Stick or Twist? Consolidate or expand?

14 November 2013

Bank of England Governor Mark Carney says that the UK recovery has “taken hold” and unemployment will fall sooner than it forecasted: the latest in a series of positive reports on the UK economy. So you might be thinking about catching the wave of Economic growth and expanding your business.

Stick or Twist? Consolidate or expand?

ASE report average dealer profits stand at £180k at the end of September ytd. That’s 1.6% ROS, and with cash in the bank you may be thinking about investing in further opportunities. But are you in the best position to expand? Only do it if it is right for your business!

Expansion has to be a part of a strategic plan for your business that has been thoroughly thought through. Don’t be railroaded into taking on another territory by a manufacturer. They often need to move quickly to fill a point and you may not have the time to think about it when it happens. Make sure you have a sanity check before you commit, understand what YOU want to do, think long and hard about it, take advice and do the sums.

1. Make sure you can afford it

At our last Pole 2 Pole event in conjunction with Motor Trade Consulting, we discussed the Hierarchy of Financial Needs which identifies whether you are generating enough cash to do everything you need to do in your business. You may have cash in the bank, but having enough to buy a business is only part of the equation. If you can’t fund the working capital requirements and loan repayments for your existing and new businesses, YOU could be the next dealer being acquired!

2. Make sure your Management is ready to take on more responsibility

You cannot grow your business without having the right people. It is vital that you have sufficient human capital in your business to maintain the performance of your existing business as well as turning round (for it often is the case) the business you are acquiring. Don’t let your existing customers down by spreading yourself, or your team, too thinly.

3. Bring your Stakeholders onside

Ensure your key stakeholders are happy for you to expand. Your Shareholders, Manufacturers and Funders all need to be brought into the loop at an early stage in order to address any concerns they may have.

The key is being ready. Have a strategic plan NOW. Establish whether you are in a financial position to expand NOW, speak to your stakeholders and grow your team NOW so that you are in a position to move forward quickly with your growth should the opportunity arise

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