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Regular checks can help keep a business healthy

In the latest of our series of insights into running an efficient dealership, Thurlby Motors managing director Chris Roberts looks further into business basics.

Last month I talked about the importance of customers’ first impressions and my own approach to sanity checking this when initially visiting businesses in crisis. 

This month I want to expand on this and look at some issues that regularly came up with underperforming dealers.

In my experience the main reason many businesses get into crisis situations is down to a lack of basic controls and regular health checks that are fundamental to maintaining a profitable operation. 

If you analyse the main symptoms inherent in a business with problems you often find that the signs were present long before the crisis occurred. 

The sad fact is that if these businesses had been doing regular checks then many of the situations could and would have been avoided. 

As an example of this, let’s take used vehicle profitability. 

It sounds like an old cliché when we hear about the oldest car in stock having a flat battery or tyre, but I can assure you that if I visited a dealer with a performance problem on used cars, checking out the oldest vehicle often highlighted an obvious management issue. Although maybe not a flat battery, the oldest car would always be the oldest for an obvious reason: dirty, dull or damaged paintwork, poorly presented trim, smelly interior, or sure enough, it wouldn’t start. 

You may believe that in your operation this couldn’t happen, but that’s what the majority of businesses in crisis told me.
Go and check your oldest used car today and see what opinion you would form if you were a potential customer. It may well be OK, but this kind of check is an essential control. 

Another common issue when discussing used car stock with general managers and owners is the misconception many have about the ability to retail out of problem vehicles.
Many times when analysing stock it is apparent that a significant percentage of overage is not going to sell regardless of presentation. 

When asked as to why someone still stocked a 100 day plus unit, I can’t tell you how many times I’ve had a reply along the lines of “well we did pay a little too much for that, but it’s a good retail vehicle”.

When overage starts to creep up, a business effectively has a lower proportion of moving stock to turn, but still has all the cash tied up. 

The major groups and many good independents have a strict overage policy. This is for a good reason and although many operators don’t like to take the big loss by trading an overage vehicle, it is absolutely the best policy as it frees up cash to buy stock that will sell. 

Having an ageing policy and carrying out regular checks on vehicles approaching the cut off point is simply good practice.
Of all the businesses I dealt with which had serious issues, the majority were based around used car performance and within this, the failures were generally always basic and could have been avoided.

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