Several months ago, a long term client-dealer admitted to me that he was finally ready to drink the water from the horse trough that I’d been continually leading him to for the last 15 years. This dealer has always had a lot of financial resources, both business and personal. Because of these extensive resources, he never felt the need to become properly trained to truly understand his balance sheet or its importance. His was one of the balance sheets that I referred to in an earlier Up to Speed article…he was using it as a “protective cover sheet” for the income statement. It was unreadable, disfigured by coffee stains, drink rings, smudges, miscellaneous notes, etc.

He’d noticed that the most profitable members of his 20 Group (those who enjoy the highest net-to-gross percent and ROI percent) are also both practitioners and advocates of disciplined asset management and he'd finally come to the conclusion that there’s a valid correlation between sound asset management and superior profitability. “It’s my understanding,” he said, “that these dealerships focus on asset levels and aging for a good part of their weekly management meeting. I know you told me that so many times, Garry, and now I’d like your help in setting up a disciplined asset management process here at my store!”

Wow! I never thought I’d hear those words come out of his mouth. But as a wise man once said, “When the student is ready, the teacher will appear,” and after 15 years of preaching asset management to this dealer, the teacher (yours truly) was certainly ready to be engaged.

We started this new initiative by scheduling a meeting with his GM and department managers, at which the dealer introduced the concept of disciplined asset management and defended it by displaying the profitability metrics of those 20 Group members who were the advocates. The dealer and I then outlined the proposed process:  (1) A well-structured weekly managers meeting, limited to one hour, focused not only on asset levels and aging, but also on other dealership key results areas, driven by a consistent meeting agenda; (2) In-meeting development of action plans to improve all key results areas; and, (3) Next-meeting follow-up on all in-process action plans. The dealer then talked about how this would be a “high impact, low effort” initiative, and therefore should be looked upon as a “win-win” program for the managers and for the dealership. He asked for and received the managers’ commitment to aggressively and sincerely pursue this new initiative.

Following this meeting, I met individually with each department manager to discuss what the guidelines should be for both asset levels and asset aging. These consensus guidelines were then submitted to the GM and the dealer for review, possible revision, and final approval. In a future article of Up to Speed, I will present the detail related to the asset management guidelines currently in use at this dealership, together with a report on the dealership’s progress in adhering to these guidelines.