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Small businesses should be figuring out how to get immediate cost relief now, and they should also be devising a plan to get expenses under control moving forward after the coronavirus pandemic subsides.
COVID-19 has put a crimp in everyone’s business, but during any downturn that’s when expenses need to be analyzed to “stop the bleeding now,” said Doug Austin, president, principal and founder of StrategicSource, a Minneapolis, Minnesota-based purchasing spend management company.
“Life going forward post COVID will be different,” Austin said April 8 during a webinar. “There are so many opportunities to find cost savings. For example, there are over 50 national suppliers out there offering discounts. It doesn’t hurt to ask suppliers if they can provide any relief for your company.”
“Build a 60-Day Profit Protection Plan Using Benchmarking to Reduce Costs,” was the webinar hosted April 8 by the National Automobile Dealers Association as part of its Dealership Lifeline Webinar Series.
Here are 10 quick strategies to consider today as both auto dealers and other small businesses deal with the pandemic, according to Austin:
- Review top categories by spend for opportunities to reduce and eliminate. Look for any redundant suppliers and get rid of ones your company isn’t using. This is the time to look at vendors that are innovating and coming up with new ways to help businesses during this tough time, as well as offering free solutions that matter now. Request a free budget review from Digital Air Strike here.
- Focus limited financial resources on marketing to service and online sales. Digital Air Strike’s new Virtual Retailing Program allows businesses to interact and transact with customers using video, AI, social media and automation.
- Implement Preferred Supplier Rebate Programs.
- Review Warranty Uplift opportunities with OEMs for parts and labor. Find a company that specializes in analyzing your parts and service sales and reimbursement rates. In most cases, your warranty opportunities can be improved upon, Austin said.
- Centralize services and digitize where possible. If your business has multiple locations, this is a good time to consolidate your services into one, such as payables. It’s also a great time to digitize any forms and paperwork. “Now is a great opportunity to centralize and realize those economies of scale,” he said. “We have seen up to 29% savings for companies who centralize services. Even before COVID there were problems about that.”
- Consider outsourcing non-core functions, such as HR, compliance, IT and procurement. “Outsourcing has been around since the late ‘80s,” Austin said. “There are a number of opportunities to look at outsourcing options.”
- Revisit bonus pay and incentive plans to adjust compensation to new key performance indicators.
- Ensure all real estate-related expenses are shut off on unoccupied buildings, such as telecom, IT, utility, janitorial and landscaping services. “This is a no-brainer, but we’ve seen it happen time after time,” he said. “You don’t want to pay two bills for the same service.”
- Begin paying supplies with a credit card for cash discounts rather than points, as the cashback option can earn your company back 1.25% to 1.5%. “A lot of Visa, Mastercard and American Express credit cards offer cashback options,” he said. “If you’re not paying 50% of your monthly spend with credit cards, then you need to fix that.”
- Set new inventory reduction targets at all or selected stores.
As auto dealers look for ways to save money, Digital Air Strike offers free budget reviews to help you navigate the process. Click here to learn more.
Digital Air Strike’s automation tools help auto dealers easily connect with consumers that still expect fast responses even if dealers have fewer employees on staff. Response Path AI-powered, multi-channel chat engages consumers automatically, 24/7, asks and answers questions, captures lead information, and alerts employees when human interaction is needed.
As companies look to get expenses under control moving forward, Austin suggests benchmarking is a great way to do this spend analysis.
Benchmarking is a process of measuring the performance of a company’s products, services or processes against those of other business considered to be the best in the industry. The point of benchmarking is to identify internal opportunities for improvement, he said.
“Benchmarking supplier prices and using that data to negotiate new, more competitive prices with incumbent suppliers offers the best and quickest way to reduce costs in the environment today,” Austin said. “Ask yourself if you’ve done a good job benchmarking or are you just taking the offer that’s put on the table. Well-managed organizations use benchmarking continuously.”
The process involves taking a look at over 130 spend categories to compare profitability, pricing and market share, among other metrics, he said.
“The opportunity here is at least a 25% savings. You could be spending more than $1 million too much, depending on the size of your company,” Austin said. “You want to control these expenses long term. Benchmarking is highly effective, but it takes time.”
Internal benchmarks include groups, service providers and suppliers your company pays for. Focus first on high-spend categories to get the biggest returns, he said.
“Encourage everyone to develop a spend map with all spending to track results,” Austin said. “Look at all the opportunities to reduce costs. Make sure to get an electronic supplier usage report.”
Companies should then audit the costs six months later to make sure the new agreed-upon prices came through and all costs are what was expected and planned for, he said.
Austin also suggested other revenue sources auto dealers should consider if they don’t already offer them, such as adding paintless dent repair, glass replacement, selling key FOBs and wheel repair.
To learn more about this topic, download NADA’s webinar slide deck at https://www.nada.org/Build-a-60-Day-Profit-Protection-Plan-Form/.
To get the latest business updates, videos, and safety and communication guides during COVID-19, visit https://digitalairstrike.com/commitment.
