When Mike Beyer created a central accounting office for his two dealerships nine years ago, his competitors scoffed.
The office took over payroll operations and accounts payable and receivable for both stores in northern Virginia. Back then, it seemed like a revolutionary notion. Today, Beyer says, centralized operations are largely responsible for his company's success.
"The only way we could afford to buy dealerships was to consolidate accounting," Beyer told Automotive News. "The ones with high labor expenses are getting crushed."
Beyer says his company has cut its personnel costs to 25 percent of operating income. At a typical dealership, it's often 40 to 45 percent, industry analysts say.
Beyer Automotive Group has an annual net profit margin of 4 percent before taxes, Beyer says. Before he centralized operations, he adds, it often dipped below 3 percent.
The average new-vehicle dealership's net pretax profit margin is 1.7 percent, the National Automobile Dealers Association says.
Beyer's company has grown to four dealerships. A fifth store is being built. The stores sell Volvo, Land Rover and Subaru vehicles.
Beyer is one of a growing number of dealers who are centralizing operations as their groups expand.
Those operations include accounting, advertising, used-vehicle wholesaling, information technology, human resources and employee training, legal compliance, warranty administration and facilities management.
Streamlining operations enables dealerships to slash personnel costs, boost their purchasing power and improve customer service. Dealers say that standardizing their practices makes them more efficient retailers.