Pandemic Panic: A Scary Time to Be In Business? March 2020

As you are all aware by now there’s quite a bit of unease looming in the air with the one-two punch of COVID-19 and the current Oil Price War. We’ve taken some time to pull together information that we thought could be useful for your planning process as we navigate these shaky times.

I know I don’t need to remind most of you what we went through back in 2008-2009, but there’s no more resilient group of people in the world than the automobile dealers in the USA. We will push through this just like we’ve always done.

Our thoughts are summarized below.

Current Status

Dealers across the nation are reporting that demand is on target with prior expectations at the moment, but it is a much different picture in localized regions and likely to move downward. Local areas that have been more affected by the spread of coronavirus are seeing a decline in sales. Seattle, for example, saw a 20% decline in auto sales last week.

We expect these localized trends to continue as consumers will be likely to exhibit behavior change when things get “close to home”. Also, on a national level, as more celebrities/influencers contract the virus and more organizations/governments take measures to contain it, media coverage will expand and consumers will likely take it more personally, even if it is not yet local. This will likely help propel a downward trend nationally.

Morgan Stanley analyst Adam Jonas says he expects the outbreak to send U.S. auto sales down 9% this year as consumers delay large purchases. Prior to the virus he expected a decline of 1-2%.

It’s unclear at this time whether this will be a quick event or something that plays out over a longer period of time.

Recommendation: Plan for a Range of Scenarios

Right now there is a ton of uncertainty and doom and gloom in the media. Don’t get too caught up in the worst-case scenario and remember to think rationally. Good leadership should plan for a range of scenarios, not just one. We recommend reading the attached report published by McKinsey & Company. This report does a great job of briefing the current situation and range of possible scenarios at a global economic level based on the current facts.

Also, stay informed and pay attention to news and trends for your local market around containment efforts impacting your customers like school/work closures or remote work mandates. Let your leading indicators, like floor traffic, help guide you in your decision making.

Recommendation: Be Hyper-focused on Inventory Levels

If things do slowdown it’s important that you maintain appropriate inventory levels and don’t get stuck with too many units that are destined to age out. Similarly, you don’t want to miss out on a quick recovery because you are too short on inventory right at tax refund time.

To help manage this balance, pay particular attention to units sold vs units acquired at a more granular level than you typically would. We’d recommend your team touch base on this daily as long as market volatility is high and be a touch towards the short side on how many units you’re stocking to accommodate for a likely slowdown. The closer you are to these numbers the quicker you will be able to take corrective action if needed.

A good tactic here could be to pay attention to daily sales compared to prior periods and to project 7-day rolling sales, 14-day rolling sales, and 21-day rolling sales into monthly sales rates. For example, if you sold 10 units in the last 7 days, that would translate to 42 units (10/7 x 30) in a month. Similarly, if you sold 25 units in the last 14 days and 38 units in the last 21 days that would equate to monthly rates of 53 units (25/14 x 30) and 54 units (38/21 x 30), respectively.

You would compute these values for every rolling category every day (i.e. 7-day rolling monthly rate, 14-day rolling monthly rate, etc.). You could then plot each of these rolling monthly rates each day to see if things are slowing down. This would be good to review in the daily meeting mentioned above.

A good rule of thumb would be that your current inventory should not greatly exceed those monthly values. So if you 7-day rolling sales equates to a sales rate of 42 units a month, and you currently have 70 units on hand, you’re likely going to experience unwanted aging on at least 20 of these units.

Note that if things are changing fast in your area, it will take time for the longer rolling periods to pick them up, so pay particular attention to the fluctuations in the 7 and 14-day values. You could use even shorter rolling periods as well, just know that they will be a little more all over the place as they could relate to the day of the week and are just generally have more noise as they are a single data point.

Also, if you do see signs of the virus becoming a bigger concern locally (school closures, spike in cases, local quarantines, cancelation of activities), be sure to adjust levels and cut back on auction purchases in anticipation of things slowing down a little. The 20% decline in Seattle might be a good reference point if things start to hit closer to home for you. (Note this number can change over time, so it would be a good idea to keep an eye on places that are harder hit and see what they are experiencing as you are planning to have a concept of the downside)

Recommendation: Preserving Cash is King in Uncertain Times, Be Hyper-focused on Advertising ROI

In times of great uncertainty and fear, retail marketing effectiveness can take a huge hit as consumers can become distracted and too worried about “bigger problems” to pay attention to your marketing efforts. This is a large variable expense that you should become hyper-focused on now. We’d recommend setting up a daily meeting to touch base on advertising spend and performance as long as market volatility is high.

We’ve attached a report from Dealer Teamwork that has some good comments on short-term branding and consumer behavior due to the virus that is worth a read.

Future Status

While things may slow down initially, we do believe that there will be a post-panic boom. This is likely to be fueled by pent-up demand and historically low rates. Its too early to make any comments on the timing here but do believe these conditions will prove to be favorable in the future. Stay the course and use any downtime to focus on all your basics that have served you so well in the past. Tommy Gibbs & Jarrod Tanton

We’re here to help

We wish you and your team the best during this uncertainty. Be safe, use common sense, and protect your health. Don’t hesitate to reach out if we can be of any assistance in any way.

 

Why Should You Read This?

Because you like progress, you like improvement and you like money.Follow

At some point along the way I’ve had the honor of speaking to your 20 Group. I love 20 Groups. Always have. Always will.

One of the things we both know is there are dealers in your 20 group who are excelling, a handful in the middle and a few others that have their struggles when it comes to the bottom line.

My used car processes are designed to improve your used car operation and your overall bottom line. Your bottom line and your organization will only grow but so much unless you grow your leadership team. My workshop now includes a section on that very subject, “Growing Your Leadership Team.”

We’re in the final stages of testing “The Gibbs Report,” a short list of Key Performance Indicators, which will guide you to greater performance, accountability, and profitability. If you choose to hire me, I’ll provide it to you and personally monitor it for free for 60 days. Such a deal!

My processes make sense and get amazing results. My prices are based on time zones and traveling out of the country. 20 Group members get a discount. If you would like a quote hit the reply button and say so.

I don’t train just your used car manager, I train your entire management team including your service manager. Until you get your entire team on the same page not much is going to change. To understand what I do and how I do it watch the short video at the bottom of this email.

Do the math. Divide my fee by the number of managers and/or the number of stores in your group. It’s a no brainer and a great investment in your team, your business and your future.

If you’re good, I’ll make you great.
If you’re great, I’ll make you greater.

Improvement gets down to one or two things:

1. Not knowing.
2. Not doing.

I fix both. That’s all I’m gonna say, Tommy Gibbs

Should You Hire Me?

For some time now you’ve contemplated hiring me to help you and your team. Yes, you’re probably concerned about the investment and you’re also concerned about my material making waves with your team.

You will earn the investment back overnight. I’d be happy to send you a long, un-purged list of clients for you to contact.

I’m sure you and your team are doing a lot of things really well. I’m not going to screw that up. But, I am going to enhance what you do well and give you some powerful concepts to take you to the next level.

Here’s the biggie; I’m going to get your team on the same page. It’s a pretty safe bet that you have management staff that all have their own way of thinking about your new and used car business. I’ll destroy the myths and line the moon, stars and earth up.

See if any of this applies to you:

1. You’ve had evaporation. Regardless of how good you are or how well disciplined you are, there’s going to be an evaporation of processes over a period of time. Bam! I can fix that!

2. You’ve had some turnover. Most people do. Turnover isn’t a sin. What’s a sin is not ensuring that the new guys and gals get it. If you don’t give them the right tools, they don’t have a chance. Bam! I can fix that!

3. The business is changing. Your team needs to understand the changes taking place and how to attack them. Bam! I can fix that!

4. Your team has gotten a little complacent, either because business has been pretty darn good or they have accepted the status quo. They need to be re-energized and see the possibilities. Bam! I can fix that!

5. Your average grosses continue to decline. Mostly they decline because someone’s not paying attention to the little things. Bam! I can fix that!

6. You have aged inventory and wholesale losses. Aged inventory helps create #5. Aged inventory causes wholesale losses. Bam! I can fix that!

7. You have a team that struggles to get on the same page. You have old school thinking. You have new school thinking. You have no thinking. Bam! I can fix that!

8. The number of days it takes to get a car online and on the line is killing you. Bam! I can fix that!

9. You’re sick and tired of listening to the bickering, excuses and lack of forward movement. Bam! I can fix that!

10. You need a coach. You need someone to lean on. You need another set of eyes on the subject. Bam! I can fix that!

A quote worth remembering: “The purpose of training is to tighten up the slack, toughen the body, and polish the spirit.” Morihei Ueshiba

Is now the time? That’s all I’m gonna ask, Tommy Gibbs

Is Now The Time?

Top 10 Reasons You Should Schedule
a Workshop With Me:

1. You’ve had evaporation. Regardless of how good you are or how well disciplined you are, there’s going to be an evaporation of processes over a period of time. Bam! I can fix that!

2. You’ve had some turnover. Most people do. Turnover isn’t a sin. What’s a sin is not ensuring that the new guys and gals get it. If you don’t give them the right tools, they don’t have a chance. Bam! I can fix that!

3. The business is changing. Your team needs to understand the changes taking place and how to attack them. Bam! I can fix that!

4. Your team has gotten a little complacent, either because business has been pretty darn good or they have accepted
the status quo. They need to be re-energized and see the possibilities. Bam! I can fix that!

5. Your average grosses continue to decline. Mostly they decline because someone’s not paying attention to the little things. Bam! I can fix that!

6. You have aged inventory and wholesale losses. Aged inventory helps create #5. Aged inventory causes wholesale losses. Bam! I can fix that!

7. You have a team that struggles to get on the same page. You have old school thinking. You have new school thinking. You have no thinking. Bam! I can fix that!

8. The number of days it takes to get a car online and on the line is killing you. Bam! I can fix that!

9. You’re sick and tired of listening to the bickering, excuses and lack of forward movement. Bam! I can fix that!

10. You need a coach. You need someone to lean on. You need another set of eyes on the subject. Bam! I can fix that!

A quote worth remembering: “The purpose of training is to tighten up the slack, toughen the body, and polish the spirit.” Morihei Ueshiba

Is now the time? That’s all I’m gonna ask, Tommy Gibbs

When You Have Aged Inventory

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.

Why You and I Should Be Working Together

One of the obvious things that happens when I work with your team is that I show them what the potential is. I get everyone excited about the used car business and the positive impact it has on new, parts and service sales.

My training is designed to train and coach your entire management team, not just your used car manager. The more people within your team that “get it,” the more your numbers will improve.

Here Are Just A Few Things I Will Teach Your Team:

1. How To Become A Student of The Game-I’ll show you how to take advantage of the information that’s available about your specific market, what it means and how knowing a few key elements will get you the competitive edge.

2. How To Press the Average Cost Per Used Car in Stock Down-As simple as this may sound it’s important to understand the reasoning and method behind the madness.

3. Attacking the Ten Most Expensive Units in Stock-I’ll show you how to do it and fully explain the impact of doing so.

4. Effective Internet Pricing-It’s probably the most misunderstood dynamic in our business today. I’ll show you how to increase your volume and gross profit with a few simple tricks of the trade.

5. Speeding Up Recon-Speed matters. It matters a lot. The service issues are very fixable. Until you fix your reconditioning issues you will never maximize your full potential. I’ll create the wake-up call that you so desperately need.

6. This ain’t no Mutual Fund-I’ll show you how to manage your used car inventory as if you were a day trader. It’s all about knowing which cars make you money and which ones don’t.

7. Track GAP-GAP stands for Give-Away-Profit. I’ll show you how to track GAP. When you start tracking GAP your grosses go up.

8. C.A.R. Meeting-Stands for Cars At Risk. I’ll show you how to track your most problematic units and make them go away.

9. Life Cycle Management-My “life cycle management” process is the most powerful innovation that’s come along in the last 25 years. It will change your world forever. It eliminates wholesale losses, improves volume and gross profit.

10. Lot Walk-It’s old school and I’ll show you how to make it work for you. Old school is a very good school.

11. Appraisal Tool-Using an appraisal tool (like vAuto) will help you create accountability and track your “Look to Book.” I’ll show you and your team why “Look to Book” makes such a big difference in your bottom line.

12. Mining Your Customer Base-You know you need to buy more units from your existing customer base. I’ll show you how to do it.

13. Under-Allowance Grid-The lost art of the car business is the utilization of the under-allowance. In today”s world of consumer information you need every competitive edge that you can get.

14. SETS & SUBSETS-You’ve heard about. You know it drives traffic. Now you get to learn how to do it. And, do it right.

15. 7 Must Have Leadership Skills-I’ll break down the 7 Leaderships Skills that are imperative for your team to understand and utilize everyday.

1. Strategy
2. Articulate Your Message
3. Be Responsive
4. Empathy
5. Introspective
6. Enthusiasm Matters
7. Discipline.

If you want to increase your business then you need to increase your personal intensity. Intensity begins with you and I working together.

Charleston, SC?

I’m going to be in the Charleston, SC area the week of October 20. If you have a dealership or dealerships in that area it would be a great opportunity for you and your staff to benefit from my very powerful used car processes and concepts. I can offer you a discount on the workshop fee and travel expenses. Contact me as soon as possible to work out the details. Thanks for the consideration.

Do You Need A Coach?

Do you struggle with staying on task? Does your team struggle with staying focused on the mission you’ve laid out for them?

Have you ever thought about having a personal coach for you and/or your team? I will tailor a coaching program to fit your needs and budget. My talent is unsurpassed as a coach of leadership skills and how to maximize your talent and the team’s talent.

Why you need me as your coach:

I teach & preach the fundamentals
I create focus
I will correct mistakes with constructive criticism
I will not let the same mistakes keep happening
I will offer positive feedback especially when things go wrong
I’m demanding of discipline
I will not let you line up wrong (as in, if you have a bad football stance, your plays will fail)
I will create accountability by reviewing the stats
I’m always learning and you will too
I will help you create plays that have a high percentage of success.
I will analyze game films, break them down and get you back on track

These are just a few reasons why you need a coach. I’m the coach you need. I can take on only a few Coaching Clients at a time. 60 to 90 days with me will open up a whole new world for you and your team. Call or email me today so we can discuss what my coaching will do for you and your team. 850-251-2310. Tommy@TommyGibbsTraining.Com