As we head into a period of reduced demand, poor supply and increased costs it is imperative that businesses assess and challenge every aspect of their performance and financial management to ensure sustainability and also a strong future.

During the last 24 months in the Automotive Industry, margins, profitability and cash generation has been exceptional. However, this is clearly beginning to change, and having experienced several downturns and recessions in the past, the one thing to avoid, having come out of such a golden period, is complacency.

Too often, businesses face the brutal truths of waning cash flow and lack of direct measures when it is just too late to stop the rot. So, the key is to address your underlying issues today and prepare robust, objective driven plans to ensure you’re best placed for a sustainable future.

Are you running an efficient business? As a starting point, make sure the basics are embedded and well managed. Are the correct processes and measures in place for success? For example, speed to market measurement, strong lead management and contact strategy, renewals tracked effectively, and what about test drive conversion? In aftersales, is the service contact and booking effective? Do you monitor workshop loading closely and ensure prompt invoicing (including Warranty). Is the Service dairy being managed for sales opportunities?

Whilst the above may seem too basic to question, I would encourage everyone to go and stress test your business, because whilst you think the above will be definitely happening….is it really? Go and see for yourself. It is often the only way to know. Back to basics is a foundation for success.

Have you recently checked your product margins? Often, the lack of comparative information means that smaller SME businesses have no real data point as to what they should be paying for things like paint and upholstery, tyre and alloy protection, etc. It would be worth revalidating both what you pay and charge for these products. Even a £10 gain per product across a calendar year will be massive.

Likewise marginal gains on part exchange vehicles can become a massive contributor if applied consistently. Ensure a robust appraisal takes place and then if you do move the offer price, do it by a smaller increments. Imagine just a £25 gain on every used unit each year? It would be game changing for your bottom line.

On the flipside of generating additional revenue, how do you deal with the increasing costs of running your business? Utilities, payroll, property costs, interest etc. Some are clearly unavoidable, but others can be mitigated with some creative thinking and actions.

‘Cash is King’ goes the saying, and it certainly will be in 2023 and beyond, so ensure you have robust balance sheet controls. Remaining within agreed stock levels, controlling obsolescence, dealing with overage cars and parts, and critically, managing your debtors effectively will be some of the key focus points for your attention. These will all help maintain a stronger cash balance and give you a longer runway through the headwinds. In addition, as stocking interest climbs, keen stock management will become even more essential.

An annual review of supplier contracts should be a must and measurement of ROI for each one essential. Make decisions on what can be reduced, re-negotiated or cancelled. Ask yourself the question; do they really add value?

It also goes without saying, avoid waste. Again, one for you to check, but are the following in effect:

• Coffee machines turned off at night
• Heating set a couple of degrees lower
• Doors and windows closed when the heating is running
• Compressors running at a lower pressure (other than bodyshop)
• Monitors turned off when not in use
• Lighting dimmed or off at night
• Reduced forecourt lighting out of hours

As a thought starter, I know one business who simply cured all the air leaks in their plant, reduced the compressor levels by two bar and saved over £250,000 per annum in one location. How many leaking airlines and hose pipes do you have? Worth a check.

Again, it sounds an obvious one, but printer costs can be excessive if not controlled. Are your printer’s defaults set to draft and black and white. If not, it’s costing you needless money. Clearly you will need some colour printing, but only allow access on a few machines.

The above are just some examples of best practice and there are clearly hundreds more. Thinking about marginal gains will stand you in good stead for not only now, but also a bright future. Maybe ask your team for suggestions; guaranteed you will generate some of your best savings’ ideas that way.

Try to think outside the box and save those wasted pennies. If you do, as the saying goes, the pounds will take care of themselves.

Author: Chris Roberts is an automotive retail sector consultant and a former AM100 car retail group director