Bert Ogden Auto Group outlined three ambitious goals at the onset of the coronavirus pandemic: Cut costs wherever possible, close deals quickly and avoid layoffs.
The 18-store south Texas dealership group has focused on cash management throughout the pandemic, permanently eliminating $150,000 in expenses and saving $400,000 more through temporary cost reductions and renegotiations with vendors. The group also tightened deadlines in its mid-month close-sales initiative, urging sales staff to finalize deals by the middle of the month, rather than letting them linger until month end.
“Cash management is the biggest area of opportunity that a dealership can have,” said Jorge Gutierrez, corporate strategist for the group. “You can be very successful at selling cars. You can make a lot of money off of it. But if you’re not collecting on your money, then what are you doing?”
Despite the pandemic-related challenges, Bert Ogden recorded some of its highest sales totals since 2014 over the past several months. Gutierrez said the group’s safety measures, such as requiring masks as early as April, made customers feel safe in the dealerships and helped increase sales.
Last year, Bert Ogden sold nearly 23,000 new and used vehicles. But at the start of the pandemic, “we didn’t know how sales were going to do,” Gutierrez said. “We wanted to make sure we had ample, ample cash reserves to pay our employees and all our vendors and keep operating the way that we that we always do.” The group hasn’t had to lay off any employees or reduce paychecks, he said.
The mid-month close initiative, which is part of employees’ pay plans, has increased sales in the first half of each month and made the transaction and accounting process more seamless, he said.
“We’ve forced people to get everything cleaned up, ready to go on the books. The first half of the month is gone by the 17th of the month,” Gutierrez said.
Bert Ogden’s cost-cutting strategy was twofold. It included eliminating some spending and renegotiating or reducing expenses, Gutierrez said. The elimination component took the most work, but the savings will last beyond the pandemic, he added.
Pre-pandemic, the group hesitated to cut vendors or services that were relatively inexpensive and could help sell a vehicle or two.
“It’s only $99 a month, and we leave it. It’s only $500 a month, and we leave it,” Gutierrez said. “We may sell one or two cars off that, so it justifies the expense. But overall, after this exercise, we realized some of those sales aren’t exactly related to that.”
The cuts were as simple as canceling cable to use a much less expensive streaming service and as complicated as dissecting features within vendors’ services to identify overlap.
“We realized we had some things that we were paying twice for,” Gutierrez said. For example, two vendors had a trade-in value tool within their products. Getting rid of the feature from one service saved several thousand dollars a month.
The group doesn’t intend to reverse any of the $150,000 in expenses it eliminated, even after the economy improves.
“None of that is coming back,” Gutierrez said. “All of that was either fat or things that we are learning to live without.”
Renegotiations were more difficult because the group was bound by contracts, but Bert Ogden hired a company to help handle the discussions with vendors and compare its expenses with those of other dealership groups.
The group decreased its spending on digital marketing and lead generators. It previously used several providers.
“That was very tricky because we didn’t want to dial it back too much where it was going to hinder our sales,” Gutierrez said. “It was a lot of tweaking and finding that spot where sales didn’t take a hit and our advertising expense came down.”
The group also was able to save cash through generous automaker programs and floorplan assistance, he said.
The group saved about $400,000 by renegotiating and reducing expenses, Gutierrez said. As the industry rebounds, he said it’s difficult to predict how much of those savings could last, but he expects about half could end up being permanent.
The new cash-management strategies allow Bert Ogden to examine the business with a longer view going forward, setting goals for five years from now, Gutierrez said.
“The pandemic has given us an opportunity to look at our future with different eyes. It’s so easy to get bogged down in the month to month. We’re making decisions based on where we want to be in five years,” he said.
Those decisions often are difficult to make and may differ from choices the group would make if it only had a month-to-month mindset. But it’s a reflection of “our flexibility to move a little bit every day toward our end goal,” Gutierrez said.