Helping out dealers hitting hard times

Guill Marais, senior business consultant at Sewells-MSXI.

Cyclical downturn

He says that the health of the South African motor industry tends to go in cycles of approximately eight years. Marais said that 2016 was, hopefully, the end of the cycle that began with the global economic meltdown in 2008/9. The previous low point had been 1999/2000. However, he warns that the upturn will be slow and it will need dedication from management and the full cooperation of staff members to ensure profitability in ongoing tough trading conditions.

The Sewells-MSXI consultant says he has found that one of the major reasons for these cyclical downturns is that management tends to forget that they are in the “people game”, not just the “motor game".

“When times and the economy improve then the focus tends to move away from people – be they staff or customers – and shifts to pure business,” explained Marais. “Only when the dealers hit hard times again do they realise they have tended to neglect the people aspects of their business and have to quickly put programmes in place for team-building at the dealership and relationship building with customers as countermeasures to the downturn.”

Multi-franchising

Marais is a strong supporter of multi-franchising for small volume dealers and believes this trend will continue to grow in South Africa, where he says many OEMs make demands that push up operating costs of a dealership substantially and impact on sustainability.

He says that multi-franchising need not just be limited to other automotive brands, but could also include joint ventures with common interest stores such as those selling outdoor equipment, top end bicycles, and the like.

Finding the X-factor

Marais sees his role as looking after a struggling dealership through what he calls the “operation and intensive care” phases before handing it over to colleagues at Sewells-MSXI who monitor the dealership’s health on an ongoing basis and give advice where and when necessary. When he is called in to assist he arrives in his Mercedes-Benz Vito, which is his mobile office. He then spends two to three days analysing not only the business, but also the environment in which it operates and its potential.

He says he finds that a lack of proper leadership is usually the cause of motor dealerships getting into financial deep water.

Marais had a spell at Barloworld before joining the Super Group as franchise director and dealer principal for the Honda and Volvo brands. During his time at the Super Group, Marais developed a formula to evaluate a motor business in terms of its economic potential.

“What is critical is to find the dealership’s magical ‘X’ which is its sales potential, staffing requirement and the financial support systems required. We develop a virtual dealership right down to income statement and balance sheet. Once we have found that ‘X’ we can start with remedial treatment such as restructuring and target-setting."