Digital Dealer - October 2017 - 13

DEALERS TEND TO BE SALES-ORIENTED
NOT OPERATIONS-ORIENTED SO THE NATURAL
TENDENCY IS TO DRIVE NEW SALES AND
'HOPE THAT EXPENSES ARE BEING MANAGED
EFFECTIVELY ON THE OTHER END.'"
lars all fall directly to the
bottom line as new profits." Selling an additional
vehicle only contributes
a small percentage to
the bottom line in terms
of profitability...improved
expense control will move
the profitability needle
quickly.
Lets' assume that all
dealerships do have a
bias for revenue as a
primary profit generator.
Most businesses do. But
can an organization do
two things at one time?
Can a dealership focus
on new revenue and drive
out costs simultaneously...thereby improving
profitability from both
ends? That answer is
obvious as well, of course
they can...and should.
Then the question
becomes...what are the
new profits where do the
new profits go? How will I
recognize the new profits
and what do I do with the
new profits generated
from the business?
If your organization is
serious about improving profitability from the
expense side of the
business, then the following questions should be
addressed:
FIVE KEY EXPENSE

CONTROL QUESTIONS

1. Is there a mea-

surable cost reduction
objective in place for
the organization today?
(Objective)
2. What is the organization cost reduction
objective? What is the
metric that defines success? (Metric)
3. How will you know
when you have achieved
that objective? (Auditing

annually, what would
you do with that money?
Would you let the new
profits flow back into the
business? Or would you
take those proceeds,
separate the new profits
and build a war chest for
future opportunities?
I know of organizations
that are using this approach today. Some seek
to generate new profits to
help them:

...IMPROVED
EXPENSE CONTROL
WILL MOVE THE
PROFITABILITY NEEDLE
QUICKLY."
and Reporting)
4. How will your organization achieve those
cost reduction and profitability results? (Strategy
- Plan)
5. What will your
organization do with the
proceeds from the cost
savings? (Investment
Strategy)
BUILDING A WAR
CHEST

If your organization
could throw off another
$100K, $250K or even
$1.0MM in new profits

	
Acquire new stores
	
Assist in dealership

facility upgrades
	
Improve the financials and their multiples
for sales purposes
	
Acquisition of new
equipment
	
Create a "rainy
day" fund for unplanned
events

NEW PROFITABILITY
STRATEGY - R. I. G.
- REDUCE, INVEST,
GROW

If the military taught
me anything, it taught me

how to use acronyms to
communicate a message.
Since old habits die hard,
let me introduce you to
R.I.G. as a strategy to
build that war chest.
	
R - Reduce your
expenses
	
I - Invest the proceeds from those efforts
	
G - Grow your profits
Steps to Build Your War
Chest through Improved
Expense Control
An organized effort to
generate new profits in
order to build your war
chest should include the
following steps:
1. ESTABLISH AN
OBJECTIVE - Remem-

ber from previous articles
that between 5% and
9% of dealership revenues will be spent on
supplies and services in
upwards of 130 different
expense categories. Of
that amount...up to 25%
of those dollars can be
extracted from the business in new profitability,
a considerable sum for
most organizations. Use
this data to help you set
your objective.

2. DEVELOP A PLAN
- You will need a me-

thodical plan to attack the
largest expense catego-

D I G I TA L D E A L E R . C O M

Continued on pg. 14
OCTOBER 2017

13
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Table of Contents for the Digital Edition of Digital Dealer - October 2017
