Barriers to entry
By Mark Mooney
June 24, 2014
Filed under Guest Blog
It’s not an easy task to open a new dealership, buy an existing dealership, or to operate a dealership, for that matter. The costs associated with along with OEM requirements are not something that most folks can comprehend or afford. The barriers to entry in our industry are extremely high. On the flip side, when you’re selling your dealership, you want your barriers of exit to be low. Generally, the lower the barrier to exit is an indication of how profitable you’ve been over the years.
I’ve met very few dealer principals that haven’t worked extremely hard. Up early, home late. Calls at three in the morning (the alarm is going off), or someone called in sick today (darn it), and we’re shorthanded already. We take up the slack, cover where needed, then sit down after we’ve closed and do what we should have been doing during the day: managing our business.
Working hard and being profitable do not always go hand in hand. If they did, we’d all have a lot more money. What does go hand in hand? Profitability and a lower barrier to exit when it’s time to reap the rewards of all your hard work when you sell. When I bought my dealership, my focus was on the barriers to entry (purchase), and a future exit plan wasn’t even on the map. In hindsight, I should have been looking at both, and so should we all.
For many of us, our dealerships are our nest eggs. What we do to build those nest eggs is up to us. Dealership profitability over the years has a direct correlation to not only what we realize now but also what could be realized down the road. If most of us know this, and we do, then doing whatever it takes to ensure the greatest return on our investment seems like a no brainer.
Hard work does not always justify a sales price, but profitability does. When reality sets in on justifying an asking price and all the blue sky you want, many a dealer, including me, has wished they had done more over the years to warrant it. Your business is special. The intangible value of your hard work over the years — there’s that blue sky again — will be worth a whole lot more, if there’s consistent profitability to go along with it.
Mark Mooney is director, retail performance for Pied Piper Management Company LLC, a Monterey, Calif., company that works with motor vehicle manufacturers and dealers to maximize performance of dealerships. One of Pied Piper’s most popular services for the powersports industry is Pied Piper Prospect Satisfaction Index (PSI) sales mystery shopping to help turn more motorcycle shoppers into motorcycle buyers.