Fourth Quarter, Clock's Ticking

If we were heading into a football game's fourth quarter, we would look at the scoreboard and then huddle to discuss any last-minute adjustments needed to win. So it is with dealers. At the end of the year's last quarter, we want to look back and know we had a solid game plan executed well. The parallels apply both offensively and defensively. Our offensive plan would include such special events as

If we were heading into a football game's fourth quarter, we would look at the scoreboard and then huddle to discuss any last-minute adjustments needed to win.

So it is with dealers. At the end of the year's last quarter, we want to look back and know we had a solid game plan executed well.

The parallels apply both offensively and defensively.

Our offensive plan would include such special events as Thanksgiving and Christmas weekend inventory reduction sales.

For the service department, there are opportunities to hold a weekend service clinic featuring specials related to winter. From personal experience, a well-planned service clinic, where all departments are involved, normally results in incremental vehicle sales.

Our defensive plan includes addressing routine fourth-quarter management items such as:

  • Doing a physical parts inventory.

  • Taking a hard look at new- and used-vehicle inventories.

  • Reviewing personnel productivity and staffing requirements.

  • Examining the status of our receivables, our total fixed-operation overheads and our other accounts.

  • Checking internal-control processes.

Some dealers allow their parts manager to make all the arrangements regarding their annual inventory. I would recommend you outsource this and have a member of your CPA firm observe the process.

By taking a hard look at your new- and used-car inventories, I'm speaking of a few specific items.

For new-vehicle inventory, first identify any vehicles 180 days old or older. Pull them into a specific area.

Inspect each to ensure it will start, isn't missing equipment, has a window sticker with an accurate description and doesn't have lot damage. Then physically mark these vehicles so the sales staff can easily identify them.

From a marketing standpoint, “price then/price now” stickers on the vehicles often help the sale, as do specifically timed incentives for your sales force.

During your weekly management meetings, have your new-vehicle managers report on the progress they have made in enhancing the sale of these vehicles.

Last, but certainly not least, identify potential reasons these vehicles have been allowed to stay this long on the lot. Install processes to help control this issue in the future.

With used vehicles, not only are you looking at your inventory and any current aging issues, you need to take a look at your complete inventory to ensure the vehicles meet your desired pricing and physical-inventory profile.

As a reference, review your sales, both volumes and types of vehicles sold, during the fourth quarter of 2010.

I realize this year has been different for the used-vehicle industry, with high demands and low supplies. Regardless, we still must manage inventory opposed to just taking trade-ins or buying vehicles wholesale.

Some quick running plays:

Total fixed-operation overhead. This is total dealership expenses excluding variable. By individual expense, compare year-to-date percentage of gross to the percentage of gross each expense was last year. A cursory review will quickly identify any areas that require a more in-depth analysis.

Prepaid Expenses: Few items should be in these accounts. For your protection, personally review the balances and ensure each entry is properly accounted for. I hear horror stories from dealers who have not done that.

Internal Controls: Review your current processes with your comptroller and then your CPA. Once you are comfortable that all processes are being properly followed, review in detail at the monthly management meeting.

We are in the fourth quarter. What you do and how you execute plays will determine the final score on Dec 31.

Good selling!

Veteran dealership consultant Tony Noland is at [email protected].