If your automotive business is like most, it is very profitable at the present time. Reflecting on your current success, you may be under the impression that your current way of operating is the only possible way – at least for the moment. But as great as the current business environment may be, things can change when you least expect it.
What can you do about it? Plenty! Even during these days of tight inventories and demand-driven pricing, it can be very beneficial to take a sober and logical look at the state of your dealership. Doing this can help you to understand how to generate improvements across every area of your business. Some of these can be accomplished in the short run, while others may take a longer period of time to achieve. Let’s start with some that can be done relatively quickly:
Achieving greater efficiency
Getting more bang for your buck is always a good strategy. Your marketing efforts are an excellent place to start. The COVID pandemic has greatly increased consumers’ migration online for more and more of the buying process. Online used car sellers like Vroom and Carvana are proof of this. By using this trend to your advantage, you can improve your dealership’s bottom line, which will in turn improve the value of your business.
Here are some tips for getting better results from your online marketing and sales efforts:
- Make your inventory searchable in every possible way
- Add chatbots to your site so that you can interact with customers 24/7
- Offer test drive appointments through your website
- Allow customers to spec and order vehicles online
- Provide online financing and F&I services for buyers who prefer it
- Offer home delivery of purchased vehicles
- Provide online scheduling and payment services for service appointments
- Set up your “Google My Business” page for faster search conversions
- Add Google PPC (Pay Per Click) ads to build traffic to your site faster
- Establish a presence on social media and interact with your followers
- Use social media ads to target your desired demographics
- Showcase your inventory and sales staff through website, social media, and YouTube videos
- Manage your online reputation across all review sites
- Use targeted email campaigns to generate sales leads, increase service volume, and acquire used cars
- Closely track your results across all online channels so that you can do more of what works and eliminate what doesn’t
Improving employee satisfaction and morale
In the eyes of a prospective buyer, the quality and effectiveness of your staff is a key determinant of what your dealership is ultimately worth. As the people who will be responsible for providing results after the transaction has been completed, a buyer is looking for team members who are fully trained, highly skilled, and can perform at a very high level from the moment that the new owner steps in.
Do your employees possess these desirable qualities? Do you reward excellence and attract the best and the brightest in your area? Or are you beset with high turnover and dissatisfied workers? Developing a winning culture with a fully-engaged team can add a huge amount to a potential buyer’s offer. It’s definitely worth it. Here are some ways to achieve this desirable outcome:
- Competitive compensation and benefits to attract the best candidates
- A thorough onboarding of new staff, including a knowledge of the company’s mission and its core values
- Regular training in collaboration, cooperation, problem-solving, and communication
- Educate your staff (all of them) in all aspects of customer service
- Recognize the contributions and successes of your team members
- Celebrate your employees’ milestones, such as birthdays and work anniversaries
- Cultivate a healthy work-life balance for everyone
Making the investment in assuring that your staff and management are top-quality and motivated for success puts a buyer at ease, demonstrating that this area of your business is sound and adds greatly to its value.
Boosting customer happiness
Once you have their business and the sale is complete, does it really matter whether or not your customers are satisfied? You bet it does! One of the first items of due diligence that a potential buyer will perform is to check your dealership’s CSI and SSI scores. These indexes of customer satisfaction will let that buyer know how well you are taking care of your customers, compared to other possible acquisition targets they may be considering. High scores will raise your store’s value, while low scores will depress it.
Here are some of the benefits of having lots of happy, satisfied customers:
- High CSI and SSI scores, with all of the benefits that they bring
- Great customer feedback on review sites
- Positive word-of-mouth to customers’ friends and relatives
- Repeat sales and service business that goes straight to your bottom line
Happy customers provide extra value when the time comes to sell. Try these techniques for generating and sustaining high levels of happiness among your customers:
- Sales staff must understand a customer’s needs to be able to satisfy them
- Have respect for the customer’s time – don’t waste it
- Keep the F&I process short and pleasant
- Demonstrate all in-car technology and features thoroughly at the time of delivery; well-informed drivers are the happiest
- Fix every car that is in for service or repairs correctly – the first time
- Perform a walk-around on each car to be serviced to identify all possible problems
- Explain to service customers on why a particular service is needed in a digestible way; people who know the value they are getting are less likely to be dissatisfied with service costs
- Review all repairs completed when customer picks up their vehicle
- Empower your staff to deal with all complaints in the moment
- Keep customers in the loop and communicate using their preferred method
- Add incentives to reward staff for outstanding customer service and improved CSI scores
Now let’s move on to those changes that may take a longer time frame to accomplish, but are no less worthy in terms of how much they can increase the value of your dealership:
Reaching higher growth potential
In automotive retailing, the usual barometers for growth are the number of units sold and the profit per vehicle sold. When executed properly, this leads to higher profits across the enterprise – in sales, in F&I, in service, and in parts. Here are some strategies for growing your dealership’s sales and service business, increasing its value as a result:
Improve the quality and the quantity of your sales leads: Without a steady flow of qualified leads, your sales will be unable to grow. Even in a production-restrained environment, you still need customers who are ready to buy. Try separating the prospecting process from the selling process by having your BDC manage website-generated leads, both outbound and inbound, and then hand them off to your sales staff for closing. Enable live chat during business hours so customers can speak with a live person on site to have their questions answered. Make sure that your site is easy to access from all smartphones. Add high-quality blog content to your site that sets your dealership up as an expert in the field. This may include a well-written evergreen article on the history of your dealership and the ways in which you give back to the community, so that potential customers can get to know you and may be more receptive towards you. Place positive customer reviews and testimonials on your website and social media pages to generate leads. And above all, follow up leads quickly – if you snooze, you lose!
Make strategic upgrades in your service departments to draw in better business on that side, particularly before winter arrives: If your dealership is located in a locale that experiences cold winter weather, make the most of your status as the franchised representative of your vehicle brands. Market your service department as the expert on preparing your brands (as well as any other related ones) for the rigors of winter. This will build trust and repeat business with your customers. Upgrade your service department’s appearance to be more consumer-friendly and add displays of weather-related parts like snow tires, chains, winter-rated wiper blades, and low-temperature washer fluid, so that your service staff can upsell these items when vehicles arrive for their pre-winter service.
Look to your customers for your future used car inventory: It’s officially well-known that the generic used car market no longer works as a reliable source of acceptably-priced used cars. Prices at auction are certainly out of control. But by reaching out to your customers, specifically those who have a lease that ends within several months, you can agree to acquire their vehicles before their leases end. This works best if you have an appropriate vehicle to put them into for their next lease or purchase. You can extend this process to non-customers in your area by using the resources of an outside data vendor. It’s a win-win – you get quality off-lease vehicles to sell and you can also chalk up a new-car sale!
Get serious about the coming electric vehicle (EV) transition and become an EV authority: It’s here, it’s for real, and it’s going to happen – with or without your dealership’s participation. While Tesla got the ball rolling, consumer interest is growing across the country as more and more EV models are delivered to franchised dealers nationwide. Serious buyers who are considering the purchase of your store are likely to have embraced the EV future and will want to see that you are too. What have you done to prepare for it?
Granted, the move to EVs will advance at varying speeds, depending on your dealership’s location. This should not stop you from becoming your area’s EV expert. Stock one or more EV demonstrator vehicles and offer test drives to all your customers. Install a Level 2 charger and make it accessible to current EV owners. Train your staff in all things EV so that they can explain the benefits and spread the word in your community. Highlight your EV expertise on your website and social media. Doing all this will build your reputation as the dealer who is best suited to sell local residents their first EVs!
Generating more sustainable profits
To increase profits on a day-in and day-out basis, you can take a two-pronged approach:
- Reduce your overhead
- Increase your prices
This plan may sound simple, but it requires a lot of planning and plenty of common sense to pull it off effectively.
Reducing your overhead: The key here is to end up with the same or better results while spending less overall. A series of smaller cuts across the board is usually easier to make than huge reductions in a few areas. This can be done by terminating the least productive employees, cutting excess staffing and overtime across every department, and cutting back on general advertising like in newspapers and on the radio. You can also shop for better deals on insurance, legal, and accounting services. Seek out lower-cost options for uniforms, cleaning services, and office supplies. Reduce your energy usage by upgrading the efficiency of your lighting, heating, and cooling systems. Find a lower-priced credit card processor. And so on. All of these savings will drop directly to your bottom line!
Increasing your prices: This can be a direct route to immediate profitability – if you do it right. The key is to target your price increases to areas where they are less likely to call attention to themselves. In other words, stay away from raising prices on routine items like oil changes, which are more likely to be noticed by your customers. Instead, focus your price bumps on less commonly-known categories such as dealer-installed accessories, parts that are not used in normal servicing, F&I products, complex repairs, manufacturer-recommended service procedures, dent removal, and detailing services. If you have been doing a good job of satisfying your customers, moderate increases over time should not cause you any problems. Keep in mind that this is a process that should be revisited periodically, particularly in an inflationary environment.
Avoid the hazards of maximizing short-term profits!
It’s a fact: in the current tight-inventory environment, every piece of inventory sells right away and for more than MSRP. Unfortunately, the temptation to maximize short-term profits is dangerous. It is highly likely to backfire on you sooner or later.
Packing cars with useless options and adding absurd ADMs are sure ways to alienate your customers, while also generating massive quantities of ill will and bad reviews. Most of these customers who feel they have been taken advantage of will never be back, except to badmouth you online – and deservedly so.
Successful dealers understand that playing the long game means having large quantities of satisfied customers who will return for their second, third, and all succeeding vehicles – as well as for their ongoing service needs. Be sure that your sales staff understands this, by incentivizing them to use tactics that don’t depend on the complacency produced by inventory shortages.
These shortages will not last forever, so why not prepare your staff for a return to normal conditions, when selling a vehicle will take a lot more effort than simply filling out an order form? Encouraging them to pursue every possible sale (within reasonable limits) is a low-cost investment in the future which could pay off in more sales in the present!
DCG Acquisitions is focused on maximizing your dealership’s value
Automotive retailing is a complex business, but when you can put all of these incremental improvements together, they will contribute to a permanently higher value for your store in the eyes of a buyer. This higher multiple will be completely justified by the efforts you have taken to elevate your rooftop’s performance to the next level.
And when the time comes to sell your dealership, DCG will help you to successfully navigate the sale of your dealership to the best available buyer. DCG is one of the country’s leading, and fastest-growing, automotive M&A firms. We pride ourselves on our network of connections — with automotive manufacturers, financial lenders, dealership buyers and sellers, and more — that help us create a qualified, competitive environment on both sides of the sale. DCG is here to help you create and enhance your legacy.
Contact DCG Acquisitions to speak directly with an Automotive M&A specialist and learn how our expertise can help you get the most out of your next dealership purchase or sale.