Dealerships couldn’t survive without a network of suppliers or vendors to perform work that would not normally be done by a dealership employee. Some examples of dealer vendors are listed below;
Auto glass installers Leather and fabric repair
Alarm installations Window Tinting Installers
Auto-Start Installers Rim Refurbishing
Dent Removal Body-shops
Tow Companies Hardware Vendors – Nuts Bolts…
Oil Companies Recycling Companies
Garbage Company Paper Shredding Companies
Lojack
The list goes on and on and on…
Have you performed a sampling to see if your expenses have increased or crept up over time? You may have originally hammered out a deal with each individual vendor for pricing but have you checked up on the pricing recently or any time since. You may be presently surprised to find out that some of your vendors have taken advantage of your businesses time constraints and snuck a few fast ones by you. Run a report month over month and compare your expenses for each vendor with services received. Look for discrepancies and you will follow and find the money trail.
We are all looking for ways to increase our dealership profits and this method is one way to help save money from bleeding out of your profits! For example most dealerships employ paint-less dent removal companies to offer customers another amenity as well as raising gross profit. If you do not have a written contract of WHAT you are paying per panel or per dent you may end up paying more as time goes on. Should this happen to you and if you have never raised the price you are charging your customers, you are effectively lowering the GP percentage.
Another way to ensure you are able to properly measure your numbers is by sitting with your body shop manager and hammer out a deal on price per panel. Yes, price per panel! I have an agreement with the body shop manager that any panel that has minor scratches and needs repainting is done for $125 per panel, even bumpers. If the panel needs bodywork we are adding an additional $75 to the $125 bringing the cost to $200. This is a great way to measure and estimate a vehicle right on the service drive which ultimately leads to more sales. All this takes place because your advisors KNOW what the price cost per panel is so they will automatically add a 30% markup. Now you can make money and your service staff won’t be afraid to quote pricing to your customers.
Be on the lookout for price creeping, inaccurate pricing, pricing terms, over inflated transportation charges and surcharges. These types of pricing inaccuracies lead to lowered gross profits which ultimately chew into your ability to achieve higher fixed absorption numbers. The goal is not to save to profit, however you MUST be diligent in examining the price you pay for outside vendor services or you might be taken to the cleaners without ever realizing your true profit potential.
One way to stay on top of your vendor agreements is to secure all written agreements in one file drawer where they are easily accessible for an on the spot review of any vendor pricing. If you have a vendor prospect looking to do business with you, don’t chase them out the door, see what they have to offer and find out what pricing they charge.
Perform cost comparisons and keep your current vendors in check! If you find a cheaper price for the same service, meet with your current vendor and restructure the cost pricing. Do not be afraid of negotiation, negotiation leads to opportunities for you and the dealership.
If you find during an audit of your vendors that you have been paying more then you agreed to, do not be afraid to ask for a refund check! The vendor will certainly think twice before trying to pull another fast one during your watch. Be on the lookout for surcharges that were not part of the original agreement, should you find discrepancies again ask for the refund and stick to the original signed contract. Yes, get contracts with each vendor showing the dissection of charges and how each charge is applied.
The benefits to keeping a watchful eye on all your vendors can be summed up as;
1. Prevention of overcharges improves overall profitability!
2. Your confidence with your suppliers/vendors improves with a regular audit!
3. Auditing information is useful in selecting future suppliers & vendors!
4. Vendor/supplier compliance improves with regular auditing processes!
5. Internal employee compliance using designated suppliers will increase and you won’t be taken advantage of with vendor/supplier kickbacks to your current employees!
Performing a quarterly supplier/vendor audit will ensure compliance with pricing and employee utilization of outside products and services as well as yielding significant results in gross profit retention!
David
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