I heard a great quote recently and it goes like this, “You should go to work for a company that has high expectations.” I like that, I like that a lot.

So, let’s turn it around. You should hire people who you have high expectations of and you should reinforce your expectations on a daily basis.

As a leader in your organization you are responsible for helping to raise the expectations of yourself and those around you.

If you accept a sales person selling 6 cars a month I’m thinking you’re gonna get a lot of 6 car sales people. What you are willing to accept has now become the standard.

If you accept the used car department selling 75 cars a month then that’s what you’re gonna get.

You might be wishing for 100 but everyone in the store knows your real expectation is 75, so you hover around 72 to 77 and that’s it. Everyone goes away happy. Sorta.

There is a direct relationship between expectations and the way people are treated. If they are treated well, they generally will perform well. Part of treating people well is educating and coaching them well.

Why do the workers at Chick-fil-A perform better than those at Burger King? Because management treats them better. They go to work at Chick-fil-A knowing full well what the expectations are.

The same at the Ritz, the same at Apple, the same at Starbucks, the list goes on and on.

Management’s error is that it often takes the approach of, “It is what it is; we are a victim of the market, so let’s just do the best we can.” Never let doing the best you can be your rev limiter.
People will stretch themselves to achieve the level of expectations that have been set. Every leader should seek to create and build high expectations to improve the performance of everyone in an organization.

People will respond when challenged in a positive way and rewarded with positive reinforcement. Positive reinforcement includes training, praise, celebrating results and acknowledging individual and company successes.

It’s not enough to just raise your expectations and treat people well. You have to raise the level of education and coaching you give your staff in order to give them the tools they need to achieve the expectations you have placed on them. To do anything less is just plain stupid.

Don’t be stupid. That’s all I’m gonna say, Tommy Gibbs

You’ve made a choice and the odds are pretty good that you may not be happy with the choice you’ve made. You may have chosen to do volume or shoot for a high average gross profit.

Your struggle may be that you’re not generating enough total gross profit based upon your choice.

Let me remind you that the only thing that is really important is how much total gross you are generating. I always say, “You cannot spend average gross profit. You can only spend total gross profit.”

It’s a contradiction to say to your staff that you expect both high volume and high gross per unit. They stay confused and frustrated when you keep pounding them over the head with this misdirection and sleight of hand marching orders.

I’m sure somewhere out there someone is making it happen on both ends, but it is certainly the exception and not the rule. So, you need to get over it.

It’s a given that more than 80% of the people shopping for a used car shop the Internet. If you think you are going to post high prices or no prices out on the Internet and traffic is going to show up then you are dead wrong. The Internet is a “game changer” for all of you regardless of your new car franchise or set of circumstances.

You have to decide if you want to play the game. More importantly you have to decide if you want to win the game.

It’s a game. There are winners and losers. As Dr. Seuss said, “You have brains in your head. You have feet in your shoes. You can steer yourself in any direction you choose…”

Taking this leap into the volume world means rewriting your overall strategy from acquisition to staffing, pay plans, reconditioning, marketing, and pricing.

Failing to address any of these will result in frustration and poor production and you may find yourself worse off than you are right now.

The bottom line should be to increase your total gross profit. It’s not done by improving your average. It’s done by maintaining a respectable gross and substantially improving
your volume. Small market or big market, it doesn’t matter.

The Internet has opened the world up to you and you have to decide if you want to be in either that world or your own little world. Your little world has limitations.

The Internet world does not. That’s all I’m gonna say. Tommy Gibbs

If you’re going to continue to make money, and hopefully make even more money, you will have to become more efficient.

Your processes will need to become more efficient. Your management team will need to become more efficient. Your entire dealership will need to become more efficient.

You will have to become more efficient when it comes to managing your expenses. And, you must become more efficient when it comes to speed and cost of your reconditioning.

There are many issues dealers are scrambling to deal with as we move into the most competitive environment in the history of the automobile business.

In order to do volume in used cars you need to have a “costing advantage.” By “costing advantage,” I mean what’s added to the car once you own it, which includes packs and reconditioning.

To have a costing advantage you have to re-think your packs (which usually gets down to pay plans) and most important, what you charge the used car department from your shop.

If you know your history, you know that the reason dealers added packs and charged full retail from the service department to the used car department was because sales managers worked from cost up.

In the good old days sales managers had control over gross so you could nail them with all the high charges you wanted. They still got the average gross you needed and you could put the money from Parts, Service and Packs in your other pocket.

This is no longer true as your sales managers don’t have control over gross as they once did. That’s why dealers are more and more becoming one-price dealers and saying “no” when the customer shows up and wants a discount.

If you’ve already dropped your pants on the Internet with a price designed to get them to show up then you have nowhere else to go.

So, without saying they are a one-price dealer, many dealers are taking a tougher stand as well as changing sales people’s pay plans to match their new found pricing and marketing strategy.

I predict within due time more dealers will become more like CarMax and not pay sales people or managers on gross.

Remember, as we move more toward a once-price concept the skill and pay level of the “desk managers” will be much lower than in today’s market. There will be more effort made to sell the store and the product with less effort on “penciling the deal.”

One of the things that you need to continue to evaluate and work on is the amount of time it takes for you to get a car on the lot and ready to go.

Sadly, most dealers do not actually know how long it takes. And even when they do, they turn a blind eye toward the problem. They let the proverbial tail continue to wag the dog when it comes to fixing the service timeline problem.

The second thing that needs to be addressed is the reduction of recon expenses. According to CarMax’s annual report they reduced recon expenses by $250 per car last year. How’d you do?

If you’re going to do more volume you need to have an advantage when it comes to getting cars through your system and the cost tied to doing so. You must become more efficient.

The pain of efficiency, or the pain of regret. You’re going to have one or the other and the cool thing is you get to pick. That’s all I’m gonna say, Tommy Gibbs

Dealers are always asking for the “secret” to their used car operation. The answer is the dealer. The dealer is the secret.

Always has been, always will be. For definition purposes, the dealer as I’m describing here is the owner, operator or general manager. In other words, the PIC (Person in Charge.)

In almost all cases the PIC has a used car manager or management team who they have high expectations of and continue to be frustrated with in terms of production and profits.

The common theme among dealers is, “I need a used car manager/used car department who can get the job done, someone who understands both the technology side and the common sense side of the business.” Where do you find this person? He is sitting at your desk!

If you are the PIC and want to take a major leap with your used car business then you need to become the used car manager. You read that right, become the used car manager.

I’m not saying that you have to take the title of used car manager, but you have to take personal ownership of the used car department.

I don’t buy your excuse that you don’t have the time. Most dealers have a good Controller, a good Parts Manager, a good Body Shop Manager, a Good Service Manager and a Good Sales Manager. Most of these departments run better when you keep your nose out of their business.

That’s not to say that you don’t have a good used car manager, but the used car department is the one area that you have unlimited potential in and the one that most of you are not even coming close to maximizing.

You have the time if you want to make the time. Far too often the PIC doesn’t want to dirty his/her little paw paws with the day to day issues of the used car department and market.

In all my travels around the country the number one common thread for the very best used car operations is the PIC. I can tell you that as a new car dealer for 20 plus years I had the most success with my used car operation when I personally took ownership of it.

As the Dealer (PIC) I could make really quick decisions. If I made a mistake I fixed it and moved on. When you’re the PIC you know anything and everything that goes on in the used car department. When your typical used car manager makes a mistake he/she can’t always fix it without the wrath of the boss coming down on them.

If you’re the used car manager you are operating under a handicap. It’s called experience. Not your experience, but the experience of the PIC.

The PIC has been burned so many times with other used car managers they have tied your hands to the point that no matter what you think or want to do/try they just can’t turn you loose.

So, even though they themselves won’t dig in, they won’t let you dig in but so much. But, they still have these grandiose expectations of what they want out of the used car department.

I can tell you until the PIC takes ownership along with a solid used car manager, it’s never going to happen.

So, now you know the secret. What are you going to do with it? That’s all I’m gonna ask, Tommy Gibbs

I think my first experience using the “V” word was when I went on a camping trip. Ok, it wasn’t a camping trip as such. I was actually having the time of my life at the Marine Corps boot camp, Parris Island, SC. It was there that I first used the “V” word.

The M14 rifle has a muzzle velocity of 2,800 feet per second.

Up to that point in my life I had never used the word. Heck, I probably didn’t even know what it meant. Speaking of meaning, since it’s become such an ugly word to some, I decided to look it up.

VELOCITY:

1. Rapidity of motion or operation; swiftness; speed: a high wind velocity.
2. Mechanics. The time rate of change of position of a body in a specified direction.
3. The rate of speed with which something happens; rapidity of action or reaction.

To keep things simple, my takeaway is that velocity simply means speed. There’s a book out by Jason Jennings and Laurence Haughton that has the perfect title for the automobile business, “It’s Not the Big that Eat the Small…It’s the Fast that Eat The Slow.”

I could not find anywhere in the many definitions I looked up where it said:

“Velocity-a method of giving your cars away so as to impact your gross to a point of a substandard amount that will make you want to throw up your hands, beat yourself over the head, and barf.”

I have a new definition for the word velocity; the whipping boy of the auto industry that can be blamed when we use software pricing tools as the bible, don’t use our brains and don’t use the tool as it was intended in the first place.

This nasty “V” word often comes up in 20 group meetings and beyond. The complainers are the ones who want to blame someone else for their woes such as a lack of front gross profit.

You can make one of two choices.
1. Hold high gross profit per unit.
2. Do lots of volume at a little lower gross.

Which way do you think is going to pile up the most gross to pay the bills at the end of the month?

Back in my day if you shot an M14 rifle and you didn’t hit the target, you didn’t blame the velocity of the rifle. You blamed the poor marksmanship.

Dealers have been known to complain that when they went on the velocity method of pricing their used cars to market, their grosses went south. Well duh, of course they did. You had to fix your sins first.

One of the main reasons the gross went south, especially in the beginning, is they had aged units on hand. And, lo and behold, when they finally priced them correctly to the market they got killed. Well, no kidding, of course the grosses went down. Those dealers were buried in the cars and they finally priced them right. What else could they have expected?

When you first buy into the velocity concept there’s going to be some pain. It’s the prolonged pain you have been putting off. You’re now paying for the sins of your ways.

And there will continue to be pain unless you use your brain. I like that, “Pain, if you don’t use your brain.”

You cannot have the mindset that the software is going to save your butt. You have to use your head in order to hit the target.

It’s just like shooting the rifle. The bullet traveling at a high rate of speed is only going to hit the target based on the shooter’s skill.

If you’ve been missing the target using the velocity method maybe you need to sharpen your skills. That’s all I’m gonna say, Tommy Gibbs

Many dealers struggle with reconditioning, either that it takes too long to get a car done and through the system or they are paying too much to get it done. Often they complain about both.

I’ve said it before and I’ll say it again, most of these problems can be fixed if the dealer really wants to fix them. The dealer has the power to fix anything they want to fix. A simple step to improve the situation is to hire a “Chaser.”

A “Chaser” will gain you a few days in recon and reduce your recon expense by a couple hundred dollars per car. Maybe even more on both ends.

A Chaser is someone who does just that. They chase the used cars through the system. This is not a high paid position; somewhere in the $3000 range per month. It’s a person who has solid mechanical knowledge, good people skills, attention to detail and the ability to communicate with the sales department and the service department.

Think of them as being in an assistant manager category. It is not the same as having a dedicated service advisor or used car technician.

The chaser has a single minded focus with no other agenda. They will never let a car sit for even one day while it waits to go from service to clean up. If clean up is backed up they will start kicking and screaming to find a solution, whereas the service adviser is thinking “next” in terms of his/her own next repair order opportunity to make some money.

The Chaser is an employee of the sales department but spends most of their time in service. They need to have a certain amount of approval authority so they can speed things up for you.

I often hear dealers say they already have that, as they give the service department the latitude of spending X dollars per car without having to get approval.

Really? Let’s say you give them $800 without asking any questions. I can promise you you’re going to get a lot of $800 tickets. It’s human nature. That’s like the sales manager who says I’m only going to accept a $1000 deal. Well, you’re going to get a lot of $1000 deals. People take the route of least resistance. You won’t see too many $500 deals and you’re not going see too many $2000 deals.

The Chaser needs to have enough mechanical knowledge to know when to hold them and when to fold them. They won’t let the wool get pulled over your eyes.

They are there, in part, to protect and assist the used car department with the ultimate goal of speeding things up.

Part of their pay plan might be based on average recon cost and the average number of days to get a car to the front line. Of course you have to be careful that they don’t go too far on the saving money part. You’ll be able to tell if your policy account and complaints go up, so don’t be too concerned if you elect to make it part of their pay plan.

The chaser is going to gain you some days in recon by doing…well, just that. They are chasing the cars through service. They chase the cars and they push the cars through each station. If things get backed up they are looking for a solution on how to make it happen.

Many dealerships rely on the used car manager, service writer or, in some cases, the service manager to handle these duties. And, for the most part they don’t have the time, expertise or focus to make it happen.

You may be sitting there reading this thinking, geez, I don’t want to have to hire any more people. I get that, I understand that. I have a question for you. How much do you have to save per car in recon or gain in days through recon for the Chaser to more than pay for themselves? That’s all I’m gonna say, Tommy Gibbs

“It doesn’t take talent to play hard.”
Derek Jeter

Some of the most successful dealerships have an all out assault on trying to buy cars from the public and their customer base.

Buying cars at the auction can help you fill some holes, but the reality is you need to turn those units pretty darn fast. More often than not, you’re paying more for them than you are for those at the front door.

Mark O’Neil, the former CEO of CarMax, told me a few years ago, the number one thing that turned the CarMax operation around was when they started a big push on buying cars from the public.

Are you focused on stepping up when a customer has something to trade? Are you really putting “all the money” on it?

Have you upped the intensity with the concept of buying more used cars from the public?

Have you upped the intensity of buying more used cars from your customer base?

Are you really making the effort? Do you have signs in the customer lounge telling the customers you want to buy their cars?

Do you have a board posted in the lounge advising your customers of the cars you’re looking for?

Have you put a process in place for the sales people on how to handle customers that want an appraisal on their cars? I mean a real process with a real appraisal they can take with them good for 7 days?

1. Step up on the trades.
2. Make sure you have processes in place to handle those customers trying to sell to you.
3. Make sure you are mining your customer base for cars you can sell.
4. Post signs in the customer lounge that tell your customers you want their cars.

None of this is rocket science, but with a little more focus, and a whole lot more effort, you will find some of your most profitable used cars located right under your nose.

Start playing a little harder. And a little smarter. That’s all I’m gonna say. Tommy Gibbs

So, how was your June? How have your first six months been? It’s July. Half the year is gone. Kinda scary isn’t it?

Some of you have had a great first half. Some of you, not so much.

Some of you have been running full speed ahead. Some of you have been dragging through the sand.

Something has been holding you back. There may be some legitimate excuses, but maybe you just had the wrong plan in place. Just because you had the wrong plan does not mean it’s too late to fix it. You’ve still got 6 more months to go.

Those of you who have had a good first 6 months need to be cautious of becoming complacent. Even though things have been going well, you would be very smart to review how you can make things better as you tackle the second half.

Everything we do is about choices. You can choose to let things be as they are or you can choose to dial it up a notch or two.

To do so means to review your plan and the strategies you have in place. And, make the changes that are necessary to get you where you know you need to go. That’s all I’m gonna say, Tommy Gibbs

The most misunderstood topic I discuss in my workshops are SETS & SUBSETS. If you’re anti SETS & SUBSETS you might want to read just a bit further.

I will be the first to agree SETS and SUBSETS are not for everybody. They are especially not for you if you haven’t solved a lot of your other used car issues.

I’m not going to try to sell you on SETS & SUBSETS, but I do want to show you that first, it’s not all that complicated and second, it’s something you’ve done with success in the past in one way or another.

SETS & SUBSETS are all about setting up a price leader to drive traffic to the store.

What’s so bad about that? Don’t you do that right now? I have to believe that in one way or another you do it with your new car business, so why not do it with used?

The lead or number 1 car is the most important car in the SET. You can do SETS in 2, 3, 4, or 5 car SETS. Experience has taught me that going deeper than 5 just confuses the issue and makes it much more difficult to manage.

If you had 5 similar cars and you wanted to advertise them as a group (you did this back in the program car days), wouldn’t it make sense to advertise the least desirable of the 5 as a price leader in hopes of driving traffic to the other 4, or better yet, to your store?

The lead car is simply the least nice of the group. Make it safe, but don’t make it too pretty. This is not about bait and switch. It’s about the customers transferring themselves to another car in the SET or to one out on the perimeter.

The key to SETS is picking the right lead car. It needs to be desirable in the “public’s mind,” and most important is that it should be the latest model you can find for that SET.

Two of the biggest mistakes that dealers make are trying to make a profit on the lead car and picking too nice of a car to be the lead.

The lead car is a “loss leader.” More often than not the car that dealers pick to be a lead is really a number 2 car. A 2 car is a profit maker and one that you’ve fully reconditioned, so you would want to make sure you haven’t made it the lead.

If you want SETS to work, you have to advertise your lead car at what you have in it or less. If you try to make a profit on the lead car the traffic probably isn’t going to show up. The sole purpose of the lead car is to drive traffic to the dealership.

When done correctly one of three things will happen:

1. The customer shows up and buys the lead car.

2. The customers transfer themselves to the 2, 3, 4 or 5 car.

3. The customers buy something out on the perimeter.

The key is that the customers showed up on your lot today and you have a chance to sell them something.

So, there it is. SETS described in its simplest form. It’s not all that complicated or any great trickery with the consumer. You’re just advertising a price leader and giving the customers some other choices when they show up.

That’s all I’m gonna say, Tommy Gibbs

If you’ve heard me speak you know the subtitle of my workshop is, “It’s Not The Big That Will Eat The Small, It’s The Fast That Will Eat The Slow.” I stole that title from a book by Jason Jennings and Laurence Haughton. Bottom line is speed is critical to the success of your business.

Your used car business and your overall business model require you to be able to travel at the speed of Mach 5. You have to think fast and move fast in today’s market.

I often refer to the lack of speed as “drag points.” Drag points are those places along the way that drag you down, hold you back, destroy morale and make you very inefficient.

Some typical “drag points,” are:

1. Car sits too long before someone makes a decision on what to do with it.
2. Car spends too many days in the mechanical shop due to shop or parts issues.
3. Car sits a few more days before it gets into “clean up.”
4. Car takes too long to get out of clean up.
5. Car sits too long before photos are shot.
6. Car’s photos aren’t posted online in a timely manner.
7. Car’s price changes are made too late in the cycle.

Most dealers would tell me they get their used cars through the system and ready to go in 2 to 3 days. The reality for most is it takes about 7 to 10 days.

The fact of the matter is you make the most money on a car in the first 20 days. If it’s hung up in the system for 10 days you just blew 10 of your best selling days.

Yes, I’m simply telling you something you already know. But knowing something and fixing something are two different things.

The Dealer, the Executive Manager, the General Manager or the Owner Operator has the power to fix any and all of those issues.

Sadly, some can’t or won’t make the changes necessary to put the store on the fast track. So, they stay on the slow track to nowhere. Speed wins. That’s all I’m gonna say, Tommy Gibbs