Blog post by Bob Daglian, flexdrive CFO & EVP
It’s the first business day of the month, and like any other month the clock starts over on making money to overcome existing operating expenses in the dealership. It’s an experience I’m all too familiar with from my days of running Holman dealerships in a past lifetime. But, I remember all too well that each month profitability presented a mountain to climb.
Allow me to let you in on a secret…
As CFO of flexdrive, I think a lot about different business and financial models. The way the automotive industry is evolving means dealerships now have options for lessening the financial burden, while also striking a competitive advantage.
That’s where car subscriptions come in and it’s frankly the most exciting thing I’ve seen in a couple decades.
Think about subscription at its core. It’s a way for a dealership to have a sales cycle (subscription cycle) that generates recurring revenue, builds a repeat customer base and steers service work back to your dealership. Just by leveraging the inventory you have on your lot, subscription reduces the impact of operating expenses at the outset of each month and then goes a step further by improving service absorption.
Let’s really break it down.
It sounds cool in theory, but let me put it another way that I think will resonate even more. Subscription at its core fixes one of the dealership’s biggest challenges…idle inventory. Subscription at its ethos eliminates idle inventory costs and converts the inventory into a recurring revenue maker and a means to attract repeat customers. Another way to think about it, Airbnb monetizes people’s properties repeatedly…that’s how car subscription works.
It’s really that simple. Now the nuance comes in what vehicles you use on the program, subscriber characteristics and things of that nature, but that’s why companies like our’s exist— to simplify and take the guesswork out.
If you’re not convinced that subscription could be a financial advantage, I’ll leave you with this. Imagine the impact to the bottom line if you had a subscription fleet with 100 vehicles that delivered annuity-based revenue? Paired with existing sales and service opportunities, your operating expense mountain at the month’s start quickly becomes an ant hill. Reach out to our founder, head of sales or myself to answer any questions or further explain the points of view I shared today.