In the December 2008 issue of Modern Tire Dealer, independent tire dealers offered 25 tips to help you survive the recession and position your dealership for greater success when the economy rebounds.
Nine months later, the economy still finds itself in a deep slump.
While some economists have predicted that better days are ahead, recovery is not a lock. Survival remains the prevailing theme for most independent tire dealers, regardless of market or sector.
MTD recently spoke with 25 independent tire dealers who made the 2009 Modern Tire Dealer 100, which appeared in last month’s issue.
We wanted to find out what they’re doing to survive and, more importantly, thrive, in the midst of the worst economic climate since the Great Depression.
The goal was to collect practical, real-world tips and strategies that any independent tire dealership could implement. Here’s what these successful dealers had to say.
1. Go after new business. “Our existing customers aren’t going to buy the same amount from us as last year,” says Jerry Bauer, president of Durand, Wis.-based Bauer Built Inc. The 27-location dealership recently increased commission rates for its salespeople and store managers to motivate them to pursue and land new accounts. “Our theme for 2009 is ‘Get Off Your Grass.’ It was designed to suggest that we need to get out of our own backyard and into someone else’s backyard if we’re going to grow our business.” The strategy is working, says Bauer.
2. Ramp up your advertising. “I’m fully convinced that in times like these, you have to get someone else’s share of the pie,” says Gary Wright, president of Nebraskaland/Kansasland Tire Group, a 35-outlet chain based in Lexington, Neb. “You can’t do that by cutting back on advertising.” Nebraskaland is expanding its advertising program and has started running ads on billboards for the first time. “We just took two of the biggest billboards in the highest traffic areas in Wichita, Kan.,” which is one of the company’s biggest markets.
3. Offer employee furloughs. Bound Brook, N.J.-based Somerset Tire Service Inc. (STS) is one of the largest tire dealerships in the country with 115 stores throughout New Jersey, New York and Pennsylvania. “We have a thousand-person employee base, so we have to deal with costs in an aggressive fashion,” says STS President Bill Caulin. Earlier this year, for the first time ever, STS implemented a voluntary employee furlough program that lets workers take time off without pay. “You have to make a commitment to do the short-term cost control things.”
4. Adjust your product mix. Lewiston, Maine-based VIP Parts, Tires and Service has responded to the recession by increasing its private brand offerings, says CEO and President John Quirk. “We’ve given them more of our in-house share. We also have a good-better-best (private brand) strategy.” To buttress this approach, VIP has brought on three new private brand lines made by TBC Corp., as well as the Sumitomo brand, which it markets as a private label product. “The bottom of the economic food chain has always gravitated toward lower-cost tires. What we’re seeing in this economy is that even middle- and upper-income customers are looking at private brands.”
5. Spend capital carefully. Erlanger, Ky.-based Bob Sumerel Tire Co. Inc. is taking a long, hard look at every capital expenditure it makes. “We’re being very careful about what we’re doing,” says Todd Sumerel, president of the company’s Commercial Tire Group. “Do we need it? How badly do we need it?” It may sound simplistic, but by asking yourself these questions before writing a check, you can generate real savings, he explains. “We’re being very conservative, so we’ve been able to hang on pretty well.”
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6. Examine your payroll productivity. “Payroll accounts for a large percentage of our gross profit,” says Kevin Cates, president of Delta World Tire Co., a New Orleans, La.-based dealership that has 14 outlets. In an effort to get the most out of its tire and service techs, Delta World Tire has established labor standards for “every single job in our shop, from mounting tires to transmission flushes. We monitor our techs based on how many hours they’re billing vs. our standard. It allows us to match our head count with our revenue.” The company also has created an incentive plan for techs who achieve a certain number of billable hours. The program has been very well-received, notes Cates.
7. Readjust your gross profit to payroll ratio. Dan and Diane Hennelly, owners of Hennelly Tire & Auto Inc. dba The Tire Choice, a Ft. Lauderdale, Fla.-based dealership with 20-plus stores, were faced with a problem last November: reduce all store employees’ hours to 36 per week or eliminate two jobs at each store. “What do you want to do?” they asked their store managers.
“Twenty-four out of the 25 managers came back to us and said, ‘We had a team meeting and said we would rather stick together and tough it out than lose anyone.’” Hours were cut the next month. The following month, December, was the dealership’s all-time toughest period. Things began to turn around during the early part of 2009 “and when we looked at our profit and loss statements in March, we noticed our gross profit rate was much higher,” says Dan.
8. Use technology to go paperless. Around one year ago, Forest Park, Ga.-based Action Tire Co. came to the conclusion that it needed to streamline its accounting operations. The 11-outlet dealership found a way to accomplish this by going paperless. Action Tire now uses commercially available software that converts bar coded invoices to electronic files, which can be distributed with the click of a mouse. “It gives everybody a view of accounts and invoices and gives us faster response time,” says Vice President Jason Stewart. “It also has allowed us to reduce manpower” in the company’s accounting office.
9. Suspend your spiffs and incentives. Chabill’s Tire Service Inc. had a record year in 2008. This year, things have been different. “Margins are lower, not only on tires but also repair work,” says Charlie Gowland, one of the Morgan City, La.-based dealership’s owners. (Chabill’s Tire has 13 total outlets.) The company has been forced to make some cuts, including reducing sales spiffs and suspending incentive trips and monetary bonuses for salespeople. The good news is the cuts have resulted in savings, and just as importantly, “I don’t think the adjustments have adversely affected our employees’ attitude,” says Gowland. “We’ve been as transparent as we can in explaining to our employees what’s happening and why we can’t do certain things.”
10. Eliminate overtime. “Labor is the most flexible, controllable expense that you have,” says Jim Enger, president of Enger Automotive Inc., which has more than 20 stores in northern Ohio. Enger is controlling labor costs at his stores by suspending overtime for hourly workers. He implemented the practice last fall. “It was a tough adjustment to make. It took us about two pay periods” to work out the kinks. The strategy has contributed positively to his dealership’s bottom line. “The most important thing is communication with your employees. You have to talk about it. Don’t let it (come across) as a punishment.”
11. Expand your supplier base. “If you go back many years, you could buy from fewer suppliers,” says Phil Nussbaum, president of A to Z Tire & Battery Inc. in Amarillo, Texas. You still can do that. However, you may be missing out on new, more profitable products, plus access to better prices and terms, he adds. “As we’ve grown, we’ve discovered that if you open your eyes to opportunities and look at more suppliers, you become more competitive.” In addition, A to Z Tire, which also wholesales to other dealers across a multi-state area, has streamlined its tire delivery methods for maximum impact. “We’ve made detailed studies of each market we’re in, and we’ve focused our sales force so we don’t drive through a single market without dropping off tires.”
12. Scrutinize what your vendors charge. Dayton, Ohio-based Grismer Tire Co. carefully examines every check it writes to its vendors, and recommends that other dealers do the same. “Scrutinize every expense, from garbage pickup and office supplies to who you buy auto parts from — everything,” says Vice President John Marshall, who also is a past MTD Tire Dealer of the Year award winner. And if you’re smart, you’ll engage your employees in the process, he adds. “Get all of them onboard in terms of being the eyes and ears in identifying where you can achieve savings.” In some cases, Grismer Tire has paid employees a percentage of savings generated by identifying areas of improvement. “I’ve discovered they can find them equally as well, maybe better, than I can,” says Marshall.
13. Reduce staffing levels through attrition. “We started reacting (to the failing economy) in June or July of last year,” says Robert Kellogg, president of Warren Tire Service Center Inc., a 14-outlet chain based in Queensbury, N.Y. “We could see the trends, so we did some downsizing through attrition. Whoever left or retired, we thought long and hard about whether to replace that person.” In some cases, the dealership also shifted personnel to different jobs, based on need. “As a result, we cut back about 8% of our staff,” which has yielded significant savings, he reports.
14. Reduce your inventory. Toledo, Ill.-based Ben Tire Distributors Ltd. has found ways to save money by reducing its inventory levels “of domestically available merchandise,” according to Terry Carlson, Ben Tire vice president. “The reasons for this were the knowledge of price reductions brought on by lower demand and the reduction of raw material prices during the fourth quarter of last year and the first quarter of this year. Our vendors have ample inventory that is accessible in less than four business days.”
15. Install more efficient lights. Wilkes-Barre, Pa.-based McCarthy Tire Service Inc. has 29 locations spread across a large, multi-state area. Needless to say, it takes a lot of light bulbs to illuminate the dealership’s facilities and quite a bit of electricity to power those bulbs. That’s why the family-owned company is switching to more efficient light bulbs at all of its locations, says President John McCarthy. “In one location, we’ve already saved 2,000 watts a month.” McCarthy Tire also has attached motion sensors to its new lights “so they turn off if nobody’s there.”
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16. Take a 401(k) hiatus. Tough times require difficult decisions, says Mike McGee, president of McGee Tire Stores in Eaton Park, Fla. McGee Tire was forced to make a hard decision this past January when it suspended its contributions to its employee 401(k) program. Normally, McGee Tire matches up to 2% of employees’ contributions. “They can still contribute on their own, but we don’t contribute right now.” That will change, he adds. “We want to get back into it, hopefully by the third quarter or the fourth quarter, at the latest.” In the meantime, McGee Tire is saving nearly $5,000 a month by suspending its matching contributions.
17. Use eBay to dump excess inventory. After the economy tanked, Tucson, Ariz.-based Western Tire Centers Inc. found itself sitting on a lot of dead performance-oriented inventory, including custom wheels. Since then, the 20-outlet company has managed to shed $1 million in stagnant stock — not at the sales counter, but on eBay. “Performance is an inventory-intensive business,” says President Jack Furrier. “If you have dead inventory, you have to get rid of it. We probably lost a few bucks, but it was worth it to turn the inventory.”
18. Reroute your delivery trucks. Service Tire Truck Centers (STTC) delivers new tires, retreads and other products to all 26 of its locations several times a week. That translates into a lot of fuel used. To lower fuel costs, STTC is now “running our routes smarter,” says CEO and President Ron Bennett. During busy times, “we visited some of our stores four times a week. Some are now seeing three visits a week.” The Bethlehem, Pa.-based dealership also has dialed down its trucks’ regulators to 65 miles per hour, an idea it borrowed from the trucking industry.
19. Modernize your distribution system. “Everything is about return on investment,” especially during tough times, says Bill Williams, CEO of Moosic, Pa.-based Jack Williams Tire Co. “We don’t mind doing something if there will be a good return.” That includes spending hundreds of thousands of dollars to upgrade your distribution capabilities, which the dealership did a few years ago at its main warehouse. “We’re now all bar-coded and on the aisles we have guide wires for our forklifts... it enables (our employees) to pick tires more efficiently,” says Williams, MTD’s Tire Dealer of the Year award winner in 2006. “A lot of times you have to pay up front for efficiency. Sometimes that’s a tough thing to convince yourself to do.” But in this economy, it’s vital, he adds.
20. Clamp down on credit. “You have to get back to the basics” during an economic crisis, including controlling the credit you extend to clients, says Ricky Benton, president of Black’s Tire Service, a 29-outlet dealership based in Whiteville, N.C. “Just because they were good at one point doesn’t mean they’re good today,” he says. “We’re trying to get stricter. If it’s a commercial account, we’re trying to get personal guarantees.” This practice also benefits customers. “You’re not doing a customer any favors by letting them get far out on credit.” The bottom line? “If you haven’t collected on time, you haven’t sold the tire.”
21. Renegotiate your leases. Twenty-five out of Mountain View Tire & Service Inc.’s 30 stores are leased, which makes the Rancho Cucamonga, Calif.-based dealership’s vice president, Chris Mitsos, an expert at dealing with landlords. “When leases come up, we reach out to the landlord and say, ‘This extension is about to expire but we can’t afford the 15% kick (in rent). We’re asking you to keep the rent at where it’s been.’” So far, this tactic has worked every time, says Mitsos. Don’t be afraid to negotiate leases, he advises, especially if you’ve been at a certain location for a long time. “I think landlords are scared to death of losing tenants.”
22. Bench your players for a few innings. If your car count is down, don’t be afraid to remove employees from your stores, says Allan Harry, controller for Jensen Tire & Auto in Omaha, Neb. The last thing you want is idle employees, he explains. Jensen Tire uses an internal system to ensure maximum employee productivity. “Everyone has a certain (target) that we can track, so we know at any time during the day or week where productivity is at.” If work is slow, Jensen Tire will send employees home and then “bank” those hours, applying them toward busier days, such as Fridays and Saturdays.
23. Maximize every customer visit. “We’re trying to do the opposite of expense-cutting, which is ‘How do we maximize every customer visit?’” says Pat Logue, managing director, retail operations, for Dunn Tire LLC in Buffalo, N.Y. It starts with greeting each customer at his or her car, according to Logue. Every vehicle then receives a thorough inspection. “We make sure we’re not missing anything.” Dunn Tire also has added new services, including oil and filter changes, in an effort to be more of a “one stop shop.” And it’s processing customers faster than ever. “You have to turn the customer as quickly as you can.”
24. Shop the competition more aggressively. Shopping your competition has never been more important, according to Chris Wyborny, vice president of Ramona Tire & Service Centers, a 13-store chain based in Hemet, Calif. “We’re requiring all of our salespeople to be very conscious of our competitors’ pricing and we’ve given them the liberty to beat any price out there,” he says.
25. Stay positive. “People think there should be a magic answer” when it comes to surviving hard times, says John Turk, CEO and president of Cleveland, Ohio-based Conrad’s Tire Express & Total Car Care. “There’s no magic answer. I think the hardest thing right now is that many people get discouraged because it’s a little bit more of a grind and the rewards are arguably less. But the big thing is to stay motivated and keep your employees motivated.” ■
What are you doing at your company to survive the recession? What’s working for you? Contact Modern Tire Dealer Senior Editor Mike Manges at [email protected].
