Buying and selling car dealerships
Submitted by John Dean
Hi Jeff
I used to do a lot of operational assessment of car dealerships as part of due diligence exercises when buying and selling businesses.
You might be interested in the first three tests that I always used – the answers are often illuminating:
1 – Weeds on the forecourt – You need a fastidious DP and if he isn’t dealing with the detail, no-one else will.
2 – Refunds for tax discs on part exchanges– Is the money going into the dealer bank account or is it going into the Sales Manager’s back pocket? The answer reveals much about (a) the morality and ethics of the business, (b) the efficiency of the Financial Controller as well as (c) the DP attention to detail.
3 - Trading used cars - Here’s another to find out if the Sales Manager (or whoever is in charge of trading cars) is bent or not: analyse all trades over (say) 6 months by trader and see what the overall profitability or loss is by trader.
If you have a trader where the trades are consistently making a loss I would bet it is because the SM is making profits for the business out of weaker traders but participating ‘under the table’ in arrangements with the loss making account.
Hope this is useful for your readers and any comments below will be brilliant!
regards,
John Dean.
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