1. He’s too expensive. OMG, OMG, you gotta be kidding me. Come on Einstein, do the math. How many managers do you have? How many stores do you own? I come to you. No one misses days from work hanging out in Las Vegas learning stuff that "stays in Vegas". I train all your managers. There is only one definition for the word all. Would you sell more used cars if your new car manager and your service manager had a better understanding of the used car business? Well imagine that!

2. I can’t find the time. For real, really, you can’t find the time? You don’t have time to change your used car business and make a bunch of money? You’re right, you don’t have time.

3. I want to wait until the first of next year. So let’s see, that would mean maybe early January…no wait, maybe sometime in February. Oh, let’s stretch it ’till March. Brilliant, absolutely brilliant. That way you can prolong your agony. Makes total sense not to hit the streets running hard on January 1. I’m grinding my teeth.

4. Tommy was just here two years ago. Well, well aren’t we the king of "stuff don’t evaporate." Look, I’m a genius, but as well as your team might be disciplined there’s naturally going to be some evaporation of processes. The longer you wait the more processes evaporate and the more complaining you can do.

5. I’ve got an old dog and he doesn’t want to learn new tricks. (Please work with me and assume he, him can mean she, her.) So, how are those old tricks working out for you? Frustrating isn’t it? But you’re loyal to him. He’s loyal to you. So why bother? It may be time to take that one more shot, show him some new tricks and if he can’t or won’t perform the new tricks then walk him outside and park him on the porch.

6. I’ve got a new guy and I want him to get settled in first. Great idea, that way he can develop some bad habits that you will never be able to break. It’s always more fun to hit them upside the head with a 2 by 4 after they have a bunch of bad "brain muscle memory" going on.

7. I’m waiting ’till we get rid of these over aged units before I hire him. So, how much money do you think you’re gonna lose screwing around with those aged units? Suppose I had some brilliant ideas on how to help maneuver you through those land mines? Nah, go ahead and take those losses so you can keep complaining.

8. Some of Tommy’s ideas are too far out in left field. Really? The view from out here is pretty good. I see all and know all. You might want to come join me and get a view of what the future looks like.  

9.We’re making a lot of money doing it our way even though the used car department keeps losing money. So, let me see if I have this right. You’re making a lot of money, used is losing money and you see no need to fix used so you can make any more money? Ok, got it. Keep doing what you’re doing.

10. I make a lot of money in new cars, parts and service, why should I worry about selling more used cars? Duh, did it ever pop into your brain that if you get stronger in used that you would sell even more new, more parts and more service? Nah, why bother, you’re doing just fine.

11. Tommy can’t teach me anything in a half-day workshop I don’t already know. Hmm, you know that might actually be true, but I can teach you a lot of cool stuff you aren’t doing. Knowing and doing are two totally different things.

12. I already get Tommy’s newsletters and learn all the stuff I need to know for free. Makes total sense. I get it. Why bring me in to get all your people jacked up about the potential you have for making lots of money in used cars? You can get all the motivation and enthusiasm you want by reading my stuff. I’m a far better writer than I ever thought. That’s all I’m gonna say, Tommy Gibbs

Being a former Marine, part of my core values as an individual comes from my Marine Corps training. And no doubt a large part of my success in life comes from being well disciplined.

Many of my disciplines have come from being an athlete where you cannot achieve any level of success without discipline. Without question people with a military and/or a sports background make better employees/team members because they are well disciplined.

Discipline shows up in many forms in the workplace including being on time, achieving assignments, how you dress, how you talk, what you say, how you say it and who you say it to.

I cannot fathom someone achieving a key leadership position unless they are highly disciplined. If you do not have a sports background, military background or if you didn’t grow up in an environment where there was a focus on discipline then you are at a total disadvantage as you attempt to climb the ladder of success. It is virtually impossible to achieve success in sports or the military without discipline, and business and life are the same.

It’s pretty much a sure bet that if you are un-disciplined in your work life that your personal life is no different and chaos has become your best friend.

Discipline is about controlling willpower/self-control over one’s desires to do the wrong or easy thing. It’s about doing the right thing when the wrong thing keeps screaming “why bother.”

Focus on improving your discipline regardless of where you have come from and where you might be today. Observe others around you who you deem to be well disciplined and start to emulate them. Pretty soon others will start to emulate you and now the tribe becomes very powerful.

Only the well disciplined ever get to be the chief of the tribe. "The pain of discipline or the pain of regret." You get to pick. That’s all I’m gonna say. Tommy Gibbs

Some Will?-the truth of the matter is very few will. Will what, you say? Will make the necessary changes to leap frog and kill the competition. Yes, kill the competition. Killing the competition is a worthy goal. Of course I don’t mean that in the sense of the word. But you really should want to kill them. You should want to drive them nuts. Make them have sleepless nights because you are dominating the market. You show me an athlete or a team that doesn’t have a killer instinct and I will show you a loser.

You often hear coaches say “We couldn’t put them away.” When would you think they would say that? Yep, right after they just lost. Quit being a loser. Start thinking like a winner. Kill the competition.

Being a winner is going to require you to do some things that will make you very uncomfortable. Being a winner is having a healthy discontent for people and things getting in the way of your ability to kill the competition.

Some Won’t?-Re-read “Some Will.”

Some Do?-Of course some do. They are the ones buying more dealerships and starting more businesses. They are part of the “rich get richer” saying. I remember hearing my dad use that saying when I was a young man.  I never really understood it. Now I do. The rich get richer because they are always pushing forward. They are willing to try different ideas and things until they get it right. Then when they get it right, they try to get it “righter.” A simple winning formula!

Those who do are not sitting around and saying “Yes, I know the train is coming, but I don’t want to be the first one on board, because it might jump the tracks.” Oh, pooh pooh that, jump on the train, take over the engineer’s job and drive the darn thing.

Some Don’t?-Re-read “Some Do.”

So What?-I’ll tell you so what. Keep on doing it the old fashioned way. Keep on keeping some of those same stinky old loyal people. (Old as in thinking old, not age.) Keep on thinking you can still sell cars the old fashioned way with old fashioned pay plans, old fashioned concepts in the service department and your hole will get deeper and deeper until one of the “Some Dos” comes along and buys you out or picks your dealership up for nothing after you go out of business.

What you should be saying to the competition is “Here’s what.” Watch my dust as I pull further and further away from you.

Who’s Next?-As in whose butt are you going to kick next? Are you willing to absolutely kick your competitor’s butt? Are you going to turn your used car department upside down and finally make it work for you? Are you going to explain to the service department and parts department who runs the dealership? Will you do that, will you really do that? (I’m screaming.)

Are you going to let the entire dealership, including the office staff, know that if we don’t sell cars, lots and lots of cars, that they don’t have a job.

I’m always amazed at how the office staff complains about all the mistakes the sales department makes, but they don’t understand if the sales staff doesn’t make mistakes then they don’t have a job.

“Who’s next” should be you standing up and telling it like it is. “Who’s next” should be the tail quits wagging the dog. That’s all I’m gonna say, Tommy Gibbs

Here’s a section from last week’s newsletter:

…To price it right you have to own it right. When you add packs to the high cost of reconditioning (that’s a subject for another newsletter) then you are at a huge disadvantage when it comes time to sell the car.

As promised, today’s newsletter is going to be about used car reconditioning.

I realize human nature is that people like to complain and want to blame someone for their inefficiencies. What do you think the number one complaint is I hear from Sales management when I’m in dealerships?

Yep, you’re right, the service department. Sometimes it’s subtle, sometimes it’s blunt, often tempered with an excuse or apology to dare complain about it. Early in my career my attitude was "Shut up, go to work and control the things you can control because it’s not going to change." Well, I’m here to tell you it does need to change and sooner rather than later.

If you review history, you know that the reason dealers charged full retail from the service department to the used car department is very much the same reason they implemented packs as was pointed out in last week’s newsletter. Sales managers have historically worked from cost up and it has made dealerships a lot of money over the years.

You can think what you want, but as time has progressed, the used car department has become an easy mark for the service department. The mere fact that the hours per RO on a used car ticket vs. a customer pay ticket is more than double should tell you something.

It’s not only the amount they are charged, but also the time it takes to get the car in and out of service. Used car managers will tell you they get charged for things that they don’t need fixed, and things that need to be fixed often are not. Almost everyone in the business today understands how crucial speed is to being successful. The lack of speed and efficiency in your service department as it relates to used vehicles is killing your ability to do volume and make the money you have the potential to make.

Creating speed and becoming more efficient should be your number one priority as you move toward 2013. I like relating our business to sports. Name a sport, any sport and today’s athletes are bigger and faster than they have ever been. With profit margins decreasing, your business needs to emulate sports. You have to get bigger (sell more cars) and become faster and more efficient than ever before.

Yes, becoming more efficient means speed but it also means figuring a way to reduce the cost from the service department. There are many pieces to this puzzle, but with creative thought I’m confident a lot of dealers are going to figure it out and for those who do they shall reap the profits. Dealers will all tell you they know the key to being successful is teamwork, yet the pay plans and territories that are set up in the dealership enhance the opposite.

In CarMax’s 2012 Annual Report, Under the section "Discovering Efficiencies" it states:

"Eliminating waste from our reconditioning processes has contributed to a year-over-year improvement in our gross profit per used vehicle sold in 12 of the last 13 quarters, while still preserving the competitiveness of our pricing. At the end of last year, we noted that our targeted efforts allowed us to achieve a cumulative reduction in average reconditioning costs of approximately $250 per vehicle, while still maintaining our high quality standards. While actual reconditioning costs will vary based on sales mix, these sustainable savings are now embedded in our cost structure."

So, forget that they don’t have packs. Forget that they don’t pay sales people and sales managers on gross profit. Forget that they don’t view the service department as a profit center. Forget that they buy based on data. Forget that pricing is controlled at corporate headquarters. Forget that 99% of what they put on their lot to retail, they actually retail…just forget all of that…but realize and don’t forget they have a $250 cost savings per car that you don’t have. They have 108 stores. They sold 408,000 cars last year and made $413 Million in their last fiscal year so they must be doing a lot right. 

I had lunch this past Monday with two of the smartest people I know in the car business. Part of that conversation was that there are a lot of little things dealers can do a better job with in the sales department when it comes to managing the inventory, working deals, managing systems, etc.

I told them that even if all things were perfect in the sales department, until the service issues are fixed (cost and speed) it will be impossible for dealers to come close to maximizing their potential. The dealer has the power and expertise to fix any of these issues if they want to.

Here’s the bottom line: If you can become more efficient, more streamlined, and reduce the cost of repairs to your used cars then doesn’t it stand to reason that you will be able to sell more cars than you are currently selling?

Seth Godin, one of my favorite writers, wrote a blog this week and here’s the article:

Denying facts you don’t like

"Transformational leaders don’t start by denying the world around them. Instead, they describe a future they’d like to create instead. Denying the truth about relative market share, imperial power or the scientific method helps no one.

Gandhi didn’t pretend the British weren’t dominating his country, and Feynman didn’t challenge Einstein’s theory of relativity or the laws of thermodynamics.

It’s okay to say, "This is going to be difficult." And it’s productive to point out, "our product isn’t as good as it should be yet."

The problem with Orwellian talking heads, agitprop, faux news and Ballmer-like posturing is that they take away a foundation for a genuine movement to occur, because once we start denying facts, it’s difficult to know when to stop. Tell us where we are, tell us where we’re going. But if you can’t be clear about one, it’s hard to buy into the other."

If you’re happy and you know it and clap your hands. If you’re not happy smack yourself upside the head and fix it. That’s all I’m gonna say. Tommy Gibbs

Here’s a section from last week’s newsletter:

…While it’s very smart to understand the market you are in it can be futile "to do as the market does." Just because everyone in the market charges a $500 processing fee doesn’t mean you should. Or, to be specific about your store, just because you’ve always charged packs, doesn’t mean it’s the right thing to do in today’s market. (You are killing your used car buyer, and your ability to sell cars in the Internet world with your old style thinking, but that’s another Zinger for another time.)…

As promised, packs will be the subject of today’s newsletter. I love packs. I’ve always loved packs. I also love manual typewriters, but they are no longer effective and neither are packs. Packs are "Voodoo Magic" of the past.

Wheee, I said it, I really said it. Packs are no longer effective and they are killing your ability to buy cars and sell cars in today’s market. Out with the voodoo and in with the "New new."

Packs are very much like the Labor Unions, Factory CSI scores, and all the stuff that J.D. Powers puts out. They were very effective at one time, but they have all outlived their usefulness. As is the case, especially with labor unions, many people want to hang on to the good old past and not accept the present.

Let’s review the history of packs and where we are today. My best guesstimate is packs came to being somewhere in the 1960’s. They were very effective because managers worked deals from the bottom up. If the mindset was to make a $1500 gross profit on each car sold then regardless of what was added to the cost, the managers would get the $1500 because they were working from cost up. Over the years talented sales managers have been darn good at working the deal, working the sales person, and working the customer. Many of you are dealers today because you had such skill and talent.

Dealers became very creative and developed hard packs and soft packs. Soft packs were added to the cost of the car for commission purposes. Often dealers (me included) would advertise up to 40% commission in order to lure new sales people to the dealership. By adding packs dealers were able to say they were paying a much higher percentage than they were actually paying. Everybody went away sort of happy and voodoo magic lived on.

Hard packs were a way of offsetting some expenses such as floor plan and advertising. Many dealers used part of the hard pack money to fund accounts often referred to as "Bruise, Slush Fund or Inventory Adjustment" accounts. These accounts were often used to write down or adjust aged inventory. In some cases dealers would use the money to zero out their wholesale losses. Dealers were able to justify these accounts to the management teams by paying the managers in one way or another on the "Packed money." More voodoo magic.

The bottom line is packs in one way or another increase the cost of your vehicles. I’ve known some dealers who have packs as high as $2500 per unit. Isn’t it obvious that such packs put the dealerships, the management team and the sales people at a big disadvantage when it comes time to sell a car and make a profit?

The problem in today’s market is the margins/profits are dropping because most customers shop the Internet when they are thinking of buying a vehicle. Dealers have come to realize that if they have a car they need to sell, it has to be priced right in order for a customer to show up.

To price it right you have to own it right. When you add packs to the high cost of reconditioning (that’s a subject for another newsletter) then you are at a huge disadvantage when it comes time to sell the car.

To quote my good friend Dale Pollak from his newest book (you need to get a copy) "Put another way, packs are really a tax that a dealer imposes on every used vehicle–an add-on that increases the unit’s cost but does not enhance the vehicle’s overall value."

If gross margins continue to compress, and they are and they will, then the only way to win the net profit game is to sell more cars. The only way to sell more cars is to be able to buy more cars at the auction and the front door.

You don’t have to have a big lot or a lot of money to sell more cars. You have to create a fast turn. You can only create a fast turn if you price your inventory right. You can only price your inventory right if you own it right. The rapid turn of inventory has never been as important as it is in today’s market.

The only way to buy more cars is to have a "cost advantage." Packs and other worn out strategies of the past are hurting you more than you realize. Let’s do some basic math:

Packs $1000

Recon Cost $800

Front Gross Profit Objective $2000

Total Dis-advantage $3800

Why do I call the $3800 a dis-advantage? Because that number is etched in the brain of your used car manager or buyer every time they buy a car or price a car.

Dealers and used car managers often complain there is a shortage of used cars. I’m not going to debate that as such because to a point it may be true. But, did you know that for the last 7 years new car sales have averaged 13.9 million and used car sales have averaged 38.8 million? How did 38.8 million used cars change hands if there is such a shortage?

Adding additional cost to the cost of your used cars by the use of packs and high recon cost along with some of the other issues in today’s business climate is impacting your ability to maximize your new car and used car business.

Relying on voodoo "packs" will trick you into thinking you’ve got it right, while the savvy competition quietly makes the changes necessary to dominate today’s market.

One of the elements of voodoo magic is to take a little stuffed doll and stick pins in it to create pain in the person the doll represents. The more you rely on voodoo magic, the longer the pain is going to last. 

People change when the pain of not changing exceeds the pain of changing. Enjoy the pain, that’s all I’m gonna say, Tommy Gibbs

One of my readers, Robert Whisner with Robert Basil Auto Group in Fredonia, NY, recommended I read the book "American Icon" by Bryce Hoffman. It’s about how Alan Mulally saved Ford Motor Company.

Very early in the book there’s a quote by Henry Ford that we all should pay close attention to:

"Business men go down with their businesses because they like the old way so well they cannot bring themselves to change. One sees them all about–men who do not know that yesterday is past, and who woke up this morning with their last year’s ideas." 

No truer words have ever been spoken. One of the things I find so often when working with dealers and their managers is they tend to want to rely on their past success. And they should, to a point, but if you also think that way, then you need to realize your past successes may not carry you very far into the future.

As we age in the business we have to be careful not to fall into the trap of thinking that it worked for you in the past so it will work today. If you continue to hang on to the past you could wake up one day and wonder what day you are in.

Once the mind’s thinking has set out to do something, or has gotten in the habit of doing something, it is very difficult to implement change. You don’t have to be a brain surgeon or know much about how the human brain works to know that people resist change.

If leadership is smart enough to realize this well known fact then you would think they would be smart enough to develop a strategy that would lead the group into change knowing that change has to happen.

As cruel as it may seem, if you can’t get people to change then you may need to change the people. But therein lies the problem. Leaders fear change as much as anyone and they fear the change of people even more than the change of culture, processes and ideas. The concept of "the devil you know is better than the devil you don’t" may not serve you very well if you are allowing it to become a crutch for doing nothing. 

The problem with change is it sets up an automatic element of accountability. If you decide to change course and/or change people now the eyes of the world are upon you to make it work. For many, it’s far safer and less scary if you don’t implement change because nobody’s watching and you can ride a wave to nowhere as long as you can stand up.

I have a friend who lives in Key West, FL. When the hurricanes would head toward Key West the masses of the population would head for the mainland. One of his favorite sayings is "Don’t panic and never follow the crowd." I think more often than not, many in the car business panic when it’s too late and end up following the crowd far too long.

While it’s very smart to understand the market you are in it can be futile "to do as the market does." Just because everyone in the market charges a $500 processing fee doesn’t mean you should. Or, to be specific about your store, just because you’ve always charged packs, doesn’t mean it’s the right thing to do in today’s market. (You are killing your used car buyer, and your ability to sell cars in the Internet world with your old style thinking, but that’s another Zinger for another time.)

Isn’t it interesting all the changing that takes place when new ownership takes over? How many times in your career have you seen new ownership come into a market and turn the place upside down and double or triple the previous owner’s sales?

If you are going to succeed in this volatile market then you need to constantly evaluate your market, your staff and your thinking. You cannot be afraid to change just because you and the market have always done it that way. "That way" will not carry you very far.

Ralph Waldo Emerson said "Fear defeats more people than any other one thing in the world." Nothing was ever achieved by sitting on the sidelines waiting to see what others are going to do. You will not win by following the crowd. That’s all I’m gonna say. Tommy Gibbs

As is the case with most Zingers I write they are usually a result of issues I come across in my travels, or emails and phone calls from dealers and managers with specific questions.

I was contacted recently by a general manager whose dealer was putting pressure on him because the average F&I gross was falling.

Here’s the specific question as it was presented to me:

"Great article this past week and as always very true. Here’s my question. We have been selling more and more inexpensive cars (many that have over 100,000 miles) and the volume definitely has increased and our turn is much better, but that being said our backend averages have dropped. We are selling fewer products because the cheap cars are not eligible for product. My owner is putting tremendous pressure to keep backend averages up, but due to us pushing prices down and selling these older cars our averages are falling. Basically the numbers are telling me we are doing a poor job in used car F&I. Your thoughts?"

You have to believe the dealer likes the volume that these lower price cars are bringing to the table, but he also wants the higher F&I income. I get it, I really do.

However, it’s possible the dealer is missing the big picture or he is doing what dealers sometimes do; he’s working the management team. Been there and done that and there’s nothing wrong with it unless it totally screws up the heads of the members of the management team. It may also be he’s trying to create an environment of "If you think you can, you can."

The first thing that has to be realized is achieving high gross profit and doing volume is a contradiction. It goes against Tommy’s laws of nature.

I’m not saying it can’t be done but I will say it’s very unusual, and there has to be a very special set of circumstances for it to happen with consistency. If it’s going to happen in today’s market it’s because the dealership has amazing talent or they exist in a very unique market.

There is no question F&I is going to take a hit when selling cheaper cars. What has to be determined is, are you better off selling them, with a smaller F&I average or not selling them at all and pulling your F&I average up. Hello?

Suppose the dealer puts so much heat on the F&I averages that the GM throws in the towel on the less expensive units and goes back to retailing more expensive cars and a better F&I average. Is the dealership really better off?

Here are 10 key questions that need to be answered:

1. What about all the parts and service gross that would have been generated on the less expensive cars going through service and reconditioning? 

2. What about the fact that you could have put more money in some trades because you intend to retail them vs. wholesaling them? How many more car deals do you end up making because you have a better plan?

3. Does the increase in volume from the less expensive units impact the attitude of the sales staff and their ability to earn additional income? Isn’t it true the best time to sell a car is when you just sold a car?

4. What’s the benefit of having someone driving a car, any car, high dollar, low dollar, that they purchased from you? 

5. Is there a chance you just sold a car to someone who might never have set foot in your store because you had a vehicle at a price point they could afford to pay? 

6. Is it possible that this new customer has a friend or relative who might one day come back and buy something because of the way this new customer was treated during the buying experience?

7. Are the odds in your favor that they may come back for an oil change or other service?

8. Does doing business generate business?

9. What’s the "Return on Investment" on selling these less expensive cars? Relative to the amount of money tied up aren’t they a far better investment than what you would make with a $25,000 car? How many times in a year can you turn over a $7,000 to $10,000 investment vs. a $25,000 investment?

10. Doesn’t it make sense, that if you can sell more cars with less money tied up that it’s a good thing? There really isn’t much of a downside to increasing volume and decreasing investment.

To keep the accountability up on F&I it might be a good idea to keep two logs; one with the more expensive cars that you hold to your normal F&I standard and another for the less expensive cars. You have to decide how that gets broken down.

Let me remind you that what’s really important is how much total gross you are generating. I always say, "You cannot spend average gross profit. You can only spend total gross profit." That’s all I’m gonna say, Tommy Gibbs

If you were in the military you know what the "chain of command" means. Even if you weren’t in the military I’m thinking you have a pretty good idea of what it’s all about. The chain of command is critical to success in the military, sports or business.

In a radio appearance this past week on ESPN’s Mike and Mike in the morning, former Orioles pitching coach Leo Mazzone had some interesting comments about his tenure with the club when asked about the current turmoil surrounding the Boston Red Sox.

If you’re not familiar with what’s been going on, the Red Sox new manager, Bobby Valentine, has had a very tenuous year in dealing with some of the players. He has been faulted for their extremely poor performance this year and in large part that may very well be true. Recently during a road trip to play the Yankees, a number of the players had a private meeting at the hotel with the top brass and owners of the team.

Mazzone compared his time with the Atlanta Braves (where he helped the team to 14 consecutive division titles and five World Series appearances including one championship) to his two years with the Orioles.

"It all starts at the top. It’s called the chain of command. With the chain of command, I have experience with both ends of it," Mazzone said in the interview. "When I was with the Atlanta Braves, there was a chain of command that was in place that was never broken. It was never broken by the players. It started with ownership, with Ted Turner. Then it started with the general manager, John Schuerholz, the manager, Bobby Cox, and the coaching staff and the players. So you had a chain of command that was never broken.

"Then I go to Baltimore and find out why they’re losing," Mazzone continued. "The chain of command was always broken, where players got to voice their displeasure to the front office, which took away the power from the manager and nobody really knew who was running what. Basically, what it was, was a bunch of players finding excuses for losing. This is what’s going on in Boston right now."

So, how often does the chain of command get broken in your dealership? It’s not unusual for the Dealer, GM or owner operator to have a special relationship with those who answer to others in the store. A breakdown of the chain of command and discipline occurs when they are allowed to do an end run on management.

How many times have you seen upper management allow the sales people to run off a good manager for no reason other than they don’t like the systems, processes and disciplines that manager is attempting to bring to the table? Upper management allows this to happen due to some special bond created over a long period of time with certain sales people or favorite employees.

That’s not to say that some of these managers shouldn’t have been shown the door in the first place, but to allow it to be done based on the tail wagging the dog is totally wrong. It is insanity to allow the inmates to run the asylum. A good friend of mine who referees in the NBA often uses that term to describe how the players run the league.

If you’re in upper management and aren’t going to support your management team, then why hire them in the first place? Everyone performs better when there is a solid chain of command. The management team needs to be allowed to succeed or fail on their own merit, not based on the likes and dislikes of those who answer to them.

That doesn’t mean you can’t have an open door policy. You can, but be smart enough to know when to say you need to go speak with your supervisor about that issue.

I learned this valuable lesson back in 1980 when I became a partner in my first dealership. All I really had was a little ownership on paper with the majority of the stock and ownership belonging to Ashton Lewis. All the employees more or less knew the deal. I will never forget the day when one of the managers approached Ashton to ask him a policy question. He pointed to me and said "That’s who you need to be talking to." End of story. End of people doing an end around. End of anyone circumventing the system.

You cannot run a successful business when people are allowed to break the chain of command. The reality is the chain of command is actually broken by those in command. And that’s the end of this story and all I’m gonna say, Tommy Gibbs

Ok, everybody stomp your feet. Clap your hands. Drum roll, louder drum roll…here comes the answer…PRESS YOUR COST DOWN.!!!

If you’ve ever heard me speak, and most of you have, and if you haven’t you should, you know this is my favorite subject. It’s so simple, yet so very powerful when it comes to improving your used car and new car business for that matter. I’ve included new in that statement because the stronger you get in used, the more new cars you will sell.

This may be the simplest and easiest way to get out of the NEWSCAR business and into the used car business. Most new car dealers are not in the used car business. Most are in the NEWSCAR business. That’s when the average cost per unit in your inventory keeps creeping up and up and before you know it you are too close in price points to your new car inventory.

If you don’t believe what I’m saying is true I have an easy experiment for you to do. Take out your financial statement and go to the used car page. To do this correctly you will need to chart out each month for the entire year. On that page you will see a column that has used car sales dollars in it. Simply put, that’s as if you sold one car for $10,000 and one for $20,000, thus you had $30,000 in Sales Dollars. 

That in and of itself doesn’t mean much to you. Now, subtract your total gross profit from that sales dollar number for each month. That will give you your cost of sales. Divide the cost of sales by the number of units each month. That will give you the average cost per unit sold for each of the twelve months. I know, I know, pretty simple stuff. Hang on…

When we do this little experiment here is what we generally find: the month in which you had your greatest retail sales is the month in which your average cost per unit sold was the lowest for the entire year. And, the month in which you had your worst retail sales, your cost per unit sold was the highest for the entire year. 

So, the bottom line is the more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR business. You end up selling more units with fewer dollars tied up. Oddly enough most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.

The easiest way to manage this from the Dealer’s standpoint is to drive your used car manager nuts about what their average cost per unit is in stock each day. Surely you have some way of pulling what your average cost is per unit every day? There is no set of circumstances you can lay out that negates this concept. 

So, if you were to say any of the following, you would be wrong:

1. We do a great job with highline cars. (Irrelevant.)
2. We do a great job with high dollar pick-up trucks (Irrelevant.)
3. We do a great job with high dollar SUVs (Irrelevant.)
4. We don’t have software that can separate our inventory by Cars, Trucks, SUVs and Wholesale Pieces (Irrelevant.)

You should require your used car manager to print the report every morning, and circle today’s average cost, put his/her initials inside the circle and lay it on your desk. I have found it very effective to take this page and tape it and the previous day’s page to the wall in my office. What happens is anytime someone walks in my office they all look at the number to see where we are today. 

It creates peer pressure and accountability of the used car department and especially the used car manager.

Every time I see the used car manager in the hallway I will ask him/her "What’s your average cost?" The more you aggravate your used car manager about this number the better off you will be. For me in the past it’s gotten to the point where all I had to do was just wink at them and they would spit it out.

So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $14,500 today your mindset should be how do I get to $14,000, then $13,500, then $13,000 and so on. The more you press your average cost down the better off you will be. I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars. 

No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. But, what I am saying is it’s not so much about what you buy, but what you don’t buy. If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.

One of the most important things you can do is to quit letting "Bubba and the gang" have your cheaper cars. There is absolutely no reason not to retail any vehicle that has a piece of life left in it. You can present all the excuses you want, and they are just like the rear anatomy that we all have. Don’t say well, we don’t want to be in that business because it creates customer issues. That’s all a bunch of bull. Don’t say it’s because we spend too much money on them in service. That’s a bunch of bull. If you have a service issue, then fix it. If you’re the dealer, owner or general manager then you can fix it if you want to.

There is no question that if you just pay closer attention to what you are buying and what you are keeping to retail that your average cost will go down and nothing but good things end up happening. As you monitor your average cost it is going to bump up from time to time. 

There are two reasons for this. First, it’s because you traded in some high dollar stuff, which you will naturally have to do and second it’s because you got goofy and went to the auction and bought some high dollar cars. In both cases it’s a matter of paying attention to it daily and getting back on track.

I’m often asked two questions:

1. What should my target goal be? There is no target, just try to get it lower than the day before.
2. Can I press my average cost too low. The answer is no. 

Don’t be concerned with that. If you do a good job with $25,000 SUVs, you will still sell $25,000 SUVs, but by pressing your average cost down it just makes you that much better.

Pressing your average cost down is a no brainer. That’s all I’m gonna say, Tommy Gibbs