Thinning the Heard

What ideas can you steal from existing industries?

Dealers across the country are disappearing faster than Jelly donuts at a weight watchers meeting, and this window of time between "back to school" and the "holiday shopping season" will likely yield a bigger fall-out of the powersports dealer network than any 90-day period of my adult lifetime, and perhaps the biggest ever. Do I have scientific data to support my hypothesis? No, just a hunch based on my decade of experiences wrestling with the extremely finicky and particularly tricky game of dealership cash flow management.

In case you’ve never had the pleasure of grappling with a dealership checkbook, I’ll provide you with some quick cliff notes: First, let’s look at the good months of spring and summer. Even if your profit and loss statement says you’re in the black, it doesn’t mean your cash position is automatically positive — weird, huh? Depending on how much P&A you’ve ordered and paid for, trade-ins taken (which usually represent cash), ROs completed and other accounts receivable (too many to mention here, of course), your hard cash could still be lacking (even if you’ve had a profitable month). Oh, and I can’t forget the OEM holdback money with which they are generously holding on to anywhere from 3 percent to 10 percent of your unit sales dollars to be re-reimbursed to you quarterly; just another little factor in this high-stakes and tricky game. So, in other words, the profit on your P&L isn’t always in real cash; in many cases it represents inventory and other assets which may or may not be quickly recovered. You know, kind of like the equity you used to have in your home.

Now, the above scenario was given during a profitable month, so imagine the effects on the checkbook after a month in the red. Better yet, let’s look at three months of loss, back to back to back, the kinds which many dealers experience from September to November. Then, mix in a spring and summer selling season that yields poor results, and it creates a catastrophic recipe for disaster. In fact, recently, many dealers were dipping into their personal savings to keep their stores afloat during what was supposed to be the busy months. Another challenge unique to this recession is the lack of available lending for business owners. It may have cost you 18 percent, but in years past, if you had good credit, you could get a line of credit to help you through the slow season. However, this luxury is no longer available. Attempting to have a positive attitude, ignoring the above facts is kind of like trying to ignore a 2,600-pound elephant standing on your foot.

But, instead of dwelling on the past and your inability to easily secure credit, I encourage you to think strategically about how to navigate these uncharted waters. And assuming you’re still operating, to think of what opportunities you’ll have, after this massive thinning of the herd. You’ll have far less competition, more brands to choose from, and maybe even the chance to gain yourself an additional location at an affordable price.

Here are few more things to think about: The fast food industry got the idea for drive-thrus from the banking industry. The microwave in your kitchen wasn’t intended to go there; its original manufacturer, Litton, built it exclusively for restaurants. The idea for separating F&I profits came from the automotive industry.

Often, inspiration for profitable change comes from outside-the-box thinking or from borrowing good ideas. I once learned two simple tips from a dealer in my 20-group that doubled my front-end gross profit almost instantly! I recently worked with a dealer who attended our marketing boot camp and proceeded to go back to the dealership and implement a $1,500 campaign that yielded over $20,000 in gross profit within 30 days. Often, profitable change comes from simply implementing the proven best practices of your peers.

So, what percentage of the current fallout do you think will come from dealers active in a 20-group or other mastermind group? My guess is very few. Successful dealer principals are willing to set ego aside and consider ideas of inspiration that come from outside the industry; they’re willing to embrace and implement proven best practices from within the powersports dealer network.

Conversely, the dealers who stubbornly and foolishly do not accept the advice of their peers, and who refuse to pay for training they desperately need, will likely not be around much longer. These are the same guys who love to say, "That won’t work here, my dealership and market is different." I say BS.

Just like learning to go fast on a motorcycle, the best way to learn is to watch the pros and model what they do. By committing to network with your peers who are experiencing similar challenges as you, you’ll be making an invaluable investment in your business. Tighten your belt, watch your cash, and I hope I’ll see you on the other side.

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