Negotiating DMS Contracts: When should I start? Mistakes dealers make.
In today’s economic situation, dealers want to know exactly what is going to happen and see things improve before they make any decisions. Some are paralyzed, unable to act. Are they the smart ones or are they missing some great opportunities?
Be greedy when others are fearful and fearful when others are greedy
Warren Buffet
Since it is our business to help dealers deal with technology in their operations, we’ve given a lot of thought to the actions dealers can take in these very tumultuous economic times.
The first instinct is to cut expenses.
Who could disagree? When it comes to dealership technology, the most obvious first step is to reduce your overall DMS costs and improve your store’s efficiency. Our mission is now, and has always been, to help dealers in this quest. There is no better time than now to take action and reap the rewards. In the real world, technology is always getting cheaper. Right now a dealer has more clout than ever before when he is dealing with DMS providers (and others who offer dealership technology). Why not seize this leverage that is born of increased competition and a slow economy to spend less and get more for your tech dollar?
Sometimes the path to these savings requires some “out of the box”, counterintuitive thinking. It’s important to remember that you are not buying a computer. You are contracting for computer services. It’s just like changing to a new cell phone plan. You can often get a better deal (and a free phone!) if you are proactive. There’s always a better deal for those who ask for it and are ready to make a decision. At Gillrie, we know how to help you maximize the savings. Call us to discuss your options.
It may be time to start negotiating.
We talk to dealers every day. Everyone is cutting costs. Some are looking towards the future. They realize that increased revenue is the only long term solution. They are actively seeking the opportunities and bargains that the vagaries of the market are exposing. Some are finding they can acquire the competition at a fire sale price. Others are establishing additional profit centers in their current facilities. Whether they are buying, selling, contracting or expanding, there are always DMS issues and questions. Often the solution is a simple one, sometimes it takes more finesse.
Even in the best of times, no dealer likes investing the time and effort it takes to solve the technology cost- benefit equation. It’s easy to let the very daunting circumstances extant today provide all the reasons a dealer needs to procrastinate and avoid thinking about computers and the future. Eventually they find they are literally forced to make some decisions. Negotiating “under the gun” is never a good idea. Dealers are finding that the “month to month” option that was there for them in the past no longer exists. When a temporary arrangement is available, it is often fraught with dangerous ramifications. In an industry where costs are dropping and in a market where the buyer is in charge, extending the status quo is very likely the more expensive choice. If your vendor rep is encouraging you to do nothing, it probably means that you are paying too much and he doesn’t want to rock the boat. Let the experts at Gillrie help you assess your position.
It’s time to start negotiating if:
- Your DMS hardware and /or software have become obsolete and need replacement. Are you running out of space or memory? Do complex operations (e.g. month/year end financial statements) move at glacial speed? Do you need a function that can’t be added to your current system? In many cases, you can update your system and actually reduce costs. You just need the right strategies and information. Call us if you need help!
- You are growing, expanding, adding facilities, franchises or new points. You need to expand your DMS capabilities to match. You may be asked to assume existing obligations of the selling dealer. Many dealers swallow a poison pill without knowing what it is. Gillrie clients always know their options and can make the right choices.
- Your business is shrinking. You may have sold or closed a store. You just can’t keep paying so much for your technology. Don’t assume you can’t stay with your current vendor. DMS vendors are facing a tough, highly competitive market. You may be surprised by an innovative solution to your problem. Alternatively, it may also be time to seek out a new provider. Know all your options and know you are getting the best possible deal. At Gillrie, we are here to help.
- Your current contract is coming to an end. Don’t wait until the last minute. You never want to make a decision under pressure. You need time to research, get competitive bids and analyze current expenses and new options. At Gillrie, we used to recommend starting a year before your contract expired- now we think eighteen (18) months is probably better.
- A review of your DMS bills raises some issues. Has the vendor made a modification to your agreement? Has your monthly bill gone up? Do we need to add anything? Reduce services? Are there charges for items that are no longer used? Should some maintenance be canceled?
- You need a new phone system. You’ve heard that new IP telephone systems can save you money and integrate with your DMS (and CRM). Is that the right direction? Most dealers find they want to evaluate their options so they will not regret their choice later.What negotiating mistakes do dealers generally make?There are four areas where a poorly negotiated deal can fall short of the mark:
- The dealer misses important items that will have to be added later – when he has no leverage and will pay too much.
- The dealer buys items that he doesn’t need, won’t use or which just don’t work.He, nevertheless, pays for them for the next five to seven years.
- He simply pays too much. How can he get it right when he doesn’t know what the right price is? Often additional costs emerge that were not apparent when the deal was signed.
- He agrees to a contract that leaves him exposed. Because he neglects to insist on important addenda to the standard vendor contract, he gets some nasty surprises down the road. Clauses that look innocuous enough now may turn out to be dangerous later on.
You can be sure you will avoid these problems and make the right decisions if you choose the Paul Gillrie Institute as your ally. Whether you are considering a new system or renewing your existing contract, just give us a call at 800-576-6959
