Director of Development,
The Rawls Group
The auto retail industry has seen its fair share of change
and disruption over the years, but there has never been a period as volatile
and transformative as the last few.
Profits have hit historic highs, dealerships have been bought and sold
in record numbers, and a new breed of big dealers is emerging. For many dealers, this has been a period of
great opportunity and growth; for others, it has been a time of uncertainty and
instability. So how can family and privately
held dealerships remain competitive and profitable, and how should they plan
for the future? We asked the experts,
and here are five key growth strategies that family and privately held
businesses should be implementing today:
1. Professionalizing the Family Business
Champ Rawls, a succession planner with The Rawls Group, shares:
Although dealers with a traditional mom-and-pop mentality
can be successful, they will find it challenging to compete in an increasingly
competitive market where well-capitalized private and public groups are looking
to expand. For this reason, I strongly
advocate for keeping the "family" in the family business, as this can
give a unique edge in the local community.
However, for the family business to be successful, it is essential to
have a well-thought-out plan to ensure the successor, whether family or not,
who is taking the reins has the resources, development, and support needed to
succeed. This includes establishing job
descriptions, performance policies, and a strategy for the business to ensure
it can compete with larger consolidators.
Alan Haig with Haig Partners shares:
Owners of dealership groups of the future are going to have to be empire builders versus caretakers of the business. The next generation of owners, especially those taking over for their parents, need to be open-minded about expanding their executive/management team to help them run the business. They must develop, communicate, and agree on a clear strategy regarding the team required and how to retain and attract the right people.
Recruiting experienced managers will enable the organization
to scale faster because dealers do not have to rely on themselves or their kids
to run the day-to-day. Attracting entry-level positions should include
communicating the potential money they can make over time and the career path available to them. If college kids understood how much
money they could make right out of school and eventually work up to running or
even owning a dealership, more would likely choose to enter auto retail. Those
with less education can be trained in various dealership departments, earn a
great living, and build a great career.
Davis with HHM CPAs shares:
Creating an organizational structure to support the family
in its ownership and the operations of the dealership group can help transition
to a more corporate mindset. And this can be both internal and external.
Internally, a transition to a corporate structure with clear responsibilities
can help the organization expand. If a family is already treating the company
as if it were a corporation, for example, with annual meetings and performance
evaluations, the transition to include outside talent to the internal team can
Externally, relying on advisors for certain roles, such as
outsourced CFO, can help navigate a group from a smaller group to a larger one
that can then leverage the collective to attract high-level talent to the
2. Create a Development Game Plan
Champ Rawls, a succession planner with The Rawls Group, shares
It may sound cliché, but a strategic plan is essential for
achieving whatever future you envision.
First, start with determining your goals within your current footprint
because you should not consider growth if you're not maximizing your current
market's potential. If you can
confidently say you are one of the top dealers in your area, then we can talk
Growing does not always mean adding to an existing
portfolio. Instead, developing a
successful acquisition strategy may include selling to buy more stores. For
this reason, it is essential to create a Buy Box™. The Buy Box™ exercise
strategically organizes your growth parameters, eliminates distractions, and
allows you to zero in on the opportunities supporting your strategic
plan. The process identifies your growth parameters, such as geography,
brands, volume, etc. So, if an opportunity comes across your desk that
does not fit within your Buy Box™, you can quickly decide to move on.
Growth requires capital, desire, and expertise, especially
for those looking to grow from two to ten stores. In today's environment, plenty of capital is
available for dealers looking to grow. However, acquisitions are complicated, and
therefore, dealers who wish to expand must develop an acquisition strategy that
is focused not only on the brands and locations/geography they desire but
consider the culture and people dynamics that fit their current organization,
talent to run the stores, and the desire to be working in the business and
building a team of managers on who they rely on running the day-to-day.
My firm is starting to see more owners of dealership groups analyze
options on where they can divest one or more stores to reinvest the
capital back into the industry in areas that align with their strategic growth
Jon Paul Davis with HHM CPAs shares:
A development game plan should also consider the allocation of talent within the group. Creating a platform to support growth in the same market could help allocate time from the management team without allowing performance oversight in legacy locations. However, if acquiring an existing group of stores also allows a dealer to expand their team and acquire both franchises and talent, the need for geographic proximity to legacy locations diminishes. You must determine the strategic importance of each growth target to the overall group, knowing that it could be different for each opportunity.
3. Create Scale and Build Efficiencies
Champ Rawls, a succession planner shares:
Rooftop growth provides inevitable scale and efficiencies
that inherently comes with stable and strong leadership. For example, a CFO of
a two-store group will be more costly than a CFO of a 10-store group while
providing the same services. You will
have to recruit additional staff to support ten vs. two stores, but you don't
need 10 CFOs for ten stores. Centralizing management can also provide for
scale and build efficiencies as you grow. Add roles such as variable or
fixed ops trainer, HR director, or positions that bring consistency to your
Dealers who provide more choices to customers in their area than the Publix's or a national company will win locally. As Champ mentions, when a dealer gets to 10 or more stores, they can create more scale and efficiency by building key roles and centralized teams. The more dominant presence allows larger dealers to outperform smaller local stores in their market further. And those dealers will sell more cars per dealership and earn a higher net-to-sales profit margin. Greater profits fund further growth so auto retailers can continue growing and becoming more resilient.
Scale can help a dealer group leverage itself to acquire larger platforms. At a certain point, the collective of existing
earnings can be the basis for leverage to purchase additional stores.
Should a dealer look to purchase underperforming locations, the strength of a
larger existing group can help provide comfort to a lender concerned
about the target’s underperforming earnings. A larger dealer group can then better able to negotiate financing terms and negotiate other contracts,
such as DMS, etc.
Champ Rawls, a succession planner with The Rawls Group,
Culture is a key factor in business growth, as it
establishes values, norms, expectations, and goals that guide how decisions are
made and implemented. Without this, businesses can quickly become chaotic and
disorganized. Developing a winning culture is essential to create a winning
team and ensuring the success of a family business. It requires intentional
effort and commitment but is necessary to future-proof the business. By nurturing a culture of shared values,
respect, and trust, employees will feel empowered and more likely to stay with
the business long-term, leading to increased productivity and creativity.
Alan Haig with Haig Partners continues to say:
Culture and growth go hand in hand. Whether a dealer is growing
the business organically or through acquisition, having an environment in which
people are proud to work is critical to building value in the business. If
growing organically, you must have the right team in place who agree with the
vision and values of the organization. If adding new stores to the current
organization, ensure the culture of the target stores is a good cultural fit. Growing requires capital and people
investments not only for success during integration but also for future years
and perhaps decades.
A key component of culture is people and how they are
appreciated within the collective group. It is difficult to create culture,
though it is easy to recognize. There are dealer groups where it is evident
that the entire management team is working together, though not necessarily
always agreeing with each other. Making sure that the family’s vision for the
organization is cemented first can help a professionalized team know in
which direction to push. Creating a strong culture, which can be different
between dealer groups, is key to creating an environment that helps facilitate
talent acquisition and increased operational performance.
5. Clear Vision & Strategy
When it comes to business, the mission and vision are at the heart of what drives the company and its employees. Without a clear vision that everyone is working towards, the organization can become disorganized and unfocused, impeding its goals and objectives. It is essential, therefore, that the vision is well-defined and easy to understand and that it also is communicated to every employee. When employees have a clear understanding of the mission, it creates a sense of purpose and motivation, inspiring them to do their best work and take ownership of their tasks, ultimately leading to the company's success.
The pandemic has transformed how customers shop, forcing a shift in customer expectations and shopping experience, with the biggest being more initial online interactions. Therefore, it has changed the way dealers interface with customers. Dealers cannot operate in the same fashion as years prior, which means evaluating people, processes, and technology. Forward-thinking dealers need to focus on giving the customers what they want and how they want to be serviced. It all starts with the first touchpoint from the customer, which today is online. A world-class online experience is essential, and dealers should compare their current digital strategies and consumer propositions with what buyers are offered at larger online and publicly traded auto retailers.
Having the end goal in mind strengthens the group's vision and approach, which should include the final harvesting strategy and whether that is multi-generational.
Certain decisions are needed if the family desires to grow to a point where the group can IPO or create a more attractive acquisition target for another large dealer group.
Alternatively, suppose the family desires a multi-generational company. In that case, this could lead to certain decisions to create a management team to carry on the operational legacy of the family while allowing family members to enjoy the economic benefits of a large company.
Regularly revisiting the overall vision and strategy for the group is needed while working on timely, overall strategic planning. Being able to pivot appropriately and hopefully proactively can help a family group maintain its overall ambitions.
By staying ahead of the curve and making sure you are implementing the right strategies into your business, you'll be well-positioned to remain competitive in the auto retail industry in the years to come. It's up to you to stay informed and ensure you're taking advantage of the opportunities the changing industry offers.
Kendall Rawls knows and understands the challenges that impact the success of a family-owned business. Her unique perspective comes not only from their educational background; but, more importantly, from her experience as a second-generation family member employee of The Rawls Group - Business Succession Planners.