Recently I met with a prospective client who was about to sign a five-year contract with a vendor that was going to charge a lot of money for a new phone system and carrier service. I hope I talked him out of it, because that dealership was about to spend thousands of dollars per month on something that wasn’t going to help them.
Unfortunately, this scenario is pretty typical among dealers, and it’s understandable. They know the car business, they don’t know the telecommunications business. Many dealers are spending far more than they need to every month with their phone and Internet carriers.
Fortunately, this is a problem that’s easily solved. Follow these steps and you may be able to cut thousands of dollars a month in unnecessary expenses.
Assess Your Current Situation
First, it’s important to learn more about what kind of service you have. Many dealers do not take the time to really understand what they are paying for. Review your last few phone and Internet carrier bills. Are there charges on there that you don’t understand?
If so, get on the phone with your carrier and ask questions. You should know what every line item on your bill represents. You may find several items right away that can be eliminated. You should also know when your current contract expires.
Your dealership spends a lot of money for phone and Internet service. You should know exactly what it is you’re paying for.
Consolidate Carriers
If you are part of an auto group that has more than one location, you have extra negotiating power. All too often I see situations where each individual store has their own carrier and negotiates their own deals. If this is happening in your group it’s almost guaranteed that you are wasting thousands of dollars per month.
Multiple store groups should all be using the same carriers and they should have two carriers; a primary and a secondary carrier for redundancy purposes. One person should be negotiating contracts for all locations. Take advantage of economy of scale. Carriers will give substantial discounts for larger organizations and/or volume.
Sign 36-Month Contracts: Never Five Years!
Most carriers will give large discounts for multi-year contracts. For example, AT&T has been known to offer 90 percent discounts for a three-year contract. Let’s say you’re paying $1,000 a month for one circuit. After the three-year contract is up, that cost jumps to $10,000 per month.
Carriers want to lock you in for at least three years because with any new contract they have implementation costs such as build-out and paying their salespeople’s commissions. But after three years they have recouped these costs. Their costs drop dramatically, but your costs all of a sudden skyrocket. Of course they also want you to sign another contract.
To avoid this spike in costs many dealers agree to sign a five-year contract, believing it will save them money. But locking yourself in for this long gives you far less flexibility in negotiating any changes. For example, there’s a very high probability that within two to three years, you will need to increase your Internet bandwidth. Let’s say you’re paying $1,000 a month now for 100 Mbps. In two to three years that same $1,000 a month could buy you 200 Mbps if you put it out for a competitive bid. However if you are locked into a contract it’s doubtful the carrier will double your bandwidth for the same amount.
In my experience it’s better to sign a 36-month contract, then re-negotiate for a new contract. Don’t automatically renew with the same carrier! Contact several carriers and have them bid for your business. Competition is what it’s all about. One dealership I know of was unhappy with their carrier. Even though they were in a contract, they put their business out to bid. Another carrier offered them way more stuff for the same amount, plus an extra $300 per month off their contract to cover the cost of breaking their prior contract. You never know what kind of great deals you can get unless you ask for them.
Switch to Fiber Optics
You may believe fiber optics is more expensive, and you’re right. It is up front. However, switching to fiber optics will save you money in the long run.
First of all, many dealers aren’t aware that recently cable companies and utility companies were awarded with Rights of Way, which means they can compete with phone companies to provide fiber optics services. The increased competition has significantly lowered prices. In some areas, dealerships can now bring screaming fast Internet via fiber optics right into their server rooms for under $1,000 per month.
Initially there will be additional costs in paying for some build-outs, or your carrier may include those costs in your contract.
Once your contract is up however, that fiber optics line is yours. You can switch to any carrier and they cannot charge you those initial build-out fees. You’ve already absorbed that cost so now you can bid your service out to multiple carriers and perhaps find a better deal.
The main advantage of fiber optics is that it gives you unlimited scalability. No matter how exponentially your wireless and Internet needs grow in the next ten years (and they will grow exponentially, trust me) a fiber optics line will be able to handle it all.
Monitor Monthly Bills
No matter which carrier you decide to go with, always monitor your monthly bills. Be sure that you are not paying for things you don’t need, such as extra phone lines, long-distance bundles that are overkill, or fax lines that you are no longer using.
There seems to be a trend right now that dealers are moving away from paying for their employees’ mobile devices. Are you sure that your carrier has eliminated those devices, or are you still paying for them?
Examine your usage reports periodically. When we do this for our clients it’s very common initially to find anywhere from five to ten devices that are no longer in use but are still being paid for. At $100 per month a pop, that’s $1,000 a month right there that can be eliminated.
Is your dealership or auto group paying too much for phone and Internet? Chances are the answer is yes. Take some time to figure out what it is you’re paying for, don’t lock yourself into long-term contracts and bid your business out to multiple carriers. Following these steps could save you thousands of dollars per month.
