AUTOFORUM

Resilience, Focus and Persistence: your antidote to a listless business climate

Mar 15, 2016 Robert Kaiser Business, Economy, RobertKaiser, Aftermarket, Dealership

Robert Kaiser

There is no doubt that 2016 has not started particularly well and is instead living up to the forecasts by economists that this is going to be a tough year. This does not mean all is lost and that we should cover ourselves in ash and sackcloth. There is always a way forward and what is required for us to survive are focus, resilience and persistence! There are challenges but also opportunities for the retail automotive sector during the following months. Let’s look at some of them:
Challenges

1. Taxes and Utility Costs

The Government budget presented in Parliament in February is widely seen as being an expression of prudent fiscal management and there was an absence of what many economists believed would be significant interventions in the form of tax increases, except perhaps the rather hefty increase in the fuel levy from 1 April. From a business point of view therefore, the 2016/17 budget is one that business could live with, but that is unfortunately not the whole story. Expect increases in property taxes and utility costs (water, sewerage, refuse removal, electricity) that will most assuredly be implemented by local authorities countrywide during the course of the year, usually by 1 July, the start of the financial year for most local authorities. We already know that Eskom has been granted an increase of 9, 4 % in electricity tariffs and that is the first salvo in the next round of increases.

2. Interest rates
We are in an upward spiral and expect further increases in interest rates as the year progresses. Not a good time to run an overdraft or incur debt. Cash is King!

3. Labour
If your business is part of the automotive aftermarket, you will be affected by the negotiations for a new substantive (wages and other benefits) agreement. The current 3- year agreement in the retail motor industry expires at the end of August this year. Hopefully the parties to the Motor Industry Bargaining Council (MIBCO) where negotiations will take place, will reach an agreement without strike action, which we certainly do not need. Be aware and stay informed on this issue. If you are a member of an employer’s association that is a party to the Bargaining Council, you will have an opportunity to participate in the mandating process preceding the commencement of negotiations. It is very important that you participate and support your associations as they can only negotiate what they are mandated for by their members. The employers’ associations who are parties to the Bargaining Council are the RMI, FRA and Neasa.

4. Cash Flow
Management of your cash flow on a daily basis is always an imperative for a business to stay healthy and solvent. Enough said!

5. Credit Control
A debtor’s ledger should not be allowed to grow a beard and if you are managing your cash flow, your appreciation of the necessity for tight management of credit control will grow. Beware of granting credit, it is easy to make very costly mistakes!

Opportunities

1. Marketing and training
We know that a tight economic situation calls for cost cutting and prudent management and marketing and training budgets are favourite first line casualties for cost cutting. To me, it just doesn’t make sense to cut on marketing activities when you are actually trying to be out there in the market to only retain existing customers, but winning new ones? The same
goes for training of staff; the market moves fast and in most areas there is a constant need for training of your staff to ensure that your business has the necessary skills in place to provide relevant and superior products and service to clients and ensure that the business can deliver what its clientele needs and expects. Having said that, it does not mean that you do not need to review the manner in which you apply your marketing and training spend; there may be ways and means by which you could fulfill your marketing and training objectives in a more cost-effective manner. There are always opportunities for cost-cutting and improvements in efficiency if some focused thinking is applied to all the processes in the business.

2. Identify new markets and niches
This may be a good time to reflect on your business and the environment in which you operate; do some serious research to determine if there are any opportunities for your business to introduce a new product or service or in some other way to set your business apart from the mainstream in your sector, which would enhance the uniqueness of what you offer to your customers, without going the discounting route (which could be commercial suicide!)

3. Your Team
People make or break a business and in tough economic times, a motivated, passionate, skilled and loyal employee corps can make a gigantic difference to ensure survival. Justice cannot be done to this important and complex subject here, but suffice to say that it is a matter that requires deep and thorough consideration by any business owner and manager.
The Retail Motor Industry remains viable even in a tight economy A huge advantage of business in the retail motor industry is that it remains viable, even in a tough economic climate; vehicles need to be repaired, fuelled, tyred and accessorised.
The drop in new vehicle sales has to date not assumed disastrous proportions, used vehicle sales are holding up and the age of the car parq is steadily increasing, thereby enhancing business opportunities in the aftermarket. This is borne out by the latest Motor Trade Sales Stats for the quarter ended 2015, which was released by Stats SA at end February. The figures speak for themselves. The recurring nature of vehicle maintenance makes customer retention and aggressive marketing to woo new customers so important in this industry.

What an opportunity!
There is a lot of light and it isn’t a train!

Few people realise that the South African GDP is dwarfed by the total value of the Johannesburg Stock Exchange (JSE) , the 19th largest stock exchange globally and the largest, by far, on the African Continent. The total market capitalisation of the JSE is a whopping 300% larger than the value of the SA GDP. Add to that the value of thousands upon thousands of unlisted companies and the figure may well be staggeringly high in comparison. If this truth alone does not give you hope and reassurance that we are not going south, but are just experiencing a blip on our northerly trajectory, what will?

Business, Economy, RobertKaiser, Aftermarket, Dealership

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