By Chris Saraceno, Kelly Automotive Group
After 35 years in the automotive industry and 22 years as a vice president and partner in the Kelly Automotive Group, I’ve been involved with several dealership acquisitions and in discussions with many others that, for one reason or another, did not proceed.
From this experience, I’ve learned it’s critical for everyone involved to be prepared before, during, and immediately after the papers have been signed. The following checklist includes action items we’ve found particularly useful when bringing a new dealership or franchise into our automotive family. This is not a complete list — every situation is unique — but here are some common core items every checklist should include.
- Receive Approval from the Manufacturer/OEM and Meet the Representative — This should be one of the first steps in any acquisition. The manufacturer has to sign off on any transfer of ownership, so creating a good rapport is a must for future success.
- Decide Who’s Going to be the Key Person Communicating with the OEM —Having someone responsible for this is critical for ensuring nothing falls through the cracks during the transfer.
- Choose a Contractor for Possible Redesign — Are you going to remodel/refresh the look of the dealership? To minimize any downtime after you take control, decide early on which company you’ll use to make this happen.
- Decide on a Floor Plan Funding Source — Will you go with OEM financing or with another financial institution to make this happen?
- Decide Who’s Going to Lead the Dealership — If you’re going to retain the current leadership, bring them into the planning and transition team directly after closing. If you’re going to choose your own leadership, make that decision and bring them on board as soon as possible.
- What Benefits Have Been Offered to the Staff? What Will You Offer? —Become familiar with health insurance and other benefits (dental, 401(k), disability, life insurance, vacation, etc.) that the seller provided to his/her employees. How do they compare to what you offer to your current employees? Are there changes to make?
- Decide Who Will Deal with the Vehicle Insurance Carrier —This is too important a task to leave vague, so assign who is going to make sure the inventory has adequate coverage.
- Establish a Reinsurance Company or Decide if You’ll Sell the Factory Warranty —Reinsurance is a profit center for many dealerships. If your group has this mindset, take the steps necessary to get one started in the new dealership; if not, make sure you’re up to speed on what the manufacturer offers.
- Perform Appraisals of the Dealership’s Loaner/Courtesy Vehicles —Your fleet of courtesy vehicles represents your dealership to both customers who need use of them and to potential customers who see them out on the road. Make sure they’re well maintained or make plans to refurbish or replace them.
- Review the Seller’s DMS and Incorporate your Company’s Accounting Policy and Procedures After Closing — It’s critical to get the new dealership in line with your other rooftops as soon as possible.
- Review All the Contracts the Dealership has with Vendors — If your group has vendors it does business with, it will probably be in your best interest to move the new dealership under their umbrella. If the dealership is locked into contracts with other vendors, it’s better to know this early on.
- Become Familiar with Factory Incentives —This is especially true if the franchise you’re adding is new to your company. Learn how it does business so you can take full advantage of the opportunities.
- Get Access to Critical Systems — This includes Google analytics, CRM information, log-ins to the website, backend tools, email accounts and other critical items. Perform an audit to see what the dealership has already and what you’ll need to add.
- Make Sure All the Dealership’s Licenses are up to Date — Be ready for business on Day One. Make sure licenses (banking, business, agricultural, and any other certificates needed) are current.
- Transfer Ownership of Social Media Accounts — This includes Facebook, Twitter and Instagram, as well as online review sites like DealerRater, Yelp and others. If the dealership has no social media presence, or needs better online representation, be prepared to build it.
- Obtain a List of All Current Owners by ZIP Code — Make sure you get an updated list of current customers so you can tell what kind of base you’ll be getting and where there’s room for improvement.
- Prepare Your Publicity —Handled correctly, a dealership coming under new ownership is an exciting event for the community. Be ready with press releases, opening events and letters and other communication to the current customer base. It’s a new beginning; make sure everyone is ready for it.
Keep in mind that buying a dealership is not an instantaneous process. The manufacturer has to approve the sale, there needs to be financial statements gathered from every investor and so on. Expect the transfer of ownership to take between 30 and 120 days. During this time, follow all the steps necessary to make this acquisition go as smoothly as possible and provide positive returns for your company.
Chris Saraceno, vice president and partner of the Kelly Automotive Group, is also a speaker, mentor and author of the book Theory of Five. He can be reached at firstname.lastname@example.org and 1-321-960-6133.