Ice Cream and Coffee are absolutely two of my favorites, but not necessarily together. Is there anything better than the first lick of an ice cream cone or the first sip of coffee?

The first of everything in life is the best. Your first love, your first computer, your first car, your first job, your first house, your first management position.

The more you eat the ice cream cone and the more coffee you drink the less enjoyment there is. The first taste of anything is always better than the second and so on.

Call it the “The Point of Diminishing Return of Satisfaction.” (I made that up; I make lots of things up, just work with me.)

Used cars are no different. Think of the first day that you own a used car as if it’s the first taste of coffee or ice cream. It tastes a lot better if you sell it on day one than it does on day 61.

The longer your coffee sits the colder it gets. Not so good. The longer ice cream sits the more it melts and the less ice cream you get to enjoy. The longer a used car sits the less you make on it. The less you make on it the less enjoyment you get to have.

But even if the coffee stayed warm, and the ice cream stayed cold, your second taste of either is never as good as the first.

You’re going to hear a lot about the “Life Cycle” of your used cars this year. My definition of “Life Cycle” would be how long you allow a car to hang around and more importantly, what elements impact and extend your “Life Cycle?”

The management of “Life Cycle” is the most important element of maximizing the potential of your used car department. (Up Your Gross Software Coming Soon!)

Doesn’t it stand to reason that if you can shorten the Life Cycle of your used cars that you’re going to enjoy them a whole lot more and make more money?

Dealers and used car managers are always looking for that magic bullet. We all know there is no magic bullet, but if there was one it would be called the bullet of “Life Cycle Management.”

Poor “Life Cycle” management impacts:

A. Slow Turn
B. Aging
C. Volume
D. Gross
E. Poor ROI
F. Attitudes
G. Ability to Trade at the Door
H. Future Acquisitions

When you shorten the life cycle of your used cars, you make more gross, sell more used cars, your coffee is warm, your ice cream is cold and the taste doesn’t get old.

That’s all I’m gonna say, Tommy Gibbs

The Philadelphia Eagles crushed the Minnesota Vikings in the NFC playoff game on Sunday, January 21, 2018. The Vikings showed up for the first quarter, but left town in the second and weren’t seen or heard from again.

On Monday I was chatting with a dealer who happens to be a big Vikings fan and the phrase the dealer used was that the Vikings “didn’t show up.”

That got me to thinking; do you or some of your team members sometimes fail to “show up?” I don’t mean in the physical sense, but I do mean in the “have your head in the game” sense.

Football is a tough game. The automobile business is a tough game. If you’re going to have sustained success you have got to show up every day and “get after it.”

Getting after it means guarding the processes.
Getting after it means creating high energy.
Getting after it means holding yourself and others accountable.
Getting after it means removing those obstacles that keep your team from reaching their goals.
Getting after it means making those tough personnel decisions that you know you need to make.
Getting after it means amping up your training to be the best you can be.
Getting after it means paying attention to what’s going on around you.
Getting after it means not ignoring “the elephant” in the room.

Don’t be a Viking. Get your head in the game. Show up. That’s all I’m gonna say, Tommy Gibbs

Even if you’re not a football fan, it’s a good bet that by now you’ve seen the dramatic catch by #14, Stefon Diggs, of the Minnesota Vikings and the missed tackle by # 43, Marcus Williams, of the New Orleans Saints in the last 10 seconds of the NFL playoff game on Sunday, January 14, 2018

A lot of people have analyzed the missed tackle and put the spin on it that he didn’t want to take a chance on a pass interference call.

I played defensive safety in college. The number one rule is don’t let anyone get behind you. The number two rule is to make the tackle and/or take the penalty. This ain’t rocket science.

Let me give you an old-school rule. Don’t duck your head. When you duck your head, you might miss your target, and even worse you might break your neck.

This is no different than the business you’re in. All the computers, all the software, all the social media and all the bells and whistles you can muster are null and void if you can’t block and tackle. Just as in football, you have to stay focused on the fundamentals of the game or it will eventually catch up with you.

People often feel training is redundant. It isn’t redundant until you’re perfect. You’re not perfect.

Here’s another little spin for you. As a leader, you should always be focused on blocking. Blocking, as in removing obstacles that get in the way of your team performing to the best of their ability.

Every day when you hit the hole (front door) you should be looking for something to knock out of the way. The more obstacles you move, the more you give your team a chance to win.

Rules for the day:

1. Don’t duck your head. (As in ignoring the issues.)
2. Make the tackle. (Stick with the fundamentals.)
3. Remove the obstacles. (That’s what leaders do.)
4. Don’t be #43.

That’s all I’m gonna say, Tommy Gibbs

By now you have seen your December statement, which of course includes your year-to-date numbers. So, rock star, how do they look? I’m thinking you’ve had one of three reactions to them:

1. They look great. Could have even been better, but a little pat on the back is in order.

2. They are ok. Kind of pleased, but you know you could have done a lot better.

3. Not happy at all. What a wasted year. You are super disappointed and know you have to do better.

While you have that statement out, take a look and see if you have any used units over 60 days old. Even one is too many.

That being said, the odds are pretty good that you’ve not made as much money as you think you have, and if by some chance you lost money for the year, you’ve lost a lot more than you thought you did.

I hope the reasons are obvious, but if they aren’t, let me enlighten you a bit.

If you had to liquidate your used car inventory today, your bottom line would take a real hit. The fake news is you think you’ve made money. The real news is you haven’t made any, or at least not as much as you thought.

If you’re the owner or GM, keep in mind someone’s paycheck has been impacted in a positive way from that stuff that’s been sitting. The company’s paycheck, not so much.

A simple New Year’s resolution for you is to fix it. Fixing it doesn’t mean dumping stuff at 60 days old. Fixing it is understanding there’s a retail buyer out there at some number. Retailing early at some price is far better than dumping or retailing late.

I’ve been doing this a long time and for the life of me, I don’t understand the mindset of keeping aged inventory. I’m sure you have a great excuse for doing so. Keep in mind, there’s not a unit in your aged inventory that you couldn’t have already retailed at some number. Think retail, retail, retail.

The choices you have are to keep on doing what you’re doing or do something that will dramatically improve what you’re looking at this time next year. Enjoy your numbers. That’s all I’m gonna say, Tommy Gibbs

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.

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 for 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-Meet with your GSM/Sales Manager and ask him/her to review with you what the selling process is. Better yet, prior to the meeting, ask them to write out the selling process to bring to your meeting. Make this a regularly scheduled activity.

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. That last sentence would seem to be common sense and something I shouldn’t have to say. I said it because we all need to be reminded of what’s important once in a while.

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. A lot of people talk-the-talk, but very few walk-the-walk.

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. Training requires an investment of money. Invest some money.

Create Accountability-create a daily checklist 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,” and therefore eliminate evaporation.

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.

I hope you’re off and running. That’s all I’m gonna say, Tommy Gibbs

I’m betting you’ve either got a lot of numbers already laid out on a spreadsheet for 2018 or you’re scrambling to get it done in the next few days.

I’m a big proponent of forecasting. It lays out a map as to where we are going. Although there are detours along the way it gives us a chance to get to our final destination.

I’m an even bigger proponent of department head meetings. I believe your job as a leader should be to teach, educate, coach and encourage your team to seek ways to improve your operations.

I tend to take a common sense approach to most things in life and I approach forecasting and monthly management meetings no differently.

Dealers, or any business for that matter, tend to forecast based on what they would like to do in the upcoming year. Often it’s based on statements such as “we need to increase our sales by 10%” and/or “we need to reduce expenses by 15%.”

Saying you want to increase your business by 10% sounds good, but if you don’t have a plan to get there what good is it? I’ve always been baffled by annual forecasting.

One of two things usually happens:

1. Someone is overly optimistic and/or they are blowing smoke up someone’s butt.

2. Someone serves up a low ball because they don’t want the pressure of hitting an unrealistic number.

Although dealers want to see an improvement in the next year’s numbers, what they really want is a number they can take to the bank.

In order to do a realistic forecast, you have to take into account staffing, inventory, and market conditions. How can anyone do a forecast and predict what those three pieces of the equation are going to look like 3, 6 or 12 months down the road?

I’m not saying you shouldn’t do an annual forecast, but doesn’t it make more sense to adjust that forecast monthly or quarterly based on those three fundamental elements?

Because most leaders don’t make those adjustments it frustrates the management team and defeats whatever good intentions there might have been. Everyone eventually loses respect and confidence in any type of forecasting and concludes “Why bother?”

While it makes good sense to do a monthly or quarterly review of the actual numbers, managers become disillusioned with these reviews in that they become a “beat up” session rather than trying to figure out what went wrong and how “we” can fix it.

People know when they didn’t perform. What they want from upper management is leadership that gives well defined ideas and direction on how to “fix it” or make it better.

Using more common sense with your forecasting and monthly management meetings will help you grow a solid organization that generates consistent profits and sustained growth.
That’s all I’m gonna say, Tommy Gibbs

In just six more days you’re going to be very, very busy. Next week has the potential to be one of the best selling weeks of the year.

It will only be a great week if you make it a great week. It’s not going to be a great week if you stay in your seat acting like a computer geek.

You can make it a great week by getting up and moving around. You should be like a bumblebee on a pollination mission. You’re here. You’re there. You’re everywhere. Stinging your little heart out.

You can’t just flap your little wings in place and think someone’s gonna sell a car.

You have to create the buzz. You have to go from being weak and meek in order to make it a great week.

I don’t like things to be all about you, but this is all about you. This week is all about you making things happen.

It’s about you contributing as much in a week as you sometimes do in a month. It’s not about you giving 100 or 110%. It’s about you giving 200%. It’s about starting early and ending late.

It’s not about asking others to do it. It’s about you doing it. You sometimes think you’re important. Well, you are important. You’re even more important than you think. At least this week you are.

You may have to sting a few people this week. That’s ok. Some of your team could probably use a sting or two. A little stinging pain for a whole lot of car selling gain.

Wishing you a very Merry Christmas, and an amazing 2018. That’s all I’m gonna say, Tommy Gibbs

Pay plans are a very touchy subject. I’m always being asked about pay plans. It’s often been said you’d be better off not to discuss religion, politics and let me add one more, pay plans. I’m feeling kind of froggy today so I’m jumping in.

There are as many different pay plans as there are dealerships. It’s fair to say that how sales people’s pay plans are constructed often depends on the dealer’s philosophy of doing business and of course the influence of his/her key managers.

Those philosophies were developed early on, based on the experience and success of the decision makers in their personal and business growth.

We tend to think that everyone thinks like we do, and so if the way we were paid when we started made us successful, then it will work for others along the way. Or we think it’s worked so well for the dealership over the years, why change?

Just because you’ve always done it “that way” and it got you to where you are today, doesn’t mean doing it “that way” will get you to where you need to go.

See how much of this rings true:

1. You’re paying a lot of flats.

2. You’re pricing your used cars (even new) online with killer prices designed to drive traffic to the front door.

3. You’re working harder and harder to hold the line on your pricing when the customer shows up.

4. Because of #2 and #3, your sales staff have very little control over gross profit. Certainly not like they did in the good old days.

5. You’re not a one-price dealer yet, but you’re moving more in that direction.

6. It’s becoming more and more difficult to hire people, especially millennials, willing to be paid on gross profit.

In today’s market, it doesn’t make much sense to continue to pay on gross profit. What does make sense is to move more to a volume-based pay plan.

Some of your concerns:

1. You’re afraid to change pay plans because you’ll lose some of your key people.

2. You’re afraid your sales person’s compensation percentages will get out of line.

3. You’re afraid gross profit will go further south.

Let me clear those concerns up for you:

1. Some of those key people will actually like the change. But, if you have some people that you’re concerned about, then tell them that if they sell the same number of units over the next 12 months as they did the previous 12 months and if they don’t make the same or more money that you will pay up.

2. If you do your homework, analyze your history, analyze your grosses, trends and really think it through, you won’t screw it up and get out of line.

3. Gross profit could very well get better. Yes, your management team will have to work harder and harder to hold the line on pricing. If we spent a little more time on selling the sales staff that we’ve got the price right, gross might just go up.

When you dissect all of this, it is not so much about changing pay plans that’s all that hard. It’s about changing the mindset and culture of your organization.

I’ve attached a spreadsheet that you can change around to fit your style. Might be worth your time to take a peek. That’s all I’m gonna say, Tommy Gibbs

Pay Plan In Excel

The odds are pretty good that your internal labor rate is $75 to $125 or more depending on a number of factors. Thus, your average reconditioning costs could be somewhere in the $800 to $1400 range.

Or, if you are a big time “Certified Dealer” then your cost per unit would be higher because of the factory requirements.

Let’s round the reconditioning number off to a nice $1000 per unit or whatever number you feel comfortable with.

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the “Pack Generation.” I’ve always loved packs, but this business has changed, I’ve changed and you should too.

Stop trying to justify it to yourself by saying you’re adding it back into gross and the managers still get paid on it.

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add the reconditioning cost and packs you have a total of $1800.

You are starting off from “jump street” with an $1800 cost disadvantage against those dealers who aren’t doing it the old-fashioned way. (CarMax and Texas Direct to name just two of them.)

The problem with the pack and recon “drug” is that it still sorta works and you can’t shake ‘da habit.

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail or close to full retail, that they will just give it away in the sales department is old, tired and a worn out theory. By and large, we’re not working from cost up anything like we used to. Hello to the world wide web.

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

What compounds the problem is your pay plans. As long as you keep paying salespeople and sales managers on gross you are going to fight a losing battle. Changing pay plans is more about changing the culture in your store as much as it is about the pay plans themselves.

Can we agree that the pricing you put on the Internet has an impact on the amount of traffic that shows up? Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? For sure it’s not as much as they used to have.

What if you changed the pay plan, took gross out of the equation and went to more of a one-price concept? Under that scenario what you charged in service and the need for packs would be irrelevant. The fact of the matter is you’re being pushed into less and less negotiating whether you like it or not.

If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy and trade for more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world?   That’s all I’m gonna ask, Tommy Gibb

 

More and more, dealers are admitting that whether they want to be a one-price dealer or not that they are sort of being forced into it because of the pressures from today’s market. That being said, there’s a very small percentage of dealers who have made a commitment to being a one-price dealer.

If you’re one of those dealers who still negotiate the price of your new and used cars let me suggest you go back to some old-school of under-allowing on trades. Not just some of them. All of them.

When I ask the question of managers if they under-allow, most will say yes, some of the time. Bad idea. If you’re going to do it, go all in and do it with all of your customers, not just those you think are stupid or drunk. That may be a little harsh, but I want you to get the point. Stop picking and choosing.

I’ve attached my world famous under-allowance grid. You may not like mine and that’s fine. Come up with your own. Then come up with the discipline to serve it up to everyone that has a trade.

If you do so, one of three things will happen:

1. The customer says “yes.” Bam, you made some gross you would have never made.
2. You have to peel the customer off the ceiling. No problem. That’s why you get paid the big bucks.
3. You have now checked the customer’s temperature and gotten their thinking in line.

Don’t act all righteous and say you don’t want to do this because you want to be transparent. If you wanted to be transparent you would stop negotiating and show everyone the invoice.

If you’re going to negotiate in today’s market you need every tool or advantage you can get.

Let the old-school gang smile again. That’s all I’m gonna say. Tommy Gibbs