SMEs are good for business
At this time of year, dealers will no doubt have their eye on the used car market as part-exchange vehicles flood the forecourts and auctions. With the franchised sector chasing a declining new car market, the competition to boost used car business will be intense. However, there’s one element of the car-buying sector which is often overlooked. If tackled with the right offer and an insight into their needs and concerns, it could reap awards for both new and used car sales operators.
There were a staggering 5.7 million SMEs (businesses with fewer than 250 employees) in the UK in 2018, accounting for over 99% of all businesses, according to the Business Statistics report from the House of Commons. Micro-businesses, those with 0-9 employees, numbered 5.4 million and made up 96% of all businesses.
This creates an opportunity in a largely untapped segment of car buyers. It could be that they are presenting themselves as private retail customers, but if dealers delve a little deeper they might discover the customer is a small business owner and could qualify for different funding options.
Even if buying privately proves the best route, exploring all avenues will most certainly boost customer care and with it comes repeat and referred business.
In a world where highly targeted personalised marketing is the not only the norm, but also inexpensive, savvy dealers can target those small business people effectively especially by utilising social media. It is quite easy to reach these people through social channels, all dealers need to do is craft the right message that appeals to the small business owner looking for their next vehicle.
So why is this band of small business people so often overlooked by dealers and automotive marketers and why are they more likely to be lumped into the vast private buyer segment? Part of the answer could well be contained in the same government figures.
Although the vast majority of UK businesses employ fewer than 10 people, they only account for 33% of employment and 21% of turnover. Perhaps, they are not being seen as a potential source of custom in their own right, other than just being perceived as a private buyer.
These small business owners will still need a car or van to undertake their business, even if it is simply to drive from one client to another or to pick up supplies. Undertaking a wide variety of jobs from traditional trades to professional services and emerging roles such as plumbers, decorators, mobile beauticians, florists and consultants, a vehicle will no doubt be as important a business tool as their laptops and paintbrushes.
There could also be something else at play here. Treating all customers as private buyers is perhaps a reflection of the mentality of sales executives, who are finely tuned and well versed in the benefits of PCPs.
PCP accounts for around 80% of the motor finance market, according to the Finance and Leasing Association (FLA), but sales executives should look at different funding options for small business owners.
With just a fifth of consumers who fund their vehicle using PCP owning the vehicle outright at the end rather than changing their car and starting all over again (according to Money Saving Expert), there is a clear case to explore other funding methods such as a lease, fleet funding or VAT Assist.
The industry has almost become conditioned to resort to PCP as the default rather than looking at alternatives. Different funding options are always emerging in the industry as lenders work to tailor their products to the customer and their needs. By exploring all the options with business customers, especially different costs and tax implications, you could be delivering a better outcome and overall journey for the customer.