While I’ve mentioned my favorite story a time or two before, its worth repeating: During the Space Race, NASA spent more than a million dollars designing a pen for astronauts that can write in weightlessness, while the Ruskies simply took pencils.
The reason I’m so taken with this story is that it explains so much about life and, more importantly, our current economy. I call it the simple solution. What likely took our scientists and engineers months or even years to create probably took the Russians all of a few seconds to figure out: "Pens won’t write in space," one said. "Take pencils," came the reply.
The problem you are most likely facing is that your customer base is shrinking. What’s the simple solution for your situation? The spectacular guy goes out and hires a killer agency, spends his reserves to come up with a sure-fire marketing plan to create top-of-mind awareness, launches back-to-back ad campaigns featuring various sales and promotions, diverts his kid’s college funds to cover a deep product buy for lower costs and, in the end? He files bankruptcy. I don’t want this to be you.
The simple solution is to make your business not need customers. Huh? That’s right. Sure, you’ll always need some customers, that’s a given. But you can greatly reduce the need by lowering your costs. Yes, the decisions are hard, but in the end survival is key, and the wise old businessmen will tell you that those who survive these things come out stronger than they went in.
In my efforts to trim the bacon I have taken one company from a high of 26 employees to just four full-timers and a scattering of part-time workers. I’ve taken another from 122 down to just 57. These are huge reductions, but we’re still getting the job done. The worst part is that many of those people didn’t deserve to be cut.
Like you, I’ve spent hours upon hours looking at vendor contracts. Why are we paying so much for this? Should we clean our own windows? Why do we need such a big dumpster when the cheaper one will work? These are all things that are key to your business’s health, but when times are good, they easily slip through the cracks. And, if you’re not personally signing every check your dealership writes, you should be. Watch those expenses like a hawk! Get your parts manager, service manager and office supplies buyer to do the same. It’s amazing how many thousands of dollars you’ll save just by keeping your eye on the checkbook.
How did I cut out so many jobs? Well, it wasn’t easy, but the key is cross-training. Can your parts counter do with one less guy? What if your service writer pulls double duty? Should your service writer actually be your service manager? Are your bikes boldly tagged with prices to make shopping without sales assistance easy? Are all of your managers actually working managers or are they there solely to manage?
Nobody likes firing people, but when it comes down to saving the jobs of many over the few, sometimes this is a necessity. Furthermore, you’ll keep a company going that can produce more jobs again later. That, my friends, is the key.
There is very little else on your P&L that can kill you faster than inventory. I sometimes drive by those big motorhome dealers and wonder how they do it. Let’s face it, floorplan interest kills! Fortunately for us, we saw this thing coming early on and started reducing inventory. We’ve still had a hard time getting the numbers down, but we’ve been luckier than some. I drive by fellow dealers and see 50+ side-by-sides in their lot and just wonder, "How long before those actually move?"
Believe me, reducing inventory is hard. Many of the manufacturer reps will hit you with everything from "You won’t get incentives unless you order X number of units," to, "My grandma needs an operation, and if you don’t buy X number." Just remember, it’s your money. You can get machines from other dealers or even from the warehouse if you need them. As for the lost incentives, add up the total of all incentives you’d earn and then compare that to a $10,000 per month interest bill for six or 12 months. I bet you’ll realize that the incentives aren’t worth that much.
And finally, don’t order under pressure … ever! Take that order sheet that your DSM gives you and write the dollar value of each machine next to its model number on the left. Then, using your calculator, figure out the total for the number of units that you want to order on the right. When you look at bikes in terms of dollars spent, not numbers of units, I think you’ll find it a lot easier to stand up to the DSM.
It’s all part of the simple solution. Someday, the customers will return, and you can rebuild to the size needed to handle the flow of traffic then. The goal is to still have a door for them to walk through when they do stumble back into your store.
