Bright ideas

All economic indicators point to the fact that we are in a full-blown recession. Between billion-dollar government bail-outs of distressed banks, mortgage brokers and insurance companies; declining property values; massive layoffs at major corporations; bankruptcies; ever-escalating foreclosure rates; and nightly doses of media-propagated doom and gloom, reason for optimism seems to be in short supply.

Next year isn’t shaping up to be any easier. “Survival” will be a major theme . However, that doesn’t mean you should stop trying to move your business forward. In fact, this could be an excellent time to boost your profitability. It’s certainly an opportunity to analyze what you’re already doing.

“You need to talk about the challenges and at the same time talk about the opportunities,” says Tom Gegax, founder of Gegax Management Systems, chairman emeritus of Tires Plus and past Modern Tire Dealer Tire Dealer of the Year award winner. “I wouldn’t engage in phony optimism and I wouldn’t engage in pessimism. There is a middle ground that I call ‘authentic optimism’ and that says ‘These are challenging times, but if we put our minds to our disciplines and be more aware, we’ll overcome these challenges.’ Really get serious about the things that need to be done.”
Independent tire dealers throughout the country are doing just that. Some are employing traditional, tried-and-true methods, while others are breaking new ground and are trying things they would not have imagined attempting just a few years ago.

Modern Tire Dealer recently polled a random sample of independent tire dealers of all shapes, business models and sizes, including retailers, wholesale distributors, and commercial tire dealers. We wanted to find out how they plan to survive 2009 and also how they plan to forge ahead. In addition, we spoke with business management experts like Gegax  and “picked their brains” for effective tactics and strategies. Here’s what they had to say. Maybe you can take some of their ideas and best practices and make them your own?

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1. Form an action plan. The first step when dealing with any crisis is developing a plan of action, says Gegax. “Every time I was faced with something during my career, I sat down and developed an action list of all the steps myself and my team needed to do to meet that external threat. Once I had that list and we began moving on those things, it was sort of a security blanket for us. We had weekly meetings and would review the status of each of these actions. The over-arching plus is that it gave me a calmness I wouldn’t have had if I didn’t do that.”
Make sure you write down your plan  ­­— the more details, the better — and share it with everyone in your organization. With a well-defined, achievable plan in place and everybody in your company on the same page, it’s much easier to move forward.

A helter-skelter approach will only add to your general stress level and open the door to mistakes, says Gegax.

2. Analyze your cash flow. Part of developing an action plan is getting a handle on your cash flow, says CPA Thomas Houck, a certified financial planner who works with small to mid-size business owners. (For more information, see www.heritagebusinesssolutions.com.) “Business owners, in every business, have had a run like they’ve never had before over the last 10 years or so. They’ve let themselves get fat and happy.” Go back and look at your cash in vs. cash out over the last six months, he advises. “Where did you allow yourself to become a little bit fat? You bought that fancy copier; do you really need it? You bought the high-speed Internet connection because it was slightly faster than cable, but cable was a lot cheaper... it’s time to trim that fat.” After you’ve examined your past cash flow, look at what your income and expenses will be over the next six months. “Take last year’s sales and knock them down by 30% — just to be conservative.” Does it look like you’ll only break even? Don’t lose heart. “Breaking even for the next six months is a great place to be; there are a lot of people who aren’t even close to doing that.” The last thing you want to do is rely on credit to compensate for poor cash flow. “I suspect this slump is going to be long enough that very few people will have the financial ability to borrow their way through it. Leave borrowing completely out of the picture because you can borrow yourself right out of business.”

3. Pump more money into marketing. The natural inclination for many small businesspeople in a struggling economy is to slash their marketing budgets, says Dick Morgan, founder of Morgan Marketing Solutions (www.morganmarketingsolutions.com) and a certified management consultant.  Don’t do it. “I would be very reluctant to reduce my direct communications with customers and prospects even though business is lousy. How are you going to make it better by eliminating those efforts?” In fact, when times are bad, people are more inclined to listen to your story, especially if you can show customers how you can help them save money — whether by selling a set of tires that are guaranteed to last a long time or selling preventive maintenance to avoid a much more expensive repair down the road. What if your situation is so bad that you can’t get by without pulling back on marketing? Make sure you’re making a sufficient effort to get new business, says Morgan. “If you’re not gaining new business during a down time, it’s almost a sure thing that you’re going to have attrition.”

4. Sell the visit. Family Tire Inc. in New Bern, N.C., fields a lot of pricing calls from consumers. Its goal is to convert those inquiries into sales, but not by harping on price, says co-owner Denny Bucher, a 30-plus year tire retailing veteran. “We try to sell the visit, not the tire. Our competitors just quote price; we try to sell the customer on coming and visiting with us.” Bucher and his salespeople follow a simple formula when taking calls: they always list their lowest priced tire first, then they list their highest priced tire, and then “we say, ‘In between, we have four or five others. We ask what type of car the tires will go on.” After that, they mention that Family Tire offers free rotations, alignments (with the purchase of new tires) and a 90-day, no-interest credit card option. “Our competitors may offer the same things, but they don’t talk about it on the phone,” says Bucher. “At the very end, we say, ‘The best thing you can do is visit us and let us show you the best tire for your vehicle.’” Sincerity goes a long way when you’re trying to convert a phone call into a sale. “You have to sound friendly and sound like you want the business.” The window of opportunity is often small. “When someone calls about a price on a tire, they are going to buy a tire within seven days.” 

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5. Upgrade your labor pool. Nearly 4,000 new car dealerships are expected to close during 2009, which means thousands of highly skilled technicians will be looking for work. There’s never been a better opportunity to add some automotive all-stars to your roster. That’s exactly what Ron Lautzenheiser, who owns three Big O Tire stores in the Ft. Collins, Colo., area, plans to do at his dealership. He’s gearing up to run “trolling ads” in local newspapers, which will give him a pool of applicants. He says word-of-mouth referrals will play a key role in finding new techs, as well. “Techs seem to hang out together. Many times our employees come to us with referrals. We’re looking for guys with a good attitude; we don’t like prima donnas.” Over the years, Lautzenheiser has learned that “the most difficult hire is a well-qualified tech. But you always have to build your team.” Keeping your new team together is just as critical. “When things get good again, car dealers will try to lure their old techs back. You have to pay a competitive rate and you have to provide the right working environment.” That’s an important thing to keep in mind when you bring new people on-board, he adds.

6. Shop around for new equipment. Now’s the time to move ahead — not pull back — when it comes to investing in new tire and garage equipment, says Tony Koles, president of Melrose, Mass.-based Montvale Tire. “Efficiencies of business come from advances in technology and equipment.” Each of Montvale Tire’s two retail locations have five service bays, where a myriad of jobs — including brake replacements, transmission flushes, antifreeze flushes, suspension work and alignments — are performed. A new alignment machine is in the works for one of the shops. “I was going to update our equipment last spring, but the supplier I was with was switching from one manufacturer to another,” explains Koles. “I’m waiting on feedback from them and once they give me feedback I’m going to look at their equipment. You have to examine the parts of your business that are profitable and make sure they’re profitable.”

7. Don’t forget to sell the add-ons. Selling road hazard warranties may not be as exciting as selling a $3,000 tire and wheel package, but it’s a tried-and-true way to buttress your bottom line — if your salespeople ask for the sale. “Sometimes when you process the sale too quickly you forget about the little things you can add on without taking advantage of the customer,” says David Fox, president of Performance Plus, a single-location dealership based in Torrance, Calif. In the past, Fox has used old-fashioned spiffs to encourage his staff to sell warranties. At $1 to $2 per spiff on a $10 sale, Fox said it was affordable. He discontinued the practice a few years ago but plans to reinstate it in 2009. In fact, due to the struggling economy, he thinks road hazard warranties will be easier to sell. “If customers’ money is tight, the insurance could be more beneficial.”

8. Schedule your service calls and deliveries better. Last summer, when diesel prices hovered around the $5 mark, Kevin Key, owner of Bud’s Grocery Inc., a commercial tire dealership/general store in Palatka, Fla., was spending $750 a week to fill his three service trucks with fuel. (Key’s service trucks also deliver tires.) That’s a lot of money for a small operation, he says. In an effort to cut down on fuel expenses, Key is scheduling his tire deliveries to coincide with service calls, whenever possible. He’s now spending considerably less on fuel. “An emergency is an emergency; you can’t put that off. But if you’re heading in a certain direction, you can always deliver some tires” to other customers on the same route.

9. Try a fuel surcharge. ABC Tire, which operates out of Kansas City, Mo., delivers tires to more than 1,000 customers. The dealership is paying $8,000 more a week for fuel than it paid approximately one year ago. What’s the company doing to stop the bleeding? Charging for the fuel it burns up on the way to customers’ shops, says President Chris Smith. ABC Tire tacks on a $10 surcharge to every delivery. “It doesn’t matter if we’re delivering one tire or a thousand tires.” His customers have accepted the fee. The secret to making a fuel surcharge work is to be up-front with your clients, according to Smith. He sent a letter to each customer explaining why the charge is necessary and gave them two weeks to digest the information. He also let them know that the charge probably won’t be permanent. “We said that as long as diesel is above $3.50 a gallon, there will be a surcharge. If it drops below $3.50, we’ll get rid of the charge.”

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10. Open an e-commerce site. Peoria, Ariz.-based S&S Tire Co. already sells plenty of tires out of its three locations. The 32-year-old dealership is poised to sell many more tires through its recently launched e-commerce site, www.specialtytiresusa.com. The site processes orders of specialty tires for lawn and garden, towing trailers, golf carts and other niche applications. Buyers pay via PayPal or by submitting a credit card number. The site is secured by a third party, says S&S Tire co-owner Bob Slagle, who reveals he was inspired to launch it after briefly managing another e-commerce site. “We did a lot of business in a short period of time with no bricks and mortar.” S&S Tire’s e-commerce portal cost more than $16,000 to design and launch. “It can certainly be done for less, but I wanted a professional to do it. I wanted a site that was easy to navigate and easy to purchase from.” Slagle’s son, co-owner Rob Slagle, says they are expecting “big things out of it.”

11. Optimize your Web presence. Mr. Fox Tire Inc. is based in Buffalo, N.Y., on the United States-Canada border. The dealership draws plenty of customers from nearby Ontario, but wants more clients from the province. Instead of reaching out to them through traditional methods like TV, newspaper advertising and direct mail, Fox Tire is using what co-owner Sheldon Yellen calls “search engine marketing. Our Web site is searchable through Yahoo! Canada and Google Canada. If you put Fox Tire in Yahoo! Canada’s search engine, we come right up. We see southern Ontario as a big potential market for us. A lot of people want to pull back” when the economy is bad, says Yellen, “but there are opportunities.”

12. Review your commission program. When the economy is bad, you have to look at every expense. If you’re a wholesaler, that includes the commissions you’re paying to your salespeople, says Ron Brady, vice president of wholesale for Free Service Tire Co. Inc. (The Johnson City, Tenn.-based dealership has one wholesale distribution center in its hometown, as well as one in Knoxville, Tenn.; another in Roanoke, Va.; and a fourth center in Asheville, N.C.) Starting two years ago, Free Service Tire switched to what Brady calls a “budget process. We said, ‘Location X, this is your monthly budget. If you hit 100% (of your target), we’ll pay you this much. We even broke it down by salesperson,” who have different deals based on their positions. For example, area sales managers “are tied to monthly sales objectives. A general sales manager is tied to gross profit... a sliding scale based on the gross profit percentage that his store attains.” It’s critical to incentivize during tough times, according to Brady. But you have to incentivize so that all parties benefit. “If our salespeople don’t meet their goals, the company doesn’t meet its goals.”

13. Speed up your turnaround time. You know the problem: You want to move more vehicles through your service bays, but you just can’t seem to do it because repair jobs are taking longer than they should. Rick Kelso, owner of Rick’s Car Care, a single-location dealership in Norfolk, Va., says there’s only one way around it: speed up. The trick, however, is not sacrificing quality in the process. Kelso’s shop performs heavy repair work like engine rebuilds, which can take up to three weeks to complete. He charges a lot for the service, but because so much time is involved, “in the end it’s not a good deal.” He’s trying to reduce engine rebuild times to one-and-a-half weeks. Rick’s Car Care also performs less complicated repairs like brake replacements and suspension system work. He sources parts from multiple suppliers and will even drive 30 or 40 miles to pick up a part if it saves time. “I don’t need a rack to be tied up for a whole day. When I first started in this business, a guy told me, ‘You’re not in the business of repairing cars; you’re selling time.’”

14. Streamline your parts supply chain. One way to boost your efficiency moving into 2009 is to take a good look at your parts suppliers and whether they’re truly meeting your needs. Bill Anders, owner of Burlington Tire Service in Burlington, N.C., is in the process of reducing his number of parts suppliers from seven to two or three in an effort to increase his dealership’s buying power and “manage our dollar outflow better. We have delivery trucks coming in and out of here all the time and have to process an awful lot of invoices. It requires us to work harder to create a finalized invoice.” Who will make the cut at Burlington Tire? “Those suppliers with the best warranties, pricing and availability,” says Anders.

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15. Turn out the lights. Turning out the lights doesn’t mean the party’s over; it just means you’ll have more money in your pocket at the end of the month, says Pat Malone, co-owner of Plainsman Tire Co., a wholesale operation with warehouses in Dallas, Waco and Tyler, Texas. “Last month, I had a meeting with all of my managers and said ‘It costs a lot of money to run lights all the time. If you have enough natural light in the warehouse, don’t run all the lights. If you’re not using the break room, turn off the lights.’ It’s something you don’t normally think about.” Temperature control is another area where you can gain substantial savings, says Malone. During the winter, he sets his warehouses’ heat to 69 degrees; in the summer, he runs air conditioning at a consistent 79 degrees. He plans to install programmable, digital thermostats in his facilities. “They come with a plastic cap that locks down over them so nobody can change the temperature.” Another hint: If you live in a state that has deregulated its utilities, shop around for the best rates and service contracts. Take your time and examine every option. “What I’ve tried to communicate to my employees is that we can cut a lot of costs before we have to cut people.”

16. Create a BtoB customer discount club. Sure, you’re doing a great job of marketing to end users, but what about marketing to other companies? That’s what Dunn Tire Corp., one of the northeast United States’ largest independent tire store chains, is doing with its business-to-business discount program. Here’s how you can get one going at your own dealership, according to Pat Logue, managing director of retail operations for the 27-store chain: Using the Yellow Pages, the local chamber of commerce or some other source, obtain a list of companies in your area and identify their human resource directors. Ask if you can extend tire and service work discounts to those companies’ employees via a “discount club.” Print up “membership cards” and let HR personnel distribute them. And of course, make sure your employees and locations are ready to handle the extra business that will inevitably come their way. Dunn Tire has been doing this for the last 10 years and now has nearly 300 companies in its BtoB program. (Members receive 5% off their next tire purchase and 10% off alignments.) “It’s a way to attract customers you might not normally have,” says Logue. As a bonus, the company that distributes the cards to its employees “looks like a hero because it presents the program as a perk.”

17. Take advantage of suppliers’ money. How often do you leave co-op advertising money, rebates, promotions and other supplier-provided funds and programs on the table because you’re too busy tending to other matters? Craig Schoenthaler, co-owner of The Tred Shed Tire Pros, a single-store dealership in Pittsburg, Calif., says he’s been guilty of it. “I’ve found myself blowing off rebates and other opportunities with suppliers.” Now that money is tighter, he’s taking advantage of everything his suppliers offer. “These companies are spending a lot of money helping us sell their products. It’s a matter of using the resources that are available.” It can be something as simple and inexpensive as a key fob that can be scanned each time a customer buys an oil change, resulting in a free oil change down the line. (Schoenthaler is running a promotion just like this in conjunction with his oil supplier, Exxon Mobil Corp. He says it’s been extremely well-received.) “This stuff works!”

18. Get strict on credit. Colusa, Calif.-based Superior Tire Service sells lots of tires to farmers and commercial operators. Jim Reading, the dealership’s president, doesn’t worry about their credit. But when a stranger off the street comes into his shop looking for tires, it’s a different story. Reading and his salespeople use a credit check system offered by one of Superior Tire’s suppliers. “If they won’t give credit, we won’t. If a customer doesn’t check out, they pay cash or they don’t buy anything.” The idea is to nip bad debt in the bud before it blooms into a problem, says Reading. The less bad debt you have, the better your cash flow.

19. Sell more oil changes. In terms of sheer profit, oil changes probably are not the most lucrative service you offer. But they can lead to high profit tire and vehicle repair sales, says Scott Robinson, owner of Taylor’s Discount Tire & Discount Automotive in Greensboro, N.C. That’s why he’s trying to boost the number of oil changes performed at his 12-bay shop — which already sells a whopping 80 to 90 oil changes a day — to 100 a day! To get there, he’s promoting his oil change service in newspapers and weekly advertising circulars. “If you do 100 oil changes a day, 10 people will say, ‘Hey, while you’re doing that, will you check my brakes?” Another secret: Once a customer’s car goes up on a rack for an oil change, Robinson refuses to give the customer the “hard sell” on other repairs, even if he sees potential repair jobs. Does he worry about missing out on extra income? Not in the least. Robinson says this practice differentiates his dealership from many of its competitors. “People like it.”

20. Pay upon receipt of merchandise. Tires, valves, patches, wheel weights — no matter what you order, you have to pay for it sooner or later. “Why not pay up front?” asks Richard Slavett, president of Glendale (Calif.) Tire Co. Inc. “We pay on delivery, not on the request of the distributor. My accountant doesn’t like what I’m doing, but we’re in the process of cutting inventory.” There are a number of benefits to paying up-front, he explains. Number one, you take care of the transaction right away. “It’s easier to know you’ve already paid. And you also pick up on discounts.” It all goes back to smart buying, he says. “The name of the game is what you pay, not what you sell for.”

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21. Start promoting used tires. One of the realities you may face doing business in a struggling economy is the fact that not all customers can afford new tires. And even if they have the money, they may not be inclined to pay new tire prices. Rusty Coats, operations manager for Bore-MPC, a Big O Tires franchisee based in Columbia, Mo., says his company has been stockpiling used tires for quite some time in anticipation of this phenomenon. Each of the dealership’s 13 stores stocks 150 to 200 used tires “and we probably have another 500 used tires in a centralized warehouse.” Before they are re-sold, all tires are carefully inspected using the latest equipment, says Coats. If they don’t make the cut, they’re trashed, which he says is non-negotiable.

22. Ask your employees for ideas. Looking for ideas to cut costs? Have you considered asking your employees for their thoughts on the subject? Two months ago, Al Turner, co-owner of Turner Tires Inc. in Chesapeake, Va., took the question right to his 14 employees: How can you help our company save money? As an incentive, he offered to give one paid vacation day to each employee who provided a successful idea. (“We originally suggested a gift certificate, but everyone liked the idea of an extra vacation day,” he chuckles.) Employee response was both immediate and enthusiastic. Ideas ranged from turning off air compressors when not using them to letting shop rags dry instead of throwing them away. The ideas are simple but they work, says Turner. “I’m sure we’ll see more savings,” which he in turn can channel into moving his company forward.

23. Train, train, train. Keeping employees up-to-date on training is always important, but it’s even more vital during an economic downturn, says Cal Murdoch, owner of Yukon Tire Center in White Horse, Yukon Territory, Canada. “Without a well-trained staff, you can’t keep your customers happy.” Murdoch has implemented a strict training regimen for his shop employees. “I’m a member of the Tire Industry Association (TIA),” he explains. “Before a person even touches a tire,” he or she goes through the association’s Basic Automotive Tire Service training program. Then after a couple of months, that tech takes TIA’s TPMS Training Program. After that, it’s on to TIA’s Commercial Tire Service training program. The end result, according to Murdoch, is a well-rounded technician who can handle anything that comes his or her way. When customers bring their cars and trucks back to Yukon Tire for long overdue service work, the dealership’s techs will be ready.

24. Extend your hours of business. Wood & Fullerton Inc. has traditionally been a Monday through Saturday operation. However, tough times require tough decisions, says Steve Swenson, who manages one of the Atlanta, Ga., area-based chain’s nine stores. Two of the dealership’s outlets are now open on Sundays. The rest of them will open on Sundays at some point in 2009. “This is something new for us,” says Swenson. So far, it’s working out. “The first day we opened on a Sunday we had a very good day. The store manager was really happy.” Both Saturday and Monday are strong days for Wood & Fullerton, according to Swenson, who believes there’s a continuity advantage in linking them together with a Sunday. “We’re trying to be optimistic. It will take a lot from everybody to make it work, but we’re going in with an open mind.”

25. Watch your employees’ time. John Anhorn doesn’t have many employees — just a full-time employee and a part-time employee — but he’s watching their hours very closely. Anhorn’s dealership, Medford, Minn.-based Anhorn’s Gas & Tire, is a small shop, and the vast majority of the work it performs is by appointment. Because of this, Anhorn has a good handle on when and how long he’ll need his employees, which enables him to keep overtime to a minimum. (Anhorn, a third-generation tire dealer, also turns wrenches when needed.) “Payroll is one of your largest expenses,” he says. “You have to mind your p’s and q’s when the economy is tight.”

Whatever method you choose to move your business forward during 2009, don’t forget to keep in close contact with your customers. Nothing says you care more than a follow-up phone call, letter or e-mail.

It doesn’t take a lot of time, says Ryan Miles, who managers Richmond, Va.-based Miles Auto Service.

Miles and his salespeople call each customer after the sale to make sure they’re satisfied with the service they received.

“We usually call within a week of the sale. Whoever sold the job calls the customer.”

Most customers report they’re pleased. The few who complain are taken care of immediately.

“It’s the little things the customer remembers.” And it’s the little things that, quite possibly, will help you not only survive 2009, but also prosper.   ■