Lowering your breakeven point safely without sacrificing quality.
A year that started out pretty much just like any other will end with dealers facing some of the toughest challenges in living memory. And right at the top of the list is this one: How can I lower my breakeven point safely without sacrificing quality?
For the vast majority of dealers, the answer to that question has come mainly in the form of headcount reductions. But firing or furloughing people can only move the needle so far before it starts impacting on the quality of service that your dealership provides. And when that happens, sales slump even further and a sustainable breakeven point becomes even harder to achieve.
It doesn’t have to be that way.
At Avanto, we’ve spent much of our time since March working with dealers of all types, sizes and alignments to help bring them to a lower breakeven point without damaging relationships with customers and vendors or hurting cash flow.
Given the incredible diversity of the dealer community, there have been no two dealers with the same set of problems or solutions. But we’ve discovered some valuable lessons from the dealers we’ve worked with over the past nine months that just about anyone can benefit from. They include:
Lesson One: Maximize the return on your technology investment. Far too many dealers view technology as nothing more than a necessary evil. They throw a ton of money at the latest hardware, software and the rest, only to end up taking advantage of little more than 20% of what it can do for them.
Maybe there was a time before the pandemic when you could get away with that but not anymore. Technology is the most valuable resource you have to lower the cost of running your business and if you’re not making more money as a result of spending money on it, then something is seriously wrong.
If you don’t have the in-house expertise to make the most of your technology spend, go out and find it. Ideally, of course, we’d like you to talk to Avanto but if not us, at least find somebody.
Lesson Two: Take your headcount-to-revenue ratios to the next level. The advent of the pandemic has rendered traditional ratios between headcount dollars and revenue dollars unsustainable.
If your dealership was doing $6 million per designer or $8 million per order entry person before the pandemic, you need to be thinking in terms of at least doubling those numbers now and the only way you can do that safely, without negatively impacting quality, is by dramatically reducing processing costs.
One way you do that, of course, is by making full use of your technology resources (See Lesson One). But you also need to be willing to put your current processes under the microscope and eliminate any and all redundancies and opportunities for costly human error.
Lesson Three: Aim for seamless integration between your various pieces of software. How well do the various dealer application programs you’re running work with each other? If you’re manually having to enter data from one program into another, you’re not only eroding your return on investment but also making more work for people who in many instances are already close to burnout because of the increased load they’re facing.
Lesson Four: Focus on the key pain points. Where does it really hurt? It’s not about the paying the electric bill or paying the rent. That’s not where the pain is. It’s all about order-related transactions: responding to customer requests, order entry, paying your manufacturers and getting paid. No matter how well you are handling those functions today, there are ways to do them better. If you do nothing else, commit to finding them.
Lesson Five: Take a long hard look at your current business model. Conventional wisdom says that every dealer needs a sales department, a design department, order entry, installation and accounting. But what if you don’t need all those pieces anymore? Or what if they can become variable or provided through a hybrid model that lowers your breakeven point without hurting quality? A growing number of dealers we work with are doing just that. Should you be thinking about joining them?
Want to find out more? Contact Avanto’s Matt Danyliw today.
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