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Q&A with John Spader, president of Spader Business Management - Trade Only Today

Q&A with John Spader, president of Spader Business Management

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John Spader is president of Sioux Falls, S.D.-based Spader Business Management, which defines itself as a "resource for a dramatic course to improved productivity, profitability and performance."

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Spader, 43, is one of the primary instructors for the company's popular Total Management Workshop and also presents various other business management workshops and seminars. He is the author of a number of articles that have appeared in industry journals and he is frequently invited to speak to such groups as the Marine Retailers Association of America, Recreational Vehicle Dealers Association of America, North American Equipment Dealers Association, and the Outdoor Power Equipment Institute.

Spader has worked closely with companies in a variety of industries around the world, including marine, as a small business management resource provider and Spader 20 Group facilitator. He has consulted with associations and manufacturers, focusing on privately owned businesses where owners' personal savings are on the line.

Spader lives in Sioux Falls with his wife, Carol, and two children, 10 and 7. In his free time, he enjoys the outdoors, particularly fishing and hunting.

Q: What are 20 Groups, and why do dealers join them?

A: It's a group of dealers who are going through the same things in the same industry, fighting the same battles. They get together three times a year, taking turns meeting at members' dealerships. Some get together fewer times a year, and we're doing online meetings with them in between the face-to-face meetings, so our models have really evolved. A majority of the groups get together three times a year for two to two-and-a-half days.

Spader provides a facilitator who knows the dealerships well and leads the discussions. It's all about learning from one another, helping one another, and being one another's board of directors to help each other get better and grow, and to benchmark and compare and see how others are solving those issues.

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They have the name "20 Groups," but we have some as low as seven or eight members to a high of 20. Most groups are between a dozen and 18 members. However, some groups intentionally limit membership to no more than 10 to 12. That allows them to get more individual attention.

Q: What are dealers looking for with their 20 Groups?

A: Market intelligence is one of the biggest things. Things are changing so fast. What is happening with retail and wholesale financing? What trends are developing with customers? What do they see in the economy? What signals are coming from manufacturers? What's going on with those relationships? It's the current issues, and the only way you're going to truly get that is by sitting with others who are going through the same thing.

A few other things [they are looking for] are confirmation. We've had some new members join recently that said, "We thought we were in a vacuum by ourselves. We just didn't know." They're also looking for of out-of-the-box ideas. In any tough times, some great new things come out of it. There's always that silver lining. What's working? What's not working? Any industry insights? In a lot of cases they may not be looking for this, but something they often get is the support of the other dealers, which helps them stay positive in front of their employees back at the dealership. A positive attitude during these times is invaluable.

I can't tell you how many times I've heard a dealer comment in the last couple of years, "I've got to keep the game face on in front of the employees, and [a 20 Group] is someplace I can come and just pull the plug and let it all hang out, and people really understand where I'm at." Fellow 20 Group members really get it, so in a lot of cases it can almost be a support group. You can get it all on the table and [say] woe is us and then get that out of the way and address the reality.

It's a network. It's not just about the times you get together with the meetings. They'll talk as much, if not more, between meetings as they do in meetings.

Q: How is membership holding up, and what changes have you seen due to the economy?

A: We've seen some people come and we've seen some go because of financial reasons. A lot of the members who have dropped, it's as much about time as it is financial, because they've shrunk the business so much that being gone that amount of time [is a hardship]. That's where we've done some online meetings and some other things for them. I've even recommended to two or three that were going to stay in the group ... as much as we'd like to keep them, it's probably best for them to not stay [because of] where their business is at during these tough economic times. Almost all the members that have dropped from our groups say they will be back as soon as they know they're going to survive.

There are people looking for answers who never were before, so you get some new members. But it's not like the masses are jumping to get in. Everyone wants answers, but most are just really hunkering down.

Q: What are dealers' main concerns these days?

A: Cash and cash flow, retail and wholesale financing, and the uncertainty as to manufacturers and how stable are they? When your life savings is on the line and the rules are changing daily, it's just hard to keep up. What game are we playing? The rules of the game are changing so often and so fast. That's the biggest concern.

If a manufacturer goes out of business and I have a lot of its inventory on the lot, I [take] a serious hit. We've seen a lot more of that in the RV industry. I don't even know what the number is now, but a lot of the major manufacturers went out of business, and the value of inventory on dealers' lots dropped by 30 to 40 percent overnight.

So the manufacturers, financing and cash are the main things - on top of "Can I survive this?"

Q: Regarding the relationship between manufacturers and dealers - are manufacturers meeting dealers' needs?

A: It's an area of concern. First of all, it's important to say dealers truly don't know what manufacturers are going through in most cases, and manufacturers truly don't know what dealers are going through. We've outlined behavior patterns of both manufacturers and dealers in one of our industry models that describes what [each] do when they're in survival mode, when they're in drive mode, or when they're maximizing. Most are in survival mode now.

The one thing dealers often don't understand about manufacturers is that manufacturers almost have it worse than dealers right now because they've got no revenue stream. Most dealers still have some storage, a marina or service they can manage down to, but a lot of manufacturers just have zero.

It's tough for both. You're seeing a lot of character differences come out - or philosophical differences. Some dealers are saying about manufacturers, "Boy, they're really stepping up to the plate, trying to be more of a partner and working with us more than ever before." Others are saying the complete opposite. There are strains that have never been at this level before. For some of them it's going to cause better relationships and for some it's going to cause the opposite.

Q: Do you see dealers using the service side of their businesses to make up for the lack of sales?

A: I wouldn't say it's making up. It's become the thing that's allowed them some stability as sales have dropped. I'm not going to say there aren't dealers out there whose service volume has gone up, but the extra service volume they may be getting is nothing close to what they've lost in boat sales and F&I. What it's allowed is some revenue coming in and some stability.

If you really study the numbers, which we do in our 20 Groups, looking at the percentage of service work the last few years before this bad economy you observe the following: Of 100 percent of your labor, 15 to 20 percent may have been warranty labor, another 20, 30 or 40 percent may be unit prep and another 10, 15, 20 percent is extras put on for the people that bought boats. If a good share of your boat sales go away, a good share of your service revenue also goes away. In a lot of cases you've got to double, triple or quadruple your cash customer service just to keep the same level of service volume, because all the other service was sales-department driven.

Now, service is very important. Those that are holding their own, are doing OK, still making some net profits - the one thing they have in common is they are all focused on service and are maximizing everything they can out of service. But even those dealers that are holding their own have made severe adjustments, because service isn't going to make up for all those lost sales. But it does give stability, it does allow you to get orphan customers [from dealers that shut down]. That's one place where so many dealers are missing opportunities. If another dealer goes out of business, you ought to be over there trying to buy his customer list and getting on the phone, because those will turn into retail units at some point in the future.

Q: What do dealers tend to overlook that could help them grow their businesses?

A: I would go back to service, and there's two pieces to that. A lot of dealers have made a commitment - they built the facilities, they staffed up, they have techs - but watch where their time and energy goes. You will notice that they really haven't mentally committed to [providing] the best service around and [being] the place that everybody wants to come for service.

They'll spend hours negotiating on one boat, but they'll spend 15 minutes addressing service department issues during the week. The skill set and the culture of what it is to run a high- performance service department is the opposite of what it is to run a big-ticket sales department. That's part of it. Those that are naturally good at selling are typically not naturally good at service and vice versa.

Another big [oversight] now is the Internet. Following up, getting back to the basics on sales, measuring close ratios - so many are not doing that. We have mystery-shopped in every industry - dozens, if not hundreds, of dealerships - and it's not uncommon to request information and it takes 10, 15, 20 hours or more for somebody to respond. Treat that e-mail request for information just like a phone call or a customer walking through the front door. Somebody will e-mail for information, and they'll leave that to sit for a day or two days or never get back to them. Would you do that to a customer who walked through the front door or called on the phone?

Q: What advice do you have for dealers?

A: Dealers need to ask themselves: 1) Do I have what it takes to get through this, and 2) do I want to do what it takes? There have been a lot of dealers I've worked with one-on-one, and when I've asked that I get a long silence, and they say I really don't want to do this and my passion is gone. That's OK. That doesn't mean you're a failure. This is a whole different set of rules than what many signed up for. Just really be honest with yourselves and ask yourselves the question: Do I want to fight this battle or not. It's OK if you don't.

Q: What lessons can dealers learn from the downturn?

A: Make sure you have the basics down solid before you grow - grow on a solid foundation. So many just grew and, if you look below the hood, the foundation was not solid. As things come back, make sure you're on a solid foundation. And [pay attention to the] balance sheet and cash flow management. Most dealers ... don't understand the balance sheet, and that's just something they need to get into and understand better because that's a big part of their foundation.

This article originally appeared in the November 2009 issue.

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