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

Well, here we are. It’s spring time. Trees, flowers and your excitement about the “selling season” are starting to bloom.

Are you running your used car department the same old way expecting different results?
 
1. Re-evaluate-Take a minute and go walk your lot. Take the blinders off. First thing you have to ask yourself is “Does it look like Nordstrom?” Ok, maybe it’s not going to look like Nordstrom, but does it look like Walmart after a big sale? You know, everything is just thrown everywhere. Let’s do a little checklist:

• Are the vehicles in straight lines?
• When was the last time the entire lot was rotated?
• Are you using angles to display your inventory?
• If you are using license plates, do they all have one or do some have them on the front, some on the rear and some not at all? Some cars do not have a bracket on the front. Why would you even bother if you can’t put a license plate on all units?
• Do they all have your decal on the rear of the vehicles?
• Are all old decals removed?
• Do you have fresh FTC stickers on each vehicle?
• Do you have fresh window stickers on each vehicle?
• Do you have the year of each vehicle on the front and rear windshield? Yes, front and rear.
• If you have other decals or markings on the windshields, do they all have same or similar markings?
• Do you have hang tags? If so, do they all have hang tags? Are some lying on the floor?
• Do they all have at least a quarter of a tank of gas in them?
• Are they nasty, dirty on the outside?
• Are you making use of your entire front row for used vehicles?
• When the public rides by or pulls onto your lot can they easily identify where the used cars are?

2. Refocus-To be successful in the used car business you have to be well focused on it and be totally committed. Your entire management team has to understand your commitment to the used car business. This doesn’t happen through osmosis and a meeting every six months. When I say entire management team I mean just that. All Sales, F&I Management, Service Management, Parts Management, Body Shop Management and the Controller. Little Johnny, the lot attendant, needs to be a part of this as well. For the next 60 days, meet with these key staff members twice a week to discuss where you are and where you’re going. Tuesdays and Fridays are best. Make sure on Fridays that they are all included in a lot walk. Do not miss a used car on this 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. You will come across issues you never knew were there and better yet you will solve them immediately. (Don’t let anyone miss these walks.) Make sure a part of that conversation includes everyone knowing how much money you have tied up in used cars and how many of those dollars are over 60 days. Yes, they need to know the dollars, not just the number of units. Make sure they also know what percentage is dead money over 60 days. Example: You have $1,000,000 in used. $600,000 is over 60 days. Make sure they understand that 60% of your money is dead and eroding fast.

3. 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.) Most of them should not need mechanical work done, but if they do, get it handled. Most importantly, put a full clean up back on them. Whatever you have to spend, it’s going to be worth it.

4. 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. You may think you already know all there is to know about the used car business and you will just be wasting your money. The fact is maybe you actually know a lot, but you need something to jar your brain and get it going again. You have become real good at talking the talk, but you may not be walking the walk.

5. Re-think- your management team. Do you really 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 may be that you are not making the best use of their talents. Used car managers today have to be “Asset Managers.”  It is not a matter of just being a “Car Guy.”  They have to have a good blend of common sense and ability to make use of technology. In my travels, about 75% of the dealers have the wrong person managing their used car operation and they wonder why they are not maximizing their full potential? (Even if you have the right person, they have to have the right tools, processes and your full support to be successful.)

A special note to those of you in management that feel somewhat frustrated by the lack of support from your Dealer or General Manager. You may have some things you want to do, but the Dealer or General Manager keeps rejecting your ideas. Next time you have a brilliant idea, don’t just discuss it with your Dealer or General Manager, put your idea in the form of a proposal totally written out with every detail. Present it to the Dealer or General Manager and ask for 90 days to make your plan work. When you give it to them, tell them not to make a decision right away. Ask them to review it and make a decision within the next 48 hours. Most of the time, a dealer with half a brain will let you go with it, unless it’s just totally out there in left field. If your request is reasonable and the Dealer or GM rejects it, you might want to start looking for someplace else to hang out because you are fighting a losing battle. That’s all I’m gonna say, Tommy Gibbs

I know what you’re thinking and that’s not what I mean. I’m talking about "Execution Dysfunction?" Sure you’ve got a plan, maybe even an awesome strategy, but it’s not worth much if you can’t or won’t execute it. How many times have you seen your organization lay out a great roadmap of what they want to do and then 6 months later ask yourself "What happened to that?"

In a meeting a few years ago with two executives from AutoNation they stated that they had the best processes of anyone in the automobile business. In that same conversation a competitor’s name, CarMax, came up. They said "The biggest difference between CarMax and AutoNation is that CarMax actually executes their processes." Shocker. What a shocker. 

That wasn’t a slip of tongue, they were simply being truthful. They are no different than many of you, you know what to do, you know how to do it, but you just don’t get it done. You can increase your odds of defeating ED by paying attention to some of the following.

1. Get "buy in"-from staff members-Nine times out of ten ED happens when staff members don’t get a real sense of commitment from the top. They hear you say it, but they don’t see you live it.
2. Create Accountability-You need to have systems in place to measure what’s supposed to be taking place. Even more important, impose penalties if the measured targets are not achieved.
3. Kill the Cancer-There are always those that are naysayers, determined to undermine any changes you bring to the table. Negativity is like a cancer that will destroy the health of your business, and there comes a point where you have to cut out the cancer if the rest of the body is to live. There are some people you need to replace and you must have the courage to do so.
4. Properly Train and Re-train-If you think you can put a process in place, train the staff and walk away, you are dead wrong. Training or coaching has to take place every day. There are some aspects of training that have to take place monthly, quarterly or annually. Far too often business leaders want the "shake and bake" method. Shake it up, put it in the oven and that’s the end of it. You have to be willing to train and allocate a certain amount of resources for continued training.
5. Develop Your Own-In the example of AutoNation vs. CarMax, the biggest difference between the two is that AutoNation has purchased many dealerships and attempted either to re-train the previous staff or hire people from other dealerships. In the case of CarMax, each time they build a new store they hire new people and train them their way. If you are ever going to grow and remain successful, you have to develop your own staff.
6. Celebrate Success-Look for opportunities to applaud people and their "wins." I don’t mean just a pat on the back. Maybe it’s the employee of the month. Maybe it’s a lunch party for the office staff for closing the month out after a hectic last minute rush. Maybe it’s a record month in widget sales. Doesn’t really matter. Find a reason to celebrate.
7. Employees are more Important than the Customers-It’s a fact, if you want happy customers then you have to have happy employees. Yes, you want happy customers, but you will never have them unless you can get to the heart and soul of your employees.
8. Have a Sense of Humor-It’s ok to laugh at yourself. If your organization has gotten to the point where they can’t laugh and smile then they will have some very miserable days. A lot of miserable days is a formula for failure.

 

ED isn’t a laughing matter. The best processes in the world are just file drawer filler if you don’t have committed, trained, positive people executing them.
Recap:

1. Create Buy-In, Then Live It
2. Develop your Own. Train those that you can, unload those that you can’t
3. Celebrating and Laughter is good for the soul.

I wish there was a magical pill I could give you for ED,
but there isn’t. It takes hard work and paying attention. That’s all I’m gonna say, Tommy Gibbs