Michel St-Arnaud
Partner | CPA, CA | Assurance

They warned the pandemic could be a catastrophe for auto dealers. The reality couldn’t be any more different.

In the early days of the pandemic, many observers predicted that Quebec’s auto dealers would run into financial difficulties. Despite this, several dealers have posted surprisingly strong results, even when excluding the emergency wage subsidy. Even the dealers that experienced a slowdown at the beginning of the pandemic have returned to positive performance.

These strong financial results reveal a major shift in consumer trends over the course of the pandemic. Remote work, concerns about social distancing on public transit and online sales all appear to have influenced consumer purchase patterns in Quebec. In turn, these changes in consumer behaviour have forced auto dealers to realign their strategies in order to seize new business opportunities.

Online shopping and the digital transformation

One problem that dealers have had to face is supply chain challenges. In Quebec and across Canada, auto dealerships have reported drops in new vehicle sales. Despite this, sales of used vehicles saw major growth in the past year, fuelled by online sales.

Auto dealers have recorded a significant increase in e-commerce sales over the past several years. Online sales rose by 168% between 2016 and 2019, totalling $161.3 million. Soon, consumers in Quebec will be able to purchase a car entirely online, once the government authorizes the use of e-signatures for car sales.

Today’s consumers increasingly shop on the internet, even when it comes to making large purchases like a car. Dealerships have responded by moving new and used vehicle sales online.

This, in turn, has accentuated their digital transformation needs. The preference for online shopping is probably here to stay, even in the post-pandemic world.

To ensure the long-term viability of their business, managers of auto dealers need to prioritize solutions that incorporate strategic innovation and technology. Nowadays, they need to offer consumers tools that save them time and facilitate their purchase experience. Auto dealers must identify their unique selling point and anticipate their customers’ needs. By adopting flexible planning, they’ll be able to adjust to the shifting preferences of consumers.

Opportunities for sales and acquisitions

Before the pandemic, some dealership owners who planned to sell their business to an external buyer weren’t sure if it was the right time to sell. Since then, the strong financial performance by many of Quebec’s auto dealers in the past year has fuelled a number of acquisitions. There is now a range of opportunities on the market.

And despite the pandemic, there has been an increase in the number of transactions between auto dealers in Quebec: 22 were recorded between September 2019 and September 2020, compared to 16 in the previous annual period.

If your plans include selling your dealership, it’s important to plan adequately for this important step. The sales process is complex and requires a carefully thought out approach. Significant time and effort must be invested to ensure a successful transaction, for the best possible sales price, that ensures the longevity of the business. Do you know what the value of your business is? What about taxes?

The same considerations apply when you acquire a business. Do you have the capital to finance one or more acquisitions? Do you have legal and accounting partners who can guide you with your transactions and help you set up a growth plan?

The pandemic has created new opportunities for auto dealers, and you too can benefit. Effective preparation will help you get through all the steps with peace of mind.

The pandemic has forced auto dealers to improve the ways they manage their expenses. This partly explains their strong performance in the past year, following previous years of positive results. Now is an excellent time to review your corporate, organizational and tax structure so you too can seize the new opportunities that arise.

15 Apr 2021  |  Written by :

Michel St-Arnaud is an assurance expert at Raymond Chabot Grant Thornton.

See the profile

Next article

Jean-François Boudreault
Partner | Human resources consulting

Many workers are nearing retirement age. In order to thrive, businesses will need to find ways to retain these workers’ valuable skills and knowledge.

A major shift is occurring in Quebec’s labour market. For the first time in Canada’s history, people over 65 outnumber those under 15. Baby boomers currently account for 27% of the population, an increase of 9% from 2019. And in 10 years, it is estimated that more than 20% of Canadians will have reached retirement age.

With many skilled workers leaving the job market, businesses will struggle with even more acute labour shortages in the years to come. But if organizations start planning now, they can mitigate some of these losses. Besides passing on key skills and knowledge, a successful transfer strategy should contribute to employee motivation and retention.

Plan ahead to prevent a drop in productivity

The more prepared you are, the better your organization will be able to cope with the departure of your most experienced employees. To avoid a drop in productivity—and a slowdown in growth—you’ll need to plan how your business will pass on critical knowledge and expertise.

By adopting the right strategies, you’ll be able to retain the knowledge acquired within the organization and stay competitive in your market.

Creating a knowledge transfer strategy

We recommend implementing a simple and effective knowledge transfer strategy focused on maintaining a strong level of performance within your organization.

The first step is to identify, classify and model the areas of expertise that you consider to be essential to the long-term success of the business.

Without restricting the autonomy and initiative of new hires, your knowledge transfer strategy should specify the skills and abilities required for each position and the risks associated with losing this valuable expertise.

Include these key actions in your strategy :

  • Identify critical roles where a loss of knowledge could become a major challenge for your business;
  • Clearly define your knowledge transfer objectives and strategies (competency map, risk management, loss of productivity, scarcity of skilled labour, etc.);
  • Develop and encourage a culture of learning and knowledge sharing (coaching, mentoring, reverse mentoring, etc.);
  • Invest in relevant technology or resources (virtual platform, publications, community of practice, etc.);
  • Praise good actions and encourage your managers to support knowledge transfer initiatives;
  • Create a culture of recognition in the workplace that rewards motivation and engagement.

When viewed as a strategic imperative, recognition can have a positive impact on team mobilization and help the organization achieve its business objectives. It’s also an important factor in the success of a knowledge transfer strategy.

Finally, offer training on knowledge transfer to your managers and HR staff and educate them about the importance and challenges of this strategy.

Passing on the organization’s culture

Besides transferring knowledge from your most experienced employees to your newest hires, it’s also important to pass on your organization’s culture: in other words, an understanding of its history, values, mission and clients. Employees who acquire this understanding are more likely to stay with your organization in the long term.

An effective knowledge transfer strategy is a powerful driver of growth and essential for preserving an organization’s culture and knowledge. This knowledge is a strategic asset, and underestimating the importance of the knowledge transfer strategy can have serious consequences. Fortunately, an experienced external advisor can help guide you through this process and recommend best practices tailored to your business model to ensure a successful transition.

Skilled labour is an increasingly rare commodity. Demographic trends and the departure of key employees will only increase the pressure on businesses facing a shortage of skilled workers.

By encouraging your teams and managers to develop skills sharing practices, you’ll be helping your employees thrive and feel valued while improving the agility and performance of your organization in the future.

14 Apr 2021  |  Written by :

Jean-François Boudreault is a partner at Raymond Chabot Grant Thornton. He is your expert in human...

See the profile

Next article

The International Accounting Standards Board (IASB) has issued COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16), an extension to the practical expedient period in the amendments to IFRS 16 Leases made last year.

This extension is for one year, so the application period now extends until June 30, 2022.

In May 2020, the IASB published an amendment COVID-19-Related Rent Concessions (amendment to IFRS 16) (the 2020 amendment). The 2020 amendment added a practical expedient to IFRS 16 which provides relief for lessees in assessing whether specific COVID-19 rent concessions are considered to be lease modifications. Instead, if this practical expedient is applied, these rent concessions are treated as if they are not lease modifications.

In light of the impact the COVID-19 pandemic has had on business activity across the world, and response from feedback received from stakeholders, the IASB decided to extend this relief for one year to provide relief for recent concessions in relation to COVID-19 that reduce payments up until June 30, 2022.

The extension is effective for annual reporting periods beginning on or after April 1, 2021.

Our thoughts

We welcome this latest amendment to extend the scope and application date of the relief for another year. The COVID-19 pandemic is still very prevalent around the world and it is, therefore, reasonable that lessors would still be providing rent concessions to lessees for lease payments beyond June 30, 2021.

Next article

Sound governance is essential for your business’ sustainability and growth. What principles should guide you?

Good governance is key to the success of any organization, regardless of its size, industry or service offer. Since effective oversight affects all corporate processes, practices and structures, it can help you meet your financial, strategic and operational goals.

Taking a proactive approach

You may need to review your governance periodically to make sure it’s properly aligned with your business’ current reality. Because of the pandemic and the pending economic recovery, this need has become more critical than ever. Business models have changed and your objectives probably aren’t the same as they were before the pandemic.

“This isn’t optional. Businesses that remain static in the current context will fall behind their competitors and find themselves out of step with the expectations of their customers and employees,” said Emilio B. Imbriglio, President and CEO at Raymond Chabot Grant Thornton.

By proactively reviewing your corporate governance, you can:

  • Manage risks and reduce blind spots;
  • Establish a healthy balance sheet and get financing if you need it;
  • Anticipate future developments and prepare to respond quickly;
  • Innovate and develop your business;
  • Retain workers and attract new talent.

Applying the principles of good governance

To be effective, your governance structures need to reflect your organization’s strategic plan as well as its values, mission, vision and succession plan. Here are some key principles to follow:

  • Review your game plan regularly;
  • Put the right people in the right positions;
  • Assign responsibilities wisely;
  • Get an outside perspective;
  • Increase diversity on your board;
  • Embrace human leadership.

Review your game plan regularly

It’s important to review your company’s action plan, business strategies and priorities on a regular basis.

“Your organization needs to turn a critical eye on itself. Questioning your practices is the only way to evolve and adapt to new market realities,” explained Éric Dufour, Vice-President and Partner, Management Consulting at the firm.

Put the right people in the right positions

Make sure each position is filled by the right person and then make changes as needed to reach your strategic targets.

Assign responsibilities wisely

Be judicious when assigning duties to the various members of your management team. The head of the company shouldn’t be left stranded, shouldering all the responsibility.

“You definitely need to have good chemistry between the board chair and the CEO,” stressed Mr. Imbriglio.

Get an outside perspective

Even the smallest companies should look for external board members who bring complementary skills to the table, especially in the area of technology. With fresh ideas and an outsider’s perspective, they can shake things up and spur innovation.

Increase diversity on your board

Boards should be more inclusive. “Aim for diversity in age, gender, experience, and cultural and social background,” advised Mr. Dufour. “Diversity is important because it leads to productive discussions and can help organizations meet their environmental, social and governance (ESG) criteria.”

Embrace human leadership

“Tomorrow’s leaders will need to be more approachable, people-centric and able to communicate more effectively with stakeholders, especially employees,” advises Mr. Dufour.

With this in mind, you want people with strong interpersonal skills and emotional intelligence to sit on your board. Directors with these qualities will be better able to anticipate the impact of key decisions.

Get help with your governance review

Our firm has developed a comprehensive approach called the ABCDs of Good Governance to help you establish or review your governance structure.

The government offers a number of financial assistance programs to support organizational change and procedural reviews. Up to 50% of the associated costs are covered.

Remember, investing in your corporate governance isn’t just profitable, it’s essential for your business’ survival and growth.

Contact our experts today for advice on setting up a sound governance structure.

We invite you to watch the highlights of the governance discussion that took place on April 1, 2021 between Emilio B. Imbriglio and Eric Dufour.