4 options to wind down BHPH business
Continuing a series about creating a strategy either to retire or at least depart from the business, Julian Codding — a member of the National Alliance of Buy-Here, Pay-Here Dealers Hall of Fame — pinpointed four main options BHPH operators could leverage.
In compiling this list of four choices, Codding reiterated that he is neither an attorney nor an accountant, but that these are the quartet of possibilities he discovered when he decided to wind down more than 40 years of full-time commitment to the dealership.
“The Bible is correct that for everything there is a season,” Codding said. “We’ve all known people who have retired, gone home, sat in a rocking chair and made everyone around them miserable. If the season has come for a change in your life, welcome it with the same positive attitude you did when you started your business.”
First, Codding noted that operators could do what he did, simply shut down the lot and collect on the vehicle installment contracts unit the reach maturity. If there is any inventory remaining, those units simply can be taken to auction while a finance company location remains in operation to continue to take payments and service the portfolio.
Next, Codding offered what he called the “50 percent times two rule.” Operators can cut their sales volume by 50 percent during the first six months of the wind-down process, cutting operator overhead. Then after six months, the remaining 50 percent is eliminated.
A third choice: operators can sell off their portfolio in one lump.
“Get one bid for everything with no recourse to you,” Codding said. “Get bids from finance companies first, and then if you trust one of your competitors, get a bid from them. They are in a position to pay more if they have the financial resources.”
Lastly, Codding mention that a BHPH dealer can take on a junior partner and go through a buy-out process.
“Many new-car dealerships have changed hands in this manner,” Codding said. “There are a lot of positive factors if the person you sell to is the right person and the controls are in place.”
If BHPH operators choose to take the last route, Codding suggested that the ending structure have $1 million in outstanding notes, a credit facility for floorplan, as well as a credit line for another $1 million to originate more contracts as well as have working capital available.
Once the plan is in place, Codding mentioned two other suggestions when dealing with two other important constituencies — store employees and dealership service providers.
“Your employees are going to be completely different the moment they know you are shutting down,” Codding said.
“Don’t be angry and blame them for it. Once again, it’s human nature,” he continued. “While you and I wouldn’t steal as a result, their attitudes are going to nevertheless change immediately.
“Your vendors are going to want to be sure you are going to pay them,” Codding went on to say. “If you are going to ask for some payment terms, be sure you deliver on your promise. They have been one of your ‘partners’ over the years.”
Now that he is not selling vehicles every day, Codding is offering his Hall of Fame wisdom to operators who are members of the NABD or who attend one of the organizations events such as the upcoming East Coast Conference in Orlando, Fla., on Nov. 3-5. Through his website, Codding indicated that he wants to reach out to operators who are making the investment in training and development through what’s offered by NABD.
Beyond a segment labeled Compliance University, the upcoming NABD East Coast Conference features dual-track workshop sessions starting at 3 p.m. ET on Nov. 3, covering BHPH best operating practices and compliance. The program features many of the nation’s leading attorneys, experts and successful operators who will share their latest tips and insights that bring success in the highly competitive subprime auto finance market of today.
The NABD East Coast Conference is scheduled for Nov. 3-5 at the Wyndham Orlando Resort International Drive in Orlando, Fla.
The complete agenda and speaker information is posted and will be continually updated on the NABD website at www.bhphinfo.com. Registrations can be made at the website or by calling (832) 767-4759.
Editor’s note: The first segment in this series when Codding touched on the two most important individuals operators should consult if they’re leaving the business can be found here.