26 PROFESSIONALIZATION ABLA’s training, which will continue to be free, will gain new momentum in 2015.It involves the expansion of what has already been a success, as in 2014 hundreds of professionals who took part in ABLA training courses set a new record in terms of positive feedback, with over 90% of the 12 courses being rated as “excellent” and “good.” According to economist Jorge Miguel dos Santos, a teacher on ABLA courses, these results show that the pursuit of profitability really is one of the main obsessions for every rental and leasing company. “We started a new venture in 2015 to train members to achieve a return that can guarantee the growth of the company and the sector as a whole,” he says. The market is changing rapidly and competitiveness even more so. “This has forced ABLA to develop a new methodology to really help companies compete in some of the toughest markets,” adds Santos. “And so the course and the support of software have been upgraded to better meet the new needs rental and lease companies have,” he says. Today, the level of sophistication is what the companies were looking for. For example, the software calculates the result of a monthly lease (fleet outsourcing) or daily rental not only through cash flow, but also using financial and economic indicators such as the Margin of Contribution (MC), Net Present Value (NPV) and the Internal Rate of Return (IRR). In addition, new approaches have been incorporated into each training stage in a very natural evolution for a dynamic sector like vehicle rental and leasing. “What gets an increasing number of members involved is the fact that standing still means losing out,” says Santos. According Santos, one common mistake is to want to increase the size of the fleet at any cost, imagining that costs will be reduced.” It is a half-truth, which works to some extent,” he explains. “Over time, it can lead to losses that will increase the rental company’s debt level and make it unfeasible,” he warns. Santos says it is critical to understand what in fact fixed costs, variable costs, administrative expenses, taxes and fees are. “For example: fixed costs are independent of the vehicle’s use, meaning that if it is rented out or not, these costs must be paid,” he stresses. “Variable costs occur only when the vehicle is rented or leased, such as tire wear and maintenance,” he says. Regarding administrative expenses, Santos says they are not linked to the quantity produced and are paid to manage the business.” It is administrative expenses that differentiate each of the companies,” he says. Taxes and fees, which focus on revenue, should also make up the final price. Santos warns that the incorrect incorporation of taxes can lead to losses. Another question many administrators have is with regard to filing use of the property as a cost. “It’s not a cost, but comes in as an expense as it is not linked to the quantity produced,” explains Santos. “The main fact is that if this property is not being used by the company, it will certainly be generating resources, either through rent or being sold,” he says. “Being owned could be a competitive advantage in a given period,” he says. Another uncertainty among businesspeople regarding the balance sheet is about what “outlay” is, what “cost” is, and what “investment” is. Santos explained each item in the course. “There is a lot of confusion among technicians and some the businesspeople,” he says. To make it clear, he adds: “outlay is the effective output of cash resources and may occur before, during or after costs. It is common to believe that because it has been paid, the cost or expense ceases to exist and therefore the rental price may be lower,” he says. He goes on, “Cost is the spending linked directly to the quantity produced and, in some cases, there is no outlay, but the cost exists. A typical example is the cost of loss insurance, which is often not paid, but still should be considered as a cost item,” he says. He defines investment as any capital contribution made in the company, whether by partners or third parties. “Regardless of the owner of this capital, they must be paid. If it is one the partners, it is profit; if a third party, it is interest.” The economist also clarifies what is the financial age of a vehicle. In fact, he prefers to call it economic life. “It is the period in months in which the vehicle is available for rent or lease, or whine is generating revenue. In the rental and lease sector various economic lives are adopted, according to the strategy of the company, which can vary from 6 to 24 months,” he says. Knowledge is key Course teaches managers to calculate costs, to arrive at the profit margin About ABLA’s training course According to Jorge Miguel dos Santos, calculation methodology is one of the innovations in the current ABLA training course compared to the previous version. “The method used is Total Cost. Briefly, it is the sum of costs and expenses added to the mark-up, a margin that includes taxes and profit.” The current program uses Direct Cost, in which are included only the costs incurred directly at each location. “In this method, the businessperson’s role is to identify whether there is enough margin to pay the costs and generate a profit. This is a more appropriate method for a competitive market, as the vehicle rental and leasing market in Brazil has become,” says Santos. The course lasts eight hours and aims to raise awareness that what matters is making a profit and not the number of vehicles. Santos emphasizes the importance of participation. “Besides being of specific training for rental and leasing of cars, we teach how to analyze results and analyze them,” he concludes. “This is fundamental to the sector’s health.”
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