How to GROW your business WITHOUT more sales!

I recently read an article that said if you are not growing your business you are, and will soon be, putting the key in the door and locking it forever.  But can growth only be measured by an increase in sales?  My emphatic response is NO

If you’ve been watching the news lately you will know that the financial gurus are preaching another bad year for 2016.  They are saying that there will be little growth this year, the stock markets will be very volatile, retirement savings portfolios will shrink, the Canadian dollar will continue to plunge and oil could drop below $30 a barrel.  They say we are not moving into recession, but suggesting that this is a year to stay the course and just ride it out.

Taking this forecast into consideration, is this a good year to plan for an increase in unit sales and/or parts and accessories – maybe not.  That doesn’t mean that you can’t grow your business, because in my book growth is measured by PROFIT

It all starts with preparing a strategic plan for the future based on an analysis of the past performance of your business.   As I have written on many occasions, get that calculator out and analyze your financial statements for all those key ratios and percentages that drive your business.

Here are a few ideas on how to grow your business based on your analysis without increasing your sales:

  1. Parts & Accessories:  If your analysis indicates you are making 29% gross margin on P & A sales then you have room for growth.  Industry numbers dictate you should be making 34% plus on parts, so you may need to put in a price increase across the board, check how much discounting is going on at the parts counter and/or your policy on giveaways.
  2. Unit Sales:  Set in policy that your sales staff must ask for at least one percent more in margin on all sales.  We get tricked into thinking that the margin we are making is the best we can do so we begin discounting before we even start the sales pitch.
  3. PDI, Freight & Documentation Fees:  Your costs are going up every year so don’t forget to factor these charges into your sales contract.  Maybe it is time for an increase in one or all of these charges.
  4. F & I:  This is a very important income source for your business.  Financing, extended warranties and insurance are all very lucrative income sources that should be a part of every sales pitch.  If you are not big enough to have your own F & I department, there are good brokers out there that can maximize your income opportunities.
  5. Expense Control:  There are a number of key expenses that are variable and can be controlled.  Check your analysis to see if you are hitting industry standards for these expenses.  For example, if your salaries are 12% on $5 million in gross sales and knowing your target should be 9%, you are overspending by $150,000.
  6. Inventory Control:  If your inventory is not turning well you are probably incurring a lot of after free floor plan interest expense.  Minimizing your carryover will add dollars to your bottom line.
  7. Service Department:  You should periodically if not every month analyze your billable hours and efficiency ratio to maximize your margin in this department.  A lot of profit can be left on the table by idle or non performing technicians.

These are just a few ideas on how you can add income to your bottom line which spells more profit and growth in your business.  This does not require one additional unit or part sale, just a strategic plan to address the weaknesses in your operation.

I recently received a video from BDC (Business Development Bank of Canada) that I want to share with you, because it demonstrates exactly how I think you can grow your business.  It is only a couple of minutes long so take a look now! and If you want or need help in developing your strategic plan, contact me for a free consultation.

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