I’m betting you’ve either got a lot of numbers already laid out on a spreadsheet for 2018 or you’re scrambling to get it done in the next few days.

I’m a big proponent of forecasting. It lays out a map as to where we are going. Although there are detours along the way it gives us a chance to get to our final destination.

I’m an even bigger proponent of department head meetings. I believe your job as a leader should be to teach, educate, coach and encourage your team to seek ways to improve your operations.

I tend to take a common sense approach to most things in life and I approach forecasting and monthly management meetings no differently.

Dealers, or any business for that matter, tend to forecast based on what they would like to do in the upcoming year. Often it’s based on statements such as “we need to increase our sales by 10%” and/or “we need to reduce expenses by 15%.”

Saying you want to increase your business by 10% sounds good, but if you don’t have a plan to get there what good is it? I’ve always been baffled by annual forecasting.

One of two things usually happens:

1. Someone is overly optimistic and/or they are blowing smoke up someone’s butt.

2. Someone serves up a low ball because they don’t want the pressure of hitting an unrealistic number.

Although dealers want to see an improvement in the next year’s numbers, what they really want is a number they can take to the bank.

In order to do a realistic forecast, you have to take into account staffing, inventory, and market conditions. How can anyone do a forecast and predict what those three pieces of the equation are going to look like 3, 6 or 12 months down the road?

I’m not saying you shouldn’t do an annual forecast, but doesn’t it make more sense to adjust that forecast monthly or quarterly based on those three fundamental elements?

Because most leaders don’t make those adjustments it frustrates the management team and defeats whatever good intentions there might have been. Everyone eventually loses respect and confidence in any type of forecasting and concludes “Why bother?”

While it makes good sense to do a monthly or quarterly review of the actual numbers, managers become disillusioned with these reviews in that they become a “beat up” session rather than trying to figure out what went wrong and how “we” can fix it.

People know when they didn’t perform. What they want from upper management is leadership that gives well defined ideas and direction on how to “fix it” or make it better.

Using more common sense with your forecasting and monthly management meetings will help you grow a solid organization that generates consistent profits and sustained growth.
That’s all I’m gonna say, Tommy Gibbs

In just six more days you’re going to be very, very busy. Next week has the potential to be one of the best selling weeks of the year.

It will only be a great week if you make it a great week. It’s not going to be a great week if you stay in your seat acting like a computer geek.

You can make it a great week by getting up and moving around. You should be like a bumblebee on a pollination mission. You’re here. You’re there. You’re everywhere. Stinging your little heart out.

You can’t just flap your little wings in place and think someone’s gonna sell a car.

You have to create the buzz. You have to go from being weak and meek in order to make it a great week.

I don’t like things to be all about you, but this is all about you. This week is all about you making things happen.

It’s about you contributing as much in a week as you sometimes do in a month. It’s not about you giving 100 or 110%. It’s about you giving 200%. It’s about starting early and ending late.

It’s not about asking others to do it. It’s about you doing it. You sometimes think you’re important. Well, you are important. You’re even more important than you think. At least this week you are.

You may have to sting a few people this week. That’s ok. Some of your team could probably use a sting or two. A little stinging pain for a whole lot of car selling gain.

Wishing you a very Merry Christmas, and an amazing 2018. That’s all I’m gonna say, Tommy Gibbs

Pay plans are a very touchy subject. I’m always being asked about pay plans. It’s often been said you’d be better off not to discuss religion, politics and let me add one more, pay plans. I’m feeling kind of froggy today so I’m jumping in.

There are as many different pay plans as there are dealerships. It’s fair to say that how sales people’s pay plans are constructed often depends on the dealer’s philosophy of doing business and of course the influence of his/her key managers.

Those philosophies were developed early on, based on the experience and success of the decision makers in their personal and business growth.

We tend to think that everyone thinks like we do, and so if the way we were paid when we started made us successful, then it will work for others along the way. Or we think it’s worked so well for the dealership over the years, why change?

Just because you’ve always done it “that way” and it got you to where you are today, doesn’t mean doing it “that way” will get you to where you need to go.

See how much of this rings true:

1. You’re paying a lot of flats.

2. You’re pricing your used cars (even new) online with killer prices designed to drive traffic to the front door.

3. You’re working harder and harder to hold the line on your pricing when the customer shows up.

4. Because of #2 and #3, your sales staff have very little control over gross profit. Certainly not like they did in the good old days.

5. You’re not a one-price dealer yet, but you’re moving more in that direction.

6. It’s becoming more and more difficult to hire people, especially millennials, willing to be paid on gross profit.

In today’s market, it doesn’t make much sense to continue to pay on gross profit. What does make sense is to move more to a volume-based pay plan.

Some of your concerns:

1. You’re afraid to change pay plans because you’ll lose some of your key people.

2. You’re afraid your sales person’s compensation percentages will get out of line.

3. You’re afraid gross profit will go further south.

Let me clear those concerns up for you:

1. Some of those key people will actually like the change. But, if you have some people that you’re concerned about, then tell them that if they sell the same number of units over the next 12 months as they did the previous 12 months and if they don’t make the same or more money that you will pay up.

2. If you do your homework, analyze your history, analyze your grosses, trends and really think it through, you won’t screw it up and get out of line.

3. Gross profit could very well get better. Yes, your management team will have to work harder and harder to hold the line on pricing. If we spent a little more time on selling the sales staff that we’ve got the price right, gross might just go up.

When you dissect all of this, it is not so much about changing pay plans that’s all that hard. It’s about changing the mindset and culture of your organization.

I’ve attached a spreadsheet that you can change around to fit your style. Might be worth your time to take a peek. That’s all I’m gonna say, Tommy Gibbs

Pay Plan In Excel

The odds are pretty good that your internal labor rate is $75 to $125 or more depending on a number of factors. Thus, your average reconditioning costs could be somewhere in the $800 to $1400 range.

Or, if you are a big time “Certified Dealer” then your cost per unit would be higher because of the factory requirements.

Let’s round the reconditioning number off to a nice $1000 per unit or whatever number you feel comfortable with.

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the “Pack Generation.” I’ve always loved packs, but this business has changed, I’ve changed and you should too.

Stop trying to justify it to yourself by saying you’re adding it back into gross and the managers still get paid on it.

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add the reconditioning cost and packs you have a total of $1800.

You are starting off from “jump street” with an $1800 cost disadvantage against those dealers who aren’t doing it the old-fashioned way. (CarMax and Texas Direct to name just two of them.)

The problem with the pack and recon “drug” is that it still sorta works and you can’t shake ‘da habit.

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail or close to full retail, that they will just give it away in the sales department is old, tired and a worn out theory. By and large, we’re not working from cost up anything like we used to. Hello to the world wide web.

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

What compounds the problem is your pay plans. As long as you keep paying salespeople and sales managers on gross you are going to fight a losing battle. Changing pay plans is more about changing the culture in your store as much as it is about the pay plans themselves.

Can we agree that the pricing you put on the Internet has an impact on the amount of traffic that shows up? Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? For sure it’s not as much as they used to have.

What if you changed the pay plan, took gross out of the equation and went to more of a one-price concept? Under that scenario what you charged in service and the need for packs would be irrelevant. The fact of the matter is you’re being pushed into less and less negotiating whether you like it or not.

If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy and trade for more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world?   That’s all I’m gonna ask, Tommy Gibb

 

More and more, dealers are admitting that whether they want to be a one-price dealer or not that they are sort of being forced into it because of the pressures from today’s market. That being said, there’s a very small percentage of dealers who have made a commitment to being a one-price dealer.

If you’re one of those dealers who still negotiate the price of your new and used cars let me suggest you go back to some old-school of under-allowing on trades. Not just some of them. All of them.

When I ask the question of managers if they under-allow, most will say yes, some of the time. Bad idea. If you’re going to do it, go all in and do it with all of your customers, not just those you think are stupid or drunk. That may be a little harsh, but I want you to get the point. Stop picking and choosing.

I’ve attached my world famous under-allowance grid. You may not like mine and that’s fine. Come up with your own. Then come up with the discipline to serve it up to everyone that has a trade.

If you do so, one of three things will happen:

1. The customer says “yes.” Bam, you made some gross you would have never made.
2. You have to peel the customer off the ceiling. No problem. That’s why you get paid the big bucks.
3. You have now checked the customer’s temperature and gotten their thinking in line.

Don’t act all righteous and say you don’t want to do this because you want to be transparent. If you wanted to be transparent you would stop negotiating and show everyone the invoice.

If you’re going to negotiate in today’s market you need every tool or advantage you can get.

Let the old-school gang smile again. That’s all I’m gonna say. Tommy Gibbs

It’s Thanksgiving and time to give thanks. If you’re like me for sure you have a lot to be thankful for. Among many things I’m thankful for are your friendship and support.

Thanksgiving also starts the closeout of the year. It centers around Black Friday and rolls through the last week of the year. Like it or not, 2018 is already here.

I’ve listed some very basic ideas you need to take into consideration that will help you finish strong and get ready for your best year ever.

A. Re-commit yourself- and your thinking towards being the very best you can be. Take stock of all those great ideas running around in your head. Write them down and make a commitment to get them done by certain dates. Post it on the wall in several places that you will see frequently. If you have a private restroom, put it on the mirror.

The dealers and GMs with the most successful used car operations are those who have taken ownership of the used car department. The more involved you get, the more success your dealership will have. If you’re not committed to the used car business, it’s a safe bet your team isn’t either.

B. Re-evaluate-the appearance of your inventory. Let’s do a little checklist:

1. Look at your inventory online. Are they all there? 40 + pictures & prices posted?
2. Take a lot walk. Are the vehicles in straight lines?
3. When was the last time the entire lot was rotated?
4. Are you using angles to display your inventory?
5. Do you have hang tags? If so, do they all have hang tags?
6. Are they nasty, dirty on the outside?

C. Refocus Your Disciplines-To be successful in the used car business you have to have daily/weekly/monthly disciplines that you live and breath by.

One of those disciplines might be to do a weekly lot walk. Every car in your inventory must be touched. If it’s in service, touch it. If it’s in prep, touch it. If it’s in the budget center, touch it. Everybody touches it. Even if you think you have your disciplines well defined inside your head, you’d be well served to make a written list and check them off from time to time.

D. Re-Recon-Take every unit over 30 days old back through a recon process. (You’ve already missed your best window of opportunity to make gross; that would be the first 20 days.)

E. Re-Invest-in yourself and your management team. Do something to gain some knowledge. Hire me, visit CarMax, or visit a dealer friend in another state that does a good job in used. Attend a workshop. Join a Twenty Group. Join a Used Car Twenty Group. Do something besides sitting there and waiting for something to happen.

F. Re-think- your management team. Do you have the right person running your used car operation? Yes, that person may have been with you for years. Loyalty sometimes equals mediocrity. Maybe they have some great skills, but the fact is that you may not be making the best use of their talents.

I’m thankful for lots of things this holiday season and I’m especially thankful that you’ve taken the time to read my little Zingers. That’s all I’m gonna say, Tommy Gibbs

Time To Dig Into The Numbers

By now you’ve closed out October, twisted over the numbers and gone back to work.

Not so fast.

October is the perfect month. “Perfect for what?” you say. Perfect for figuring out where you’ve been and where you want to go.

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.

What also makes October a perfect time is it sets the stage for the next year. Now is the time to start planning for 2018. 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, stretch your organization and stretch your imagination. 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.

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 brutally honest with yourself. Then take the necessary action to get yourself 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 achieving 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 and then you stay after it some more.

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

Great leaders know that in order to win it takes constant preparation. They know there is no single strategy they can execute that will make the team a consistent winner.

They know and understand the need for ongoing preparation. They are constantly exploring new strategies, concepts, and ideas.

Winning in any sport requires preparation. Most great coaches will tell you the game isn’t won on game day. It’s won during the week on practice days. It’s the preparation that makes the biggest difference.

It’s a given that most people want to be part of a winning team. Winners are drawn to those organizations that are willing to pay the price with preparation. I believe there are three types of people:

1. Those who want to get better and embrace preparation.

2. Those who don’t care if they get better and will do everything they can to avoid preparation.

3. Those who are just confused and looking for someone to show them the way.

If you’re not winning as much as you would like it’s either a not knowing or a not doing issue. If you don’t know, then you need to figure it out. If you’re not doing, then you need to do it.

In either case, your will to prepare is what will put more “Ws” on the board.

Preparation breeds confidence.
Confidence creates a can-do spirit.
A can-do spirit creates momentum.
Momentum keeps the ball rolling.
Winning is constant preparation.

That’s all I’m gonna say, Tommy Gibbs

There’s not a week that goes by that I don’t get several calls from dealers struggling with reconditioning of used vehicles.

Either that it takes too long to get a car done and through the system or they are paying too much to get it done. Often they complain about both.

Most of these problems can be fixed if the dealer really wants to fix them. The dealer has the power to fix anything they want to fix. A simple step to improve the situation is to hire a “Chaser.”

A “Chaser” will gain you a few days in recon and reduce your recon expense by a couple hundred dollars per car.
Maybe even more on both ends.

A Chaser is someone who does just that. They chase the used cars through the system. This is not a high paid position; somewhere in the $3000 range per month. It’s a person who has solid mechanical knowledge, good people skills, attention to detail and the ability to communicate with the sales department and the service department.

Think of them as being in an assistant manager category. It is not the same as having a dedicated service advisor or used car technician. Far better.

The chaser has a single-minded focus with no other agenda. They will never let a car sit for even one day while it waits to go from service to clean up. If clean up is backed up they will start kicking and screaming to find a solution, whereas the service adviser is thinking “next” in terms of his/her own next repair order opportunity to make some money.

The Chaser is an employee of the sales department but spends most of their time in service. They need to have a certain amount of approval authority so they can speed things up for you.

I often hear dealers say they already have that, as they give the service department the latitude of spending X dollars per car without having to get approval.

Really? Let’s say you give them $800 without asking any questions. I can promise you-you’re going to get a lot of $800 tickets. It’s human nature.

That’s like the sales manager who says I’m only going to accept a $1000 deal. Well, you’re going to get a lot of $1000 deals. People take the route of least resistance. You won’t see too many $500 deals and you’re not going see too many $2000 deals.

The Chaser needs to have enough mechanical knowledge to know when to hold them and when to fold them. They won’t let the wool get pulled over your eyes.

They are there, in part, to protect and assist the used car department with the ultimate goal of speeding things up.

Part of their pay plan might be based on average recon cost and the average number of days to get a car to the front line. Of course, you have to be careful that they don’t go too far on the saving money part.

You’ll be able to tell if your policy account and complaints go up, so don’t be too concerned if you elect to make it part of their pay plan.

The chaser is going to gain you some days in recon by doing…well, just that. They are chasing the cars through service. They chase the cars and they push the cars through each station. If things get backed up they are looking for a solution on how to make it happen.

Many dealerships rely on the used car manager, service writer or, in some cases, the service manager to handle these duties. Most don’t have the time, expertise or focus to make it happen.

You may be sitting there reading this thinking, geez, I don’t want to have to hire any more people. I get that, I understand that.

I have a question for you. How much do you have to save per car in recon or gain in days through recon for the Chaser to more than pay for themselves? That’s all I’m gonna ask, Tommy Gibbs

There’s not a week that goes by that I don’t get several calls from dealers struggling with reconditioning of used vehicles.

Either that it takes too long to get a car done and through the system or they are paying too much to get it done. Often they complain about both.

Most of these problems can be fixed if the dealer really wants to fix them. The dealer has the power to fix anything they want to fix. A simple step to improve the situation is to hire a “Chaser.”

A “Chaser” will gain you a few days in recon and reduce your recon expense by a couple hundred dollars per car.
Maybe even more on both ends.

A Chaser is someone who does just that. They chase the used cars through the system. This is not a high paid position; somewhere in the $3000 range per month. It’s a person who has solid mechanical knowledge, good people skills, attention to detail and the ability to communicate with the sales department and the service department.

Think of them as being in an assistant manager category. It is not the same as having a dedicated service advisor or used car technician. Far better.

The chaser has a single-minded focus with no other agenda. They will never let a car sit for even one day while it waits to go from service to clean up. If clean up is backed up they will start kicking and screaming to find a solution, whereas the service adviser is thinking “next” in terms of his/her own next repair order opportunity to make some money.

The Chaser is an employee of the sales department but spends most of their time in service. They need to have a certain amount of approval authority so they can speed things up for you.

I often hear dealers say they already have that, as they give the service department the latitude of spending X dollars per car without having to get approval.

Really? Let’s say you give them $800 without asking any questions. I can promise you, you’re going to get a lot of $800 tickets. It’s human nature.

That’s like the sales manager who says I’m only going to accept a $1000 deal. Well, you’re going to get a lot of $1000 deals. People take the route of least resistance. You won’t see too many $500 deals and you’re not going see too many $2000 deals.

The Chaser needs to have enough mechanical knowledge to know when to hold them and when to fold them. They won’t let the wool get pulled over your eyes.

They are there, in part, to protect and assist the used car department with the ultimate goal of speeding things up.

Part of their pay plan might be based on average recon cost and the average number of days to get a car to the front line. Of course, you have to be careful that they don’t go too far on the saving money part.

You’ll be able to tell if your policy account and complaints go up, so don’t be too concerned if you elect to make it part of their pay plan.

The chaser is going to gain you some days in recon by doing…well, just that. They are chasing the cars through service. They chase the cars and they push the cars through each station. If things get backed up they are looking for a solution on how to make it happen.

Many dealerships rely on the used car manager, service writer or, in some cases, the service manager to handle these duties. Most don’t have the time, expertise or focus to make it happen.

You may be sitting there reading this thinking, geez, I don’t want to have to hire any more people. I get that, I understand that.

I have a question for you. How much do you have to save per car in recon or gain in days through recon for the Chaser to more than pay for themselves? That’s all I’m gonna ask, Tommy Gibbs