The last month or so, I was following up on where dealers stand in terms of AI, Automation, Robots, etc., and how benefits are being produced in terms of quicker turnover, cost reductions, better customer experience, improved sales per employee, and above all, the sales results along with EBITDA data.
The results so far, as I am concerned, seem good for those companies and dealers who have invested in and can actually deliver results from AI and other available automation products. And when I inquire about the employee headcount, two possible outcomes result.
The AI results are so good that the increase in business requires keeping employees and having them produce more sales per employee, rather than reducing headcount. A nice outcome: an increase in sales and margins, without increasing headcount.
In those cases where headcount is reduced and we keep hearing the potential increase in unemployment, it appears that because we basically find ourselves in a position where more workers are required, with some new potential ways now available for minimum cost, and as result a recent Fed report stated that in the last six months the USA has had more new business start-ups up to this point in our existence.
In fact, many folks are quitting their jobs and finding an opportunity to start a business with a $599 Mac and access to AI, all of which can be accomplished in 48 hours. As they say, all is hackable now, and with AI, data can detail how each type of business works, which in turn provides revenue-producing opportunities by hacking a segment of some form of transaction. In other words, get rid of the middleman in a transaction.
Starting a business in the past would cost six figures. Almost every industry has a middleman collecting fees, rent, etc. Cut the time and cost of these expenses, and you are in business: tools for a specific operation, tools for a type of business, expertise in business management. And, of course, there are systems out there specifically for these types of business.
So, we have some dealers working with AI to reduce cost, improve turn around and customer relations who have invested up to this point and are reaping he rewards of doing so, But what I am hearing is that while the initial investment is manageable and producing a real ROI, the costs are starting increase as a result of a lack of “compute” time as well as cost increases for power. Consequently, your initial investment and ongoing expenses will be much higher compared to those already started. And the longer you wait, the more it will cost.
So, what happens in a territory where dealers are involved with and using AI systems to reduce costs and increase margins? In the same territory, dealers who are avoiding this opportunity will soon find it tough to compete with more competitive dealers with lower cost structures and superior customer service. The dealers who have not made the changes to AI can certainly compete with the more technically advanced dealers, but with lower margins, which in turn reduce net income and cash flow. This is how the performance gap begins.
To deal with the performance gap, dealers have to take the AI plunge, which will cost more the longer they wait. Do nothing, and performance remains strained, while the AI cost continues to increase. A recent article I read noted that if a conversion is not completed by 2027, the only result will be to sell or shut down the business. In short, no turning around to start over.
I also made some inquiries about the OEM involvement in these conversion scenarios. They are not pushing for the required changes. CANNOT UNDERSTAND THAT RESULT?? It would be much easier and less costly to assist their dealers, thereby protecting their market in the territory. Or do the dealers not want the OEM’s involved?
Last month, we introduced Columbus Global, a small, experienced AI conversion consulting group with dealer experience that could help evaluate your needs and provide a cost and ROI estimate for the project. They would prepare a three-part report: a project report based on their review of your data and systems; an AI Governance report and outline in plain language; and finally, a Scorecard detailing time and cost using real numbers.
I don’t think it’s correct to say your employees aren’t interested in this topic. The discussion above regarding the 48 Business tells us that employees understand what is going on and can either stay on the ship or try to make a buck by making another company more efficient. In fact, I would suggest that management sponsor in-house seminars on AI and related topics to both introduce employees to AI and explain how it will impact the company and their jobs.
The Bottom Line here is that management needs to drive this project to a conclusion, including moving ahead, how to fund it, the expected ROI, and the impact on the company’s value over the next five years or so. As I said at the beginning…..TIME IS RUNNING OUT!
About the Columnist:
Garry Bartecki is a CPA and MBA with GB Financial Services LLC, and a Wholesaler columnist since August 1993. E-mail [email protected] to contact Garry.
