ORLANDO, Fla.—Knowledge of finances and the competition is key to business survival, according to Kurt Geisheimer, president of Integrity Group Ltd. and a former vice president of Cooper Tire & Rubber Co. Mr. Geisheimer addressed the issue of business profitability at the recent International Tire Exhibition & Conference (ITEC) in Orlando.
One of the biggest causes of business failure is uncontrolled growth, which he said “puts a strain on your resources, and when that happens, you can't react to market conditions if there is a downturn or an uptick. “You don't have the bank facilities.
You don't have the reserved cash to do anything. It limits your options.” The secret to success is knowledge of a dealership's financials and of its competition, as well as a business plan that benchmarks the business against its competitors. He said he has seen several dealerships expand and then fail—either they lose everything or they go back to the way they were before the expansion but with less-healthy financial standing.
Mr. Geisheimer offered seminar attendees 10 tips for business survival:
- Know your gross profit margins.
- Emphasize brands that maximize margins and gross profit.
- Take advantage of supplier terms.
- Prepare the dealership's basic financials report monthly, or at least quarterly.
- Differentiate the dealership from the competition—through products offered or level of service.
- Know your business model—Is the dealership known for providing good service, as a price leader, etc.?—and determine how that will affect your investment, policies and credit terms.
- Monitor your benchmarks—financial and non-financial. Determine how fast you're turning inventory and how customers feel about your business. “Some of the most successful and profitable businesses that I ran into in my career at Cooper were local tire dealers who knew their customers and had a rapport with them,” Mr. Geisheimer said. “And quite frankly those customers didn't care, within reason, what they paid for the tire. They were going to XYZ Tire because 'Joe' took care of them and they've never had a problem with him.”
- Know what you want out of your business and determine what you want to do with the resources you have—Do you want to invest in growing the business or do you want to receive cash income from the business?
- Look for ways to extend your building, such as adding commercial accounts, extended sales or products. “Look for ways to extend the bricks-and-mortar, without adding bricks and mortar.... Extend your sales but don't extend your investment,” he said.
- Hire good people. Mr. Geisheimer also encouraged business owners to put someone in charge of the accounts receivables, noting that those who expect to get paid do get paid. His tips for managing accounts receivable included:
- Establish policies, train your employees and make customers aware of your payment terms. Once customers find out you're a push-over, there will be certain people who will take advantage of you, he warned.
- Set up a frequent and consistent communication schedule with the customer and have a plan for collection.
- Leave the other party with something to do to resolve their debt, and if they don't do it, let them know what the consequences are.
- Don't turn your back and let accounts receivables get out of control—make it part of the daily business.
- Stick to your guns by being firm and clear on the terms and conditions of a sale and communicate this with your employees.
- Have a pre- and post-call plan and provide employees with scripts so they know exactly what to say and do when calling customers.
- Don't be afraid to “turn up the heat.”
- Say what you mean and mean what you say, he said. For example, if you say the consequences are that you will stop selling to a customer, then stop selling to him or her.
To reach this reporter: [email protected]; 330-865-6127; Twitter: @kmccarr