There’s a lot of "lip service" going on these days.  That, along with the "loyalty factor," is holding some dealerships back from maximizing their full potential.

Many dealerships have key personnel saying, "Yea, yea, I get it, I understand and will make the necessary changes." They are saying one thing and doing another. 

More often than not these people have been with us a long time and we are convinced they are loyal to us and so therefore we should be loyal to them.

Some of the changes that dealers continue to struggle with are the utilization of technology, the Internet, processes and the high tech mindset of the customers and some of your team members. Notice I said some of your team members.

There are people on your staff who just cannot make the change because of bad muscle memory. Here are some examples of muscle memory involving sports:

Shooting a basketball
Throwing a baseball or football
Swinging a baseball bat
Hitting a tennis ball
Swinging a golf club

The action of doing any of these is based on muscle memory.  It is extremely difficult to make changes to any of these actions due to old muscle memory. The changes can be made in a practice or coaching session, but as soon as you get into the game, your old muscle memory wants to kick back in.

The same thing happens every day in your dealership. You have people saying "Yes, yes, now I get it," but as each day goes by muscle memory wants to kick back in to the old way of doing business.

Employees give us lip service and in return we reward them with undeserved loyalty. We truly believe these people are trying and wanting to make the changes, but the fact is most can’t and won’t. Our thinking is that they are loyal to us and we need to be loyal to them.

The dictionary defines loyalty as "being faithful in allegiance to one’s lawful sovereign or government; faithful to a private person to whom fidelity is due; faithful to a cause, ideal or custom."  Your dealership is neither sovereign nor government.  Nor is it a person, a cause, an ideal, or a custom.

We all go to work each day, and we are expected to put out our best efforts and use our talents to their fullest.  Perhaps we are even expected to serve above and beyond the call of duty (or at least beyond what we feel our current pay justifies!).  In turn, we expect a fair wage, or at least an agreed upon wage.  

That is where loyalty begins and ends; we give our service, and the company pays us for it.

People work hard and extend themselves because they expect something in return.  They expect to be paid for their efforts and eventually to receive a promotion, a bonus, or even just a pat on the back.

An employee is not disloyal to a dealership if they failed to do their best; they would be disloyal to themselves.  And if a company retained an employee in spite of mediocre performance just because he or she has 20 years service, supposedly out of loyalty, it would actually be disloyal to other employees and the stockholders.

There’s nothing inherently wrong with loyalty, but there’s a lot wrong with it when it’s tied to lip service, poor production and your bottom line. That’s all the lip service I have to say, Tommy Gibbs

It’s funny the things I see. You can see much more clearly when you are not in the heat of battle. Successful dealers have a different view; a different attitude; a different swagger about them and a different way of managing accountability.

It’s always a good feeling when we are kicking off a new year. Right now some of you are feeling great going into the New Year. This time of the year sort of reminds me of spring training for major league baseball. Optimism is running high, as it should be, but in a few months reality will start to set in. 

The stronger teams will have started to pull away and the weaker teams will be asking themselves "What happened, where did we go wrong?"

A number of my articles recently have been prodding you to get ready for the New Year. Here are a few thoughts to get you moving a little faster toward your goals and some suggestions of changes you might need to make.

Observe-Spend a Saturday just sitting in the tower observing. Say nothing. Take notes. Of course you’re not going to see the true picture, but you will see enough to give you an idea of where the loopholes are.

Ask Questions-On Monday meet with your GSM/Sales Manager and ask him/her to review with you what the selling process is. Better yet, prior to meeting, ask them to write out the selling process to bring to your meeting.

Get After Them-Tell them what you observed and how far off track they are compared to the list and the discussion you just had. Of course, first tell them all the things you observed that they are doing well. Do your best to end the meeting on a positive note and create a plan of action to improve.

Re-Commit-Get them re-committed to what they say they are supposed to be doing. Reviewing the processes is the single most effective way to do this.

Re-Deploy-get them on a mission to get back on track through renewed focus, training, disciplines and processes. Get a commitment for the training they intend to do with the sales force over the next 30 days.

Create Accountability-create a daily check list to review what they are doing as compared to what they said they were going to do. Continue to observe and whenever it’s not right go back to step one and start over again.  Your number one job is to "Guard the Processes."

Raising expectations is in part about raising your level of intensity and creating accountability within the team. Human nature being what it is, people will do what little they have to do to get by.

When you cut corners you end up going around in a circle, a circle of lower expectations. Regardless of how good you are or how disciplined you are, your processes are going to want to evaporate. That’s all I’m gonna say, Tommy Gibbs

If you’ve ever watched ESPN you might be familiar with a segment they do called “C’mon Man.” They show clips from some of the strange and ridiculous things that happened in sports such as a football player tackling his own teammate or a basketball player scoring at the wrong end of the court. ESPN’s segment could just as easily be called “You gotta be kidding me.”

Just the other day I was having a conversation with a key manager of a dealer group whose dealer was beating him up pretty badly about his average used car grosses being so low. Like many dealers, the dealer has either seen numbers in his 20 group or heard of dealers doing big averages. Dealers will often quote that they have dealer friends doing as much as $3000 and higher on the front.

Achieving $3000 on the front is easy enough to do. It really is. You can do it overnight. Yes, all of you can. I believe in you and I know you can do it. When dealers are screaming about low grosses they often point to the fact that their cars are priced too low on the internet and therefore the easiest solution is to increase the prices. The fact is you can improve your grosses dramatically overnight by increasing your prices. I mean really if you don’t ask for it how do you ever think you will get it? Remember you can always go down but it’s impossible to go up.

Yep, that works for me. Raise your prices, ask for more and you will get more. Gross has always been a state of mind. Whatever mindset you are in then you can achieve it. So, right now, right this minute, right this second all of you need to quit giving your cars away, raise your prices and the grosses will go up.

Oops, there are a number of little problems with raising your prices.

1. Your used car volume is going immediately in the tank.
2. Your total gross is also going so far south you will lose your butt.
3. Your profits are going to be pooh pooh because you have totally cut off the spigot of cars going through service.
4. New car volume will go into the tank because you are reluctant to step up on trades since you need to steal them to make gross on.

I bet you saw this coming: “C’mon man, you gotta be kidding me.”

I’ve said this before and I’m going to say it again, doing used car volume and achieving high used car average gross goes against the laws of nature. I’m not saying you can’t improve your grosses, but the days of doing $3000, $2500 and in some cases $2000 are history.

Should you shoot for high gross? Of course you should on selected models, but if you think you are going to price your cars on the internet like you did in the “good old days,” then you are in for a rude awakening as your volume goes south.

More often than not a dealer who has high gross averages also may have a lot of aged inventory loaded with water that he or she has not come to reckoning day with. Take the water out of the inventory and how good does “high gross dealer” look now? If your inventory is turning then the “water factor” ain’t much of a factor.

I’ll bet you that if you and I sat down we could come up with at least 25 things that are impacting gross rather than your pricing. Here are 10 to get you started:

1. Can you reduce your recon cost? Are you being as efficient as you can possibly be? Does service have carte blanche? Is service still selling the used car department the same old same old?

2. Can you speed up reconditioning? Very few of you really know how long it takes to get a car through service and clean up. Is your sales management team constantly crying about how slow service is? Might be some truth to it. Check it out. “It’s not the big that will eat the small, it’s the fast that will eat the slow.”

3. Re-evaluate your packs. Have they outlived their usefulness? Are packs ultimately affecting your average gross in a negative way? Are they giving you a false picture? Dale Pollak refers to packs as taxing yourself. I think we are all taxed way too much.

4. Have you made an all out effort to convince your sales and
management staff to sell the value of your company, your product and the fact that you have the best prices in the market?

5. Re-think what you are stocking and the when, how and how often you tweak your pricing. Far too often prices are not massaged soon enough so you end up pricing your cars at the end of the cycle at crappy grosses. I suggested in a previous newsletter that you go back and review your grosses by age categories. Have you done it yet? The older units you are selling are killing your grosses.

6. Think in terms of improving gross in small increments. Try paying the managers a bonus for achieving nominal increases each month. Start by improving gross by $50 a unit. Do that over the next year and you will see a slow, but effective way to increase your gross. You can only eat the elephant one bite at a time.

7. How could I talk about your grosses without mentioning “Life Cycle Management?” Life Cycle Management is designed to help you create a sense of urgency on those cars that are most likely to kill your grosses. The faster they go away the better your gross will become.

8. Track GAP and ROI. When you do, grosses go up. How much are you giving up once the customer shows up at your store with a price from the Internet? If you don’t know then you can’t fix it.

9. Are you stocking the wrong stuff? If the data tells you there are a lot of Impalas being sold in the market then it stands to reason that there must be are a lot of them for sale? And wouldn’t it be logical to assume that it will be hard to make money on those units since there is a high day’s supply? When it comes to making gross, the law of supply and demand is certainly in place. You don’t have to be an economics major to understand this fundamental principle.

10. Shoot the moon on the right stuff. Since the beginning of the car business, higher grosses are driven by some homerun cars. You have to understand which ones are home runs, singles, doubles and triples.

C’mon man, get real with your thinking on gross profit and fix those things that can have a meaningful impact without killing your volume. That’s all I’m gonna say. Tommy Gibbs

It’s January and we’re off and running. Actually, some of you are running, some of you are walking. The runners have been training hard for the last few months. The walkers have been talking about training hard.

The runners were getting into shape back in November and December by laying down "the plan" for 2013. The walkers were thinking they needed to get in shape and get a plan for 2013.

Runners are never happy. I’ve never seen a runner smile. Walkers are well, walkers. They often smile because they are dreaming of the things they would like to do. Whatever they are dreaming stays in their dreams.

The runners have a firm plan going into 2013. The walkers have a "kind-a-sort-a" plan going into 2013. Walkers talk about a plan, runners actually execute the plan.

Walkers are afraid if they make a plan they might have to change it. Runners know there are mud puddles and they just have to jump over a few to get where they want to go.

Runners like challenging their leadership skills by changing the plan. Walkers are afraid of change and would rather go with the flow than rock the ship.

Runners love Dave Anderson’s book "If You Don’t Make Waves You Will Drown." Walkers would rather read "Winnie the Pooh" and dream about Pooh Bear.

When I do a workshop I recommend, suggest, and urge those in attendance to write out an action plan for the next 90 days using the top 3 or 4 processes from the workshop. At the end of 90 days re-write the action plan adding 3 or 4 more processes to it.

Any time you’re planning, there should be 30 day, 90 day, 180 day and 365 day action plans. The weather and the terrain are going to change and you need to be ready for change.

Walking along whistling a happy tune will make you feel good for that one little moment in time. Running hard with a flexible plan will exhilarate your soul and brain and will allow your team to leap tall buildings with a single bound for a long time to come.

Runners take money to the bank. Walkers go to the bank to borrow money so they don’t go out of business…yet. 

Becoming a runner means harder training, greater commitment and disciplines that most people don’t have and will never have. That’s why there is so much room at the top. Some will, most won’t.

It’s very simple to go from being a walker to a runner. Just do it. That’s all I’m gonna say, Tommy Gibbs

Odd as it may seem we often put a lot of energy and wasted effort into trying to control the things we don’t have control over and miss a real opportunity to control the things we can control.

I often like to compare the car business to the coaching field. Coaches never have total control over the game, but they do have control over the things they do to prepare for the game. You can take control by preparing the team.

If you are the dealer, you should think of yourself as the head coach or the team owner. If you are in management, you’re an assistant coach. If you’re the General Manager or General Sales Manager, consider yourself an offensive or defensive coordinator of a professional football team.

Great coaches study the game 24/7/365. If you don’t live, eat and sleep the car business, then you will never be able to control what you can control.

Successful coaches understand that to control the game they have to teach the game. They make an investment in time and resources to ensure the team understands the plan and how best to execute it.

Any dealer who has half a brain takes as many of his/her people as possible to training meetings and conventions. More important though, is what happens after the training sessions and meetings.

Whenever you or any manager goes to any type of meeting or training, there should be a de-briefing within 24 hours of your return to determine what you/your team learned and what you are going to put into play at your store.

The same is true for Twenty Groups (if you are not in one, you should be) and the NADA Convention. You should take as many members of your management team as possible to these functions with the purpose of bringing back real ideas to put into play.

Your mission as a coach is to create an ongoing environment that demonstrates you are committed to training and developing your staff at all levels; "Controlling what you can control."

There is no way you can become a well-rounded student of the game and compete effectively in today’s market without understanding the high tech side of the business. Making use of the right software like vAuto and tools like Auto Count USA gives you a huge advantage when it comes to controlling your inventory.

You cannot control the price of gas, the stock market or the world economy. You can control the speed by which you turn your inventory.

Knowing and understanding the necessity of controlling your inventory is a major step toward controlling what you can control. That’s all I’m gonna say. Tommy Gibbs

I know it’s a very strange title and I know some of you may be thinking you would like to help me with it. Have you ever actually known something and a light bulb goes off and then you really know it? It’s one of those revelations that makes you wanna reach up and slap yourself.

I, like many of you, continue to put part of the blame on the lack of average gross profit on the Internet and the stress it creates on pricing. There is no doubt it’s a factor in bringing your average gross profit down, but it’s not the most important one.

But before I share my “slap myself in the face” revelation with you, I have some questions for you:

1. How many of you struggle to make gross on those units over 45 to 60 days old?

2. Is it fair to say the grosses on 45 to 60 day old units pull your average down?

3. What if you could eliminate 45 to 60 day old units?

4. What would the impact be?

5. Have you taken the time to analyze the average grosses on 20 day old cars vs. grosses on 45 to 60+ day old cars?

Shazam…Bingo…Hallelujah!!!

Why hasn’t your light bulb gone off? Why haven’t you smacked yourself?

Don’t we all know that the lack of speed kills your used car business? Don’t we all know that if you have speed you win? What’s it gonna take for you to realize it’s not just the price on the Internet that’s killing your grosses, but the slowness of your processes and marketing.

I write and speak to groups about “Life Cycle Management” with the passion of a Baptist preacher at a church rival on a hot day in July.

If someone said to me, “Tommy name the top three things dealers must understand to improve their used car business” it would be:

1. Get more involved

2. Press your cost down

2. Life Cycle Management

Since I’ve often written and spoken about all three, I’m not going to take up any more of your time writing about them and especially “Life Cycle Management” in this article.

I think you know what it’s all about and since you do, and since you keep struggling with average gross profit, this might be a good time for you to reach up and slap yourself upside the head. That’s all I’m gonna say. Tommy Gibbs

A dealer friend of mine recently went through some really bad publicity. The highlight of this bad publicity is that they sold a car and a day later the customer came back and wanted a different color which they allowed him to do as an even swap.

Within a day or so the dealership discovered they had made a $5600 mistake. Management attempted to contact the customer in order to collect the additional money. When they were not able to find the customer they had him arrested for theft of a motor vehicle. Eweeee. (Charges have been dropped.)

There is some debate over who said what involving the actual arrest. So, you guessed it. When all is said and done they have a multi-million dollar lawsuit and many millions of dollars worth of bad publicity.

I know that the managers involved in this deal are really good people. I also know they were trying to do what they believed to be the right thing and in the best interest of the dealership.

The bottom line is that somewhere in the equation there was a massive screw up. If you’ve been in this business for any number of years you’ve either seen this scene before or have been a part of such an incident. Maybe not this severe, but you’ve seen it.

Situations like this don’t just happen in the sales department, they happen in all departments and in all businesses. With the auto industry being such a heavily regulated industry many people want to take a shot at us.

When these things happen you have to ask yourself what could you have done differently?

I know what you’re thinking. The customer owed the money so what’s right is they needed to pay it. I don’t disagree with that statement. But, when the fire starts to burn someone has to have sense enough to put it out. All it’s going to do is get bigger and a whole lot hotter.

In the book titled “It’s Ok To Be The Boss,” the author makes a point that if you receive bad service at a restaurant it’s not the waiter or waitress’s fault. It’s management’s fault. In cases like this it’s upper management’s fault.

The dealership has apologized and offered to let the customer keep the car with no additional money to be paid. Too late, which is frequently the case. In most cases the problem is not recognized and/or dealt with soon enough.

Whoever initially gets a problem often tries to push it under the table, thinking they are doing the right thing. They often end up jerking the customer around due to pay plans or what they think is in the best interest of the dealership. It usually turns out that management is making a decision that is in the best interest of that individual manager. As in cover your butt.

During my dealership days we had great success with what I called “The Playbook.” Before I share that with you let’s see if we can come to an agreement on a few things.

1. More often than not when a major issue comes up management will hold a meeting to state what the new policy and/or procedures are going to be.

2. When the meeting is held, it is possible the entire staff is not present. Someone is off, with a customer, etc.

3. Sales people and sales managers come and go.

4. Most messages will evaporate over some period of time.

Therefore, if you can agree to the aforementioned you can see that the message that is delivered to the troops either has an incomplete audience and/or a short shelf life.

Now, the Playbook:

Make a list of company policies and legal issues you know to be a potential problem. Set them up on an excel spreadsheet with 12 months across the top and two columns under each month for the date and initials. (See Example)

Each person who attends the meeting will be given his or her sheet to sign off on at the conclusion. The meeting leader will use a book to discuss in great detail each item on the list. The “Playbook” is done once a month and once set up will take an hour to cover, depending on the length of your list.

With the technology we have today this could be done electronically but there is no substitute for a solid presentation by the GM or Dealer/Operator.

So, over the course of time you will have eliminated the excuses of “I didn’t know” or “I forgot.”

You will not eliminate all your problems with the “Playbook” but you will go a long way toward reducing about 90% of them and maybe avoid a multi-million dollar lawsuit and millions more in bad publicity. That’s all I’m gonna say, Tommy Gibbs

 

Wholesale losses and the lack of gross continue to plague dealers around the country. Speed and common sense go a long way toward improving these two major issues.

The reality is they are both closely connected. If you’re going to reduce wholesale losses you have to be geared to take fast action and make early decisions on cars and trucks. If you are paying attention, that decision is easy because potential losers are sending you a message the minute they show up on your lot.

If you would take the time to look, then you would see. Improving gross is doable if you focus on selling fresh inventory. Selling a fresh piece at a premium has always been the "gross makers." Buying and selling into "today’s market" is the key to your success.

The only way you will ever get control of these issues is to be honest with yourself about every car, purchased or traded, that comes into your inventory. This newfound honesty occurs when all the members of the management team go on the "trade walk" each morning. Make sure you include all purchased cars in the "trade walk line."

This is the beginning of "Life Cycle Management." Once you have decided to keep a car in your inventory you should give it an Expiration Date, "ED." Some cars will get 20, 30, 45 and maybe a few get 60 days. Some units should be designed as an EWR unit. That stands for "Early Warning Radar." These units only get 20 days in the "Life Cycle." There are a number of factors that create an EWR unit:

1. Equity position (You’re upside down from jump street)

2. Make-a-Deal Car (Did you step up to make another unit go away?)

3. Odd Equipment (As in this car really needs NAV)

4. Previous Sales History (You have never done well with it)

5. Bad Color (You should know it when you see it)

6. No Experience (You like it, but don’t know squat about it)

7. Service History (Traded a customer out of it because they were driving the service department nuts)

8. Potentially Large Repair Bill (That’s why the service manager needs to be on the walk)

9. High Miles (2 year old car with 45,000 miles, hmm)

10. Suspicious CarFax Report (Might be a problem)

11. Gut Feeling (Sometimes it just doesn’t feel right)

If you stop and think about your oldest unit in stock you will come to realize that the reason it aged, aside from not pricing it right in the very beginning, was that when it first came into your inventory it had one or more of these issues attached to it.

Look at the list and see if you can spot one or more of those items on the list tattooed on the hood of your oldest unit in stock. It was there on day one, but because you didn’t exercise "Life Cycle Management" as a daily discipline you either didn’t see it or you ignored it. If you had utilized "Early Warning Radar" on day one, then it would have been gone by day 20.

When you assign all units an ED date and start the count down on day one, your intensity toward making that unit turn goes way up. It’s far different to view a unit as having 15 days left on its "life cycle" as opposed to it being 45 days old.

If you want to reduce wholesale loses and improve gross profit you need to pay attention to "Life Cycle Management." That’s all I’m gonna say, Tommy Gibbs

When I was growing up in Richmond, VA my dad was in and out of the used car and nightclub business. My father has always been a bit of a hustler. I don’t mean that he would hustle you. (Well, he might.) I mean that he was always scrambling to make a living.

One of the bad habits my father had was he loved to gamble. He loved the “action” that gambling brought to his brain, the adrenaline rush or whatever. To this day, at age 89, he still loves going to the auction. It’s all about the thrill of the kill for him. It’s the “action,” not the auction that turns him on.

When growing up in the 60s I often observed my father gambling, playing cards and shooting craps with a bunch of his used car cronies. It wasn’t unusual for him to go to the Windsor Auto Auction in Windsor, VA with no cars. He would register some late numbers, buy a few early cars and then assign them to his numbers. He would make money without investing a penny of his own and then turn around and lose it all at the end of the day shooting craps on the back of a pickup truck.

My dad and his friends would often rent a hotel room at a downtown hotel in Richmond and have really big poker games. One of the characters that played with him was a used car dealer by the name of Howard Hughes who went by the name “Mad Man Dapper Dan.” Dapper’s slogan was “I’d give ’em away, but my wife won’t let me.”

Dapper nicknamed my dad “Nervous” because when they would have these gambling sessions my father was always nervous about the cops showing up and putting them in jail.

I’ve come to believe that I inherited my dad’s nervous gene. Used cars have always made me nervous. In the early 80s when Ashton Lewis and I first partnered up at Parkway Pontiac Volvo in Chesapeake, VA it was a real struggle to make any money. Jimmy Carter was president and floor plan interest rates were over 20%.

It was not an easy time and we were struggling along without much cash on hand. Turning used cars was not a strategy, it was a necessity.

My nervousness was in part due to GMAC being such a pain to deal with and the magical word called “curtailment.” Curtailing used cars was a real drain on cash, so whenever any, and I mean any, used cars came on the lot I was a “Nervous Nellie.”

This is the time of the year when you need to be nervous for a number of reasons:

1. If you’ve not already started to plan for the first quarter of 2013 you are already behind.

2. This is such a critical time of the year to make sure your inventory is under control which will put you in the driver’s seat as 2013 kicks off.

3. The “Hurricane Sandy” hangover. With a shortage of used cars in the northeast it will be easy to get lulled into a false sense of “let’s keep ’em longer cause the values are going up.” It’s a really bad bet that used car values will stay up very long.

This cycle is a repeat performance from a few years ago. Back then some dealers said “Wow, I can take my inventory to the auctions and make money therefore I can keep them longer.” Not! Stay nervous, there is no substitute for turning your inventory.

If you have units in the 60-day-old range you should be super nervous because you’re not buying and selling in “today’s market.” You are getting ready to get your head handed to you on a platter. Don’t for one minute bet or structure your game plan based on a used car shortage and values going up. If it happens it’s temporary and a really bad model to base your business on.

I’m getting more nervous by the minute. That’s all I’m gonna say. Tommy Gibbs