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Understanding The Complexities of Running an Auto Dealership

Auto Dealership Complexities

I was speaking with a neighbor this week, and I mentioned I was heading to the 2017 NADA Convention and Expo (the annual trade and education event for the National Auto Dealers Association which gets underway today in New Orleans). I attend this event because a significant number of my clients own, operate, or invest in auto dealerships and other related businesses. I was struck by how little my neighbor knew about what it actually takes to operate a dealership, much less multiple dealerships. Since we are friends and I had some time, I tried to enhance his understanding while reminding myself of why I find my work so rewarding.

The normal impression of a dealer is a person who merely “wheels and deals.” While every dealer I have met is certainly a skilled negotiator, the strong and lasting dealers are, first and foremost, managers of highly complex businesses that including many moving parts and skilled players.

The Parts

In practice, a dealership is a conglomeration of several businesses — new car sales, used car sales, auto service, body shop, vehicle financing, warranty, and insurance. These businesses are so heavily regulated that you could argue that a dealership must also include its own law firm.

The dealer also partners with a manufacturer (supplier) who has the shared objective of selling vehicles at a profit, but often with a different approach to achieving that milestone. There are some different and often conflicting objectives along the way, and little understanding or concern about each dealership’s unique challenges and opportunities.

The Players

Operating a successful dealership is an exercise in relationship management — managing relationships between employer and employees, supervisors and subordinates, customer service and sales personnel and customers, the dealership and the manufacturer, the dealership and various vendors, and so on.

A single transaction often involves the same customer moving from sales through financing, warranty, and insurance, and ultimately to the service business. Personnel must be skilled in their respective areas, as well as in dealing with customers and coworkers. The dealer must ensure that this multi-layered relationship among personnel and customer is consistently exceptional at every stage, with every single customer, dozens of times each day.

Compounding the challenge is that personnel can range in education and life experience from those who have not completed high school to people with advanced degrees and others who are more mechanically inclined. Successful dealers are great at attracting, engaging, and retaining the top talent required, placing them in the roles where they perform best, and encouraging and facilitating collaboration among a diverse workforce.

A Complex and Fascinating Ecosystem

As I brought my neighbor up to speed on the complexity of auto dealerships, I realized again why I find this industry so fascinating and rewarding. I can think of few other businesses that combine the same level of operational complexity and interpersonal relationships — an ecosystem that engages both my knowledge of business law and my passion and expertise in helping my clients navigate the relationship dynamics that enable them to fully utilize their human capital and clear the human hurdles that often stand in the way of businesses achieving their full potential.

Working with these many moving parts and players is one of the main reasons I find the auto retail industry so interesting and why I spend a significant amount of time working with its participants and constantly striving to learn more about the auto dealership industry.

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Disclaimer: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Stephen Dietrich, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
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About The Author: Stephen Dietrich is an attorney and author who has a passionate interest in the human side of business. His distinctive combination of legal and business knowledge, human insight, and dedication to clients makes him uniquely qualified to help corporate leaders and other C-level executives navigate high-value mergers and acquisitions, restructure transactions, and manage day-to-day operations. Through this blog, Stephen shares his extensive experience and unique personal and professional insights in the hope of stirring thought and dialogue that leads to ever deepening insights and understanding. For more information, please visit www.StephenDietrich.com.

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