PUTTING CAPITAL TO WORK FOR YOUR DEALERSHIP

BY JOE O’BRIEN, SVP SALES AND MARKETING, KINETIC ADVANTAGE

As a business owner, the most important questions you face each day are how to best utilize capital to operate and grow your dealership, and more importantly, whether you have sufficient working capital to achieve your growth objectives. The key difference between dealerships who experience little to no growth versus those whose growth surpasses that of their market is the way successful dealers put capital to work for them, as well as the different types of capital they utilize. A dealership’s ability to tap into additional sources of capital can provide them with the ability and flexibility to grow their business without restraints and restrictions of limited capital access. Smart dealerships will often use their own capital for smaller dollar items such as monthly expenses, benefits, etc., and then choose to utilize other sources of capital for larger dollar items.

What are some different types of capital that dealerships can tap into to propel growth? There are several options available to dealerships that provide varying levels of flexibility, including small business loans, revolving lines of credit, home equity loans, equipment leasing, floor plans, and private investors. These options, and a dealership’s ability to qualify for them, can vary depending on several factors, such as time in business, personal credit, business plan, home equity and commercial real estate equity, personal net worth, current balance sheet and P&L along with working capital. Revolving lines of credit, home and commercial equity loans, and equipment leasing are typically a more involved process that may include review of business plans, business financial performance, personal credit of dealership principals, working capital, property appraisals and current business creditors. Typically, equipment leases, small business loans and floorplan lines of credit will be the easiest capital for dealerships to be approved for.

Why is putting capital to work for your dealership so important? Simply stated, it can provide you additional flexibility to increase your dealership’s revenue and bottom line. How can it achieve this? Additional capital can allow you to: improve the in-person and digital appearance of your dealership, provide you with the ability to acquire more inventory, hire additional team members, add locations, increase advertising and marketing, invest in new technology to create efficiencies while improving your customer acquisition process, and be more aggressive in your pursuit of new business.

To capture prospective customers attention, dealers need to separate themselves from the competition. What are some things that dealers can do to attract more customers? Since you cannot sell what you don’t have, and customers are more likely to visit a full lot than one that is sparse, having a larger inventory is a great place to start. Updating the appearance of your dealership is another great idea. Perhaps a fresh coat of paint on the building or a newly paved lot? Maybe an updated showroom or office area to make it more appealing? What about adding additional locations to tap into other areas of your market?

Today’s customers are very savvy and perform more research online than ever before. A great way to attract new customers to your dealership is through creative advertising and marketing; however, it can be very costly. Dealers will often push advertising and marketing to the side because of costs. A successful marketing campaign requires a solid budget and, sometimes, outside assistance. Small dealerships often neglect this aspect of their business to use their budget in other areas of their business. However, marketing is an essential part of growth, and a successful marketing campaign can increase sales in a short amount of time. Whether your dealership needs a website, social media promotion or mailer campaigns, having access to more capital creates an opportunity for you to grow through marketing.

An important, and often challenging, way to increase productivity and function of a dealership is to update or acquire new equipment or technology. Updated equipment and technology can help streamline a dealership’s operations and create efficiencies. It can be difficult for some dealerships to acquire these assets, as new equipment and technology can be

A dealership’s ability to tap into additional sources of capital can provide them with the ability and flexibility to grow their business without restraints and restrictions of limited capital access.

very expensive. While a dealership may be profitable, it may not have the working capital at hand to spend on expensive equipment that can depreciate over time. This is an area where utilizing additional capital can be very beneficial.

Are there products or services that your dealership could sell to increase your bottom line? New products/services are a great way to increase interest and traffic for a dealership, especially if others in the area do not provide it. Perhaps you could create tire and wheel packages or add a service department. Would increasing products/service require an increase in staff, new equipment, or an expansion of the dealership location? Dealerships often realize there is a demand for an additional product/service that they could provide, but they aren’t willing to cut into current budgets to add it. Utilizing other sources of capital could be a great way to pursue these new opportunities. Have you thought about adding another location for your dealership or pursuing different niches within your market? Adding another location or venturing into a new niche market can be very costly for a dealer. The upfront costs alone often prevent dealers from expanding. With that said, the profitability of a dealership can increase substantially from such a move. Investing in expansion using your own capital will tie up your ability to use those funds to continue your existing growth. On the contrary, utilizing short-term financing can prevent a dealer from cutting into current costs and further increase their customer base.

Having the right inventory on hand is crucial for a dealership’s success; however, acquiring inventory is the single largest expense for a dealership. A dealer’s ability to maximize their inventory may only be limited by the capital they have on hand to procure it. Dealers need the ability to acquire units from multiple sources, including auctions, privateparties, trade-ins, consumer loan payoffs, and dealer-to-dealer purchases. Many dealers are not able to take advantage of all these available options due to limited or restricted capital. Additional capital would allow a dealer to maximize their inventory acquisition strategy and, in turn, produce more sales.

For profitable dealerships, adding debt can seem counter intuitive, but there are several ways in which expanding your capital resources can provide your dealership with opportunity to expand beyond your current growth plans. Utilizing additional capital resources can be the catalyst your dealership needs to increase overall profitability and propel larger long-term growth. Knowing the right capital to utilize and how to best deploy that capital is the key to putting capital to work for your dealership. n

n ADESA SEATTLE adesa.com/seattle Tuesday: Consignment, 9:30AM Alternate Tuesday: Specialty, 8:30AM Thursday Night: InOp Sale, 4:45PM

n ADESA PORTLAND adesa.com/portland Thursday: Consult website

n BIDBUY DEALER AUCTIONS (844) 505-1555 bidbuydealer.com Weekly Thursday Auctions 8:00AM to 3:00PM and previews Tuesday and Wednesdays 12:00PM to 3:00PM

n COPART copart.com Times vary: Consult website

n CTM UNLIMITED ctmunlimitedauction.com See website for auction dates and times.

n DAA NORTHWEST magauctions.com/daanw Weekly auctions: Thursdays, 9:00AM Monthly promotional event auctions: Wednesday, 2:00PM & Thursday, 9:00AM n DAA NORTHWEST (CONTINUED) Monthly MotorSports auctions:

Thursdays, 11:00AM (Lane 8) Monthly RV auctions: 11:00AM (Lane 8) Heavy Metal auctions, 8:30AM as scheduled (Lane 8) NOTE: MotorSports, RV and Heavy

Metal auction For dates, visit: daanwmotorsports.com

n DAA SEATTLE magauctions.com/daasea Friday: Dealer and Fleet/Lease, 9:00AM Alternate Friday: Heavy Metal,* 9:00AM (Lane 8) Monthly GSA Public Auctions, 1:00PM *Mechanically-challenged/cosmetically damaged/non-running inventory

n EHLI AUTO AUCTIONS ehliauctions.com Last weekend of every month

n IAA - INSURANCE AUTO AUCTIONS

SEATTLE

iaai.com See website for dates and times.

Download the WSIADA App!

Online shopping, e-news, alerts and more!

In a desire to be more accessible to dealers and maintain a footing in the ever expanding digital age, WSIADA has its own mobile app for dealerships to utilize features that the Association has available. The app is for members and nonmembers. It’s free and easily downloadable through your smartphone app store. Options that are available: • Dealer Alerts • Events Calendar • Online Store • Smart Dealer Auction Discounts • the Front Row Magazine • Dealer Auction Schedules • Sponsor Contact Information • and much much more

IT’S FREE from these app stores:

For More Information Contact: WASHINGTON STATE INDEPENDENT AUTO DEALERS ASSOCIATION 253-735-0267 | staff@wsiada.com | WSIADA.COM n IAA - INSURANCE AUTO AUCTIONS

SPOKANE

iaai.com (509) 891-2388 See website for dates and times.

n KAMAN kamanauctions.com Thursday, Noon

n MANHEIM PORTLAND manheim.com/locations/PAA/events Tuesday: Open Sale, 9:00AM

n MANHEIM SEATTLE manheim.com/locations/SSAA/events Monday: OVE Event Sales; Foothills

Toyota Mobile Sale, 1:00PM in

Burlington, WA Wednesday: General Sale Weekly, 9:00AM All sale dates and times are subject to change. Please verify with the Auction or manheim.com.

SAVE the DATE

CHELAN, WA June 13-16, 2022*

CAMPBELL’S RESORT AT LAKE CHELAN 104 W Woodin Avenue, 98816

WSIADA

2022 Convention

Breakfast, lunch and dinner are included each day with registration. The last full day features events at local businesses for entertainment, which may include golf tournaments, horse riding, and more! Families are welcome to join. Save the date and look for more details soon! *Date subject to change

Financial solutions that maximize success and minimize worry.

A P P L Y T O D A Y

www.kineticadvantage.com

Support Your Support Teams

BY ANTHONY GREENHALGH, DIRECTOR OF MARKETING AND SALES AT RAPID RECON

From the age of 16, I have been a guy who grew up in auto dealerships. I’ve held 11 positions over 29 years — 24 working for the same dealer and the last five for a reconditioning company. I’ve held many positions in a dealership, from office clerk to director. When I thought I had experienced it all, I was pleasantly surprised with new challenges every new day.

From my dealership experience and observations from my current seat, good processes and good people are the pinnacles of success.

I argue these two points here: • Dealerships everywhere miss the mark when it comes to their non-revenueproducing employees • When support teams ask for something, the importance of getting that “ask” handled quickly is much greater than you

Hit the Mark

I am no stranger to personnel expense. Fifty-two percent of my annual gross as a dealership manager went to personnel, making it the most expensive line on the financial statement.

I’m not here to preach about spending less on people or arguing you should save yourself into a bigger net profit. It’s more about efficiency and how dealerships everywhere miss the mark when ignoring or minimizing the value of non-revenueproducing employees to your dealership’s (and your) success.

When your support team asks for something it’s because they need it to complete a more significant task. Holding a payable is just a small part of cutting a check, finalizing a car deal, and getting a vehicle titled. You have a $250 bill on your desk, but it’s holding up $80,000. Plus, your dealer is still covering A successful business is built on a solid foundation: a foundation supported by non-revenue-producing personnel.

holding costs until that $80,000 is in your bank.

You have taken an hourly employee off their task. There’s only one of them (AP support), but they support 11 of you, including department heads. That means this holdup is also delaying 11 people because a fiveminute task isn’t getting done, which quickly turns into an hour of inefficiency. I was a department head before I realized I was the problem. Arrogance is expensive, and you can quote me on that. When your support team asks for something, the importance of getting it done quickly is much greater than you.

I talk efficiency every day, but it’s usually related to service, parts, body shop, and sales. Business office efficiency rarely comes up, but it’s just as vital, if not more so, from a financial standpoint as vehicle holding costs and contracts in transit. Inefficiency here adds up to big money when the dealer’s left holding the expense instead of the bank.

Equip for Efficiency

Let’s talk tools, specifically technology hardware. I visit many dealerships, and too often, the business office is stacked with hand-me-down computer equipment plagued with slow, inadequate processors and low memory. That gigantic copy, scan, and print machine you require team members to share is stuck in a corner room away from desks. Reread those last two sentences, and if you don’t cringe, I believe you’re comfortable with wasting money.

We, literally, have people paid by the minute carrying out tasks that take time. Rather than asking someone to work harder, think about what we can do as department heads to help them work smarter by eliminating things that slow them down. Making minor adjustments can easily justify a $500

investment in hardware and could keep you from having to add that extra headcount. A $10-per-hour-employee that is 10% more efficient will cover your $500 investment in 2.8 months.

Two ideas: • Cut down their number of trips around the office by installing a small all-in-one printer, copy, scan machine at each users’ desks. You can purchase these for around $100, and highyield aftermarket replacement toner cartridges are available from Amazon for $30. But remember, some brands have reconfigured their firmware to reject aftermarket cartridges. A multitask machine like described in use at each desk will reduce multiple trips and eliminate the unproductive “walk” and “copier talk” time between team members who huddle there. • Build, buy, or upgrade hardware in computers that exceed the minimum requirements to run your DMS. Have at least two monitors per workstation.

Our team members almost always run multiple tools in our business, i.e., CDK, vAuto, Rapid Recon, banking, desking tools, etc. The minimum hardware requirement will let them down the moment they do more than clock in.

Now that hardware is upgraded and other efficiency changes made, it’s wise to focus on the softer upgrades that inspire.

A Good RX

Respect support people.

I once brought an accounts team member to tears because I was frustrated that she didn’t understand me. I reacted poorly, and not that she wasn’t capable of understanding, but I wasn’t explaining it in a manner she could understand. I had way more information than she did, and I made her feel inferior when I told her, “it’s not that hard.” It wasn’t that hard for me because I had the knowledge and the right tools. I was expecting her to hit a baseball out of the park with a spaghetti noodle. The problem was me and how I was explaining it. Note: If all your support team is frustrating you, search the mirror for the solution.

Be kind.

Let them know you care. A thank you, an occasional treat, and responding positively to someone having a bad day goes a long way. Besides making me feel better because I wanted to be a better guy, subtle acts of kindness made my job easier. But I’m not saying you now have a hall pass to be disingenuous. Your team members aren’t naïve, and they’ll see right through your fake actions. Everyone in the dealership behaves and performs to the level set by management. A little attention and kindness paid to those rarely in the limelight will, as the great motivational writer and speaker Dale Carnegie taught generations, “how to win friends and influence people.”

A successful business is a built on a solid foundation supported by non-revenueproducing personnel. Give them the leadership, communications, efficiency tools, and respect they deserve. n

SUPERIOR SERVICE STARTS WITH SUPERIOR PARTNERS

EXCLUSIVE DISCOUNTS FOR WSIADA

AutoZone Parts & Services ALLDATA Software Solutions

©2021 AutoZone IP LLC. ALLDATA LLC. All rights reserved. AutoZone is a registered trademark of AutoZone Parts, Inc. ALLDATA, ALLDATA Repair, ALLDATA Diagnostics and ALLDATA Tech-Assist are registered trademarks of ALLDATA LLC. All other marks are the property of their respective holders.

QUALITY PARTS

Replacement Parts

Sell with confidence and reduce comebacks. Backed by our parts and labor guarantee with 48-hour reimbursement. Dedicated Services

We prioritize NIADA members’ needs and offer 30 minutes or less delivery on extended import and late model OE and OES parts. Special Member Pricing

Take advantage of bulk discounts to make the most out of every sale.

REPAIR INFORMATION

ALLDATA Repair®

Whether reconditioning for resale or servicing customers’ vehicles, save time and get the job done right with OE-accurate repair data. ALLDATA Diagnostics®

Your affordable scan tool solution, the only one with ALLDATA’s industry-leading repair information built-in. ALLDATA Tech-Assist®

Call our hotline staffed with ASE-Certified Master Techs. Available Monday through Saturday to help diagnose and repair tough problems.