What If You Stopped Selling Price?

I was talking to a dealer last week about the challenge of playing the “race to the bottom” and how much he wants to stop pricing his inventory so aggressively. He wants to move to a model of selling the value of his product and organization. He believes that if he stops chasing price that he will achieve a higher average gross profit. He thinks the velocity mindset is hurting his average gross profit. He’s tired of playing his competitors pricing war games.

If you’ve followed my thoughts on this subject you know that I’m pretty convinced that if you pull back on your pricing that your grosses will go up….and, and, and…you know what’s coming don’t you? Your traffic will go down.

Screaming from the rooftops that you are a great place to buy a car won’t work for you unless you can scream it loud and clear and for a very long period of time. Your ultimate knee jerk of back to price wars would occur probably before you ran out of money.

If you follow CarMax you know they are the number one seller of used cars and don’t play much of the pricing game. Their cars are usually more expensive than yours. They have done a consistently good job of telling people, this is a great place to do business, we have lots of inventory and we will buy your car even if you don’t buy ours. That’s pretty much what they do. And, they don’t negotiate the price or the value of the trade.

We can all agree they have a totally different model than most new car dealers. Unless you are willing to convert to one-price, change your culture and are willing to spend a lot of bucks it’s not going to work for you taking the approach of “Buy here, ’cause we are great.”

I really do think one of the biggest problems in the industry (though it is getting better) is that when the customer shows up at the front door we still discount the car. This applies to new as well as used. The number one thing you can do to improve your operation and your gross profit is to learn to say “no.” Say it by presenting all those reasons why a customer should buy your car and do business with your dealership. You can only do this by preaching the message to your team every month, every week, every day. The entire team has to believe.

I recently visited with a very successful used car dealer who specializes in high line cars. He retails about 250 units a month and he gets about 1500 hits a day on his website. He said that he has noticed a trend over the last few years that people are driving shorter and shorter distances to purchase. His analysis of that is that more dealers are doing a better job of marketing their inventory online and therefore the customer can find what they want much closer to home.

As you may know Texas Direct has always used eBay as its website. In the early days they sold a large number of their vehicles online through eBay. A few years ago they relocated to an old Auto Nation Used Car Superstore facility and now sell a lot of cars to more of the local public. Yes, people still go online to find the price and car they want, but they are doing it in a shorter distant. Here’s a recent article on eBay losing traction that more or less backs up this thought process. Article

Strategy to consider:

1. Price your vehicles smarter. Everything doesn’t have to be at market price on the first day. Some should be over. Some should be below.

2. Re-price your inventory faster. Don’t let “buckets” rule your world.

3. Train and re-train your staff on selling the value of your vehicles and your organization.

4. You have to learn to say “no,” when the customer wants to negotiate when you know you are holding the winning cards. (Cars.)

Never give up on creating value, but if you give up on aggressive pricing you will be giving up a lot of traffic. That’s all I’m gonna say, Tommy Gibbs

Bee Swatting

In a recent interview, Jimbo Fisher, the head coach of the 6-0 Florida State Seminoles football team was asked how he kept his team focused on the next game.

He said it’s about managing the clutter that goes on around him and the team. Clutter for him means the media and the distractions that keep things stirred up as they go about the task of getting ready for their next opponent.

Managing clutter is one of your biggest challenges as you go through your day. There are things coming at you from left and right. At times, you feel like you are being attacked by a swarm of bees. Your ability to swat those bees one by one will often determine your progress and results on any given day.

You cannot let the clutter get you off your progressive track. The more you can do to control clutter the better. Clutter is just a bunch of little stuff that slows you down, moves you off your center, gets you off track, discombobulates you and messes up your entire day. You cannot let clutter control your production and performance.

Clutter is best dealt with by making sure you take a few minutes at the end of the day or first thing in the morning to map out your major tasks for that day. Swatting those little bees one by one and having an attitude of “next” will keep you on task and moving forward.

Staying on task and swatting the “clutter bees” at the same time is what separates the bee killers from the killer bees. Start swatting. That’s all I’m gonna say. Tommy Gibbs

What’s Your 0-7?

What if you owned the Tampa Bay Buccaneers and every day you opened the paper or turned on the sports talk shows and the headline was “Fire Schiano?” As you may know Greg Schiano is the coach of the NFL football team the Tampa Bay Bucs. As I write this article his team is 0-7. If you owned the Tampa Bay Bucs would you fire him?

You may very well have your own Greg Schiano working for you right now. Why haven’t you fired him/her? Is it the fear that you could do worse? Is it the fear that you may have to work a little harder? Is it the fear of what your staff might think?

Greg Schiano may be a really good guy. Your guy may be a really good guy. How long are you willing to endure the pain of your own Greg Schiano going 0-7? Is it 0-8, 0-9 or will it be 0-10 when you finally do the right thing?

0-7 for you might be a sales person who averages 7 cars a month.
0-7 for you might be a new car manager who can’t desk a deal or take a “TO.”
0-7 for you might be a service manager who keeps running your techs and customers off.
0-7 for you might be a used car manager who just doesn’t get “turn.”
0-7 for you might be a controller who can’t work with people.
0-7 for you might be a parts manager who always has to have it his/her way.

I can’t tell you who your 0-7 actually is. You know who it is and you just won’t do anything about it.

If you have someone who is 0-7 it’s probably due to one of two reasons. (I’m stealing a Dave Anderson quote with my own little touch.) Are they stupid? In other words if they are stupid they just don’t know. If they don’t know how to do the job it’s because you haven’t taught them how and/or they don’t care enough to learn it on their own.

Or they may be ignorant, meaning they know how, but just won’t do what they actually know how to do.

I hope you’re not staring at 0-7. I doubt it because if you were that would make you stupid or ignorant. I know you’re not stupid or ignorant because you read my material.

I’m betting you know someone who’s got some 0-7 going on. You might want to give them a wake-up call by forwarding this to them. That’s all I’m gonna say, Tommy Gibbs

Now Is The Time

Get ready to dig into your October financial statement.From a timing standpoint this is a perfect time of the year. I always looked forward to analyzing the October financial statement.

I can’t say that math was one of my best subjects, but I can divide by 10 real easy. At a glance I know what the averages are for any line item expenses, sales volume and gross profit. A Oct. Cal

What also makes October a perfect time is it sets the stage for the next year. Now is the time to start planning for 2014. Waiting until the last week in December to get your plan together is a really bad strategy.

This is the perfect time to dig in and firm up your fundamentals in all departments. This is the time to get back to basics. This is not the time to cut back on your training. This is when you need to amp up your thinking and stretch your organization.

If you don’t have a solid foundation of basic processes you will never maximize your success. This is the time to take control of the “evaporation factor” that’s been occurring all year long. This is the time to stop the “process bleeding.”

Your long term plan should include joining a Twenty Group and attending the NADA convention. Look, we all get lazy, and get caught up in our daily routines. Attending these meetings gets you revitalized. It gets you outside of your daily box and opens your eyes up to what the possibilities might be. Seems like a no brainer. This is the time to make those plans.

Teamwork is critical if you’re going to maximize your bottom line. To keep your team on the same page you have to constantly communicate to them what the expectations are and what processes they are expected to follow. There is no “shake ‘n bake” solution. You don’t fix it and walk away. You fix it and re-fix it.

What to do?

1. Ask yourself if you can improve your processes? If you focus on revamping your processes, what effect do you think it will have on your business? It is an absolute fact, that regardless of how well disciplined you are, over time your processes are going to evaporate. The best piece of advice I can give you is to lock yourself and your management team in a room and review every detail of your selling processes. Be bluntly honest with yourself. Then take the necessary action to get you back on track.

2. Can you improve your team? Got the wrong players? Now is the time to make the changes. If you already have the right team in place then it’s time to let them know what your expectations are and show them the plan and the path to achieve those expectations.

3. Don’t think of your planning as “you now having a plan.” Think of it as a “mission.” Plans can fall apart. When you’re on a mission you stay after it until you succeed.

I’m on a mission to get you to re-think what you’re doing…That’s all I’m gonna say, Tommy Gibbs

Whatcha Got?

I had great mentors when I first got in the car business. One of the first things I learned was that when a salesman was working a deal the whole world stopped.

Most of us are familiar with the tower or desk concept, the area where deals are worked, which can at times be like Grand Central station. It’s the nerve center. It’s the airplane control tower. It’s the emergency room and ICU all rolled into one.

What it’s not is a place to socialize, but socialization does happen there. With that being the reality, the management staff has to have the discipline that all silly activity stops when a sales person walks in the room. To this day when I’m in a dealership and a sales person walks in the tower I want to say “Whatcha got?”

Sometimes they have a deal. Sometimes they have a question. Sometimes they need encouragement. Sometimes they are looking for a little push. Sometimes they are just lost. But at all times I want them to know I care about them and I’m there to help them do business.

If you’re not already using the term “Whatcha got,” maybe you should. By saying “Whatcha got,” you will get a lot. That’s all I’m gonna say, Tommy Gibbs

Inventory & People

The two hot topics of conversation of late, actually all of the time, have been how to find more cars and how to hire more and better people. That same conversation occurred 20 years ago and will occur 20 years from now. The reality is that there is no simple fix to either of these problems.

If you think hiring a rock star buyer will solve your inventory problems in the end you will probably make them worse. If you think hiring a full time trainer/recruiter will be the fix-it for your need for sales people then it’s probably not going to work out all that well. But of the two, hiring the recruiter/trainer will probably work out better than the buyer. These are the two toughest problems facing all automobile dealers and there is no one fix and voila it’s done.

Finding great players is a fulltime, never ending job. It’s just like being in the coaching field. Great coaches are always scouting and recruiting. If you are looking for a magical ad to put in the paper that’s going to attract your next superstar you may be waiting quite a while.

If you are looking toward the next great job fair and think you’re going find 10 college graduates for your sales team that will carry you to the promised land you are in for a very long day. It doesn’t happen. It doesn’t work that way. If you wait to hire people when “you need” them you are never going to find the people you need.

You and your assistant coaches have to be recruiting every minute of every day. You should be recruiting your customers, the sales clerk at the shoe store, your next-door neighbor, the waiter or waitress you meet at lunch or the enthusiastic hostess you met at Applebee’s. One of the most successful General Managers I know was working at Wendy’s when he started selling cars.

I love college graduates. It’s not so much what they actually learn, but it does show they can stick to something. However, the odds of them sticking with you are not very good. Most college graduates don’t see selling cars as a “step up” in their life.

What you should be looking for is someone who feels they missed the boat and this is their big chance. Someone with a year or two of college is a great selection. They think they screwed up by not finishing school and they see what you offer as a super opportunity. And of course it they have a sports background all the better. They are used to getting knocked down and getting up.

As for finding more inventory…Hey coach it’s the same thing. It’s a constant thing. There is no one answer. If you are going to succeed in finding used car inventory you cannot leave any stone unturned. Trades, mining your customer base, online auctions, auctions, for sale by owner and any other brilliant idea you can come up with. But, none of them in and of themselves will give you the inventory you need. If you are only looking for cars when you need them you are going to end up with a lot of cars you don’t need.

When it comes to finding people and finding inventory they both require an ongoing effort by the entire management team. When you dabble in finding people and cars when you most need them, it’s like plowing a field uphill with a mule.

When you can convince your management team that we all have to look for inventory and people in multiple ways then you will at least have some control over your destiny.

It still won’t be easy, but the alternative is far more frustrating and a lot less rewarding. That’s all I’m gonna say, Tommy Gibbs

Management By Committee

I’m a big fan of making the team inclusive of what’s going on. I’m a big fan of educating the team. I’m a big fan of getting insight from those who are in the trenches. I’m a big fan of listening to the troops.

But, I’m not a big fan of rule by committee. Ruling by committee is an easy way to avoid accountability. Ruling by committee allows us to blame no one when it fails. Ruling by committee is a sickness designed to allow those in charge to accept responsibility for nothing.

Ruling by committee is a way to hide in the back room. Ruling by committee is peeking through the closet door.

Step out of the closet, come into the room and be counted. If you’re ruling by committee, stop it! You’re not running a democracy, you’re running a business.

That’s all I’m gonna say, Tommy Gibbs

Kids Say The Darndest Things

We have no doubt become enamored by the numbers. We track this and that and a little bit of everything. There was a time many moons ago when the two most important things we tracked were how many ups we had and how many we sold. In some ways we may have over complicated things and in other ways not so much.

I would strongly argue the point that it is the simpler things we need to pay the most attention to. There are some people in this business who make it much more complicated than it needs to be.

There is a number, a very important number, yet a simple number, that I find the most ignored in my travels and that’s “look-to-book.” Book A

Before I go any further, let’s make sure we all agree on what “look-to-book” actually is. It is: How many cars did you appraise (look at) and how many did you get. It doesn’t get any simpler than that.

I cannot tell you the number of times I ask the question, “What is your look-to-book?” And most people don’t have a clue. At best they state a guessed number because they have heard that’s what it should be.

Maybe it’s ignored for the same reason the number of ups and the number closed is often ignored…because it’s not always accurate. If you don’t get all your ups logged then you are misleading yourself with an amazing closing ratio. If you log all your ups, then you get upset that your closing ratio is too low. Oh, whatever. Get it right. Demand that it be done correctly.

And maybe it’s the same for look-to-book. Or is it? Is it that you really don’t understand the importance of look-to-book? Look-to-book is a powerful tool to help you make more deals. The more units you can capture at the front door the more gross per unit you end up making.

The question often comes up as to what your look-to-book percentage should be. Most would answer the question by saying in the 40 to 50% range. (It means nothing if you don’t put them all in the system.) My answer to the question is there is no specific number it should be. What it should be is better than you were yesterday.

You should always be thinking press it up:

The more you press it up, the more deals you are making.
The more you press it up, the more your average gross will go up. (You always make more on trade-ins.)
The more you press it up, the less of a need you have to go out and purchase cars.

Do you remember the Art Linkletter program, “Kids Say The Darndest Things?”

That happens in the car business too. Managers often say the darndest things, such as “We Never Miss a Trade.”

I’m thinking you do. Actually I know you do. We all miss trades. If you aren’t paying attention to look-to-book you have no idea what you might be missing and I’m thinking you’re missing a lot. That’s all I’m gonna say, Tommy Gibbs

Not Self, But Others

This past weekend I had the honor of being inducted into the Ferrum College Football Hall of Fame. Actually it was the entire team from the 1965 National Championship team. Ferrum is now a four year school, but at the time we won the Championship it was a Junior College. Can you say “bad student Tommy?”

I was a defensive safety. Fast and mean. Imagine that. If you have an appreciation for football you can probably appreciate the fact that we went 10-0, had 7 shutouts and only gave up 18 points the entire year. That’s strong as goat’s breath. I (We) might have been better than I thought.

I’m not writing this to tell you about my accomplishments, as much as to tell you about a couple of observations.

First, I hadn’t seen my teammates for 47 years. Though most sounded the same, none even came close to looking the same. Many are overweight. All are aging just like me. When I look at the original team photos I sorta gasp. What the heck happened?

In a sense it seems just like yesterday we were beating and banging on each other and in a flash we’re all as old as dirt. I don’t get it. What happened to all the time? Where did it go? How did this all happen so fast?

The message here, whether it’s business or your personal lives and regardless of where you are in the cycle of life, enjoy it, try to understand that if things are good or bad that where you are today will not last forever. Enjoy where you are.

I had another great take away from the ceremonies I want to share with you.

One of the other items on the agenda was the presentation of the “Distinguished Alumni Award.”

As the master of ceremonies was going over a former tennis player’s list of accomplishments he mentioned she had won an annual “sportsmanship award” presented by the NCAA.

When she got up to speak, she told the story behind the award. She stated that her coach had always warned her to make sure she took two tennis rackets with her to every match just in case one broke. The way she put it is, “he had beat it into her head.”

In the middle of a regional NCAA tournament match her opponent broke her racket. And guess what? Her opponent didn’t have a spare. Apparently there is an amount of time they give you to come up with another racket. The other player’s coach was not present to help her find one and time was running out. She was going to have to forfeit the match. The young lady who won the award gave her opponent her spare. And guess what? You guessed it didn’t you? Her opponent beat her with her own racket.

The school’s motto is, “Not self, but others.” She obviously learned well. When you put others first, you always win. The game of life (and the game of business) is short. Putting others first always makes you and the team winners. That’s all I’m gonna say, Tommy Gibbs

Why Would You Take The Losses?

I continue to be amazed and flabbergasted by what some people are thinking when they finally decide to clean up their problem cars by dumping them at the auction. I’m not talking about the onesies or twoesies that you dump at the end of the cycle. Nor am I talking about the clunkers with no life left in them that you sell at the local auction.

I’m talking about those that surfaced when you changed used car managers. Sorta like finally finding all the dead bodies. More often than not it’s in the $100,000 range of water going over the dam. Money AA

The dealer’s famous last words are “Oh crap, all these problem cars have been hidden by the previous used car manager. I’m gonna fix this once and for all. We’re gonna dump all these problem cars and start over.”

Really, really, really…why would you do that? Why would you want to lose $100,000 in an instant?

Let me give you some basic math. Let’s suppose you have 50 cars and you’re $2000 high in each car for a total of $100,000. In your brilliant thinking and with a mindset of starting over you take them to the auction and lose $100,000.

As much as none of us like writing inventory down, let’s pretend you decide to re-appraise those aged units and take the $100,000 worth of water and eat a bit of it each month, at the end of the year or whatever.

You now own the cars for the “real money.” The best part is that prior to taking this drastic step you developed some solid strategies and put into use Tommy Gibbs’ world famous “Life Cycle Management Process.”

You take each of these re-appraised units that are now on the money and give them a new birthdate, along with a life cycle exit strategy.

Since you are now “on the money” we can safely assume that the sales people are less likely to walk around them. Also, we can safely assume that we have a much better chance of retailing them now that we can price them right using the vAuto pricing tool.

I think it’s a safe bet that on these “on the money” units you will generate $70,000 or so in front gross profit.

Ok Einstein, how much money did you really lose versus taking them to the auction? $30,000. Would you rather lose $30,000 or $100,000? But wait there’s more! You didn’t have to truck 50 units to the auction and you didn’t have to pay auction fees on 50 units. Yes, you did have to pay commission on the 50 units you retailed. Tell me how retailing more cars and paying a commission is a bad thing!

Oh shucks, I failed to mention you might have some F&I income from those units. Oh darn, I also failed to mention that you might have a trade in on some of those 50 units. More darn, I almost forgot to mention the retail parts and service work that might come your way from having a retail customer. Oh, pooh, I also forgot to mention you have just captured a retail customer who might re-buy from you down the road, or they might even tell a relative or friend how awesome you are.

Yeah, go ahead and dump those 50 units at the auction. It’s faster, easier, and more fun…and you send a powerful message that you have finally gotten serious about the used car business. Works for me. That’s all I’m gonna say, Tommy Gibbs