific items.  

For new-vehicle inventory, first, identify any vehicles 150 days old or older and put them in a specific area. Perform an inspection of each vehicle to ensure they start, there is no missing equipment, window sticker listings and equipment match up and that there isn’t any lot damage. 

Then mark these vehicles so they can be easily identified by your sales staff.  From a marketing standpoint, was-and-is pricing stickers on the vehicles often help the sale. So do time-specific incentives for the sales force. 

At weekly management meetings, have your new-vehicle manager report on progress made in moving these vehicles. Last, but certainly not least, identify the reasons these vehicles have been allowed to reach this age, and install processes to control this issue in the future.

For used-vehicle inventory, the process is more involved. Not only are you looking at your inventory and any current aging issues, you need to look at your complete inventory to ensure specific vehicles meet desired pricing and physical inventory profiles.

If they don’t meet those, act now. As a reference, review your sales, both volumes and types of vehicles sold, during the fourth quarter of 2012.

This year has been different for the used-vehicle industry, but regardless, we still must manage inventory opposed to just trading or buying vehicles and putting them into our inventory.

Here are other areas to look at.  

Total Fixed Overhead. This covers total dealership expenses excluding variable. By individual expense, compare percentage of gross year-to-date with the percentage of gross each expense represented in 2012. A cursory review quickly will show areas that require a more in-depth analysis.    

Prepaid Expenses. Few items should be included in these accounts. Personally review the balances and ensure each entry is properly accounted for. I have heard horror stories from dealers who haven’t done this.

Internal Controls. Volumes could be written about the dos and don’ts of internal controls. Review and discuss your current processes with your comptroller and accountant. Once you are comfortable that all processes are being properly followed, designate 30 minutes of a monthly management meeting to review them with your management staff.

Back to the game. We are starting the fourth quarter and have the ball. What we choose to do and how successful we execute our plan will determine the final score when the buzzer sounds on December 31.

Good selling!

Tony Noland of Tony Noland & Associates is a veteran dealership consultant. He can be reached at tonynolandandassociates.com.