Surviving Asset Management 101
By John Spader
When you receive your financial statement every month what are the first things you look at?
The bottom line? Major unit sales and margins? Service sales? Personnel expenses? All are good answers. Often these numbers just scream at you because you can easily track them compared to your budget and or last year. In a glance you are able to tell if you are ahead, behind, or on track.
What about the balance sheet? In our experience dealers can be sharp eyed about their income statement but many get downright fuzzy when it comes to really understanding asset management and its importance to the business. Many do not even look at the balance sheet let alone plan and manage it. And the bigger your business gets, the more important this is.
After the great recession, we asked our best performing clients what they would have done differently if they had a chance to do it over again. Almost without exception they responded that they wish they had better understood and cleaned up their balance sheets prior to 2008. And this starts with making sure that the key assets of the business are working hard and generating quality returns.
One of the problems with the balance sheet in general and asset management in particular is that beyond major unit inventory levels we rarely budget or plan for it. The numbers are just there, month after month, with nothing to compare to or alert us if there is a problem. And make no mistake - often there is a problem but it doesn’t show up until a soft market hits. It is different than a sales or margin problem in that it isn’t usually tracked on your budget, but balance sheet weakness and poor asset management are just as dangerous to the business if not properly understood and acted upon.
Over the past several years the market has been kind to most of our clients. Dealers all over North America are reporting stellar sales and profits. But we all know that this will not go on forever: at some point the market will soften. It might be this year, it might be several years away, but eventually we will all get tested again by a tough business environment. And just like in 2008 – 2009, the survivors will be those with the balance sheet strength and asset management skills to withstand the pressure.
Key question: are you ready? In other words, if a significant sales slowdown were to begin right now is your business properly positioned to survive?
We’ve spent a lot of time learning how to help dealers answer this very question. We’ve got a handle on the right metrics to watch, and have even developed an assessment that can help you figure out the health of your balance sheet and your asset management plan.
A critical survival factor will be your ability to generate cash when you need it. Cash is king, as the saying goes, and that is never more true than during tough times. The financial data from hundreds of dealerships has proven that there are often huge cash generating opportunities locked up in underperforming assets. By converting these “lazy assets” into high performing assets dealers can not only earn significantly higher profits now but also prepare themselves for the downturn we all know is coming at some point.
In this seminar John Spader will help you identify where the lazy assets might be in your business and what you can do about them. He’ll review the most important metrics for analyzing asset management balance sheet strength and walk you through an assessment that will help you easily understand how your balance sheet measures up. John will also discuss the single most impactful asset management metric that is not in your financials – one that most dealers do not measure or manage but which is the main driver of all the other key asset management metrics.
While we will talk about numbers, this is not a presentation about bookkeeping. It is a presentation about making sure your dealership is operating at peak efficiency now and is properly prepared for the future.
Editor’s Note: The Marine Dealer Conference & Expo will take place December 5-8, 2016 in Orlando, Fla. If you find value in this blog post, just think of the value you could receive at MDCE.
Get registered here.