Don’t you just hate it when someone says, “We’ve always done it that way.” What I find so very interesting is that more often than not we don’t actually say it. We just do it.

It’s one of those weird things in business that happens and we just look the other way. Not going to make any waves that what we’re doing doesn’t put us in a competitive position. Nope, just going to go with the flow. The old “father knows best” theory.

There’s not one person reading this that will disagree that the business is undergoing dramatic changes on a daily basis. We’ll soon have chips in our heads and sensors on our fingertips.

The pricing of new and used cars on the worldwide web is as normal as sleep and 3 meals a day.

The other thing that’s normal is we still charge full retail from the parts and service department to the used car department. Talk about putting yourself in a non-competitive position. Whamo.

A lot of smart people read my newsletters. I know you’re smart because you read them. I’m sure someone out there’s going to figure out a better way.

Those that figure it out will sell more vehicles.

Those that sell more vehicles will pile up more total gross.

Those that pile up more total gross will make more money even though they aren’t charging full retail to the used car department.

We’ve always done it that way is such a stupid thing to say. That’s all I’m gonna say, Tommy Gibbs

I realize this may not be a fit for some of you. And yes, there are some who believe this is old school, old fashioned and outdated. But, there are some who can make this work. And if it helps someone sell a few more units, I can handle a little criticism.

Memorial Day is just a few weeks away. It’s not too soon to be thinking about putting on a Memorial Day sale.

Consider Having An Onsite Tent Sale:

1. Put the tent up as close to the road as possible. Pick the best strategic position on your lot.

2. Put tables and chairs in the tent.

3. Put ALL of your people in the tent.

4. Everybody goes in the TENT!

5. Work all deals in the TENT!

6. If at all possible, move your computers into the tent and do F&I in the TENT.

7. Hang banners from the TENT saying “TENT SALE.”

8. Promote it with Direct mail and/or with a “private invitation” only deal for Thursday before you kick off your regular ads.

9. Do anything you can to make it look like a circus.

10. Rent those jumping air things for kids.

11. Balloons and more balloons.

12. Pop Corn, Sodas, Hot Dogs.

13. Lots and lots of spiffs for your sales people and managers.

14. Do a great kick off breakfast on Thursday for your staff.

15. Don’t do it just for the sales staff; get as many of your
employees involved as you can. (Feed everybody lunch every day of the event as well.)

16. Send out memos and emails to all employees explaining in detail what’s going to be happening.

17. Rope off special parking for customers. Hire an off duty police officer or security guard to direct them.

18. Answer the phone XYZ Dealership Tent Sale in Progress.

19. Do a fundraiser at the same time for the local little league or whatever.

20. Post the event on your website.

21. Do an email blast to all your customers advising them of the sale. If your CRM system is sophisticated enough make sure you tell them you need their specific trade and will pay top dollar for it during the sale.

22. Giveaways generally don’t do much except cause people to show up to get their gift and leave, but having people register for a free car is a good way to get info on them when they show up. Pick out a $1000 or $2000 car and give it away.

23. Along that same line, give the salesman who registers the winning ticket some sort of prize. Gift card, $200, whatever floats your boat.

24. Make up a bunch of signs like real estate signs that say “Tent Sale in Progress” and put along the grass in front of the dealership.

25. If you’re close to the interstate do some signs with arrows and put them up close to the ramp. (Oh come on, the worst that can happen is they make you take them down.)

26. Rent a chicken suit or some kind of character and have them walk up and down in front of the Dealership with a placard that says “Tent Sale in Progress.”

It’s not complicated and it’s not expensive. You just have to be creative. Get some of your key people together and throw some ideas around.

That’s all I’m gonna say, Tommy Gibbs

If you aren’t, you should be. Mad about what? You should be mad if you have even one unit over 60 days old.

Who should you be mad at? Well that depends on your position in the dealership.

If you’re the Dealer or GM you should be super mad at yourself and everyone around you for allowing it to happen.

If you’re the General Sales Manager you should be mad at yourself and everyone around you for allowing it to happen.

If you’re the Used Car Manager you should be mad at yourself and everyone around you for allowing it to happen.

If you’re the Desk Manager you should be mad at yourself and everyone around you for allowing it to happen. (Yes, you’re part of the problem.)

If you’re the Sales Manager you should be mad at yourself and everyone around you for allowing it to happen. (Yes, you’re part of the problem.)

If you’re the F&I Manager you should be mad at yourself and everyone around you for allowing it to happen. (Yes, you’re part of the problem.)

If you’re the Controller you should be mad at yourself and everyone around you for allowing it to happen. (Yes, you’re part of the problem.)

If you’re the Service Manager you should be mad at yourself and everyone around you for allowing it to happen. (Yes, you’re part of the problem.)

It doesn’t matter what your position is, you’re part of the problem of aging units. Either it’s your responsibility or you’re contributing to the problem, or if nothing else you’re an enabler.

Unless you’ve been living under a rock for the last 20 years you know that having units over 60 days old is stupid and a horrible business practice.

If you weren’t mad before this email I hope you’re mad now. Go ahead be mad at me for saying it’s stupid for you to have units over 60 days old.

That’s probably your problem in the first place. You want to blame somebody else. Sure blame me for your madness because that’s what having units over 60 days is.

It’s madness. That’s all I’m gonna say. Tommy Gibbs

1. 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 and effective way to increase your gross. You can only eat the elephant one bite at a time.

2. 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.

3. 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.

4. Improve your look to book. You make the most money on units you trade. You will trade for more if you get serious about improving look to book. Review every appraisal from the previous day in your “save-a-deal” meeting every morning. Someone in management should be responsible for calling every customer that had a trade and up the ante.

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

Fix what you can fix. That’s all I’m gonna say, Tommy Gibbs

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. If you got rid of packs could you buy and trade for more units? If you bought and traded for more units, wouldn’t you sell more units? If you sold more units wouldn’t you have more gross going to the bottom line?

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 aging units you are selling are killing your grosses. If you don’t believe that to be true start tracking 30/30. It will blow your mind.

There are many parts to improving gross profit. Look for Part 3 in 2 weeks. That’s all I’m gonna say, Tommy Gibbs

Did you see the game on Friday night? What game? The Women’s Final Four game with Mississippi State and University of Connecticut. Even if you didn’t you’ve probably heard about it by now.

Mississippi State defeated the University of Connecticut in overtime with a last second shot and stopped their willing streak at 111 games.

The shot maker and one of the top players on the floor, Morgan William, drills a game winner in overtime at the buzzer. At 5’5″ tall she’s the smallest player on the floor.

So let me remind you of the book, “It’s Not The Big That Will Eat The Small…It’s The Fast That Will Eat The Slow.”

Speed up your reconditioning.
Speed up your sales travel rate.
Speed up your selling process.
Speed up your turn.

You make the most money on a used car that you sell in the first 20 days. It goes south after that. If it goes to 60, you’re sitting in the locker room with your head in a towel.

Think like a 5’5″ basketball player. That’s all I’m gonna say. Tommy Gibbs

$3,000 average front gross profit. Yep, you can do it.

Achieving $3,000 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 stop giving your cars away, raise your prices and the grosses will go up.

As good as that all sounds 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. Stealing trades will become the norm and new car volume will go into the tank because you are reluctant to step up.

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 $3,000, $2,500 and in some cases $2,000 are history.

Your best opportunity to improve your overall business is to improve your volume. Improving volume improves business in all your departments.

You can’t spend average gross profit. You can spend total gross profit. Stay tuned for part 2 next week when I’ll give you some realistic tips for actually improving gross profit. Look for part 2 in 2 weeks.That’s all I’m gonna say. Tommy Gibbs

One of the more interesting things I’ve discovered over the years is that unless a dealership has a really large body shop or does a big job in wholesale parts, that the difference between the used car inventory and the parts inventory runs about 75%.

In other words, if you have $1,000,000 tied up in used cars you probably have less than $250,000 tied up in parts. Now here’s the most amusing part. Every dealership has a dedicated parts manager. Not every dealership has a dedicated person handling used cars.

It is not unusual for someone to be serving double duty and sort of handling used cars. Sometimes it’s the desk manager. Sometimes it’s the sales manager. Sometimes it’s the general sales manager. Sometimes it’s the general manager.

The conventional skills we once looked for in the person managing our used car inventory have no doubt changed over the years, but what hasn’t changed is that somebody has to “own the department.” Without ownership the department is left to run itself.

Using my example you have a dedicated parts manager managing a $250,000 inventory that actually goes up in value each day.

On the used car side you have $1,000,000 tied up going down in value each day without a dedicated manager.

You might be sitting there saying, “Hey, wait a minute that’s not our dealership.”

Sometimes even when you have a dedicated manager, they aren’t dedicated.

Either way this might be you. That’s all I’m gonna say, Tommy Gibbs

Many of us in the automobile business talk about aged units. For most people an aged unit is one that’s over 60 days old. Some of the more forward thinkers cut it off at 45 days. If you’re one of them, count me as a raving fan of yours.

In my workshops I often talk about aging out. Aging out is a term you should start to include in your thinking tool box.

Aging out happens at about the 30 day mark. In other words the unit is starting to age out because it has seen its most profitable days go by.

For those of you using my 30/30 spreadsheets you know there’s a substantial difference in gross profit in the first 30 days compared to the last 30 days.

Units that are aging out deserve your utmost attention in order to prevent them from aging. Once they have aged it’s too late to do anything except watch your average gross profit go in the tank.

Pay attention to “aging out.” Stay out of the tank. That’s all I’m gonna say, Tommy Gibbs

Try sorting your used car inventory by cost or investment with your most expensive units at the top of the page. Print it out. Now sort your used car inventory by age. Print it out.

Compare the two pages. The odds are pretty good that a lot of your aged units are also listed on the top of the page you sorted by cost or investment.

You should be looking at and analyzing this list every day.

With a few exceptions, you should be pricing your most expensive units under the market and on the most problematic ones you should consider paying bonus money on them, regardless of the number of days in stock.

Sometimes we do things in this business bassackwards. When units start to age on us we sell it for little or no gross and pay the sales person a $500 bonus to make it go away.

In many cases you would be better off to price them tight to the market and pay a bonus on them on day 1 rather than day 61.

That’s all I’m gonna say, Tommy Gibbs