What I Learned the Hard Way

With the exception of small stores, dealerships operate with great specialization of tasks. Profitable operators respect the significant difference in skills between those who walk with customers and those who calculate deals, those who keep the books and those who analyze them. Similarly, complexity in dealership cash flows and the sophistication required to calculate dealership profitability demand

With the exception of small stores, dealerships operate with great specialization of tasks.

Profitable operators respect the significant difference in skills between those who walk with customers and those who calculate deals, those who keep the books and those who analyze them.

Similarly, complexity in dealership cash flows and the sophistication required to calculate dealership profitability demand nothing short of experts and professionals for oversight and accuracy.

For these reasons, dealering has been transformed into a blur of outsourced expert advisors.

The idea that dealers alone control their operations died years ago when they were forced to turn over their advertising to co-op; their service centers to extended warranty companies; and their showrooms to special-finance programs and factory events.

A dealer can't order a car today without computer access and tedious manufacturer restrictions. Today's dealerships run on an amalgam of retail processes designed by engineers.

Given dealers' obvious dependence on outsiders, the estimated 700 dealerships that are closing this year and the thousands more bleeding suggest something very wrong about the way our auditors and advisors have attended to their duties.

The current plague on our economy is not simply a matter of a greedy gang of fat-cat dealers manipulating the system and hoodwinking the public. The culprits in our industry are the hoards of auditors and analysts pretending professionalism and skulking beneath the radar of responsibility.

This is not a jab at legitimate consultants and CPAs. Hands-on professionals are critical to the success of a dealership.

However the advisor who poses as an expert, but is not, is a cancer to his client. Trust only experts who stand behind their own experience. Pretenders approach their work with escape routes through which they intend to crawl away from the stench of failed advice.

Those who take on the role of business advisor, and look the other way, doom their clients. The offer of a life saver by a trusted advisor, especially by the guy licensed to prepare your books and sign tax returns, is very compelling and therefore treacherous.

Be wary of the profound conflict of interest of consultant CPAs; they are incentivized to overlook ineffective back-office controls and to accept questionable sales numbers. Their interest in generating hours runs against to their responsibility to challenge your staff.

A first-rate accountant is the only one you can count on to decipher your cash position. By casting him as your business advisor, you enable a level of greed that puts your interests and his at odds.

Worse, an unscrupulous accountant is in a position to give your entire office a reason to overlook waste while he's churning hundreds of easy hours. His obvious failure to study your numbers appears to your staff as an endorsement of looseness.

Only the accountant expert who is tied to the consequence of his work will demand that you install appropriate controls. You need your advisors to be held to that standard of care. Here are a few lessons I've learned the hard way:

  1. Match your bills to the engagement documents of your experts. They know what they've billed for. See that they stand behind their work and document their conclusions. Start gathering their contracts and review them with a magnifying glass.
  2. Keep good records of your advisor's advice. It is easy for a consultant to verbalize but few document their unsubstantiated boasts. When they say it, make them write it down. If they don't, know why.
  3. Get a good lawyer. Forget all the lawyer jokes. When no one else is there for you, only your attorney holds your advisor's feet to the fire. Developing that relationship is the first step in taking control of your business life.

Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.

TAGS: Dealers Retail
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