What's different about this month than any other?
We know with a degree of certainty based on historical evidence that actions we take or choose not to take in October will affect our business not only for the balance of the year, but also the first quarter of the next year.
Generally speaking, October is a stronger month for vehicle sales than is November.
This presents an opportunity for us to make that extra push to bring our new- and used-vehicle inventories in line.
This is especially true as it relates to our used inventory. Take a few minutes and complete the following exercise:
First, look at your past three years' used-vehicle sales volumes during the months of October, November and December.
Now, calculate your unit and dollar days' supply at the end of each of those months.
As a memo column, note your wholesale performance in terms of profit or loss for those three months, and add the months of January and February for the following year.
My point is this: If you have a strict aging policy, you have some indication of the month that contributed to a month's wholesale gain or loss.
For example, if my internal policy is to not allow a vehicle to remain in inventory more than 90 days, then some or many of the vehicles I wholesale in December were actually valued in September, (which represent two completely different seasonal markets).
By noting our recent historical wholesale performance, we have the chance to prevent the reoccurrence of a bad situation this year. It is a matter of reacting more quickly.
If we've made a mistake in the appraisal of a vehicle, let's either put the vehicle on the money to give it a chance at retail, or wholesale it sooner than later.
Waiting 60 to 90 days to recognize a mistake will only become more painful during a month with decreased sales volume.
October also is a good time to review our expense structure to identify those nonessential expenses that have a way of sneaking into our dealerships.
Look at each expense we consider necessary and try to find a way to reduce each one by, say, 5%.
Remember and act on my often-cited quote: “Each dollar of excess expense is a dollar of net-profit lost.”
Now is the time to establish a preferred vendor list for your operation if one does not currently exist. By concentrating your purchases with fewer vendors, you should be able to command a more competitive price.
Your management team has to support this list of suppliers and avoid the tendency to occasionally make purchases from another source.
If you currently have a preferred vendor list, this is the month to send your annual letter advising both current and potential vendors you are soliciting bids for their services for 2008.
If they are currently a vendor, you might add a sentence such as, “Based on the good service your company has provided, we would like to continue our business relationship, but that decision will be based in part on your competitive price position in the marketplace.”
If you would like a copy of a sample letter, please contact me and I will provide one.
Last, but not least, look at your personnel, both from a productivity standpoint and an expense basis. If personnel expenses are too high, are they the result of low gross or too many people? Sometimes it is tough to make personnel decisions as we approach the holiday season, even if those decisions are necessary.
By seriously looking at the components of your business, you can identify the actions needed to ensure a strong finish not only to 2007, but for the start of 2008 as well. You have to put yourself in position to win.
Tony Noland is the president and CEO of NCM Associates, Inc. He is at [email protected].
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