Digital Dealer - January 2019 - 26

D E A L E R OP S & M ANAGEM ENT: Sp e n d M anagement

By Doug Austin
Founder and President,
StrategicSource, Inc.

How to Add
$1.0MM to Your
Bottom Line
Profits
Whether you are a
single-point dealership,
small group, mid-sized
group or mega group of
dealerships, the opportunity
to add $1,000,000 to your
bottom line is absolutely
achievable. For smaller
groups, the profit improvement may span a couple of
years, for larger groups the
profit improvement can be
annually, and for mega
groups, the profit improvement opportunity can be
multiplied by a factor and
achieved much quicker.

THIN PROFIT MARGINS

Most organizations were
formed to sell a product or
perform a service and do so
at a profit. Auto dealerships
are no different. Profitability
is key to maintaining the
business and achieving
growth and expansion objectives. The more efficient
and effective a business is,
the more profitable they will
be. Auto dealerships operate in a challenging environment as we all know. The
way cars are researched
and purchased today is
changing dramatically.
Most dealers are quickly
adapting to the new realities
26

JANUARY 2019

of vehicle sales. In spite of
all of the new strategies,
tactics, and approaches
employed by dealerships,
most dealerships are
operating on very thin 2-3%
profit margins. For most
organizations, 2-3% profit
margins are too thin. The
profits generated are not

producing the returns expected given the investment
in the business. So naturally, dealers are searching
for processes, strategies,
and approaches that will enhance their profitability, not
only now, but on a sustainable basis. As many dealers
anticipate a slow-down in

CHART 1

Uncover $1,000,000 in profit improvement
opportunity, and determine your annual
spend in each of the 130 categories.
Some, but not all category examples are listed below.
- Auto Parts - Non OE
- Background Checks
- Body Shop Supplies
- Car Wash Chemicals
- Car Washes- Check
Processing
- Credit Bureau
- Dealer Management
Systems
- Detailing Supplies
- Energy Management
- Fire Safety-Monitoring
- First Aid
- Glass and Installation
- Insurance, Casualty
- Janitorial Supplies
- Key Management
- Maint. - Door Services
- Maint. - HVAC-Mechanical
- Maint. - Lighting &
Electrical

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

- Marketing Products
- Marketing Services
- Office Equipment
- Office Supplies
- On-Line Manuals
- Payroll Services
- Printed Materials
- Records Management
- Security
- Shop Gases
- Shop Supplies
- Telecom Misc.
- Telecommunication
(Local & LD)
- Telecommunication
-Cellular
- Towing
- Vehicle History
- Waste - Hazardous
- Waste & Recycling

business at some point in
the future, strategies to
improve profits are both
defensive and offensive
in nature by maximizing
profitability today (offense)
and by protecting their
bottom line (defense) when
challenges come again.
COMPLICATING THE
SIMPLE

Again, if organizations
are designed to be profit-generating enterprises, it
just makes sense to explore
options that will, in fact,
improve the bottom line and
increase profits. Increasing
margins, improving gross
profits, reducing expenses,
and wringing costs out of an
organization is not easy, but
those savings dollars will
flow to the bottom line as
new profits.
Most financial statements
hide obvious opportunities to reduce costs and
increase profits due to the
summary nature of the documents themselves. Profit
and loss (P&L) statements
usually contain 25-30 lines
that reflect revenue and
expenses and ultimately,
retained income or net profit
for the enterprise. In short,
the P&L for most organizations can complicate the
simple. Reviewing a typical
P&L to look for hints at
reducing costs and increasing profitability can be a
daunting exercise given the
complexities of the business
and the summary nature of
the documents.
DEALERSHIP FACTS

 Most dealerships
spend money in up to 130
expense categories.
 Most dealerships will
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