Without a doubt, the global market has been negatively affected by the coronavirus pandemic and will most likely affect your business if it has not already. You have probably read numerous articles advising you to manage expenses in today’s economy. But what exactly does that mean? In addition to cutting out the “non-essentials” in a downturn, consider the following suggestions for managing your essential costs.

Obviously, employment costs are the largest expense of a car dealership. Making sure the work force is the right size, has the right individuals, and awards the right compensation is key to managing employment costs. Compensation includes benefits. If you were to poll your employees, I imagine many of them could not name all the benefits you provide them. An example may be a profit-sharing contribution. Many employees do not look at their retirement statements and recognize a contribution was made on their behalf, let alone appreciate the contribution. Most employees recognize a cash bonus and appreciate that. So maybe a cash bonus instead of a profit-sharing contribution is the more effective way of creating goodwill with employees. The key is determining what is important to your work force and adjusting accordingly.

Vendor relationships are arguably just as important as employee relationships. Look at your vendor list. Do you know what product or service each one provides and why they are your supplier? If you haven’t established an approved vendor list, you may be surprised by what you find. You may find that you are purchasing from multiple vendors in an expense category or that you are paying an outside party for work that could and should be done internally. For instance, you may have a body shop that has the capacity, but because of poor communication between the used car department and fixed operations, you are paying someone else for dent removal on your used units.

When evaluating your vendor relationships, assess whether you are “overbuying.” For instance, think of your cell phone. Like most people, you may not utilize many of the features you paid for. You may be doing the same with some of your vendors. The options sounded good at the time you purchased them, but now you realize they just aren’t practical. Trim the list to the options you use.

Lastly, don’t be afraid to negotiate for a better price. If you determine you have been purchasing the same product from multiple vendors, you may be able to negotiate a better price with one by promising them more of your business. Also, look for new competitors you haven’t considered before. Even if you don’t want to switch vendors, a competitive price to take to your current vendor is a good bargaining tool.

Expense management takes time and effort and is an ongoing process. If you would like assistance in establishing a plan and getting the ball rolling, please feel free to contact us.