How dealers can increase their enterprise value during recessionary periods
Today’s volatile economic environment has created significant challenges for dealers.
New tariffs and supply chain issues are raising concerns on dealers’ ability to continue as a going concern. Dealers’ must remain resilient, focus on what they can control, and not get overwhelmed with the changing environmental conditions.
It is, however, more important than ever to think long term during these difficult times. You must focus on opportunities, operational excellence and recalibrating your overall growth plans.
You must focus, deeply, on how to increase your overall enterprise value despite being in recessionary periods. The decisions you make today will have huge impacts on your businesses’ next phase of growth.
Do not overleverage yourself. Rather, optimize your inventory, receivables and payables to ensure you have as much cash in your account as possible.
Here are some strategic ways to build enterprise value during challenging times:
Drill down on your operations, streamline processes and reduce waste. Investing in technological advancements can lower costs and reduce redundant employees. Negotiate with suppliers, review credit terms and make decisions on the necessity of each dollar spent. Consider shared services or outsourcing non-core functions like marketing, HR, accounting and other back-office tasks;
Cashflows and liquidity are paramount. Building a strong cash reserve will lead to your dealership’s survival. Your senior financial team should review your capital stack to ensure it meets your business needs during these difficult times. They can do this by refinancing debt and evaluating new equities investment. Partner with new banks and credit unions to offer flexible auto loans and consider offering special financing for pre-owned vehicles;
Do not overleverage yourself. Rather, optimize your inventory, receivables and payables to ensure you have as much cash in your account as possible. Shift your inventory mix to high-demand, affordable models and used cars that turn quickly. Good analytics can help you predict trends in buying behavior and avoid overstocking slow-moving vehicles;
Diversify your revenue streams. Explore new markets and customers within the automotive space. Minimize risk, and work to develop products and services that complement your current business. During these times, you’ll want to align with new strategic partners to help service your variable and fixed operations better;
Prioritize your repeat and profitable customers and focus on delivering exceptional customer service to enhance your brand loyalty. Providing new financing options and offering loyalty programs or service packages will help encourage repeat business. Focus on improving your digital presence and offer seamless buying and servicing options;
Promote service and parts during a recession. They tend to remain steady, or grow, during these difficult times. Introduce vehicle trade-in programs with fair valuations and ensure credit approval remains smooth to minimize lost sales. Add vehicle protection programs like insurance, GAP coverage or maintenance plans on all your deals;
Continue building a strong talent pool. During recessionary periods, you will find exceptional talent in the market that is available at great prices. Don’t sit idle. Double down on your recruitment strategy. Retain as needed to create new critical skills within your current talent pool. Incentivize top performers to maintain their morale. Focus on building a strong team culture to reduce turnover costs;
Keep all your stakeholders up to speed. All they are looking for is to hear the truth so give them that. Investors, employees, lenders should all know where you stand, within reason of course. They all have a stake in your success so build their trust during this difficult time; and
If you are positioned to do so, seek out strategic M&A opportunities. Try to buy out your competition or other complimentary verticals but do so with caution. Proper due diligence is key as you don’t want to put yourself in a worse position after the transaction.
These times are tough, but this too shall pass. Remain focused on your enterprise value. It’s the one thing you can control.
