Hurricane season is here and you will often hear the National Weather service issue a Hurricane warning. I have a new one for you. "This just in from the National Auto World Service: Warning, the winds of success are subject to change."
We’re 5 months into the year and you’ve done pretty darn well. Many of you have had record months. As we all know, it’s easy for complacency to kick in and with it a certain amount of self-assured confidence that you are a rock star, on a roll and you can do no wrong.
I’ve reminded you in the past that dealers make the most money when they are coming off of tough times. The reason for that is pretty simple. When things are tough, dealers get back to the basics and grinding it out. As business gets better they are in a great position to make a lot of money because they have cut all the fat out. But the better and better business gets, dealers tend to add this and that to the expense line and get further and further away from the basics.
Gross profit can cover up a lot of sins. (Can hide the wind.) The really smart dealers recognize the trend and look for opportunities to go from 2% net profit of sales up to 4 to 6% or more. It stands to reason that if you can get the percentage up during the good times then in the worst of times you can still maintain the 2% plus numbers.
If you are currently in the 2% bracket or less then you are missing something somewhere and need to re-evaluate your operation and do what you have to do to get it fixed.
There’s also another storm on the horizon and that’s the upcoming elections. If you check history you will discover that as we move closer to the November elections the buying public will start to tighten up their purse strings due to uncertainty that goes with the elections. There is no way of knowing how the economy will react regardless of who is in office. Uncertainty causes people to sit tight with their money.
A slip in your disciplines can create major damage to your bottom line. Keeping used vehicles 45 to 60 days and beyond (talk about a serious hurricane on the horizon) means you are not selling in "today’s market." Never forget that a car that you have owned in excess of 45 days is not going to make you the kind of serious money that a fresh piece would.
Realize that another dealer is buying or trading a similar vehicle today for less money than you have in yours and they therefore can sell it for less and make more money on it than the one you’ve been sitting on. Some of you are starting to think you can hold inventory longer than normal. Shame on you if you are keeping vehicles past 45 to 60 days. The days of carrying units 60 plus days are over.
Let’s review this Hurricane Warning in the simplest of terms:
1. Stick to your basics
2. Don’t get stupid with your expenses
3. Keep the inventory turning
4. Get your profits into the 4 to 6% of sales bracket so when it gets tough you are no less than 2%.
Warning over, that’s all I’m gonna say, Tommy Gibbs