Dealership pre-tax profits are down 33%. It’s a significant hit, and it’s got a lot of Dealerships worried. But what concerns us isn’t the decline itself – it’s the potential for Dealerships to repeat costly mistakes we’ve seen in past downturns.
The Costly Mistake of Panic Cutting
When profits take a nosedive, there’s a knee-jerk reaction that happens almost every time…cutting staff. Dealerships start slashing their workforce, often starting with their highest-paid employees. They think they’re trimming the fat, but in reality, they’re cutting into the muscle of their operation.
During past downturns, we’ve seen Dealerships let go of top Technicians, star Salespeople, and high-performing Service Advisors. These were often the very people bringing in the most revenue. This kind of short-sighted thinking is detrimental to long-term success and makes recovery much more difficult when the market turns around.
Learning from Past Mistakes
To navigate this downturn effectively, we need to learn from past errors:
- Cutting top performers in any department is a critical mistake.
- Slashing marketing budgets can lead to a dangerous drop in customer awareness and traffic.
- Reducing training and development often results in a less competitive workforce.
- Neglecting customer service to cut costs can damage long-term relationships and reputation.
The Real Opportunity You’re Missing
The opportunity of a lifetime comes once a day. And right now, in the midst of this profit decline, there’s a massive opportunity staring us right in the face.
Customers are keeping their cars longer. They’re not rushing out to buy new vehicles – they’re buried in the ones they have. The average car on the road is pushing 14 years old, and it might hit 15 soon. What does this mean for your Service Department? It means there’s a growing need for maintenance and repairs.
This is not the time to contract. This is the time to expand your Fixed Ops, to go after those customers who need your services more than ever. If you’re not capitalizing on this trend, you’re leaving money on the table. Your Service Department should be busier than ever. If it’s not, you’re missing out on a golden opportunity.
Strategic Approaches for Dealerships
Instead of making these errors, here are the strategies Dealerships should be implementing:
1. Retain Your Top Talent
Your best performers are your lifeline during tough times. Find ways to keep them engaged and productive, even if it means getting creative with compensation or responsibilities.
2. Focus on Customer Retention
It’s more cost-effective to retain existing customers than to acquire new ones. Double down on customer service and relationship-building across all departments.
3. Intensify Fixed Ops Marketing
Now is the time to aggressively market your Fixed Ops. Develop strategies to find customers online and bring them into your Service Department. The customers are out there – you just need to reach them effectively.
4. Elevate Your Standards
Raise the bar for your operation. When you elevate your standards, you’ll attract top talent that might be looking for a new home due to other Dealerships’ shortsighted cuts.
5. Focus on Fundamentals
It’s surprising how many appointments and drive-ins are missed simply because Dealerships aren’t focused on basics like answering the phone promptly. Ensure your team is executing these fundamental tasks consistently.
6. Adopt a Long-Term Perspective
Remember…this downturn won’t last forever. The decisions you make now will position you for success when the market turns around. Don’t sacrifice long-term potential for short-term savings.
The Critical Role of Fixed Ops
This is a rare moment where Fixed Ops gets to be the star of the show. If you’re not making healthy profits in service and parts right now, you’re missing a significant opportunity.
The key is having the best team – the best Technicians, the best Advisors, the best Parts Department personnel. Combine that with the ability to efficiently process customers and communicate effectively, and you’ve got a formula for success even in challenging times.
Conclusion
When profits are down, it’s natural to feel pressure to cut costs. But I’m challenging you to think differently. See this as an opportunity to gain market share, strengthen your team, and set yourself up for long-term success.
Don’t be the Dealership that panics and runs. Be the one that recognizes the opportunity and comes out of this downturn stronger than ever.
If you’re looking for guidance on navigating these challenging times, consider reaching out to our team. We’re here to help turn these challenges into opportunities for growth and improvement across your entire Dealership operation.
