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Joe Basil

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What Mode is Your Dealership Operating In?

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As the great recession started to unfold in 2008 and 2009, gasoline prices rose above four dollars a gallon, the banking and housing industry began to collapse, unemployment rose and auto sales fell off the charts. Those dealerships that came out on the other end in strong financial shape recognized and acknowledged this change. They adapted to the changing economic environment by recognizing what mode they were in and shifting their business operating mode as needed.

Now that we have had four years of continued retail auto sales growth, those same dealers that successfully maneuvered their way through the recession are again studying the changing market conditions and adapting accordingly. They will continue to be successful because they consistently evaluate and assess the changing marketplace environment and reconcile that against the operating mode of their dealership.

So, one might ask what am I referring to by asking what “mode” a dealership may be in? Generally speaking, any business at any one point in time could be categorized in any of the four following modes: crisis, growth, profitability or maintenance.

Crisis mode would be a dealership or department that:

  • Has weak leadership throughout
  • Is consistently reactive versus proactive to market changes
  • Undercapitalized and short of cash
  • Has no strategy or direction
  • Has low or no hiring standards
  • Has over-aged inventory issues
  • Is liquidating its net worth on a daily basis

Growth mode would be a dealership or department that:

  • Has clear aggressive leadership
  • Is making long-term strategic decisions
  • Is properly capitalized
  • Is focused on growing their customer base, market share, and in turn, their enterprise value
  • Typically has very high standards that are consistently implemented through strong management teams
  • Is willing and able to make short-term sacrifices for long-term growth

Profitability mode would be a dealership or department that:

  • Has a time proven business model supported by a solid balance sheet
  • Is focused on and run by return on investment criteria, as opposed to sales volume or market share
  • Identifies opportunities for profit improvement at each and every transaction level within the dealership business process
  • Focuses on and invests in recruiting and developing top-performing employees

Maintenance mode would be a dealership or department that:

  • Might typically, but not necessarily have a strong balance sheet with excessive or lazy working capital
  • Does not focus on its market share position
  • Does not make decisions based on return on investment criteria
  • Consistently fails to recognize changes in the market and adapt accordingly
  • Makes little or no investment in training and developing the management team and employees
  • Complacently relies on an existing customer base
  • Carries excess over-aged and obsolete inventory

So based on these categories, which one might your dealership fall into? How did it get there? What will make it possible to maintain or change your position? It might be an interesting exercise to have your management team review these categories and determine which one they think their department falls into, compared to your assessment. A step further would be to have employees in each department determine what category they feel they are in, in comparison to their manager’s opinion.

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About the author

Joe Basil

Joe Basil

An NCM 20 Group member for 10 years, Joe now serves his former peers as an NCM Executive Conference Moderator. With 40 years of retail automotive and general business experience, Joe began his career at age 14 progressing through a variety of positions in his father’s dealership in Buffalo, New York, eventually becoming the used car manager for the Chevrolet store. At 26, Joe became the owner-operator of an Oldsmobile dealership. As the oldest of seven, he has bought and sold three dealerships of his own, ventured into several non-automotive businesses, including business consulting and training. During his career with the Basil Group, Joe assisted in the purchase, sale and start-up of over 24 dealership transactions and five non-automotive businesses. Joe is a graduate of Northwood University with a degree in automotive marketing and holds a Bachelor of Science degree in marketing from Canisius College. Joe is a graduate of the Chevrolet Management School and has completed formal training in family business advising and entrepreneurial leadership.

Permanent link to this article: http://blog.ncm20.com/2014/08/what-mode-is-your-dealership-operating-in/

1 comment

  1. David L. Fabre

    Nice article Joe

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