I continue to hear from folks who say their business is tougher than it has ever been. I always chuckle when I hear from a recycler that business in his area is off, after I’ve just spoken with another recycler in the same area who is having record sales and/or profits. How can this be?
First, it is tougher. I am not in denial. Cost of goods is continuing to rise, and I think if you are buying the same way you were a year ago, it has likely increased 5%. Some folks have made changes in their buying, but most haven’t. And, sadly, because folks haven’t cut their expenses, a similar % of their profit has gone away.
Most affected are those who are buying 5 year and newer vehicles, especially if the average cost is more than $2200 or so per vehicle.
The reality is that gross margins have declined for many reasons. It won’t do me any good to go over the reasons because we can’t change most of those factors. At conventions, I often hear a lot of discussion about increased costs but no discussion about solutions.
Here is the solution. You simply have to understand what is selling. You must know which parts to inventory and pull and how to price your parts competitively. Also, maintaining your margins on the BEST parts must be protected. Pinnacle will make screen recommendations on holding prices and report on how well your salespersons follow those recommendations. AutoInfo and Hollander will provide you with some information in these areas, albeit not automatically. You need a good level of confidence in your pricing; don’t cut prices when it isn’t warranted but slash them when appropriate. In the past, we made these decisions off the seat of our pants, but that just doesn’t work anymore.
You MUST have your buyers go over the cars carefully and reconcile the potential purchases with your demand. Pinnacle does these functions automatically, but even with AutoInfo and Hollander, you can get some answers, although it is tedious and time consuming.
You simply must sit down and review your buying practices. Recyclers who are using the tools are protecting and even lowering their costs, while increasing turns and cash flow.
Don’t kid yourself — while you are wringing your hands, one (or more) of your competitors HAS figured it out, and they are slowly getting traction and market share at your expense.
Stop fretting and beating yourself up or complaining about how the politics or tariffs and other factors are the real culprit. The real culprit is sitting in your chair.
Remember only you can make business great!
Ron Sturgeon, Mr. Mission Possible, has been a successful business owner for more than 35 years. As a small business consultant, he can deliver wisdom and advice gleaned from an enviable business career that started when he opened a VW repair business as a homeless 17-year-old and culminated in the sale of several businesses he built to Fortune 500 companies.
Ron has helped bankers, lawyers, insurance agents, restaurant owners, and body shop owners, as well as countless salvage yard owners to become more successful business people. He is an expert in helping small business owners set the right business strategies, implement pay-for- performance, and find new customers on the web.
As a consultant, Ron shares his expertise in strategic planning, capitalization, compensation, growing market share, and more in his signature plainspoken style, providing field-proven, and high-profit best practices well ahead of the business news curve. Ron is the author of nine books, including How to Salvage More Millions from Your Small Business.
To inquire about consulting or keynote speaking, contact Ron at 817-834-3625, ext. 232, rons@MrMissionPossible.com, 5940 Eden, Haltom City, TX 76117.ec