Five things you can do to help your dealership grow
There are thousands of independent dealers in the UK, many of them are keen to grow, but in such a competitive marketplace, only a low proportion will succeed.
So what makes these growing businesses stand out from the crowd? Our Managing Director Liam Quegan shares his five golden rules for taking a dealership to the next level.
"As a stock funding business, independent dealers make up the vast majority of our customer base" explains Liam. "We want to partner with well-run businesses that we can help grow, and these golden rules are based on the skills, attitudes and processes that we see as growth indicators for the businesses we work with".
1. It starts with stock
Stock is the basis of a dealer’s business. Get hold of the right stock at the right price, make it look great on your forecourt, and you’re 80% of the way to succeeding.
Sounds simple, but there’s a huge array of places to buy wholesale stock, and independent dealers need to be flexible and innovative with their sourcing strategies.
"We advise dealers to research a range of stock providers, including physical and online auctions, and trade-to-trade platforms," says Liam.
"Often businesses get stuck in a routine of visiting the same auction every week. However, shopping around can be highly effective. One of the things I hear most often from our Sales Team is that they’ve been able to support a new customer by suggesting alternative wholesale or trade sources of stock that they simply weren’t aware of."
It may take a little time but widening the search for the stock can help you ensure that you’re offering the vehicles that will appeal to your target market.
2. The devil is in the detail
"In my experience, the most successful dealers are the ones that stay on top of the detail," explains Liam.
"Knowing your business inside and out allows you to maximise profit."
Detail, says Liam, means knowing your average stock-turn, and keeping track of how long each vehicle has been on your forecourt. It’s also recognising how much each vehicle needs to sell to make a real profit.
"The wholesale price is only the starting point. Dealers must also factor in transport, recon, advertising, and any other costs to establish the true profit margin."
For any small business, automotive or not, management information is crucial. Make MI part of your business plan and think about how you can keep it timely and meaningful. That way, you’ll be in the best possible position to make the right decision for your business.
3. Get data-savvy
Relying on intuition can only take you so far. With many different forces at play in the used car market, it can be difficult to keep track of prices, demand, and changing consumer trends.
Most independent dealers have a good knowledge of their local market, but some tend to rely on limited information to decide on their buying and pricing. It might be a quick search for similar vehicles on Auto Trader, coupled with previous experience of what sold well.
Liam believes that this strategy needs to develop as a dealership grows: "A simple approach can work well for a small operation, but as a dealership expands, it’s worth looking at a more sophisticated process for deciding what vehicles to stock, and how to price them."
"There are a lot of tools and resources that use big data to help dealers make smart decisions on what to buy to get the best return on investment. The outlay is usually fairly modest, and I’ve seen some businesses succeed in grabbing a competitive edge as a result."
Look at the smart buying tools that consumer listing platforms and pricing guides offer, they might just give you the extra insight you need to boost margins and profitability.
4. Keep the cash flowing
Most small businesses with big ambitions find that lack of funds is the biggest blocker to growth.
Whether you want to invest in physical premises or improve your online presence, then chances are you’ll need access to funds.
"We find that some dealers struggle to grow because all their operating cash is tied up in stock," explains Liam.
"It’s Catch 22 – you use the money from each sale to buy another vehicle, and growth plans end up on the back burner."
Funding could be a simple solution to this quandary. By using a finance provider, or stock funding plan to put metal on the forecourt, dealers can free up cash and use their own capital to improve facilities or stock more vehicles.
Liam adds: "Whether you use NextGear Capital or another provider, I’d recommend looking into stock funding as a catalyst for business growth".
5. Flex your plans
Liam believes that in a fast-changing industry like automotive, the days of the one-style operator are in the past:
"Anyone that creates a business plan and sticks rigidly to it is going to miss out on a lot of opportunities."
"My recommendation is to review each element of your operation at least twice a year and consider if it’s still the most effective approach."
"It could be that you’re on track, but if you’re not actively looking at the market and thinking about how you can adapt and improve you run the risk of being left behind."
Liam’s advice is to ask yourself some challenging questions - Is your advertising working? Do you need to adjust your stock profile? Are there any additional products you could offer customers to improve margins?
"You won’t have all the answers yourself" concludes Liam. "Chat to other dealers, read the trade press, or talk to your suppliers to see what’s proving effective for other people. Not everything will work, but if something sounds like a good idea, make a plan and give it a try."
"There is a lot to think about when taking a business to the next level, however, I believe that following these five golden rules will give your dealership a great chance of success."