There are very few cases when you will achieve both high volume and high average gross profit. It goes against the laws of nature. Yes, you can improve your overall numbers, but if you are going to do big numbers in either, one or the other is going to suffer.

Either way has challenges. If you have decided to be a high average gross dealer then it’s a pretty sure bet you will see decline in your traffic. Yes, you can do $5,000 per unit, but you are not going to be very busy.

If you go after volume, which means aggressively pricing your inventory on the Internet, then it’s likely you will see traffic go up and average grosses go down.

Going after volume means you have to up the ante when it comes to finding replacement cars. There is a lot more to acquiring inventory than just running out and buying more cars for the sake of a larger inventory. It requires a strategic plan of staffing and research or you will find yourself with a lot of aging purchased cars.

With so many dealers pricing cars on the Internet designed to drive traffic to the front door I’m thinking you have a far better chance of improving overall business by going for the volume.

Try These:

1. Goal setting. If you are now at $1000 a unit on the front, it’s a real stretch to set a goal of $1500. You would be far better off to bonus the management team for bumping the average up by $50 a unit for the month and then repeat the process the following month. To say to them you want a $500 bump in one month is unrealistic and if you do bump it up the $500 you can bet your volume will take a hit.

If you are still paying the sales staff on gross profit consider paying them a bonus based on $50 to $100 increases in what they are currently averaging on front gross. You can ultimately get to the $1500 and beyond, but you need to eat the apple one small bite at a time.

2. Training. 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.

3. 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. A lot walk once a week will do wonders.

4. Rethink “Buckets.” Many dealers have become sold on 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 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 must be done daily, not in 15 or 20 day windows.

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. Use my “Life Cycle Management Process.” Make sure you utilize EWR into your “Trade Walk.” Early Warning Radar helps you identify those units which are the most likely to create problems for you on day 61. Units age on day 1 not day 61. Understanding how to merchandise and market these units to create a faster turn is a major step toward improving gross and volume, as well as reducing wholesale losses.

I’m thinking you can increase your volume and average gross profit, and “That’s all I’m gonna say.” Tommy Gibbs

I wasn’t a very good history student. I couldn’t rationalize why I needed to know what had happened a hundred years ago. I could not have cared less. Actually, I hated history.

As an adult I have come to appreciate history and wish I had paid more attention in my history classes as I now find it amazingly interesting.

George Santayana, a Spanish-born philosopher wrote in his book, The Life of Reason, “Those who cannot remember the past are condemned to repeat it.”

Many in the car business keep repeating the same mistakes and don’t understand why they are always fighting with the same issues. If you are not willing to change, what else can you expect?

The two things I hear dealers complain about the most are the mistakes in their used car inventory and how difficult it is to hire people.

The reason you can’t hire people is because of the type of people you keep going after. You’re trying to hire the same type of people that you did back in the 70s and 80s. Paying on gross profit has very little appeal to generation X, Y and Z.

As a matter of fact it’s starting to having less and less appeal to all sales people as they have come to understand just how little control they actually have over gross profit these days. When you combine the old way of paying with a tired and worn out selling system it’s easy to see why it’s hard to hire people in this day and age.

By and large the way many dealers manage their used car inventory is the same as it was 20 years ago. Dealers (buyers/used car managers) buy cars based on a combination of gut instinct and a little pretending that they are using some software to guide them. Their emotions still control what they buy, what they keep and how long they keep them.

I often hear comments like “Why should I get rid of that car when I can’t replace it?” Really, really…you want some more of that? If it hasn’t sold in 45 days why would you want to go out and buy some more cars that you haven’t been able to sell?

Many dealers want to stay with the “old way of doing things.” They price cars at a certain amount of gross and then want to hold the line on those prices as long as possible. As I stated in a previous article, it’s ok to go for the home run, but you also need to know when it’s important to get on base any way you can.

Because you don’t adjust the pricing fast enough (and you’re not using my Life Cycle Management Program) you wake up one day, wholesale those units and lose your shirt. History keeps on repeating itself and you wonder why?

If through your history you keep finding yourself struggling with these same problems over and over again what’s it going to take for you to change? Yes, change is hard; it’s never easy to go down a different path. To do so you have to clear out a lot of old debris. It takes time, patience and commitment. The alternative is for you to keep repeating history.

You cannot control the past, but you can control your future and you can make your own history by having the guts and courage to change those things you know you need to do. That’s all I’m gonna say. Tommy Gibbs

Are you Changing because you see the light or feel the heat?

Back in the good old days we used to hit some homeruns on used cars. There have always been a few deals each month with some big time grosses on them. Sorta like hitting a 500 foot homerun. Not easy to do, and not that many, but there were always a few that were knocked out of the park. Those homeruns went a long way toward improving overall average gross.

For sure we would be better off with a consistent $2500 per copy, but we can all attest to how difficult that can be. Most dealers have become very price conscious when posting units on the Internet and thus have gotten away from swinging for the fences once in a while.

Many dealers are using a “bucket system,” which I do like as it gives you a solid discipline for making systematic price changes. The downside is every unit on your lot isn’t the same and you cannot price them all based on a bucket concept of 95% of market for the first bucket for 20 days. There are some units you need to be under the market and some over the market regardless of which bucket they might be in. To say they are all the same will cost you both unit sales and gross profit.

When considering which units to go for the fences on you have to use the data available to you and some good common sense. When you’ve seen hundreds of horses over the course of time you should be able to spot a Zebra (homerun car) once in a while.

Just as in baseball, you need to know the count and the game situation before you swing from your heels and you need to be smart enough to know when to swing for the homerun on certain cars. Swinging for the fences on the wrong cars and for too long a time period will only make matters worse.

So, keep hitting singles, doubles, triples and you will score some runs. Crashing a home run once in a while feels good and sure helps the overall gross average.

Time to swing….Batter up…That’s all I’m gonna say, Tommy Gibbs.

The number one killer of your ability to improve gross and volume is your lack of speed. Your inability to move fast is a killer for your used car business. Moving fast puts you in the winner’s circle. Not moving fast puts you in the loser’s circle.

The speed of your service department has a direct impact on your ability to produce gross in the used car department.

I’d be preaching to the choir, if I went over all the reasons the service department needs to cooperate and get your used cars through service just as quickly as possible. Unfortunately most service managers don’t have a clear understanding of what’s supposed to be happening or don’t care that your inventory is costing you a lot of money when it’s sitting.

Don’t misinterpret my message here about your service manager. I have the utmost respect for the very difficult job they do. The bottom line is they are only doing what they have been trained to do and what they perceive is in the best interest of the company. The problem is that it’s not been explained to them what’s really in the best interest of the company.

In some cases they get caught up in the day-to-day issues with your retail customers and they don’t pay attention to what’s going on with your used cars. They need to be continuously educated about how fast the market can change on a used car and what it does to your bottom line.

Delays in your service, clean up and the taking of photos are often compounded and tied to your poor display of used cars on your website. It is not unusual to have used cars in inventory for a week or two and they are still not properly represented on your website.

When I look at the websites of some of the top used car performers around the country most of their websites are very easy to maneuver through with only a couple of clicks. That is not the case for most new car dealer’s websites.

How many of you actually click onto your own website and attempt to shop for a used car? I will bet in most cases you are not going to be pleased. My research tells me that most of the time you require far too many clicks for me to see what I want to see.
Some of the typical issues are:

1. The lack of quality pictures. (You need your own photo booth!)
2. The lack of quantity. You need 40 plus pictures for each car to be competitive in today’s market.
3. Too many clicks to see each individual photo? Do your customers have to click on each photo or can they proceed from one to another by clicking the arrow? The arrow is much more effective.
4. The posting of stock photos. (You’ve got to be kidding!)
5. Description of cars with no photos or saying “photos coming soon.” (Another you’ve got to be kidding!)

These issues are often because someone doesn’t care, someone is lazy or someone just doesn’t have a clue. Regardless of the reason, it gets back to lack of speed being the killer and speed making you a winner.

You have to decide how serious you are about this business. If you’re dead serious you will get off your duff and get these things fixed. If you’re not then you and your business will continue to ride along in the slow lane. That’s all I’m gonna say, Tommy Gibbs

The Japanese word "Kaizen," means Continuous Improvement.  Kaizen is a Japanese philosophy that focuses on continuous improvement throughout all aspects of life. When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. 

By improving standardized activities and processes, Kaizen aims to eliminate waste. Kaizen was first implemented in several Japanese businesses, including Toyota, during the country’s recovery after World War II, and has since spread to businesses throughout the world.

If you’re going to have Continuous Improvement you first have to get back to the basics.  You can’t improve very much if your foundation is not solid. 

As I travel the country, without exception, every dealer and manager tell me they are working a sales system/selling process. They also tell me they have a 60 day turn policy on used cars. At the very least they are lying to themselves. The selling processes they think they are working are not the ones they are working.

One of my favorite sayings is "You need to know what you don’t know." In this case, it’s probably more about facing some reality. The processes you started way back yonder have evaporated. If I gave a quiz to all your managers and sales people, and asked them to list the steps in their selling system I would get as many different answers as you have people. 

Furthermore, even if they listed them correctly, then my observation is they are not doing it…they talk the talk, but trust me, they ain’t walking the walk.

Historically, over time these processes have evaporated; then what happens is one day the dealer wakes up and hires another training company to come in and revamp the system. Then X number of years down the road the dealer does it all over again.

You’re sitting there once again thinking, "Ok big mouth Tommy, what’s the answer?"  First thing is you need to open your eyes, use your peripheral vision and see if what I just said is true. Once you come down off the ceiling from the shock you’re in, then meet with your key managers and determine just what system you are supposed to be using. Re-write the mess. Then go on a major retraining mission to get everyone back on track.

Will you please quit worrying about some of your old goats quitting. They may not be necessarily old in age, but they have old stinky thinking. The fact is they are running your dealership into the ground. A lot of them are selling 4 to 8 cars a month and you are worried whether your superstar is going to quit if you put some disciplines in place. Rock on Insanity, rock on.

Maybe what the store really needs is a fire lit under your butt. Some people think they are burnt out…how can you be burnt out if you’ve never been on fire? 

Look, I’m trying to poke a little fun at you, but odds are you really need to take a hard look at your operation. Once that’s done you need to take some action and put a game plan in place. Then you need to put "Kaizen" thinking into place.  Are you continuously improving? If you are not moving forward then the odds are pretty good that you’re going backward. That’s all I’m gonna say, Tommy Gibbs

A conversation came up recently about the validity of keeping cars longer because either the dealership is very small and/or can’t find replacement vehicles. Take a look at the chart and the bullet points below.

1. The first one is a car that you make $1200 on, hold 25 days and end up in the sweet spot of 117% (Sweet spot 110 to 120%)

2. The second one shows that if you keep that same car for 60 days that in order to achieve the same ROI you would need to make $2900 in order to get to the 118%. Is that doable?

3. The 3rd example shows that if you hold that same car 60 days, make $1200 on it that you end up with an ROI of 49%…not good, but if you held it 60 days you are probably happy to make the $1200?

4. The 4th example shows that if you make a $1200 gross on a car that you hold for 90 days you end up with a horrible 32% ROI…is that a good use of your money?

5. The last example shows that if you hold that same car for 90 days that in order to hit the sweet spot you would need to make $4300 gross. Can you really do that after 90 days?

I do understand the challenges of being a smaller dealer, smaller inventory…I’m also convinced that if you sell cars sooner/faster that you will figure a way to replenish your inventory.

Holding cars based on the theory that you can’t replace them is what I call “false justification.” I once had a dealer friend who used to say “you can justify anything you want to justify.”

Sometimes when we justify things in our own mind, we are simply lying to ourselves and those around us. That’s all I’m gonna say, Tommy Gibbs