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

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