I’ve worked 16 years within the inventory finance industry in various capacities and 12 years for a major OEM as a district manager. I’ve had my share of being involved with repossessions, receiverships and weak dealerships that just can’t seem to get ahead of the issues they are facing. On reflection, those situations remind me that there was a common denominator that was involved every single time and that was the owner’s lack of participation in business administration. For lack of a better word — paperwork.
It is very easy for a business owner to get caught up in the front lines of the dealership. Sales are what drives the business and it’s so important that customers are getting looked after and that staff are customer service focused. Besides, you have a controller, bookkeeper or accountant looking after your paperwork for you so you can focus on other more important things, right? Wrong. They are processing your paperwork; processing payments, paying bills, posting work orders and sales, etc. They aren’t focusing on trends and margins. That’s your job.
When was the last time your bookkeeper came up to you with a monthly P&L and said, “Hey, your new unit sales margins are down!” or “Your P&A margins are slipping” or “Did you know your productivity in the service dept. is only 50 percent?” For most, this doesn’t happen, so if you aren’t making it a priority to review and analyze your financials on a monthly basis, how do you expect to be proactive and address what isn’t working properly? This is your livelihood and the buck stops with you. If you are not on top of your paperwork and are having financial issues, you have no one to blame but yourself.
It’s important to look at the big picture and that includes analyzing all your financials, not just the top number. Years ago, as a GM at a RV/marine and powersports dealership, I had the owner tear into me after a year end because sales were down 1 million dollars. No comments on the $170k turn around taking the business from a deficit to a profit. As a branch manager with an inventory finance company, I’ve reviewed numerous financial statements whereas the difference between a loss and a profit was a 2-3 percent in margins and the dealer had no idea. I’ve dealt with dealerships that thought they knew what their P&A margins were only to discover they were far below industry average … and dealers who were adamant that their productivity in the service department was close to 100 percent. I’ve yet to see any tech in the powersports industry consistently bill out 8 hours a day. Just doing warranty work alone will ensure that doesn’t happen.
Your financials, and in particular your monthly P&L’s, are a report card for your business and you have to review and analyze that report card every month. It shows you where your business is going now, what is working and what isn’t working, so that you can correct any issues that prevent you from going in the right direction and being as profitable as you can be. A business owner has to make this a monthly priority. Neglecting this analysis can and will result in unwanted consequences down the road. Believe me, I’ve dealt with it more than a few times over my career.
I’ve had dealers tell me that they don’t have the time or patience to deal with that paperwork. I get it, some owners would rather talk to a customer and sell a bike or work on an ATV in the shop then dig into financial paperwork but it’s a necessary evil. It’s your guide to success or failure. You can’t fix what you don’t know isn’t working.
You need to have financial information monthly, preferably a week after month end. I’ve personally seen dealerships that are 3-4 months behind in finalizing month end financials. How can anyone really know what’s going on? If you are uncomfortable with analyzing financial information or not sure what to look for, ask for assistance. Your admin staff can point out any concerns they might see but an industry consultant can help point out areas to focus on and why, what to monitor and why and offer solutions for present issues that you’re facing.
As business owner, you are in control and driving your business. Not paying attention to your financial information will get you lost and in trouble.
Bruce Marcia is the director of Bruce Marcia and Associates, a retail management consulting firm that specializes in assisting and supporting dealerships in the RV/marine and powersports industries. As a recognized troubleshooter with over 30 years of experience in inventory finance, dealership general management and as a district manager for a major OEM, Bruce has had the unique opportunity to understand and learn from all three important fields that make these industries function.