Workshop 2011_Investing in the complex used car cycle

1. WORKSHOP OPERATIONAL LEASE COMPANIES Improving cash flow and results through the management of the april 5 2011 Vienna, entire “used car” cycle th

2. Sales consulting with strong focus on automotive Nicolas Martel Optimization of sales organizations  Implementation of used car programs  Sales management outsourcing Please do not redistribute this document designed only to be a visual guide to the presentation.

3. Cash flow: key factor of used car operations The basic “used car cycle” Breaking down the basic “used car cycle” Investing the complex “used car cycle” Q&A Please do not redistribute this document designed only to be a visual guide to the presentation.

4. Please do not redistribute this document designed only to be a visual guide to the presentation.

5. Many small operators look at sales margin more than their stock rotation Sales margin being: (sale price of car + sale of ancilliary items) – (cost of purchase + cost of preparation + direct sales costs) Please do not redistribute this document designed only to be a visual guide to the presentation.

6. The sales margin is only part of the equation of a profitable used car business activity Please do not redistribute this document designed only to be a visual guide to the presentation.

7. Used cars are perishable items Average depreciation: 20% year on year Regular arrival of “fresher” models Immobilized cash is not free Please do not redistribute this document designed only to be a visual guide to the presentation.

8. Financial immobilization of capital is strong: Cost of capital: 0,5% per month (50€ per month/car with average price 10 000€) Please do not redistribute this document designed only to be a visual guide to the presentation.

9. Depreciation and cost of capital are also only part of the equation of a profitable used car business Please do not redistribute this document designed only to be a visual guide to the presentation.

10. Stock rotation means a better “return on capital” Purchase price: 7 000 € Selling price: 10 000 € Sales margin: 3 000 € Please do not redistribute this document designed only to be a visual guide to the presentation.

11. Stock rotation means a better “return on capital” EXAMPLE 1: 45 DAYS Day 1 Purchase price: 7 000 € Day 45 Selling price: 10 000 € Sales margin: 3 000 € Investment return: 42% in 45 days Yearly sales margin: 24 000 € Yearly investment return: 342% Please do not redistribute this document designed only to be a visual guide to the presentation.

12. Stock rotation means a better “return on capital” EXAMPLE 2: 30 DAYS Day 1 Purchase price: 7 000 € Day 30 Selling price: 10 000 € Sales margin: 3 000 € Investment return: 42% in 30 days Yearly sales margin: 36 000 € Yearly investment return: 514% Please do not redistribute this document designed only to be a visual guide to the presentation.

13.  15 days difference in the rotation of the used vehicle: ◦ 12 000 € more revenue per year from the same invested amount of 7 000 € ◦ Each day of faster rotation brings back 800 € of revenue  With equivalent fixed costs ◦ Storage ◦ Sales team ◦ Cost of capital Please do not redistribute this document designed only to be a visual guide to the presentation.

14. With a higher monthly volume, these amounts can be extremely significant. Fast rotation of the vehicles enables the same amount of cash to be invested in MORE potentially profitable transactions. Please do not redistribute this document designed only to be a visual guide to the presentation.

16. “Purchased” INTERNAL PROCESS Sold The “family” recipe is the key between 45 days and 30 days Cash out Cash in Please do not redistribute this document designed only to be a visual guide to the presentation.

17.  When we think of the “family recipe”, we think a lot about getting sales out fast. ◦ We always should assess our capacity to sell as fast as possible  But getting sales out faster and faster may also decrease margin and generate higher advertising costs: ◦ More promotions ◦ More advertising Please do not redistribute this document designed only to be a visual guide to the presentation.

19. “Purchased” Sold INTERNAL PROCESS Time for the car to be sold… Please do not redistribute this document designed only to be a visual guide to the presentation.

20. “Purchased” Sold INTERNAL PROCESS Time to make Time for the car the car ready to be sold… for the sale… Please do not redistribute this document designed only to be a visual guide to the presentation.

21. INTERNAL PROCESS Time to make the car Time for the car ready for the sale… to be sold… - Administrative management - Advertisement and marketing - Assessment of vehicle - Phoning contacts - Cleaning / Repairing - Price negotiation - Fixation of price - Sales administration - Providing information to (leasing, invoicing, verification sales of payment) -Getting the car physically to the selling point Please do not redistribute this document designed only to be a visual guide to the presentation.

22.  A high stock rotation is not just a question of “hard selling” ◦ It is also a question of internal organization Orientation target for a new / used car dealer: 10 days from purchase to ready to sell INCLUDING repairs and mechanical control Please do not redistribute this document designed only to be a visual guide to the presentation.

23.  Food for thought ◦ What are the bottlenecks in my organization?  Known AND unknown ◦ What is the origin of these bottlenecks? ◦ How much do these bottlenecks cost?  In terms of cost of capital  In terms of vehicle depreciation  In term of lost opportunities Please do not redistribute this document designed only to be a visual guide to the presentation.

25. INTERNAL PROCESS Later… Soon… Now… SALE These These These vehicles are vehicles will vehicles are known, but be part of the their sale is purchased basic “used distant back soon car” cycle Please do not redistribute this document designed only to be a visual guide to the presentation.

26.  One key word: tracibility ◦ I know what is coming ◦ I prepare the work ◦ I plan for eventual difficulties ◦ I shorten the basic “used car” cycle Please do not redistribute this document designed only to be a visual guide to the presentation.

27. INTERNAL PROCESS Later… Soon… Now… SALE I measure the I seek out I work with future means potential the most for selling buyers for effective these these means for vehicles vehicles getting vehicles out of stock fast Please do not redistribute this document designed only to be a visual guide to the presentation.

28.  Tools available for investing in the complex used car cycle ◦ Software with vehicle status ◦ Time goals and monitoring  Administrative processing  Vehicle estimation  Vehicle preparation  Vehicle merchandising ◦ Sale goals Please do not redistribute this document designed only to be a visual guide to the presentation.

29.  One main idea ◦ Preparing all the team for future sales:  Everyone has a role to play  No “walls” between vehicle administrative management and vehicle remarketing  The sale of the used vehicle starts right after its first registration Please do not redistribute this document designed only to be a visual guide to the presentation.

30. Q&A Please do not redistribute this document designed only to be a visual guide to the presentation.

Workshop 2011_Investing in the complex used car cycle

Workshop 2011_Investing in the complex used car cycle

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