Tips & Tricks for DMS Negotiations
You recently paid another hefty DMS fee, your 20 Group told you about a wonderful new system, or you want improved support. Dealers may change DMS providers for a variety of reasons. Whatever the motivation, it’s a significant choice because your DMS affects every facet of your company.
I understand. I worked as a Controller during a DMS switch, so I know how important and difficult this decision is. It will inevitably disrupt your operation and put your staff to the test. Nevertheless, if you take the time to properly choose the perfect companion, the advantages will outweigh the drawbacks.
The material that follows explains how to negotiate DMS contracts, what to anticipate, and what to look out for when evaluating suppliers.
how to become ready.
It’s imperative to conduct a complete examination of your current system before approaching any new providers. Conduct an expenditure study of all third-party spending as well as your DMS. This will provide you with a precise cost breakdown for your DMS each month.
Make a list of every system that connects to your DMS. Start with connectors that are obvious, like your CRM, desk product, and service applications, then work your way to less well-known ones, like your parts scan gun.
Check out business elements like your website and inventory that aren’t immediately related to your DMS. When my dealership converted, I recall the months-long struggle we had to comprehend all the websites where we listed inventory in order to ensure that the prices were accurate and reflected in the new DMS.
Meet with the managers of your dealerships to discuss what is and is not working with the present system. Obtain feedback on any previous systems they may have utilized. It’s likely that some of them have recent experience, particularly if they are recent additions to the business.
Finally, focus on a specific reason for your desire to change. Are you only interested in price, or are you seeking alternative functionality? Maybe you’re thinking of purchasing additional businesses, and you’re worried that your current setup won’t be adaptable enough to accommodate the addition.
Once you’ve determined the cause, schedule a meeting with your existing provider to go over the issue. They may have a solution that you are unaware of, or they may be open to a price reduction in order to retain your business. If your present provider is eager to take care of you, there is no reason to switch.
Decide on your priorities.
You’ve done your research and determined that a new partner is the best choice for your company. Set your priorities for the new system right away. Price is the main motivator for the majority of dealerships; they merely want to spend less for a DMS.
Make sure you’re not giving up something important for that cheaper payment if this is your top priority. When my store underwent a change, it undoubtedly appeared to be going to be less expensive. But in the end, we had to turn to other applications to find the features we required. Almost all of those cost savings were lost.
The functionality you require to run your firm should be determined. Dealers frequently overpay for features that their staff never even uses. Not every system has to be the Ferrari of systems. On the other hand, don’t forget about the essential elements that you require. Even if you can add it later, realizing you’re missing a component after the move can cause significant disruption.
Support and service quality have to be given top consideration as well. Don’t just take a provider’s words on this matter at face value. Ask your 20 Group and other industry allies for straightforward responses. When you call with a problem, they’ll let you know if you should plan on spending hours on the phone. Then you can avoid it.
Add data ownership and retention to your list of priorities. You need to be aware of your escape plan. If you want your data returned, will you have to pay? Are there going to be conversion fees? After a contract is signed, dealers ask these questions far too frequently. To ensure that you enter a relationship with clear expectations, ask beforehand.
Last but not least, consider DMS capabilities in light of your long-term goals. The average DMS contract is three to five years long. Are you going to add a store within that time? start a section for wholesale parts? open a dealership for RVs? Make sure the system can change and adapt along with your firm, whatever your plans.
Understand the schedule.
A DMS transition is a drawn-out procedure with significant milestones that start long before the signing of a new contract. You can get a better idea of what to expect by studying the timetable below.
When your current contract is 24 months out from expiration, you should start looking into switching. Get ready to analyze the cost of your current system. Meet with the managers at your dealership to go over your preferences and wants. Review your present DMS services line-by-line. Identify the building blocks of your system and what would make a new system essential.
15 to 6 months prior to the expiration of the current contract is the ideal time to start interacting with prospective suppliers. Use your prior analysis to help you choose who to talk to. You should speak with Tier 1 providers like Reynolds or CDK if you require hardware support. Tier 2 vendors such as DealerTrack and Auto/Mate don’t offer internal hardware support. The least-cost Tier 3 carriers also provide the least amount of assistance.
Plan product presentations with your management in attendance. Direct the discussions toward the requirements of your dealership and have managers practice routine duties, like paying out a repair ticket, to gain a sense of how the system functions in practical settings.
Decide which option is best for you, then start contract talks (more on this in the following section). Before signing, carefully read the final deal. Contracts can be intricate and frequently have a lot of sub-items, so if necessary, seek a specialist. Never assume you are an expert. Make certain to.
Before you sign the contract, finalize the implementation and transition details, organize training, and fix how and when the data will be converted. Don’t forget to write and mail your existing provider a 90-day cancellation notice.
When there are six months until the transition is set to go live, your dealership should start getting ready. Manager vacations should be postponed throughout the installation time. For business continuity challenges to be kept to a minimum, everyone must be on board and prepared.
All staff should be informed of the transition plan and expectations. For a conversion to be successful, employee buy-in is crucial. Curtis Horne, a dealership consultant for more than 20 years and a former vice president of sales for Reynolds & Reynolds’ Southern Division, is aware that change is difficult and that some people may need a little encouragement. “Compensation drives behavior,” he says. “Employees will change if there is a significant financial benefit.”
Employees might receive rewards for completing further online training, reaching significant goals, or supporting slower learners. Money is always a powerful motivator.
Discover insider knowledge.
DMS providers want to generate money, just like any other company. Knowing a few of their techniques will help you stay away from overpaying for services, being forced into automatic renewals, and giving up excessive amounts of control over your company. During your talks, keep an eye out for the following behaviors.
5+ year contracts – A lot of suppliers present the typical 60-month contract as the only choice. It isn’t. It is possible to sign a contract for 36 months. “Only accept a five-year term if the offer has clear financial benefits,” advises Horne. You don’t have to stick with a long-term contract because the market is so unpredictable and there are so many providers.
Price hikes for assistance – Every year, providers often raise the price of assistance. Make sure the contract expressly mentions those price hikes, so the provider cannot later raise the price. According to Horne, you may “negotiate to get support locked in with no increases, but you must do it from the very beginning before you sign.”
Installation and training terms should be negotiated in the initial contract, along with the price and the number of hours you will receive. Keep in mind that some people learn quickly while others do not. Work out a plan that provides your staff with sufficient training so they can be successful after the trainers depart.
Contract term – It’s a common error to fail to confirm the start and end dates of the contract term. The clock often begins after the system is installed, not after you sign the contract. I advise adding a calendar alert 24 months prior to the term’s expiration. An excellent moment to evaluate the system is right now. Repeat the process six months and a year before the end. If you decide to do that, you won’t be caught off guard and lose your window to cancel.
Contract extensions: Be aware that DMS providers may automatically extend the life of your contract by 60 months when you buy new hardware. Refuse to accept that. Ask for a clause saying that any upgraded hardware will have the same expiration date as the current contract. Horne takes it a step further, depending on the service provider: “I have a termination letter already signed at the beginning of the contract, so there cannot be an auto-renewal condition. A contract may automatically renew for years if you’re not paying attention to the dates.
Services bundles: Some service providers may want you to combine all of your services with them. everything, including telephone and internet service, desks, and timekeeping for employees. Providers who threaten to cut off access to their systems if dealers don’t renew can and do hold them hostage. Consider third-party providers in place of bundling all of your services. You don’t want to find yourself wanting to transfer DMS providers but not realizing your existing provider also handles your IT. Negotiate who is in charge of the network, advises Horne. Are you genuinely interested in having one provider manage your entire dealership?
Electronic document management solutions are offered by several DMS providers, however, these solutions are only functional if you utilize their DMS. If you choose to change service providers, you must purchase the new document management program. Instead, think about using a third-party system. You simply need to purchase it once, and many are DMS-independent so you can always access your data even if you change service providers.
OEM integrations – Because your OEM and dealership need to connect, several DMS suppliers offer OEM integrations. Ask how many integrations are included before choosing a service that boasts integration with your OEM. A supplier might only give 12 integration points, whereas an OEM might have 30 for a DMS. Ask before you sign because there is no requirement that they provide them all.
You should never take a provider transition lightly because your DMS has an impact on every facet of your company. Spend the time evaluating systems, understanding negotiation tactics, and, if necessary, seeking outside professional assistance. You’ll vastly improve your chances of selecting the greatest partner, with the finest framework and conditions, for your company now and in the future.
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