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My dealership needs a minimum twenty percent reduction in costs to ensure our survival in the market place.

Like many dealerships, we were looking to reduce our expense structure. After months of watching the numbers come in and working hard to improve the bottom line, we decided on a new strategy. This new strategy is a wholesale reduction of variable and some fixed expenses.

Our General Manager drafted a letter similar to the one below…

Dear Vendor Partner,

We value you as our vendor and appreciate the years of service we have had working with you. We would like to continue our relationship for many more years to come. In order to achieve this continued relationship we are requiring a minimum of a 20% reduction in your pricing. Once the economic situation turns around we are willing to renegotiate the terms.

Please send a letter with your current pricing as well as the new discounted price level that you are willing to work.

If you are unwilling or unable to lower your prices we have already contacted a replacement. Please consider this as our letter of termination of your product or service.

Sincerely,
The General Manager


(Please feel free to copy my letter)

This letter was sent out to every vendor we use on February 1st. To date all of our vendors, with one exception, have agreed to the price concession. The vendor that did not participate is no longer with us.

Here is a list of potential vendors: computer people or IT, shop supplies, wheel weights, gloves, sprays, chemicals, tow companies, body shops, dent doctors, advertising guys, newspapers, license plate frames and more. Have your controller run a list of every single vendor from your DMS. Or just attach this letter to every check that is going out at the end of the month for goods and services.

Be aggressive

Do not take this lightly. My suggestion to all dealers is to do the same thing today. Make your vendor partners share the burden of this economic time. It is your survival that depends upon controlling your expenses today. We all know that there are multiple vendors for almost every situation in our dealerships.

In fact, the license plate lady was in the shop on Friday. We were out of plate frames. My general manager personally asked her for a price reduction.

She stated, “We don’t have 20% mark-up in the plate frames”.

So my boss said, “Well you won’t be selling us plate frames then. Thank you”.

That was the end of the conversation. We will have a new plate lady tomorrow. And I am sure the plate frames will be the right price.

Get Creative

Look at the car wash soap. Look at the wheel cleaner. My wheel magic guy was able to reduce soap by over 50%. Along with the discount we switched to a different product. A barrel of the original concentrate soap was $610. Now it is less than $210. That is a huge savings. My detail manger was in the office discussing the new product. It works just the same at the expensive stuff.

We all want our cars to look great on the line, right? Imagine instead of waxing and polishing the cars to a perfect condition, just so the cars can sit in the weather for days or weeks to be sold, how about we wash the new cars for the lot. Make them look great. However, when the car is sold, then use the premium stuff for the customer. The customer needs to take the car home at its very best. I suggest you can save a few dollars everywhere you look.

Every dollar counts toward your profit, or loss. Which will it be for you?


Steve Shaw, mydealercoach.com


Comments or suggestions?
e-mail Steve Shaw
MyDealerCoach@Gmail.com

Make MyDealerCoach.com your #1 on-line resource for dealership coaching!

Views: 10

Tags: coaching, cost, cutting, dealership, fixed, operations

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Comment by Steven Shaw on February 24, 2009 at 10:23pm
Its all good. We have to be creative right now.
Comment by Matt Watson on February 24, 2009 at 4:45pm
We have received these sorts of letters from our customers. We actually like them. It gives us an opportunity to call them and explain how they could save a lot more than 20% by using more products from us instead of other vendors :-)
Comment by Tim Isaac on February 24, 2009 at 2:45pm
I can save you more than 40% on your advertising and cut ad expenses and production costs! Would love to talk! 859-539-5171

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