Author: Tommy Gibbs

When The Crowd Is Cheering

Posted on by Tommy Gibbs

You may have seen the New York Mets lose game 5 to the Kansas City Royals in the World Series. Even if you didn’t see it, you’ve probably heard what happened. Kansas City won the game in the 12th inning by a score of 7 to 2.

Matt Harvey had pitched a brilliant game for the Mets through the first 8 innings. At the end of 8, the Mets led 2-0. Three more outs and they live to see another day.

When the Mets were at bat in the bottom of the 8th, Terry Collins, the Mets’ manager, had the Mets pitching coach tell Matt Harvey they were going to put their ace reliever, Jeurys Familia in the game to close out the 9th.

Harvey approaches Collins in the dugout, has a very heated conversation and is adamant that he wants to pitch the 9th. The crowd is chanting “We want Har-vey!” they roared. “We want Har-vey!” The fans are going crazy.

Harvey had already thrown 102 pitches, but rather than go with his smarts, Terry Collins allows Harvey to start the 9th.

Harvey walks the first man he faces. It gets worse. Collins allows him to pitch to a second batter, Eric Hosmer, who rips a run-scoring double to leftfield that silenced Citi Field and cut the Mets’ lead in half. Familia replaces Harvey and Hosmer scores after a bad throw from first baseman Lucas Duda. Game tied in the 9th.

As many of you know, I refereed NCAA college basketball for 17 years. I’ve had calls booed and cheered that I’ve made. They weren’t exactly booing or cheering me, but it certainly can feel that way. (Ok, they were booing me.)

Here’s the point. Booing or cheering, it was my job to get it right based on what I’m seeing, my knowledge of the game and my knowledge of the play in front of me.

It was Terry Collins job to get it right based on his expertise and all the factors he knows about managing the game of baseball. He let the cheering crowd affect his decision making.

There’s a real lesson here. Never let the cheering, good or bad, affect your decision making.

Sometimes dealers let people cheer them into making bad decisions when they know better. They know they shouldn’t keep units past 60 days, but they get cheered into doing so.

I wrote an article this past week about paying on volume VS paying on gross profit. When the dealer tosses out a trial balloon about paying on volume the crowd boos. The dealer doesn’t want to hear the boos, so he says ok, let’s stay with paying on gross. The crowd cheers.

Don’t let the cheering crowd push you into bad decisions. That’s all I’m gonna say, Tommy Gibbs

Does It Still Make Sense?

Posted on by Tommy Gibbs

I sold my first car off my dad’s clunker lot on Broad St. in Richmond, VA when I was 12 years old. The summer of my junior year in high school I sold cars at Manchester Mercury on Semmes Ave.

Back in those days the customer signed 3 or 4 blank contracts and got roughed up by the dealership personnel. The keys to their trades were thrown on the roof, trades often hidden, and they were told they had to buy a car because their car had already been wholesaled.

Back in 1972, after a couple years of teaching and coaching I, like many of you, got in the car business until something better came along. Obviously nothing better came along.

In those early days, selling systems were the latest and greatest thing to hit since man landed on the moon. Turning the customer over multiple times was the norm and “if I could, would you,” became the closing tool of the day.

The business has changed a lot over the years.

Back them we didn’t have the Internet. We didn’t have third party leads. We didn’t have Google. We didn’t have vAuto. We didn’t have Vin Solutions. We didn’t have Auto Trader. We didn’t have Manheim online auctions. We didn’t have social media.

We didn’t have millennials as customers and employees. We didn’t have customers in their 50s, 60s, 70s and 80s who would rather shop online than spend 3 to 4 hours in a dealership negotiating a deal. We didn’t have 7 year old kids that could figure out your iPhone in a New York second.

What we did have were people in the business who had street savvy and a desire to make a lot of money. They had a strong work ethic and a willingness to grind it out 12 hours a day. And, we still had some questionable business practices. Truth in lending was right around the corner.

For many years, managers have worked deals from cost up and have been able to achieve a desired gross profit regardless of paying full retail in parts and service and/or having packs added to the cost of the cars. The skill level of those passing through the business back then was extraordinary.

No doubt a lot of things have changed over my many years in this business.

But, guess what hasn’t changed? Pay plans!

Most dealers are still paying sales people and sales management on gross profit with volume bonuses thrown in here and there.

With so many customers shopping the Internet, does it still make sense to pay on gross profit?

With a different breed of team members coming into the business, does it still make sense to pay on gross profit?

With prices being established well before the customer gets to the dealership, does it still make sense to pay on gross profit?

With customer’s expectations changing so much, does it still make sense to pay on gross profit?

With 90% of the dealerships using a pricing tool, does it still make sense to pay on gross profit?

With 90% of the public walking around with a personal device that can pull up pricing in a heartbeat, does it still make sense to pay on gross profit?

With the factory having so much control on how you price your cars and such low margins, does it still make sense to pay on gross profit?

With you paying so many flats and minimums, does it still make sense to pay on gross profit?

I’m just asking, does it still make sense? That’s all I’m gonna ask. Tommy Gibbs

Everybody Raises Their Hands

Posted on by Tommy Gibbs

Frequently in my training sessions I’ll ask the question, “How many of you agree that we do a lousy job of holding people accountable in the automobile business?” Without exception, they will all raise their hands.

Leaders that have figured out how to hold people accountable are the most successful when it comes to developing a culture of leaders and achieving high results.

Holding people accountable doesn’t have to be a negative experience. When people understand the expectations, they will seek to achieve those expectations, goals, objectives, culture or however you might want to frame it.

People tend to do the right thing when they know it’s in their best interest, not when you have to hit them over the head with a baseball bat.

Your job as a leader is to sell the team the idea that the things the organization deems to be in the best interest of the organization is actually in their best interest too. Achieving expectations means they win, we win and we all have more success.

Easy tips:

1. Make sure everyone is reminded of the expectations. Yes, that seems elementary, but the evaporation factor is always in play. Either as a direct message or subliminally leaders must constantly remind the troops of what’s expected and what’s important.

2. Get on it right now. Far too often when there’s a lapse in achievement, leaders let things drag on and on. The more things are allowed to slip, the more those things become habit, and the more the expectations are lowered.

3. You don’t have to be mean to enforce expectations. People like to work in a well-run, well-disciplined organization. This isn’t about screaming and hollering at someone about their failures. It is about letting them know quickly we’re not on track; you and your team are not getting it done, whatever “getting it done” might mean to you.

At some point there must be consequences for those who cannot live up to reasonable expectations. The ultimate consequence is they get to go to work someplace else.

4. Be consistent in your actions and statements. The easiest way for expectations to fall apart is that you are all over the place. You let some things slide for some people and not for others. You cannot be Dr. Jekyll and Mr. Hyde. Selective enforcement with just a few people will destroy the morale and productivity of the team.

5. There are times when you need to figure out the real root of why expectations aren’t being met. What’s the real problem? Leadership sometimes will set the wrong expectations. Setting the wrong expectations is just as bad as not having any.

6. In order to hold others accountable we too have to hold ourselves accountable. We should make it a daily practice of looking in the mirror and being honest with ourselves.

A part of holding yourself accountable is never to forget, “Familiarity breeds contempt.” The closer you become with people the more difficult you make your responsibility of holding them accountable.

I’m holding you accountable. That’s all I’m gonna say, Tommy Gibbs

When You Have Aged Inventory

Posted on by Tommy Gibbs

The reason you are reading this is probably because you have some aging problems. And even if you don’t, it’s still good information to keep at the forefront of your mind.

Some things to keep in mind:

1. If you have aging problems, one of the causes is that you haven’t previously been pricing your inventory competitively. Once you start pricing your cars “to market,” you’re going to see your grosses go down. Do not blame your vAuto pricing tool for the lack of average gross. Do not blame Auto Trader. Blame yourself for not taking action sooner.

2. If you have aged inventory, it’s choking you to death. You will never maximize your new car and used car sales potential as long as you have aged inventory. Sure, you will get lucky once in a while and have a good month, but you will never be consistently great until you fix the problem.

3. Asking your management team to work you out of your aged inventory isn’t the fix. Some of your managers may have helped put you in this problem, but the reality is your lack of discipline and enforcing a 60 day turn is the root of the issue at hand. Asking your managers to retail you out of your current mess is only prolonging the agony and hampering your ability to “do business” today.

A Strategy To Consider:

Re-appraise all units. Put them dead on the money. Once you do that then you have to decide how you’re going to eat the excess. There are a number of accounting tricks you can use, but in one way or another you’re going to eat some big bucks.

You could absorb some of it each month in wholesale losses or take the hit on your end of year statement. You’ve been hiding the losses way too long. Time to get on with it.

What you don’t want to do is to take your aged stuff to the auction, dump it and start over.

Let me give you a little math to think about. Let’s say you have $100,000 worth of water on your lot right now. If you take those units to the auction you will lose the $100,000.

If you write them down, they are now on the money and when you retail them you might generate $70,000 in used car gross. In the big picture you lose $30,000 vs. $100,000.

But here’s the problem. You cannot and should not do such a write down and keep running your used car department the old fashioned way or however you’ve been running it. You have got to make some disciplined changes and fix what got you so screwed up in the first place.

Remember the part where I talked about writing your inventory down and putting it on the money? What you need to do at that point is use my “Life Cycle Management” process.

As you re-appraise each unit, you need to assign them the number of days you are going to allow each unit to stay in your inventory. I recommend 20 to 60 days max. As you get better at this you should be shooting for 45 days max.

A 20 day car might be a car you are buried in; bad color, bad miles, bad equipment or a high dollar unit. You and your staff ought to know which units give you the most problems and tend to age.

A 60 day car might be a nice trade-in or something you purchased from one of your customers. You have to set your own criteria.

Remember, when you assign life cycle management, the goal is to price the units attractive enough that you find a retail buyer within the assigned life cycle. If you don’t sell it within the assigned days then the unit has to be wholesaled at the auction.

As you clean your inventory up your average gross profit will improve even though you are retailing some of these units faster at lower grosses. The reason it improves is because the units that you have determined to be problematic and have given a short life cycle, are the very units that in the past have been aging on you and destroying your gross profit.

I realize this is painful and difficult to do, but once you get on a 60 day turn you will never want to go back. Your challenge will be to have the discipline not to let anyone talk you into keeping units past 60 days. There are always excuses. Your motto should be “talk to the hand.” That’s all I’m gonna say.

Get Ready

Posted on by Tommy Gibbs

Yep, here we are again. October is almost over. 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 2016. 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. 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 brutally 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 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

Fire Someone

Posted on by Tommy Gibbs

Not a happy thought is it? Firing someone is never easy. If you’ve done your job, the someone that needs firing will often fire himself.

But, there are times when you have to say goodbye and it should never be a surprise. Not to you. Not to the firee, not to the rest of the team.

I’m not talking about an incident based firing. I’m talking about the firing that you should have done a long time ago.

Sometimes it’s the lead bull that I wrote about a few weeks ago. There comes a point in time when enough is enough.

Often the fear is that you will lose a lot of production when you say goodbye.

The reality is there will be a massive cheer from the troops that you finally did the right thing. And, they will pick up the numbers you think you would be losing.

It’s not easy having your job. It’s not easy being a leader. It’s not easy firing someone. That’s why we picked you.

Now, go do your job and do the right thing. Fire someone that needs firing. That’s all I’m gonna say, Tommy Gibbs

Improving Used Car Operations

Posted on by Tommy Gibbs

1. It starts by selecting the right inventory. Unless you are an exception to the rule, most of those aged units are purchase cars. Therefore, you are obviously buying the wrong stuff. I continue to be fascinated at how many overage cars have been purchased from the likes of Enterprise Rent-a-Car.

2. Tackle my “Life Cycle Management” concept like your life depends on it, because it does. You will never get your inventory under control as long as you allow all units to have the same number of days on the shelf. You have to identify and acknowledge what each car is on day 1 not day 61. Can’t you spot a Zebra in a herd of horses? Acknowledging what you are dealing with is a major step towards improving your used car turn and eliminating problem cars.

3. Making smart and quick decisions on trade-ins you bury yourself in. Happens all the time. You step up for whatever reason, but since you don’t use “Life Cycle Management” you treat these units just like every other unit. Look Einstein, if you buried yourself in it on day one it’s only going to get worse. The best thing you can do is price that unit below market and make it disappear.

4. Don’t get too excited about a successful short term run. It will kick your butt every time. Stop it. All of a sudden you have a strong 30 day period when you sell 10 XYZs. For whatever reason they were hot. So, what do you do? You run out and buy 20 more of those bad boys. And guess what happens? They sit and they sit. And now you have some more huge wholesale losses staring you in the face.

You have much more control when you take them in small doses rather than choking yourself to death.

5. Understand that you are in the retail business. You need to make sure you are pricing your cars to market early enough and attractive enough to find a retail buyer early in the life cycle. In most cases, if you analyze your aged units you will discover that for whatever reason you overpriced them too long. Key words here are “too long.” Sure you might have them priced correctly now, but they are now stale, the sales staff knows they can’t make any money on them so they walk around them.

That’s all I’m gonna say. Tommy Gibbs

Repeat It-Say It Again

Posted on by Tommy Gibbs

One of the best ways to make sure you’re tuned into the conversation when dealing with issues, complaints or listening to other people’s creative ideas is to repeat what they just said to you.

I learned this technique many years ago when attending service training. When someone describes or says something to you, your interpretation may not be what they have said.

When you repeat what you think they just said it does a number of things:

1. Clarifies any potential misunderstanding.
2. Creates buy-in to your response because they know you were listening.
3. Ensures we have the facts before moving forward.
4. Slows the process down and improves your judgment.
5. Creates a bond and trust with the person you are engaged with.

I’m not gonna say it again, but that’s all I’m gonna say, Tommy Gibbs

The Appraisal

Posted on by Tommy Gibbs

A tough subject, isn’t it? The who and the how are critical to your success. Of course the smart money says you use the vAuto appraisal tool. The who is often the mystery.

Does your dealership allow anyone on the management team to appraise a unit? I realize some stores only have a manager or two, so there are variables tied to that answer.

In an ideal world you never want the same person appraising the car that’s working the deal on a car. When the same person is appraising the car that’s working the deal, that’s like throwing Brer Rabbit in the briar patch.

And then there’s always that dreaded “bump.” The question is who gets to make the bump? Again, it’s one of those variables depending on the size of the store.

In a perfect world it’s the GM or GSM. Sure, the used car manager can bump him or herself, but that’s usually due to pressure from a co-manager, which doesn’t usually work out too well.

Here’s another fundamental rule you need to keep toward the front of your brain operating gear. Never bump an appraisal to make gross profit. If you need to bump an appraisal to make a deal, that’s way different.

Putting the right money on a unit is always a challenge. Stealing units is no more the answer than burying yourself. Keep in mind that most of your inventory problems come from purchase cars not trade-ins.

If you’re going to hurt yourself you are far better off to do so with a trade than with a purchase car. At least you’ve earned a new customer and have a chance to make up income in other areas such as F&I, service, etc.

Never forget that your ability to put the right number on a unit is the key to the success of the entire dealership.

But who is to say what the right number is? Often it gets down to your ability to retail that unit. This business is not about wholesaling, it’s about retailing.

You never know if it’s the “right number” until you sell the unit.

There’s an old saying, “If I could buy them for wholesale book prices and sell them for retail book prices I’d be very rich.”

That’s all I’m gonna say. Tommy Gibbs

Dealing With The Lead Bulls

Posted on by Tommy Gibbs

In the 1974 James Michener novel Centennial, he discusses the “Lead Bull” theory. The Indians had to kill buffalo and had to do it without modern-day instruments. So they would get the lead bull running toward a cliff, and the whole group would follow.

The lead bull would be running with such momentum it would be impossible to stop as he approached the cliff. The lead bull would get pushed over the side and all the bulls would follow landing down below. The Indians would come up and kill them and they’d have their food and their clothing, etc.

The problem in your business is often your “Lead Bulls” want to run in a different direction. The more they run in a different direction the more disruptive it is for your younger, less experienced bulls.

It’s not unusual for management to look the other way when it comes to the lead bull. Allowing the lead bull to do whatever he wants is often justified by management because the lead bull is a producer.

The lead bull shows up in many places within a dealership and there is often more than one lead bull within the store and within the departments. It may be your top sales person. It may be your top sales manager. It may be your top technician. It may be your back counter parts person or it may be someone on the clerical staff. There are many lead bulls in any given organization.

Your job is to find them, seek them out, corral them, feed them, nurture them, and turn them into the lead bull they have the potential to be, not the lead bull they think they want to be.

Your best approach when dealing with the lead bull is to develop a one-on-one dialogue that allows you to appeal to the lead bull’s ego. It’s important for you to acknowledge to the lead bull that you understand they are the leader and you need their help in order to get the rest of the team doing the things we need as an organization to be successful.

Key words to use with a lead bull are “I need your help.” Your sales pitch to the lead bull is, we need you to follow our processes, not because we think you need them, but because all the baby bulls do. And, if they see you doing them then we all win. There is no doubt the lead bull ends up performing better by doing so. The lead bull has been tricked again.

A lead bull can be a very wild bull. Wild bulls have to be constantly pushed, nudged, and directed. Lead bulls like being around important lead bulls like you. They like being in the “in.” It gives them comfort and fuels their lead bull egos.

Don’t think for one moment you will do a little dancing with the lead bull and they know the steps. The lead bull will want to go back to dancing freestyle in a New York second. Partner dancing is based on Lead/Follow. The Lead Bull will follow you as long as you hold their hand. Turn the hand loose and they will go into freestyle dancing faster than you can say “Geronimo.”

This ain’t no Bull. That’s all I’m gonna say. Tommy Gibbs

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