Mike Allen, managing director of Cambria Private Capital, a firm that invests in and provides advisory services to startups and scaleups, discusses technology’s role in dealer valuations.

The modern dealer group is a multi-billion pound retail operation that helps customers enjoy one of the largest and most complicated purchases they will make in their life.

Technology plays a crucial role in connecting the buyer to the dealer, enriching their purchasing experience and managing the relationship in the longer term. It also drives efficiencies across operations and helps to optimise profitability.

Given the importance of technology in modern dealerships, it is no surprise that it is increasingly viewed as an important part of the business valuation process when the management team seek to sell the business or raise funding.

Professional advisors will undertake a technology due diligence process to understand the business's risks and competitive advantages. In a merger situation, this will also help ensure smooth technological integration by evaluating compatibility and integration needs.

Understanding largely technology and data-driven compliance procedures will also inform any legal or compliance gaps and guarantee conformity to regulations.

Ecosystem

It is in the dealers' interests to ensure that operations are supported with the latest technology and that these systems are connected internally and with external ecosystems, where possible, via APIs.

A technology-led approach to operations will support the requirements of omnichannel retail and the agency model, where relevant. Customers begin their online purchasing journeys with the expectation of consistency between channels and quick access to the information they provide to the dealer.

To offer a seamless experience, OEMs and dealers' systems must work together and add value to the customer. To guarantee a uniform experience for customers and throughout retail networks, OEMs are becoming increasingly concerned with and focused on influencing their dealer partners' business process and technological decisions.

A technology due diligence process will examine a number of key areas. First, is inventory management, where technology facilitates the efficient management of vehicle acquisition, sales, and movement. This allows for better forecasting, optimising stock levels, and reducing carrying costs.

CRM systems enable dealerships to manage customer interactions, track leads, and analyse customer data. This helps them understand customer preferences, increase retention, and maximise sales opportunities.

Marketing

Digital marketing technology also enables car dealerships to reach potential customers by leveraging digital marketing channels such as social media, search engine optimisation (SEO), and online advertising.

Advanced analytics tools are essential in helping management teams analyse sales data, market trends, and customer behaviour. By gaining insights from data, dealerships can make better decisions regarding pricing, inventory management, and marketing strategies, leading to improved profitability.

Technology enables dealerships to enhance the overall customer experience through various means, such as online appointment scheduling, virtual vehicle tours, and digital paperwork processing.

Providing customers with a seamless and convenient experience will lead to higher satisfaction levels and repeat business.

Technology streamlines financial processes such as accounting, invoicing, and payment processing. This improves accuracy, reduces administrative costs, and provides better visibility into the dealership's financial health, all contributing to its overall valuation.

Value

By effectively leveraging technology, dealerships can increase efficiency, improve customer satisfaction, and ultimately enhance the value of their business. Technology underpins a successful car dealer business and is, therefore, a key part of its value for investors, funders, and potential purchasers.

It's impossible to discuss technology in modern automotive retail without discussing artificial intelligence (AI). Management teams understand its power to transform business processes and drive profitability.

Over the next three years, we can expect an explosion in the deployment of AI in everything from customer-facing chatbots to stock pricing decisions, after-sales, and management information analytics. If a business wishes to stay competitive and optimise its valuation, it needs a roadmap on how it will use AI.
 

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