For years we have used the terminology, “Gross Profit Is a State of Mind.” That may have been true years ago. Not so much today. Gross is a state of pricing, processes, and doing a lot of little things each day. 

Tips On Improving Gross Profit:

1. Do a better job of training the sales people (and sales managers) to sell the value of your company and the value of the vehicle, and your grosses would be a lot better. The Team needs to learn to say “no” and to convince the customer that you have the best deal going.

2. Provide more information. The more information your sales people have about your inventory and how it’s priced to market, the more likely they are to do a better job of convincing the customers you’ve got the best car at the best price. You have to sell the sales staff before you sell the customer.

3. Do more and better research. The more research you do on what’s hot and what’s not in your market, the better off you will be. Grosses go up when you are selling a product that’s high in demand and low in supply. Key components for you to utilize are vAuto Stocking Tool, Auto Trader Data and data from Auto Count USA (Experian.)  If you’re still making decisions on what to buy based on gut instinct, you may want to rethink that.

4. Rethink “Buckets.” Buckets are a solid discipline process, but you can’t take a position that all cars in the first 20 days are priced a certain way and at day 21 another way and so on. There are some that need to be over market and some under market, regardless of age. All cars have to be evaluated on their own merits and this must be done daily, not in 15 or 20 day windows. One of the biggest problems I observe is that cars don’t get re-priced soon enough. You might want to start to pay close attention to how often cars are re-priced. Some of your older inventory may have been ignored along the way.

5. Track GAP and ROI. Dealers who are tracking GAP and ROI are seeing a big difference in their average grosses.  If you’ve not bought into this process then maybe it’s something you should take a hard look at. If you need the GAP/ROI spreadsheet, send me an email and I’ll get it right to you. (It’s Free!)

6. Fix your reconditioning timeline. If your most profitable car is a 20-day car (and it really is) how can you allow the service department to bog you down with it spending 7 to 10 days in the shop? This is one of those things that’s fixable, but it has to be done by the dealer. If the dealer wants to fix it then it gets fixed. Speed wins; the lack of speed kills. It’s as simple as that.

7. Re-do your website. How does your website look? Your website is the “New Showroom.” Do your pictures tell a good story? Do you have 12 to 20 photos? If that’s all you have then you are not in the game. You need at least 40 and they need to be done in a photo booth. If you don’t have a photo booth you need to make a commitment to get one. Saying you don’t have the space is a poor excuse. You can make it happen if you want to. Kind of like the issue in service. You can fix it. You just need to do it.

8. Install EWR into your “Trade Walk.” If you’re not familiar with Early Warning Radar, read this article. EWR will help you eliminate your problem cars.  Early Warning Radar Even if you’ve read it before, read it again.

The used car department takes a lot of energy and effort to achieve the volume and gross you need to make big money. You can say that “gross is a state of mind” all you want, but what really creates gross is your mind getting in gear and fixing the things that impact gross, not sitting around thinking about it.

My state of mind is, “That’s all I’m gonna say.” Tommy Gibbs

Yes, you may very well be lazy. Let’s admit it, we all get lazy once in a while. Some people are lazy all the while. (I meant to say it that way.)If you’re not lazy and if you’re serious, dead serious about wanting to sell more cars, then you should do a “lot walk” at least once a week. I didn’t say trade walk, I said lot walk.Before I share a great tip with you on how to make it work to the maximum, I want to define it for you so we are all on the same page.A lot walk is done once a week, preferably on Friday after you’ve had your weekend “kick off” sales meeting. All the members of the sales management team, the sales staff and the service manager go on the lot walk. There should be very few exceptions for any of these people missing the lot walk. You will hear all the excuses in the world. You should say “Talk to the hand…you’re going on the lot walk.”The lot walk should be orchestrated by the Dealer, GM or GSM depending on how you are set up. If that’s you, you are going to be the one that stirs the pot during the lot walk, but the real spokespeople are going to be the used car manager and the sales staff. The Used Car Manager-I am appalled and horrified at how little some used car managers know about their inventory. They know very little about their cars and even more shocking they often do not know where all their cars are. A real used car manager thinks of each of these cars as if they were his/her children. They know what they wore to school today, they know when they last ate, they know when they last pooped, they know who they hang out with, they know if they are late from school, and they know if they oversleep. They are always very concerned about their “children.” Rob Seifert is one of the best used car managers I ever worked with. Yes, Rob had his quirks, his strengths and weaknesses just like all of us, but one thing Rob always knew was his inventory. From the moment we owned it until it went away, he knew everything about it, where it was at any given moment and what we needed to do to get it sold. The Sales Staff-if you’ve struggled with the lot walk in the past I want to share another layer to the equation that will help you over the speed bumps. My good friend Tim Deese introduced me to Adopt-a-Car back in the ’80s. It works very well when you have the discipline to work it. It has the potential to evaporate quickly so I want to suggest you consider trying it for 60 days. When I say try it, I mean announce that you’re only going to do it for 60 days so you don’t look stupid when the evaporation factor bites you in the butt. You can always renew it. The fundamental adopt-a-car program is that each sales person has their own used car inventory and they get paid extra money if they sell their own units. If another sales person sells one of their cars they still get paid on it. If a sales person trades a car in, that car is part of his/her inventory. All other inventory is distributed on a rotating basis to the entire staff. When you first start the program you will have some orphan cars that you would do the same with. My suggested pay plan looks like this: In order to make this work you have to have the discipline to take cars away when a sales person doesn’t adhere to the program. The main reason we are going to pay them to sell their own inventory is to get them to help us make sure the car is standing tall at all times. Here are some reasons to take a car away: 1. Cosmetic problems 2. Trash in the interior 3. Gas on empty 4. FTC and/or window stickers edgy 5. Hang tags not properly displayed And now for the lot walk kicker. During the course of the lot walk the sales people must be able to recite the following on their inventory: 1. Year, make and model of the car 2. Mileage of the car 3. How long have we owned it? 4. The Internet Price and Last price change 5. Something they know about this car. It may be one owner or something they looked up about this model on the Internet. You can come up with your own list, but if you are going to pay them to sell their own inventory then you need to require them to know something about it. Make sure that when you do the lot walk you take a copy of the inventory with you and check them off as you go. “Voila,” there will be some missing cars and the used car manager and sales staff need to have an answer. Anything else is just plain lazy. I’m not lazy. That’s why I send you this stuff. That’s all I’m gonna say, Tommy Gibbs

I was standing in the airport the other day (nothing unusual about that) and I overheard one guy say to another, “Go sell something.” And he responded by saying, “I’ll do my best.”

I have some shocking news for that guy, just as I have for you. Your best is not good enough. Never has been, never will be. 

We often hear people in business and sports speak of giving 110%. Well, it’s the same deal with 110%. 110% isn’t good enough because, trust me, someone else is giving 111%. There is always someone willing to do more than you.

The fact of the matter is you can always do more. Sure, there are all sorts of excuses as to why you don’t do more, and they are just that…excuses. If you’re a sales manager and have 10 sales people working on your team I can guarantee you that if you think back over the course of the previous month, you could have helped and pushed those sales people to get one more unit each. Maybe even two units for some of them.

If you’re the dealer or general manager I’m thinking you too could be doing more. We can all do more. I kick myself at the end of every day because I know I can do more.

Maybe you got distracted, maybe you got busy, maybe you got satisfied, maybe you got sideways about something goofy and your mind went out in left field.

The Superstar players don’t get distracted. They don’t let busy beat them. They are never satisfied, and they don’t let others get them off track when they hit a wall.

You and I both know you can do more. That’s all I’m gonna say. Tommy Gibbs.

There’s always talk about where the value of used cars is going. Are they going down, stabilizing or going up? Just this past week there were reports in Automotive News that indicated values may be on the upswing.

Let’s say for the moment there are a few models, a few markets, or a few situations where that may be true. You can skin this cat anyway you want to, but trust me on this. If they are going up, it’s temporary and if you decide that your new business model is to hold cars longer because the values see a sudden spike you’re making the worst bet of your life.

There is no sure bet. But there are some really bad bets. A bad bet is to hold on to your inventory because cars are scarce. Really, it’s a bad bet. The whole notion that you need to hold your inventory longer is as flawed as an old pair of jeans with those cool rips and tears in them.

The number one thing you should keep in mind is “buying and selling in today’s market.” You will never go wrong if you follow this discipline. “Today’s market” can be defined as a maximum of 20 to 30 days.

If today you pay too much money (or what you believe to be too much money) because the market is up, as long as you sell it while the market is up, then you will be making a solid bet.

To do anything less is a bet on “the come.” Gamblers bet on the come all the time. And they win once in a while. It’s funny how we want to remember those few wins. They are like a drug we just gotta have more of. Have you ever noticed all those gigantic, gorgeous casinos in Las Vegas? They were built with gamblers betting on the come.

They were not built by people who understand how the game is really played. Whatever the gamblers thought, it was wrong. Holding your inventory will turn out to be wrong.

Dealers who buy into a bad bet of keeping inventory often have poor processes in place, have lazy people who don’t want to scramble to find cars, and don’t understand the concept of “buying and selling into today’s market.”

A better bet than holding your inventory longer is to “shoot the moon” for gross profit for the first 20 days or so. Asking for more when the law of supply and demand is on your side is a very good bet.

As I often say, “Don’t be stupid.” Don’t think for a minute you can hold out for a $4000 gross for 45 days and then lower your price and you will be ok. You won’t.

Here’s another good bet for you. It’s now August, September is right around the corner. The fall will soon be here. Halloween, Thanksgiving and Christmas are on the way. Lower prices will follow. It’s a sure bet. That’s all I’m gonna say, Tommy Gibbs

Don’t hate me for thinking CarMax has the best model. As I often say, if I purchased another dealership today I would steal a lot of what they do. They are doing a lot of things we all know to be true and correct. Did you see this recent ARTICLE in Automotive News about CarMax?

The numbers are staggering. They outsold the number 2 seller, Auto Nation, in used cars by 227,107 units. It is not at all unusual for them to be in a market and not only are they number 1, but they outsell the 2nd place dealer by 250 units or more. It’s also not unusual for them to have the top 3 stores in any given market. (Their 2013 report came out in Feb. and they actually sold 447,728 retail units for the 2013 Fiscal year.)

According to their annual report, they have 117 stores and 4 new car operations, so they focus primarily on used sales. We all get that. Auto Nation, the number 2 seller of used cars, has 170 stores and 210 franchises, so obviously they have different models and are dealing with different issues. It’s much easier to focus on used when you don’t have to worry about generating profits from new, service, parts and body shop operations. But still the numbers are staggering.

CarMax made $460,000,000 last year. Not bad. So what do they do that you don’t do and what can you take away from their operations to make you better? Here are 10 key points that you need to be aware of:

1. They have a controlled environment. You can’t get into the inventory without going through the showroom. “Hey, who’s helping that guy in the red shirt?” You will never hear that statement in a CarMax showroom. How often does it happen at your dealership? Why is it that when you build a new facility or do a re-model you don’t set your ingress and egress up the same way? “It’s not complicated.”

2. They use a greeter-up system. Every customer gets the full routine regardless of what they are there for. If they come in to buy or sell a car they get the full routine. What happens in your store if someone comes in and wants to sell you a car? Odds are the sales person will dump the customer on a manager just as fast as they can so they can go find a real customer. You may not want to do a greeter-up system, but it’s hard to deny that your sales people will do a better job with every customer if they know they aren’t getting another one until all the other sales people have had their turn. “It’s not complicated.”

3. They will buy anything. You will only buy something you can retail. They don’t care what it is. It can be stone junk or a $100,000 sports car. They are building the reputation, “We will buy your car even if you don’t buy ours.” They want to get as many people inside their store at some point so that when they are ready to buy a car they end up at CarMax. At some of their stores, 70% of their traffic comes from people who want to sell them a car. And believe it or not some of your sales people and/or managers are sending your customers over to CarMax to get a figure on their cars. “It’s not complicated.”

4. They hire only green pea sales people. As great as you and I are, we can’t get a job at CarMax. And because they only hire green peas they never have people questioning how things are done. They do it the CarMax way because it’s the only way they know. When it comes time to promote, they have people who know the CarMax culture, the CarMax way. They don’t have to reinvent the wheel every time they promote someone or open a new store. “It’s not complicated.”

5. Their pay plans are based on volume. The sales person is interested in telling the CarMax story. The better they tell the story the more cars they sell. The more cars they sell, the more money they make. Some of the pay plans that new car dealers have almost take a rocket scientist to figure it out. We make it complicated. “It’s not complicated.”

6.They hire part time sales people. A great way to staff up and staff down depending on the time of the week, time of the month, time of the year. Besides the cost savings, they have happier people because they are not standing around during the dead time of the day. Nothing sucks the blood out of enthusiasm like idleness. “It’s not complicated.”

7. 99% of what they put on their lot they retail. Yep retail. Their concept is pretty simple. They have figured a way to ultimately find a retail buyer for their car as opposed to dumping a car when it ages out. Of course they have a timeline to meet, but they retail it, not wholesale it. “It’s not complicated.”

8. They make money on all the stuff they buy and trade that they don’t want to keep for their retail operation. (324,779 units to be exact.) They do that by holding their own internal wholesale auction each week for wholesalers and used car buyers. All that junk that they bring in that you think they paid too much for gets wholesaled to somebody vs. letting Bubba and the gang get. And they make a profit on it. There’s gold in them there hills. “It’s not complicated.”

9. They are a one-price store. Their staff does a great job of explaining one-price to the customer. Do they sell every customer? Of course not. Some people want to negotiate. But, do you sell every customer? Of course not. But the odds are pretty good that their sales staff tells the story better than yours. (Remember they only hire green peas who don’t know any different.) Because they are a one-price store their managers spend time developing people, following processes, vs. working deals. When was the last time you shopped a CarMax store? It should be at the top of your bucket list. “It’s not complicated.”

10. The pricing of their inventory is done at the upper level of management not by those who are buying and trading for the units. When you are doing the buying/trading for cars and you are also responsible for the pricing you become prejudiced in terms of what you will price at. When they price cars they are simply concerned with the law of supply and demand and have no emotional interest in the car. “It’s not complicated.”

And of course it’s not all that complicated for them because they only sell used. Don’t hate me, but they have the best model, that’s all I’m gonna say, Tommy Gibbs

My Processes Aren’t Complicated. That’s Why They Work So Well!