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May 2020 – Auto Dealer To Do List

Based on April changes, the decisions you make in May, will affect the future of your dealership. The last six weeks have provided a completely new focus on how to move forward.

May 6, 2020

Gross, Market Share & Complete all Tasks.

Gross Margins:  With limited sales you must maximize gross margins. 
 
Gross per unit:  Overhead expense new & used per retail unit usually averages $1,000 per unit.  If you sell 20% less units, you will need $250 more gross per unit and if you sell 50% less units, you will need $1,000 more gross per unit just to cover overhead. 
During the crash of 2008, it took many dealers six months to return to profitability, which usually required a gross increase of $1,000 per unit.  In March 2020 we saw many dealerships increase gross per unit.  Gross is driven by inventory, location, and your vision.  As grosses go up, we almost always see either an increase in market share or no change. 
 
Market Share:  Selling processes and marketing has shifted, you must be on the forefront. 
Monitor your Competitors:  The dealers increasing market share will increase their turn and earn, which is imperative with scarce inventory.  In the last week, I have talked with 3 different dealers that are worried about running out of new inventory.  Which is another reason to maximize gross.  

New Sales Process:  Everyone is in a different stage of setting up on‐line selling and home delivery.  Make sure your team is fine tuning your procedures after each sale and delivery to make sure the process is perfected.  Innovation is key in this market. 

Market Share is Driven by Inventory:  In the last 28 years watching market share every month, true changes only occur when inventory changes, not advertising.  This occurs after tsunamis, hailstorms, new facilities, ownership changes and hurricanes when manufacturers change allocations. Do all you can to make sure you have the correct inventory.  
 
Complete all Tasks:   
Lost Expertise:  With your dealership operating with fewer employees, make sure those tasks they specialize in are completed.  Whether ordering inventory, updating websites, following up with customers, ordering supplies, collecting receivables, paying taxes it is imperative these tasks are completed.  From my experience, whenever warranty receivables start increasing along with overaged, it always relates to a change with the person, which turns into an expensive problem. 

New Duties:  We are all working on additional duties and processes during these times.  Current employees are now doing the work of additional staff members.  It is imperative that all staff continue to complete their current tasks in addition to those of others. 

Dealerships will be much more efficient going forward, but to be profitable now, we must optimize gross.  Gaining or retaining market share in May will ensure success six months from now, because we will earn the inventory.   Making sure all the tasks that were assigned to furloughed employees are completed, will have a huge impact on the bottom line.  These are just a few items, that will make us successful going forward.