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How car dealers can keep their costs on track in 2015

Marketing

Phil Gerrard, head of European leasing and automotive operational advisory for Grant Thornton, says large marketing savings can be made if dealers implement a user-friendly CRM system that allows customers and prospects to be cross-referenced with sister dealerships within a multi-franchise group. He described the inability to do so as “tantamount to committing business suicide”.

“Prospects will invariably physically visit more than one site and dealers should be able to know that they have been there before and respond accordingly to drastically improve chances of converting them before the competition, saving a fortune in sales and marketing costs,” said Gerrard.

“The same applies to a dealer’s online presence at dealership, franchise and group level.”

 

The agile workforce

The Agile Future Forum, which helps British employers adapt to current and future demands of the economy, has cited a CBI survey that revealed 97% of UK businesses believe having an agile workforce is key to economic growth. However, most do not implement agile working practices. The traditional 9-to-5, a commute to the workplace, and retirement at 60 prevails.  

In automotive retail, businesses must adapt to follow the consumers’ desires for service at their convenience, such as through flexible working. But dealers must beware that it may mean increasing costs.  

At Staffordshire-based Knights Group (profiled in AM’s September issue), business costs went up after it expanded its opening hours and introduced a service department night shift last year. It also needed to increase headcount.

However, there are ways to limit costs even when making your business more flexible. For example, Knights technicians used to work Saturdays as overtime, but these are now worked with a day off in lieu.

 

Working capital

Finally, working capital improvements, in particular, stock turn, translate directly into higher profits.

“Working capital is frequently overlooked as a driver of profitability,” said Gerrard.

“The key working capital metric for franchised dealerships is stock turn; clearly, the quicker it is, the more units will be sold, generating increased revenue.

“In addition, the faster the stock is converted into cash, the lower the dependency on bank debt and stock financing – thereby minimising the associated interest costs and further improving profits.”

Gerrard’s three-pronged approach to working capital applies equally to all cost-saving measures: firstly benchmark, internally and externally, while identifying, understanding and sharing best practice; secondly, beware of creating more work in the pursuit of improvements; and thirdly, measure and incentivise.

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