Getting ready for the end of summer in your dealership.

3 minutes 2 seconds read.

We like to go out in the summer and enjoy what the city has to offer: festivals, patios, bbq’s, are only some of the summer favourite’s activities, and in the auto dealership industry also strong sales.

But at the same time (as we are approaching Labour Day weekend) the beginning of the school year and the fall are just around the corner.

So, don’t focus on the trees (current summer sales) to lose sight of the woods (upcoming months).

What can you do in your dealership at this time of the year, near the end of the summer?

Well, is the best time to streamline the inventory for the Fall/Winter season and take corrective measures before is too late.

Let’s analyze this for a few departments:

1).- New Car Department: With the arrival of the 2017 Model Year, and having still units of 2016 MY (some dealership a lot of them) we need to organize and forecast the following months of sales, since likely the mix of models to be sold in the Fall/Winter will change.

Still have 2016 MY convertibles in stock? Hurry up to download these units or you will spend the winter with them until spring 2017. Have enough stock of SUV & All-wheel drive vehicles? Likely will be selling these models in the upcoming months. You get the idea.

Also the Number of units sold will likely change in the upcoming months, and not adjusting volumes now, will cost your dealership extra expenses in Floor Plan interest, parking space, decreased gross margin (to eliminate excess units) and unnecessary effort from your sales staff focusing on selling these extra units rather than focusing on more profitable units.

To add salt to the injury, some dealerships sales managers create new incentives and “spiff” for employees to sell this slow moving units (or units with excessively high inventory).

So not only you have a lower gross profit per unit, but also you increase your cost by paying spiff and higher flat commission to your sales staff to focus on selling these units. This result in a down spiral of profits, combined with a slower pace for sales, generating a recipe for low profit or losses in the upcoming months.

What to do instead: Have a plan to immediately decrease these 2016 MY units (dealer trades if possible, sales, etc). AND also plan strategically the ordering of 2017 MY units.

Think in a realistic sales forecast over the upcoming Fall/Winter months. A budget that was produced almost a year ago (if you did your budget at the end of 2015/ beginning for 2016) is good for comparing Actual vs. Budget, but is NOT a good tool to forecast the upcoming months since a lot of things might have changed since then.

Although the General Manager is accountable for reaching yearly objectives measured against the Annual Budget for the year, chasing an unrealistic objective if you already have a higher level of inventory will put your dealership in an overstock position, possibly having higher floor plan levels (and unnecessary cost in interest) that will be carried out over several months that can be avoided.

Monitor the inventory levels by model at least weekly during the fall. Review the ordering of new units before an order is placed with the manufacturer, to adjust it if necessary. Incentive your Managers/staff to focus on realistic sales and measures that will produce the most for your dealership are just some examples.

Enjoy the summer and this coming Labour Day long weekend, but also get ready for the fall.

What do you think?

Have your dealership situation reviewed. We have experience helping dozens of dealerships improving their inventory, floor plan and profit management. Contact us to get your free evaluation.

Gabriel Krozkin, CPA, CGA has helped dozens of dealerships and dealerships groups achieve and surpass profit goals, working with franchised dealerships for more than 13 years. Contact him for a non-obligation meeting to see how he can help your dealership. He can be contacted at info@krozkin.ca