How Full Is Your Tank?

Preparedness is paramount to survival in a tough market.

I was driving down the road in my pickup when a song came on the radio which required elevated volume to take my mind off of the declining ATV market and bring the head-banging bliss that only loud AC/DC can achieve. Unfortunately, another great song followed that and another after that (damn XM with no commercial breaks). Before long, I was unable to hear the annoying "bong-bong" of the low-fuel warning. I guess I failed to note the LEDs flashing "low fuel" as well.

The truck sputtered once, effectively pulling me from my rockin’ out hypnosis, and I fortunately pulled off of an exit with a Mobil station. I made it to the pumps with my cheeks so puckered, that I imagine I’ll have a pinch mark in the seat for quite some time. It was then, as I was wiping sweat from my brow and filling the tank that I remembered all of the times my father had gotten into my vehicle and said, "Why don’t you drive with the tank full? It burns out of the top half just as well as the bottom."

Did You Know?

According to Motorcycle Industry Council figures, new unit sales were down 8.1% through June of 2007.

Thinking about that comment made me realize that he was right. It does burn from the top as well as the bottom and, if it’s at the top, you’ll be prepared for whatever situation comes your way, right? Damn, Dad is a smart guy after all.

Think about the situation that we all faced in 2007: the level of business dropped, the level of inventory was high, and the level of customers coming through the door was low. Many of us had been riding high from elevated sales in 2006 and life was good when we placed orders for 2007 product. Many of us thought, "Ah, what the hell, I’ll go for the top incentive tiers." We ordered big, essentially draining the fuel tank in the process.

When things began to fall apart, what did we do? Well, many dealers thought that things would bounce back. Maybe you renegotiated the trash services contract, changed the long-distance carrier and cut a part-time employee. You tightened your belt and ignored that growing pile of crates out back. Perhaps you tried to be proactive and run a sale, some might have even called other dealers to see if they needed anything. Ultimately those efforts are wonderful, but they are too little, too late. At that point, the tank fell below a quarter.

Enter Summer 2007: Finally the OEMs began to admit that things were tough. Granted, there was no help with flooring, (unless you agreed to order even more of the product that wasn’t selling), but all of the reps sounded concerned and said they wanted to help. They came to you with contracts to participate in a group advertising campaign that, after the 70/30 co-op reimbursement, would really only cost you $5,000. (Of course, casting bait when the fish aren’t biting only wastes bait, another Dad-ism). You spent the 5K, along with many other 5Ks in the hopes that people would rush through the door and shrink the pile. Unfortunately, the tank went to an eighth.

By fall, many of us found our fingers aching from being crossed so hard, wishing that people would suddenly burst through the doors. The inventory pile, while smaller than it was, still cast a shadow of doubt across the lot, and the door counter showed little more than employee lunch breaks and the occasional traveler looking for a restroom. Staffing was at an all-time low, parenthesis had begun to form around the bottom of the P&L, and the tank fell even emptier.

Some of our comrades have fallen and others still might. The point, however, is not the situation itself, but the lesson we take from it. If all dealers had gone into this with their tanks full, we’d have been better prepared for the surprising market upset. The initial 2007 orders could have been lower, staffing could have been smaller and overhead costs could have been checked. Fortunately, most of us will pull through this downturn — a little beat up, a little scarred, but hopefully much better for having gone through it. The truth is that you can’t always be the best at the game, but you never want to lose the same way twice. For that, you need to learn from your mistakes and become stronger for having made them.

My father says that a business comes out of recession stronger than it went in. Granted, the economy has not been recessed, but our market has, and the goal is to learn what things to improve upon for the future. Step back and look at your dealership: Can you still make money selling 50 bikes a month as opposed to 300? Does your inventory require you to sell the higher number in order to stay afloat? Are you turning inventory in 90 or 120 days? Are you paying a lot of extra people to stand around? Consider your answers carefully.

Gearing your dealership to post earnings at the lowest stage of the market is the key to success in any business. From here on out, make yourself a pledge to reduce your expectations. Plan to sell 50 bikes, learn to make money in that capacity and then increase your overhead only by the minimal amount required and only when the need arises. Respond to the numbers and focus your attention on what each dollar spent will equate to in sales. Remember, there should always be a return on investment in business, no matter what that investment is. Following this path means that you’ll always be prepared for the unexpected, and you’ll always be driving with your tank full … just in case.

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