Yep, here we are again. October has just ended. October is the perfect month. “Perfect for what?” you say. Perfect for figuring out where you’ve been and where you want to go.

I can’t say that math was one of my best subjects, but I can divide by 10 real easy. At a glance I know what the averages are for any line item expenses, sales volume and gross profit.

What also makes October a perfect time is it sets the stage for the next year. Now is the time to start planning for 2015. Waiting until the last week in December to get your plan together is a really bad strategy.

This is the perfect time to dig in and firm up your fundamentals in all departments. This is the time to get back to basics. This is not the time to cut back on your training.

This is when you need to amp up your thinking, stretch your organization and stretch your imagination. If you don’t have a solid foundation of basic processes you will never maximize your success.

This is the time to take control of the “evaporation factor” that’s been occurring all year long. This is the time to stop the “process bleeding.”

Your long term plan should include joining a Twenty Group and attending the NADA convention. Look, we all get lazy, and get caught up in our daily routines. Attending these meetings gets you revitalized. It gets you outside of your daily box and opens your eyes up to what the possibilities might be. Seems like a no brainer.

This is the time to make those plans. Teamwork is critical if you’re going to maximize your bottom line. To keep your team on the same page you have to constantly communicate to them what the expectations are and what processes they are expected to follow.

There is no “shake ‘n bake” solution. You don’t fix it and walk away. You fix it and re-fix it.

What to do?

1. Ask yourself if you can improve your processes? If you focus on revamping your processes, what effect do you think it will have on your business? It is an absolute fact that regardless of how well disciplined you are over time your processes are going to evaporate. The best piece of advice I can give you is to lock yourself and your management team in a room and review every detail of your selling processes. Be brutally honest with yourself. Then take the necessary action to get you back on track.

2. Can you improve your team? Got the wrong players? Now is the time to make the changes. If you already have the right team in place then it’s time to let them know what your expectations are and show them the plan and the path to achieve those expectations.

3. Don’t think of your planning as “you now having a plan.” Think of it as a “mission.” Plans can fall apart. When you’re on a mission you stay after it until you succeed and then you stay after it some more.

I’m on a mission to get you to re-think what you’re doing…That’s all I’m gonna say, Tommy Gibbs

If you read the likes of Automotive News or pay attention to media reports you may have heard there’s a glut of used inventory coming from off-lease vehicles and prices are going to start to drop.

Some of you have already experienced the so called “price drop.” If you’ve had conversations with Bubba or been to the auction of late you absolutely know about the “price drop.”

For whatever reason, you may have beefed up your inventory over the last 60 days or so and now you’re going, “Oh crap, I’ve got a serious problem.”

Let me ask you something. And before I do, please don’t get mad at me. I’m not trying to be a smart butt. But, what planet have you been living on? Don’t prices start to fade a bit this time of year? Would you call this the real “selling season?”

Doesn’t it make sense to tighten your inventory up just a tick as we move into the late fall/winter season? This media thing is a trick, a mean trick to make you think you don’t know what you’re doing.

Maybe you don’t or you had a slight memory loss when it comes to remembering how the market works. If you went out and purchased a bunch of inventory over the last 60 days, what were you thinking?

You need to stop thinking about what’s going on in the wholesale market. It’s not any different than it’s ever been.

What you need to be thinking about is how to retail your inventory, not wholesale it.

While I’m at it, I have another trick or treat for you.

If you have a vehicle and it’s priced number one in the market and it hasn’t sold, guess what? It’s not cheap enough. Trick or treat, that’s all I’m gonna say, Tommy Gibbs

I recently purchased an iPhone 6. Nice little gadget. I also tried the 6 plus. A bit too big for my style of running through airports.

At first even the 6 felt a bit too big. After a few days it felt pretty normal. About a week later I picked up an iPhone 4.

Geez, that thing feels so small. It didn’t feel small until I got used to the 6.

The question is what have you gotten used to?

1. Have you gotten used to low grosses?
2. Have you gotten used to low used car volume?
3. Have you gotten used to 60 day plus used cars in stock?
4. Have you gotten used to 7 to 10 days to get a car through service?
5. Have you gotten used to having lots of $25,000 used cars in stock?
6. Have you gotten used to buying cars from the rental car companies?
7. Have you gotten used to listening to “I can’t find used cars”?
8. Have you gotten used to crappy ROIs?
9. Have you gotten used to lousy used car photos on your website?
10. Have you gotten used to giving up discounts on used cars that you’ve priced “really, really right” on the Internet.

Yep, I’m just asking, what have you gotten used to? You’ve probably gotten used to a lot of things you shouldn’t. That’s all I’m gonna say, Tommy Gibbs

Sometimes it’s simplest processes that are the most effective. Pressing your cost down may be the easiest and fastest way to improve your used car business. Most new car dealers are not in the used car business. Most are in the NEWSCAR business.

That’s when the average cost per unit in your inventory keeps creeping up and up and before you know it you are too close in price points to your new car inventory. I have an easy experiment for you to do.

Take out your financial statement and go to the used car page. To do this correctly you will need to chart each month for the entire year. On that page you will see a column that has used car sales dollars in it. Simply put, that’s as if you sold one car for $10,000 and one for $20,000, thus you had $30,000 in Sales Dollars.

That in and of itself doesn’t mean much to you. Now, subtract your total gross profit from that sales dollar number for each month. That will give you your cost of sales.

Divide the cost of sales by the number of units sold each month. That will give you the average cost per unit sold for each of the twelve months. I know, I know, pretty simple stuff.

Hang on… When we do this little experiment here is what we generally find: the month in which you had your best retail sales is the month in which your average cost per unit sold was the lowest for the entire year. And, the month in which you had your worst retail sales, your cost per unit sold was the highest for the entire year.

The bottom line is that the more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR business.

You end up selling more units with fewer dollars tied up. Oddly enough, most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.

So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $14,500 today, your mindset should be “How do I get to $14,000,” then $13,500, then $13,000 and so on.

The more you press your average cost down, the better off you will be. I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars.

No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. What I am saying is that it’s not so much about what you buy, but what you don’t buy. If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.

I’m often asked two questions:

1. What should my target goal be? There is no target, just try to get it lower than the day before.

2. Can I press my average cost too low. The answer is no.

Pressing your average cost down is a no brainer. That’s all I’m gonna say, Tommy Gibbs

Let me share with you some personal history. When I first started selling cars in the early ’70s, I worked 12 hour days, 6 days a week, as did many of my coworkers. We didn’t work Sundays because dealerships weren’t open on Sundays.

In 1980 I became a partner in my first dealership with my good friend, mentor and long time business partner Ashton Lewis from Chesapeake, VA. Even back in 1980 we were trying to solve the recruiting and hiring problem and to this day it’s not changed very much.

The dilemma has always been that if a new sales person is going to earn a decent living they need to work bell to bell.

But, if they do so they lose their family and social life because they don’t have the time and energy. If they work only their shift they eventually quit or lose their job because they aren’t earning any money.

From the 70s, 80s, 90s and up to today, it’s the same problem. Hours and money. With the Internet and the amount of online selling that continues to grow we have to think differently about the type of people we hire, the skill sets, the type of selling processes we utilize, the hours we require them to work and the way we compensate them.

Many dealers are still trying to hire people with skills that do not fit today’s buyer. Today’s buyer and today’s seller are the same people. Think on that one for a minute. Dealers are still having some success doing it the old fashioned way.

But you have to ask yourself, as fast as the world is changing how much longer can you keep doing it the same old way?

Ask yourself these simple questions:

1. Is it time we stopped paying on gross profit?
2. Is it time we structured the duties of the sale person differently?
3. Is it time we stopped or reduced the negotiating process?
4. Is it time we allowed managers to manage people and processes instead of “working deals?”
5. Is it time to consider hiring more part time sales people? Then couldn’t you reduce the hours of the full time sales people?
6. Is it time to reduce the amount of time it takes to sell a car? 7. Is it time to have the sales person handle the F&I part of the transaction?
8. Is it time to spend more time training and less time talking about it?
9. Is it time to stop trying to steal or hire people from other dealerships?
10. Is it time to take stock of what we do, how we do it and how can we do it better?

Change is coming. Would you rather be the force of change or be forced to change? That’s all I’m gonna ask, Tommy Gibbs

Rory is a young dynamic speaker whose theme is “Take The Stairs.”

His concept simply means taking the harder way. Human nature is to go the easy route. Many people fall into the category of the route of least resistance.

It’s so much easier to stay with what they’ve got. So they “Don’t dare take the stairs.”

Here are five examples:

1. Can’t shake the addiction of packs and paying on gross profit? Ask yourself, how many times do you have customers who come to your dealership that have a legitmate quote from another dealer that’s at cost, below cost or into the holdback? So, tell me how the sales person or sales manager has much control over gross? It’s so much easier to stay the course and not change it isn’t it? “Don’t dare take the stairs.”

2. You’re reluctant to go to an “up system.” You know it’s the only way to go, but you won’t do it because of the “fear factor.” The fear that all your “Superstars” will quit. If you think through all the elements of an up system it makes total sense. “Don’t dare take the stairs.”

3. Keeping used cars in your inventory past your timeline, whatever that line might be. “Fear factor” bites you again. It’s the fear of upsetting your used car manager by holding him/her to a discipline that, again, you know makes total sense.

There are many elements to managing your used car inventory. It is not about losing a lot of money at the end of the timeline. It’s about daily disciplines and processes that you need to enforce. It’s easier to allow yourself to be sold on all those stupid reasons to keep those aged units in your inventory. “Don’t dare take the stairs.”

4. You swear you won’t go to a one price-selling concept. The reality is you know it’s coming. The fear of losing people keeps you on the path you’re on, which is old, tired and worn out.

The customers don’t like it and your forward thinking sales people don’t like it. You know there’s a better way, but it’s easier to stay where you are. “Don’t dare take the stairs.”

5. Bubba still works for you or you have “Bubba thinking.” Bubba did a great job 20, 15, 10 or even 5 years ago. But, Bubba just won’t accept the role of technology in our business.

Oh, Bubba says he’s on board, but you keep getting the same old stupid results and he keeps on selling you on the fact that he “gets it.” Bubba wants you to believe that using technology is a race to the bottom. Not true. Using technology is a tool to position you in the best place to maximize gross, turn and volume.

Being sold is far easier than using your own brain to think it through and to replace Bubba’s butt. “Don’t dare take the stairs.”

Taking the stairs requires pain and discipline. Change is never easy and you know you need to change. Maybe you should just run up the stairs and see what happens? If you fall down you can dust yourself off and ride the escalator…just like everyone else.

I hate being like everyone else. That’s all I’m gonna say. Tommy Gibbs

The summer is over. It has been a pretty good year for most of you. It’s easy to become complacent when times are good.

Dealers make the most money when they are coming off tough times. When things are tough, dealers get back to the basics and grinding it out. As business gets better they are in a great position to make a lot of money because they have cut out all the fat.

But as business gets better, dealers tend to add this and that to the expense line and get further away from the basics. From where I sit, I’m seeing dealers making good money, but many have started to get lax with spending, processes and their daily disciplines.

The standard in the business has been that we should make at least 2% net profit to sales dollars generated. If you are only making 2% right now while business is good you may be in trouble when business goes south.

Right now you should be making 4 to 6% net to sales. It stands to reason that if you can get the percentage up during the good times then in the worst of times you can still maintain the 2% plus number.

If you’re in the 2% bracket or less, then you are missing something somewhere and need to re-evaluate your operation and do what you have to do to get it fixed.

For example, if you are keeping used vehicles past 60 days, the odds are pretty good that you have a lot of water sitting out there. If you were to liquidate today, your bottom line wouldn’t look so hot. It would be a safe bet to say your net profit to sales percentage is misleading.

Here are some things to think about as we go into the fall and winter:

1. Refine and stick to your basics
2. Don’t get stupid with your expenses
3. Keep the inventory turning
4. Evaluate the inventory on hand vs. anticipated selling rate
5. Get your profits into the 4 to 6% net to sales range
6. Don’t think you have it figured out because you don’t

“We never get it right. There’s always more to do and something to fix.” That’s all I’m gonna say, Tommy Gibbs

Every week several people contact me about volume and gross. No one will disagree that we need to be focused on inventory turn, and no one will disagree that we still have to generate X dollars in total gross to pay the bills.

There is often a disconnect between the desired goals and the skill level of those who have been put in charge of obtaining the volume and the gross.

I could go on and on about this skill level, but let me give you just one key point that goes into play when trying to determine what’s what. Are you ready? Are you really ready?

It’s “knowing what you deserve” for any given car or truck on your lot. It’s part understanding the data and part common sense. It’s really that simple.

Knowing what you deserve means having a true understanding of the market and the unit you’re staring at. It’s having the “cojones” to ask what you deserve for a given unit. And, it’s also knowing what not to ask and when to fish or cut bait.

Here are 5 more thoughts to help you:

1. Redundant Training- It ain’t redundant until you’re perfect. You ain’t perfect. If your sales staff isn’t polished enough to be able to justify the price then you are not going to get the desired gross. It’s just that simple. Get busy training and you’ll get more gross. (If you have a bunch of knuckleheads working with you then all the training in the world isn’t going to make a difference.) At the very least, you should have a lot walk once a week with all managers and all sales people. The more your people know about your inventory, the more your gross goes up.

2. Ask For More On The Right Units– There are some that you need to start way high. Some very low. Once in a while you gotta “ask for it all.” Since the beginning of this business, high average gross profit has been achieved by hitting a home run once in a while. You can’t hit it if you don’t take a full swing. If it’s a low mileage, really nice car you deserve more money for it. You don’t deserve more money for an edgy one and you have to be smart enough to know which is which. And without a doubt you have every right to ask more money for a certified car. But that doesn’t mean you sit on the “more money” pricing forever. Change the pricing daily.

3. Not selling in Today’s Market-Your most profitable car is a 20-day car. If you are retailing a lot of cars at the 30, 45, 60 plus day mark, you don’t have a chance. Speed wins; the lack of speed kills. Why don’t you try charting those units that you sell at 45 days and beyond to see what they are doing to your average gross profit? In the movie “A Few Good Men,” Jack Nicholson might have been talking about you. You can’t handle the truth.

4. Lack of quantity and quality of photos -stop reading this. Go look at the used cars on your website. Now go look at texasdirectauto.com. If yours don’t look as good as theirs then you don’t have a chance. Don’t have a photo booth? Want your cars to look really cool. Check this out.

5. No Early Warning Radar-You’re asleep at the wheel. You have to be able to spot a problem child on day one, not day 44 or day 59. Every one of your aged units has a story to go with it. That story started back on day one. You have to be smart enough to have an “Early Warning Radar” system in your arsenal. Fix your Radar system and your grosses will improve. I invented “Early Warning Radar.” You should steal it and use it.

You get what you deserve, when you do the work to deserve what you get. That’s all I’m gonna say, Tommy Gibbs

As most of us know, constipation can be a terrible thing. When you are constipated it’s virtually impossible to be as productive as you might otherwise be.

Exercise, drinking lots of water and in some really bad cases taking a strong laxative can often relieve the problem and get you back on your “A Game.”

Having 60-day-old plus units in stock is a lot like being constipated. You can never perform your best when you’re all stopped up.

60-day-old units will make you sluggish and hold back your potential to be as productive as you might be. Your “A game” will never show up when you have used car constipation. Think of it as Poop in the chute.

Dealers will often give their used car inventory a laxative, flush the system and start over. It’s a costly approach that’s never the best way to go.

The problem is that even when they “blow it all out” it doesn’t do that much good in the big picture because they don’t change their diet or exercise, so the inventory continues to be constipated and therefore hold them back from achieving their maximum potential.

A good diet for the used car department would be to have good solid processes. A good exercise program for the used car department would be to understand the role that speed plays toward good health. Good diet and exercise can help you avoid used car constipation.

Constipation makes you stinky. You don’t want to be stinky. Having aged units makes you stinky. You don’t want to be stinky.

It’s not a matter of fixing a one-time constipation issue.

It’s a matter of the right diet and exercise to live a happier and fuller life. If you give a hoot you’ll clean up your poop. That’s all I’m gonna say, Tommy Gibbs

And what might that be? Well, it would simply be an opinion on the subprime business.

Is it fair to say that in many cases a subprime customer actually pays more for the vehicle than a non-subprime or cash buyer?

I’m not talking about the additional high risk interest rate. I’m talking about the fees that get added back to the retail price of the car that go back to the lender’s bottom line.

Isn’t it illegal to charge more for the car when you finance it than when you don’t?

Dealers who do a decent amount of subprime constantly struggle with the pricing of their vehicles in order to cover the subprime fees. It’s not the dealer’s fault. The lenders are the ones that have set the rules for this game.

I’m not at all saying you shouldn’t be in the subprime business. But, it’s a really bad bet to hang your hat on the subprime business continuing as business as usual.

The Feds are coming. The Feds are coming. The Feds are coming. That’s all I’m gonna say, Tommy Gibbs