Where we were, is not where we are now, and not where we are going. Due to the demand from the public to look better, be faster, and charge less; along with the pressure of consolidation, the auto business is a completely different environment than what we have encountered in the past. Dealerships today are multifaceted, high-velocity, high-capital, low-margin organizations that are both emotionally and financially demanding.
Gone are the days of “mom-and-pop” running the store in their local community. Today, day-to-day operations require highly motivated, talented employees who are sought after by competitors and other opportunities. The competitive pressures of manufacturers and the advent of technology have converted a low-investment and forgiving business into a highly competitive, capital-intensive business with little room for error.
Historically, the car business has provided immense opportunity to dealers with career opportunities for immediate and extended family. Although the changing environment creates demands for finding the right people or increasing net worth, if you can adapt to change, the business can continue to create exciting opportunities along with impressive financial rewards.
However, any endeavor of significant value, such as innovation, planning for the continuation of success, deals with change that will challenge you, your successors, and key managers. The move from a mainly “mom-and-pop” environment to ‘bigger business’ makes us ask the question, can you predict where the industry is going? Will autonomous cars drive you out of business? Will the sales process become automated? Will corporates continue consolidation? Will the advent of online sales make the brick-and-mortar dealership obsolete? This is just a short list of the many unknowns, as you know, aggressive tech entrepreneurs and their innovations are changing the landscape of not only how dealers sell, but how to operate day to day.
Furthermore, because we know the industry is changing at a rapid pace, what do we need to be teaching our successors? Is it vital they learn the various departments or is it more important for them to be focusing on what changes could impact your current model and seek innovative ways to help your business adapt? Will desk managers be relevant? What will the role of F&I managers become in five to 10 years as technology improves and margins decrease? How should we structure our facilities if more sales are happening online? Should we structure our teams and compensation models differently?
The question becomes, is teaching the ways of the past is more important than instilling the creativity needed to innovate and adapt for the challenges of the future? As you determine which is more important, you must be willing to address the fact that change is coming. As individuals and a unified organization, you must be willing to innovate and adapt.
The following are steps to ensure you’re tackling the ‘when, why and how-to’ adapt big questions:
- Discuss and develop performance criteria and expectations for the organization and managers to help you determine when it’s time to seriously consider innovation or adaption when margins become unbearable. Without an understanding of how you operate and your performance non-negotiables, how will you know the current model is no longer working and it is time to get creative?
- Define, confirm and provide accountability to proven processes and procedures to maximize current operations and allow you the discipline to adapt when needed and seek efficiency consistently. If your managers are following proven processes and procedures and for all intents and purposes, leading in a way to ‘inspire and get the work done,’ but across the board the organization is struggling to hit performance metrics, it may be time to identify areas to adapt and change the way the organization fulfills market and customer needs.
- Determine what your successors need to learn about the past but ensure they have an eye for the future. Look beyond just the owner/dealer successor, and implement a program to mentor and develop leadership for every critical management position within the organization.
- A balanced approach appears prudent where successors gain the common understanding of how a dealership operates in the various departments but also are empowered to seek innovative opportunities to add profit centers, increase efficiencies or improve processes. HOWEVER: What must be instilled in every successor is the thoroughness required to seek change. Your empowerment comes with responsibility. If a change or innovation is suggested by a successor, a business plan that has analyzed the impacts on personnel, operations, and profits or loss, should be required.
- Retain profits for investments in opportunities required by innovation or adaption. If there are no profits retained or saved, how can you capitalize on innovative profits centers, invest in technology to keep you on the cutting edge, be able to meet market needs with state-of-the-art facilities or be able to adapt in a potential financial crunch?
- Develop consistent structures to analyze your vision for business development and growth. If you do not have regular strategic meetings to plan for three to 10 years into the future, how can you be confident you have assessed the challenges on the horizon and are prepared to adapt to them? As a result of these meetings, you should ensure you document, promote, and consistently update long-term strategic action plans.
- Embrace the next generation of leadership and management. The next generation, unless they are clones of you and your existing team, will likely not operate the way you have. Instead of getting aggravated by different approaches to work/leadership, regularly discuss performance criteria, and address areas of underperformance. They may not work the same way it was always done, but recognize their style may meet the changes influencing the dealership.
Shrinking margins and increased manufacturer demands continue to require dealers to think out of the box, innovate, and adapt. The bright side is change requires innovation and adaption, which serves as a filter to the future that will handicap or eliminate competitors and provide growth opportunities to potentially other markets. With the potential of ‘proven business models slipping away,’ the need to innovate and adapt is most crucial to future success.
Author: Champ Rawls
Being a part of his own family’s business, Champ has a unique insight into the difficulties, challenges, and triumphs families face when combining family and business. Champ Rawls has been officially associated with The Rawls Group since 2012, although it could be said he became a part of the team in 1984, when he was born into the family business.