Options for Growing Your Dealership6 Apr, 2015 By: Jim Kahrs
The first thing to understand is that business growth is essential for long term survival. In this universe we live in everything is either expanding or contracting. There simply is no such thing as a static state, though some are under the false impression that there is. If your revenues remain flat your profitability will decrease simply because your costs go up. Most people know this intrinsically. This being said every business should have a goal to grow. The problem that many face is coming up with workable plans to grow. You’re bombarded with the day-to-day problems that every business owner faces. How can one find or make the time to focus on business growth. The answer lies in having a strategy. In this article, I will outline some growth strategies that have proven successful for office systems companies,
Growth Within Your Current Customer Base
The base of customers that you’ve built over time is your single largest asset. Increasing the level of business you do with them is an excellent growth strategy. This can be accomplished in a few ways. You may offer additional related products or services to these customers, or you can hire additional sales people to focus more closely on the customer base. Each of these moves has its pros and cons.
On the positive side, selling additional related products allows you to leverage your past efforts in acquiring customers. The pitfall here tends to revolve around sales people’s comfort zone. Very often, when new products are offered sales people don’t embrace them but rather continue to focus on what they know. Many have seen this when trying to build MPS sales. If not handled properly this can be an expensive proposition, as taking on new products always comes with an investment. Failing to sell the products in volume doesn’t allow you to pay for this investment, much less realize a good return right away
Hiring additional sales people for your current offerings can be one of the trickiest and most costly avenues if not handled properly. Payroll is typically the largest expense in a dealership. You can lose money very quickly if you hire non-productive people. I’ve seen good success expanding the sales team by putting specialists in place. Interestingly enough, this can also work hand-in-hand with adding new products and services to your offering. For example, if you want to add managed network services to your offering chances are you’ll see more success if you have a sales person or sales people dedicated to selling these services. This will help you grow the business as for two reasons; first you’ll be selling a new service that should result in net new revenue. Second, if you have dedicated reps you won’t have a drop off in “traditional” sales from the existing team. I’ve seen many instances where adding a new product offering to the existing team results in similar total revenues where the new business brought in is offset by losses in the existing business model. In these cases the net result is almost always lower profitability.
Let’s face it; growth in our core business almost always comes at the cost of a competitor. There simply is not an abundance of NEW businesses or industries popping up with a need for business systems. If you’re going to grow your core base you MUST have a good strategy for displacing competitors. Most sales reps and sales teams fall considerably short of the mark in this area. There needs to be a comprehensive plan encompassing a sales activity/prospecting plan, proper use of your CRM, marketing and promotion support, sales education, marketplace networking and more. We’ve seen good success when the sales team is tasked with daily and weekly activity targets. We assign point values to every prospecting and sales activity and each rep is required to get 50 points worth of activities per day. When managed properly and closely coordinated with tracking through your CRM this almost always creates a higher level of prospecting and leads to competitive take-aways. Hiring sales reps and telling them to find the competition’s installations and replace them just doesn’t cut it.
Geographic expansion can be a good option. If you’re successful in your current market it stands to reason that you can be successful in a new market as well. A strong plan is the key. This starts with market research. You need to know the make-up of the market you are about to enter. There are subtle differences from one market to the next. Assuming that what made you successful in one market will ensure success in another is an oversimplification that can lead to problems. I’ve seen markets that are only a few miles apart that require a totally different approach. Missing this could cost you thousands of dollars. The one drawback to geographic expansion is the initial cost. The dealership business model relies heavily on recurring service revenue. Starting in a new area from scratch will likely require money to be injected to cover expenses until the service revenue starts to compound. If you’re not prepared for this it could derail your plans entirely.
Diversify With Different Product / Service Offerings
Earlier I touched on adding related products. In this case we are focused on adding unrelated products. Diversifying into new offerings can be a great way to leverage your hard-earned customers. The key to success here starts with finding a product or service offering that complements your current offering and represents something that you and your team can get excited about. I’ve seen copier/MFP dealers successfully add things like managed IT services, mailing systems, water systems, ID systems and access control systems to name just a few. As mentioned earlier, success with adding new products and/or services can often be traced back to dedicated sales people. Going through the time, effort and expense of adding new products and simply assigning them to your existing sales team rarely leads to the growth that most dealership owners desire.
Form Strategic Alliances
Aligning yourself with other similar organizations can be an excellent way to grow the business and bring in new customers. Success here typically occurs when a well-organized approach is taken. The folks that have done the best with alliances have a plan in place where they meet regularly to discuss prospects and make sure that they are top-of-mind with each other’s sales people. In the copier/MFP world, I’ve seen dealers successfully leverage relationships with IT companies, office furniture companies, commercial real estate agencies, architects and more. The goal is to create a situation where the relationship is a true win-win.
Acquisition is probably the fastest growth strategy and one of the most common in our industry. By acquiring the right company or customer base you can grow your business literally overnight. The beauty of acquisition is that when done correctly it will not only increase revenue but also increase profitability immediately. However, I emphasize “done correctly.” The wrong acquisition or one that is poorly executed can become a boat anchor that drags your organization and its profitability down. A successful acquisition is all about fit; fit between the companies, fit between the employees, synergies gained when combined and more. The worst thing you can do is to try to force a square peg into a round hole when doing an acquisition. It is easy to get excited about the idea of this instant expansion, yet don’t let the excitement cloud your judgment.
When all is said and done, the key to successful growth is finding the right growth strategy for you. This may not be the strategy your friend or colleague from another market was successful with. You need to evaluate the options closely and follow the course that best fits with your goals, your resources and your market. Don’t hesitate to contact me if I can be of any assistance in your planning or execution.
Jim Kahrs is president of Prosperity Plus Management Consulting, Inc. For detailed company information visit www.prosperityplus.com