Lenders need to understand dealers -Keith Parry, Head of the Motor Retail Group Barclays Business Banking
It is important that banks understand the broader issues affecting dealers, rather than just purely analysing finance, says Keith Parry, head of the motor retail group at Barclays Business Banking.
“Issues such as the impending Financial Services Authority regulations governing the sale of insurance related products and the upcoming block exemption location clause revision are all factors that lenders need to be made to understand,” says Parry, who believes the success of a dealership can hinge on its relationship with its bank or lender.
“Motor retail is a dynamic and evolving sector and banks need to understand how it works if they are going to help dealers optimise the use of their funds. Open dialogue and teamwork is what relationship banking is all about,” he adds.
Parry also says that business continuity should be a key consideration for every bank and every business.
“The key question for a lender is whether the business will get an adequate return for the investment. Basically – the broader the spread of risk across your business the better.”
Embrace the spirit of regulatory changes - Mark Standish, Managing director Carlyle Finance
Motor finance companies and dealers should welcome the spirit of change in the industry and take a leap of faith if they are to face the challenges of the future, says Mark Standish, managing director of Carlyle Finance.
“We must embrace regulatory change and take the opportunity to develop and implement new best practice and so improve the customer experience together with our business performance,” he says.
Investing in meeting the needs of the customer, rather than concentrating merely on price, is the way to address the public and press perception of dealer finance, according to Standish, who views the Financial Services Authority regulation changes from January 15, 2005, as an opportunity for the sectors rather than a threat.
“The new regulations will drive the finance and insurance industry through major changes in the next 12 months,” he says.
“They will provide us with a chance to really change the way we go to market. As an industry we seem to be obsessed with viewing regulation as a threat but it is part and parcel of the industry today.”
FSA – get ready for January 15 -Nick Wright, director Autavis
Financial Services Authority procedures must be properly integrated with dealers’ existing sales processes to avoid finding themselves out of pocket or on the wrong side of the law, says Nick Wright, director of Autavis, the automotive training provider.
“Don’t let the FSA process be a deal prevention process,” he says. “Sales people need to be trained properly to introduce the right thing, at the right time and in the right way. The only way to ensure compliance is by using an electronic procedure.”
By applying to the FSA, dealers have committed themselves to standards that have wide implications for their businesses. There are human resources issues that need to be addressed, Standish adds.
“Businesses will need a clear disciplinary procedure to make sure employees are aware of how important compliance is,” he says. “The product mix should be rationalised. By reducing the number of products you reduce the training requirements. And you lower the risk of mis-selling.”
Financial know-how is key to performance - John Genge, Managing director Trend Tracker
John Genge, managing director of automotive consultancy Trend Tracker, urges dealer principals to form closer relationships with their accountants if they are to optimise the performance of their business.
“It’s incumbent on dealer principals to become more financially aware,” says Genge. “You must work together if you are to get an increase in efficiency and communication.”
One of the greatest weaknesses in many dealerships is the lack of financial training for DPs – an issue which will be compounded if communication between the dealer and accountant is limited, he adds.
Genge advises that DPs regularly set aside time to meet with their accountant in order to get an update on the state of the accounts, inform them of current marketing efforts and examine particular areas for improvement. Costings and works in progress should be reviewed, and they should set a formula for declaring profits and reconciliation.
He warns that deferring or spreading costs and under-reporting profits will “force a wedge” between the dealer and the accountant, who is ethically required to report the truth. Procedures should be made more transparent, and dealers should agree a consistent approach. In return, the accountant will assist in setting fair budgets, he says.
Control your existing IT expenses - Mark Cooper, Dragon 2000
The only good reason for buying a new computer system is because it best suits your needs, according to Mark Cooper, managing director of DMS supplier Dragon 2000. Low initial cost or because “senior management would recognise the brand” should not be the key considerations.
“The more a computer system achieves for you, the better the return on investment and if the goal is to maximise the return on investment, then high functionality is pretty important,” he says.
But Cooper adds there are still pitfalls: dealers need to update systems at the right time. Too early and they pay a price premium and risk system bugs from under-development. Too late and structured implementation is impossible.
“Take the middle way and bargain on three months to change over properly,” Cooper suggests. But how can retailers control their existing expenses for information technology?
“The average dealership has no dedicated IT specialist. In most dealerships, computers play such a big part on a daily basis that this is easily a full time role – you’d be surprised at how much this person can save by analysing data, sorting data entry problems, producing reports, training new users, ensuring accurate backups exist and preventing viruses,” says Cooper.
Find out what motivates your people - Chris Donkin, Managing partner, Europe Courland Automotive Practice
You can’t always motivate people, but you can create a climate in which most of your people will motivate themselves to help the business reach its objectives, says Chris Donkin, managing partner of Courland Automotive Practice.
“Survey after industry survey paints the same picture of what really motivates and drives your people, and surprisingly pay is not top of the list. Instead, teamwork and involvement along with recognition and respect are bigger factors,” he says.
In order to create a working pay plan Donkin believes automotive retailer management have a duty to find out what really motivates their staff and ask how they would like to be rewarded.
“There is no one size fits all solution,” he says. “You have to involve your people in setting their own objectives and share as much of the business background as you can. They will help you create a reward system that really works because it’s based on what really motivates them.”
Strategies for the right used car inventory - Keith Field, RL Polk UK
You don’t just have to rely on the instinct of your used car manager to get the stock level and mix of your used cars right, according to Keith Field, of RL Polk UK, the automotive intelligence company. There are more analy-tical techniques dealers can use.
He says retailers can analyse previous sales data to see where their customers are coming from and what they are buying, bearing in mind that people will travel different distances for different types of cars.
These areas can be broken down into sub-catchments on the basis of used car market patterns and demographics. Each area can then be summarised in terms of its used car market, the opportunity it represents, sources of competition and media coverage.
Used car sales managers can then prioritise the areas that present the best opportunity for their business and better direct their marketing. “Having done that, have faith in your results,” says Field. “Monitor the results and feed them back in to your business.”
It’s a system that works, he says. Polk turned around a Ford dealership in Liverpool by analysing the 31 million used car transactions that take place in the UK every quarter.
But he warns that even this strategy does not take the uncertainty out of every decision, Polk staff had to decide whether to rely on data from the previous quarter or the year previously. They opted for the data from the previous quarter and the results speak for themselves: turnover increased 452%, profit up 569% and units sold up 364%.