How would you describe your business today? Maybe as resilient, sustainable, profitable, technology-driven or an integrated partner? These are just some of the descriptions that will matter this year, likely more than they have in the past.
This industry continues to weather one of its most significant challenges, at least in recent history. And while organizations can navigate one or two challenging years, three becomes an ultimate test.
If you would have asked me a year ago where our industry would be in 2022, this isn’t what I would have predicted. While I’m a realist, I prefer to focus on opportunity over obstacles. This next year will continue to bring opportunity for dealers ready to pursue it, but will likely be different than expected—including some owners recognizing the benefits of merging or selling their business.
The industry will continue to experience troubled waters in 2022 with ongoing disruption fueled by uncertainty and worldwide market instability. There’s still a lot of unknown, and businesses don’t naturally thrive in times of uncertainty. Rather, they tend to hunker down, pull back or focus on making the business as efficient and resilient as possible.
Two of the greatest drivers impacting 2022 business plans and performance include:
Supply Chain Disruptions
The challenge: These disruptions aren’t expected to ease in 2022. Instead, there will likely be multiple disruptions from a variety of angles plaguing the industry. And once your team solves an issue, another challenge will surface in what could feel like a relentless game of whack-a-mole.
The response: Organizations need to anticipate and manage supply chain disruptions through processes and teams dedicated to analyzing, forecasting and identifying solutions with vendors for clients. This is where the problem solvers on the team thrive. The depth and breadth of a dealer’s vendor relationships will matter, playing a key role in helping offset any challenges.
Inflationary Pressures
The challenge: Businesses of all sizes will face mounting inflationary pressures for both products and people, costing more to procure products and supplies and attract talent. We’ve all felt it, but the numbers are quite telling of the reality businesses will face. The U.S. Consumer Price Index (CPI) put the actual annual inflation rate for 2021 at about 6 percent. Economic models project the CPI to trend around 284.43 points in 2022, with continued escalation into 2023 at a rate of 289.84 points.
The response: These pressures will cause price increases for many of the products dealers sell. On the surface, dealers may achieve revenue gains in 2022, but those increases will be offset by higher expenses for labor and goods, constraining profitability. On the upside, clients face the same challenges, recognizing that inflationary pressures will impact the cost of goods and will be receptive to price increases.
The industry will continue to witness further consolidation of OEMs nationally. It will also see rising interest rates that impact leasing rates as well as the ability for leasing vendors to provide the services because of the escalation. The market dynamics are complex and ever-changing, requiring leadership teams to evaluate their business plans and performance in new ways.
But with these market challenges and shifts comes opportunity. Dealers that have a jumpstart on building a resilient business model will be rewarded in 2022. Having a depth of diverse, integrated technology solutions, and the expertise to sell and deliver them to clients and then grow them, needs to be a core part of the strategy.
