Bull is here Bear is coming! Are You As A Car Dealer Prepared?
Bear is coming because bear is always coming, and we all know it. Historical evidence shows us that market adjustments are always just one step off the unsuspecting cliff. One morning, over a cup of coffee, you’re sitting in your car on the way to work, or in your home or office watching whatever form of media you choose to drink with that cup of Joe, and you hear the words as they echo in your head: “Aftermarket trading is sending us some red flags”…”Stock futures seem to be plummeting”…”We’re due for a correction”… “Looks like a pullback”… “There’s volatility in the marketplace”… Did someone say, “Selloff” And then you hear it, “BEAR MARKET and you’re day is shot as you watch it unfold. It’s like a trap door that you’re watching open and there’s nothing you can do about it, UNLESS…
Did you prepare before the adjustment? Are you running lean? Did you set aside some revenues for cash burn and cash flow challenges? Did you create new profit centers WHILE YOU WERE STILL PROFITABLE?
The chart above shows historical performance of the S&P 500 Index throughout the U.S. Bull and Bear Markets from 1926 through September 2018. Although past performance is no guarantee of future results,we believe looking at the history of the market’s expansions and recessions helps to gain a fresh perspective on the benefits of investing for the long-term. The average Bull Market period lasted 9.1 years with an average cumulative total return of 480%. The average Bear Market period lasted 1.4 years with an average cumulative loss of -41%, so my question to you is this: Can you last 1.4 years with little to no revenues to support your infrastructure while you lose 41% of your company’s revenues?
If the answer is “NO” then creating a new profit center while you’re solidly in the black is something you should consider and the time to act is now! I’m not talking about spending more in advertising to generate more in sales. I’m not talking about dropping millions of dollars on OEM requested face-lifts. I’m not talking about buying another dealership, or adding to your overheard. I’m talking about adding a new profit center that could easily be generating positive cash flow before the first of the year and be worth more than your dealership in under 5 years. It’s time to take a serious look at getting your in-dealership agency up and running before you’re looking to cut back on expenditures due to shrinking profit margins and cash flow challenges, and or a sudden slowdown in sales.
Reality Check! This is not an article designed to be a scare tactic: It’s designed to be a “pre-prep rally for profitability.” You owe it to yourself to know what your dealership can ALREADY generate in recurring revenue based on the current traffic flow you’ve worked so hard to create in sales and service. We’re talking about tweaking your process to enhance your value proposition by offering additional services your customers need and are already paying someone else for. We’re talking about transferring that wealth to you while the market is vibrant. That way, when the market starts to asphyxiate and other business owners are choking on the fumes of their celebratory cigar smoke, you’ll be standing solid and in acquisition mode while those less prepared will be busy fighting to keep their name sake alive. It’s a harsh reality, but it’s business: It’s dollars and sense. It’s assets and elbows, it’s winners, and losers, it’s survival of the fittest… It’s life in our industry.
If you’ve read any of my articles you know that I’m a dealer advocate in a huge way! But to that token, I’ve also built a lot of farriers for dealers with the best intentions just to watch them run that work of art right into a brick wall. It’s hard to watch that masterpiece that has them ranking top in the nation completely fall apart as I cringe at the sound of, “Thanks Kevin, but I’ll take it from here.” Conversely, I’ve seen some amazing Cinderella stories, come out of nowhere who are well on their way or who have already made it. I’m so proud to see their success. I’ve known salespeople who we recruited in 2000 who now own their own dealers groups and have amassed millions of dollars in net worth. I’m so proud of them, but my passion keeps me humble, keeps me real, and also keeps me from being politically correct.
This is one of those articles that just comes from the heart. I’m removed from the situation just enough to see the train coming down the tracks. We have the time. We have the resources, the means, the know how, and the foresight.
Warren Buffet once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” Let’s act now before the fear sets in. This is the time to build that new profit center inside your dealership. This is the time to set yourself apart when everyone else seems be living off the inertia of the Bull Market wave. The time to plan for 2019 is now and not after 2019 has begun. DO IT NOW.
©Copyright 2018 All Rights Reserved. Article Written by Kevin Bradberry