What We’re Hearing: Four Takeaways from the Field

Justin Ward, Digital Marketing Consultant

One thing I am seeing dealers focused on a lot of late is digital marketing. While it’s always an important item with dealers, it’s one of those areas that should always be in your top five focal points. Not just for your car inventory but also for parts and accessories. Clearly, it’s a digital world and consumers leverage it every day. The successful dealerships we see have ecommerce front and center with a clear process in place regarding advertising strategy, internal operations, inventory accuracy and shipping. Think nationally versus locally. All of this helps your search engine ranking which means consumers are finding you.

Operational Issues Can Become Positive Impacts

Tom Wolf, Director

A truism across any business, dealerships most definitely included, are that good habits are developed during bad times and bad habits are developed during good times. Inventory is short but grosses and profits are at an all-time high. Keep an eye on the balance sheet: it ain’t profit ‘til its cash”! Are you turning receivables to cash quickly? Should you take some cash out of the store to increase the sense of urgency for collections? How developed and specific is your budget for marketing, sales and digital? Look at employee costs and note where you may have some excess, but also build or refine a succession plan for all departments. This is a good time to train and develop staff, especially your superstars.

Excess Cash and Capital

Sam Agresti, Director

After the last couple of years, many dealerships we work with are finding themselves with excess working capital and cash. Dealerships often ask for ideas and suggestions regarding the best use of the excess cash. There isn’t a great, single answer because the world and the economy are still navigating uncharted waters as we still deal with the pandemic, supply chain issues and inflation to name a few things not to mention the effects of the Federal Reserve’s strategy of Modern Monetary policy in stimulating (or some might say over stimulating) the economy. It is always smart not to tie up all your excess cash reserves in ways you can’t access in case of an emergency. Investing the excess cash in instruments that can be made liquid if necessary is a smart idea such as the off-set account or just a well-diversified market securities portfolio. Also, reducing your floor liability (assuming you have inventory) might be another good option as well. We have seen dealerships invest in buying new stores and that can be a good use of cash, but it can tie up cash for the long term. If it is part of your strategy and well thought out, then be careful and prepared for higher multiples, especially over these past couple years.