As Seen in Automotive Buy Sell Report – Whether buying, selling or simply optimizing operations, these are key considerations

In “Whether buying, selling or simply optimizing operations,” Kendall Rawls shares that the changing landscape of the auto industry combined with the gap in leadership is increasing the complexities of an already complicated business. With this comes many questions for dealers concerning remaining competitive and profitable as well as the question of succession. Better to sell or to grow?

As you debate the sell or grow conundrum, start by asking the following questions:

• What does the current and future market situation look like?
• What growth am I most drawn to, market share or acquisition?
• What does life after the sale look like (for the owner, spouse, next-generation)?
• How do I preserve harmony & protect business success for family and employees?

The questions above only scratch the surface of key issues that must be addressed in considering the future of your business. In addition, you have to be mindful of three key areas dealers often overlook in a M&A transaction which revolve around people, operations, and information technology. 

To dig deeper in this complex conundrum, we asked partners at OWL Automotive Consulting, a firm with more than 75 years’ experience solving the hard issue ranging from Human Resources, Payroll, Information Technology, Operations and Accounting.

People and Talent – Potential Pothole: Not Engaging HR Early

Human resources specialist Renay Winston says an important pitfall to avoid in an acquisition is not getting HR involved early enough in the transaction. One key area that gets overlooked is understanding the cultural differences between the two companies. Engaging your HR team, or an HR consultant, early on will help identify and minimize risks and reduce wasted time during the transaction.

 Operations – Potential Pothole: Policies, Controls and Documentation Reviews & Web-based Program Audits

Tom Olney, who specializes in operations, shares 2 key areas of operational controls of which dealers need to be mindful.  First is reviewing your policies, controls and documentation on all vendor agreements. To control this important area, create a master vendor spreadsheet and include data columns to capture the important information related to your vendor and contract. The second pothole Olney shared from the operational perspective relates to your web-based programs. To test your current system, do an audit of your web-based programs.

 Information Technology (IT) – Potential Pothole: Increased and Unnecessary Expenses

Sally Lopez, who specializes in the assessment of IT controls, DMS contracts and DMS invoicing review, shares two key IT areas dealers should be proactive in: reviews of long-term IT contracts and software licensing. When looking at the long-term IT contractual obligations, Lopez shares that most IT vendors (i.e. DMS, telecom providers, web-site hosts) have long-term contracts with specific termination and notice clauses. To avoid this, you should conduct an analysis of your long-term contracts as they are approaching the mid-mark of their term and work to negotiation a shorter-term commitment or a new contract with better terms. The second pothole from the IT perspective is in the area of software licensing. With the advancement of technology, computers are deployed to almost every employee to utilize in the completion of their day to day job duties. A system needs to be put in place to track user changes and the addition and disposal of PC’s to maintain legal software licensing.

Succession is all about predictability of ongoing profits. Whether the decision is to sell or grow, profits are critical to the long-term plan.

Read the complete article on the Automotive Buy Sell Report website