With so many customers shopping online and knowing what they want and having a price when they finally get to the store it’s easy to try and justify the lack of a professional demo ride.

Dealers are always complaining about average gross profit going down. One of the biggest killers of gross profit is not doing those things that we know to be important. Allowing the demo ride to evaporate to little or no meaning is something management cannot allow.

The demo ride creates value. The touch, the feel, the smell and the opportunity for the sales person to have the customer’s undivided attention is priceless. The closing ratio and the gross profit goes up when you return to the most fundamental basic of the car business.

The demo ride is an art. Don’t let it be a lost art. That’s all I’m gonna say, Tommy Gibbs

Many of you who read my material are convinced I’m against packs and charging full retail in service, etc. The reality is I’m not actually against either. Whenever I’m working with a client who utilizes those strategies, I tell them if it’s working to keep doing it.

I’m also quick to point out that they need to be ready for the change, because change is coming. It’s going to become tougher and tougher to run your business the old fashioned way.

In a recent article published in “MSN Money,” Alison Spitzer, of the Spitzer Auto Group states “Today, customers find the car first, then the dealership.”

Part of finding the car means finding the car they want at a price they want to pay. Allison could just as well have said, “They find a price and then they find a dealership.”

If you don’t believe that’s so, drop all your photos and pricing from your website, Auto Trader, etc. and just put stuff on your website telling the consumer how great your service is and see what happens to your traffic.

The following quote from the article tells the real story when it comes to today’s consumer and where pay plans are heading.

“Today, buyers call or walk into a showroom already armed with a car’s invoice price, competing dealer bids and discounts from the manufacturers, and can get updates on their cellphones while standing in the store. They can access online reviews of the salesperson and dealership.

That has led many dealers to eliminate commissioned pay, price new vehicles closer to their own costs and station more staff in front of computers, where they are rewarded for generating sales quickly and in higher volumes, rather than trying to talk a customer into buying a more expensive model.”  (Read FULL ARTICLE)

I’m going to state this one more time. I’m not against packs as long as they are working for you. I do question whether they are really working or not.  As my good friend Marvin Barnes has always said, “You can justify anything you want to justify.”

The more the industry moves towards non-negotiating and not paying on gross, the less of a need you will have for packs.

The showroom is no longer the showroom. The Internet is the showroom. Today’s consumers go there to look at photos and to get a price. That’s all I’m gonna say, Tommy Gibbs

I hate it when I ride by a dealership and see a tent up with cars parked under the tent and the dealership is promoting a “tent sale.” Many of you have read my document on how to put on a real “Tent Sale,” which is not the same as what I’m sharing with you today.

Today’s subject is a “Mark Down Tent.” A “Mark Down Tent,” is not a permanent fixture. It’s to be used from time to time when you are trying to unload problem cars. You know those units that you all of a sudden discovered you are killed in and have had hanging around way too long.

As close to the road as possible, put up a tent that can hold 3 or 4 units. If permissible, hang banners around it that say “Mark Down Tent” and use the little signs that you can stick into the ground with arrows to the “Mark Down Tent.” Promote the “Mark Down Tent” in all your ads including your website. You might want the telephone operator to answer the phone, “ABC Motors, have you heard about our “Mark Down Tent?”

Using a marker, start off by putting a very, very high retail price with the date on the front windshield. You will be marking the price down each day by $500, with the date beside the new price until sold. Draw a line through the old prices and dates. The sales person’s commission on day one will be $2000. Each day that you mark the car down by $500 the sales person’s commission will be reduced by $100.

Now don’t panic. I said to start off with a really high retail price. If you get to a point where you are uncomfortable with the pricing going too far south you can always pull it from the tent.

The idea is to create a sense of urgency with both the customer and the sales person to take action. The reason you now need to put cars in the tent is you didn’t have a sense of urgency soon enough in the first place. That’s all I’m gonnna say, Tommy Gibbs

I often have conversations with dealers and managers about units they have had in their inventory too long or those vehicles that might be in the $25,000 to $35,000 range.

I question whether they are profitable or not. For those managers who want to keep units until they can retail them I sorta agree in that I’d like to see you retail them, but faster. I hate dumping retail pieces in the wholesale market.

I’m convinced that keeping them past 45 to 60 days probably doesn’t make you money unless of course you make a killer gross. I’m also convinced that the longer you keep the more expensive vehicles, the further you erode your profits unless of course you make some awesome grosses which isn’t too likely.

So, here’s the deal…if you disagree with me “prove it.” Yep prove it. Start tracking the ROI on any unit you retail over 60 days old and any unit that you have over $25,000 in.

Come on, bring it on. Prove it to me. Prove it to yourself. Remember when calculating ROI, the standard is to use only front gross and the sweet spot is 110 to 120%. You can use my ROI calculator. Go to FixRoi.Com.

I’m looking forward to you proving me wrong. That’s all I’m gonna say. Tommy Gibbs

I was talking to a dealer last week about the challenge of playing the “race to the bottom” and how much he wants to stop pricing his inventory so aggressively. He wants to move to a model of selling the value of his product and organization. He believes that if he stops chasing price that he will achieve a higher average gross profit. He thinks the velocity mindset is hurting his average gross profit. He’s tired of playing his competitors pricing war games.

If you’ve followed my thoughts on this subject you know that I’m pretty convinced that if you pull back on your pricing that your grosses will go up….and, and, and…you know what’s coming don’t you? Your traffic will go down.

Screaming from the rooftops that you are a great place to buy a car won’t work for you unless you can scream it loud and clear and for a very long period of time. Your ultimate knee jerk of back to price wars would occur probably before you ran out of money.

If you follow CarMax you know they are the number one seller of used cars and don’t play much of the pricing game. Their cars are usually more expensive than yours. They have done a consistently good job of telling people, this is a great place to do business, we have lots of inventory and we will buy your car even if you don’t buy ours. That’s pretty much what they do. And, they don’t negotiate the price or the value of the trade.

We can all agree they have a totally different model than most new car dealers. Unless you are willing to convert to one-price, change your culture and are willing to spend a lot of bucks it’s not going to work for you taking the approach of “Buy here, ’cause we are great.”

I really do think one of the biggest problems in the industry (though it is getting better) is that when the customer shows up at the front door we still discount the car. This applies to new as well as used. The number one thing you can do to improve your operation and your gross profit is to learn to say “no.” Say it by presenting all those reasons why a customer should buy your car and do business with your dealership. You can only do this by preaching the message to your team every month, every week, every day. The entire team has to believe.

I recently visited with a very successful used car dealer who specializes in high line cars. He retails about 250 units a month and he gets about 1500 hits a day on his website. He said that he has noticed a trend over the last few years that people are driving shorter and shorter distances to purchase. His analysis of that is that more dealers are doing a better job of marketing their inventory online and therefore the customer can find what they want much closer to home.

As you may know Texas Direct has always used eBay as its website. In the early days they sold a large number of their vehicles online through eBay. A few years ago they relocated to an old Auto Nation Used Car Superstore facility and now sell a lot of cars to more of the local public. Yes, people still go online to find the price and car they want, but they are doing it in a shorter distant. Here’s a recent article on eBay losing traction that more or less backs up this thought process. Article

Strategy to consider:

1. Price your vehicles smarter. Everything doesn’t have to be at market price on the first day. Some should be over. Some should be below.

2. Re-price your inventory faster. Don’t let “buckets” rule your world.

3. Train and re-train your staff on selling the value of your vehicles and your organization.

4. You have to learn to say “no,” when the customer wants to negotiate when you know you are holding the winning cards. (Cars.)

Never give up on creating value, but if you give up on aggressive pricing you will be giving up a lot of traffic. That’s all I’m gonna say, Tommy Gibbs

Get ready to dig into your October financial statement.From a timing standpoint this is a perfect time of the year. I always looked forward to analyzing the October financial statement.

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 2014. 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 and stretch your organization.

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 bluntly 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.

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

The two hot topics of conversation of late, actually all of the time, have been how to find more cars and how to hire more and better people. That same conversation occurred 20 years ago and will occur 20 years from now. The reality is that there is no simple fix to either of these problems.

If you think hiring a rock star buyer will solve your inventory problems in the end you will probably make them worse. If you think hiring a full time trainer/recruiter will be the fix-it for your need for sales people then it’s probably not going to work out all that well. But of the two, hiring the recruiter/trainer will probably work out better than the buyer. These are the two toughest problems facing all automobile dealers and there is no one fix and voila it’s done.

Finding great players is a fulltime, never ending job. It’s just like being in the coaching field. Great coaches are always scouting and recruiting. If you are looking for a magical ad to put in the paper that’s going to attract your next superstar you may be waiting quite a while.

If you are looking toward the next great job fair and think you’re going find 10 college graduates for your sales team that will carry you to the promised land you are in for a very long day. It doesn’t happen. It doesn’t work that way. If you wait to hire people when “you need” them you are never going to find the people you need.

You and your assistant coaches have to be recruiting every minute of every day. You should be recruiting your customers, the sales clerk at the shoe store, your next-door neighbor, the waiter or waitress you meet at lunch or the enthusiastic hostess you met at Applebee’s. One of the most successful General Managers I know was working at Wendy’s when he started selling cars.

I love college graduates. It’s not so much what they actually learn, but it does show they can stick to something. However, the odds of them sticking with you are not very good. Most college graduates don’t see selling cars as a “step up” in their life.

What you should be looking for is someone who feels they missed the boat and this is their big chance. Someone with a year or two of college is a great selection. They think they screwed up by not finishing school and they see what you offer as a super opportunity. And of course it they have a sports background all the better. They are used to getting knocked down and getting up.

As for finding more inventory…Hey coach it’s the same thing. It’s a constant thing. There is no one answer. If you are going to succeed in finding used car inventory you cannot leave any stone unturned. Trades, mining your customer base, online auctions, auctions, for sale by owner and any other brilliant idea you can come up with. But, none of them in and of themselves will give you the inventory you need. If you are only looking for cars when you need them you are going to end up with a lot of cars you don’t need.

When it comes to finding people and finding inventory they both require an ongoing effort by the entire management team. When you dabble in finding people and cars when you most need them, it’s like plowing a field uphill with a mule.

When you can convince your management team that we all have to look for inventory and people in multiple ways then you will at least have some control over your destiny.

It still won’t be easy, but the alternative is far more frustrating and a lot less rewarding. That’s all I’m gonna say, Tommy Gibbs

We have no doubt become enamored by the numbers. We track this and that and a little bit of everything. There was a time many moons ago when the two most important things we tracked were how many ups we had and how many we sold. In some ways we may have over complicated things and in other ways not so much.

I would strongly argue the point that it is the simpler things we need to pay the most attention to. There are some people in this business who make it much more complicated than it needs to be.

There is a number, a very important number, yet a simple number, that I find the most ignored in my travels and that’s “look-to-book.”

Before I go any further, let’s make sure we all agree on what “look-to-book” actually is. It is: How many cars did you appraise (look at) and how many did you get. It doesn’t get any simpler than that.

I cannot tell you the number of times I ask the question, “What is your look-to-book?” And most people don’t have a clue. At best they state a guessed number because they have heard that’s what it should be.

Maybe it’s ignored for the same reason the number of ups and the number closed is often ignored…because it’s not always accurate. If you don’t get all your ups logged then you are misleading yourself with an amazing closing ratio. If you log all your ups, then you get upset that your closing ratio is too low. Oh, whatever. Get it right. Demand that it be done correctly.

And maybe it’s the same for look-to-book. Or is it? Is it that you really don’t understand the importance of look-to-book? Look-to-book is a powerful tool to help you make more deals. The more units you can capture at the front door the more gross per unit you end up making.

The question often comes up as to what your look-to-book percentage should be. Most would answer the question by saying in the 40 to 50% range. (It means nothing if you don’t put them all in the system.) My answer to the question is there is no specific number it should be. What it should be is better than you were yesterday.

You should always be thinking press it up:

The more you press it up, the more deals you are making.
The more you press it up, the more your average gross will go up. (You always make more on trade-ins.)
The more you press it up, the less of a need you have to go out and purchase cars.

Do you remember the Art Linkletter program, “Kids Say The Darndest Things?”

That happens in the car business too. Managers often say the darndest things, such as “We Never Miss a Trade.”

I’m thinking you do. Actually I know you do. We all miss trades. If you aren’t paying attention to look-to-book you have no idea what you might be missing and I’m thinking you’re missing a lot. That’s all I’m gonna say, Tommy Gibbs

I continue to be amazed and flabbergasted by what some people are thinking when they finally decide to clean up their problem cars by dumping them at the auction. I’m not talking about the onesies or twoesies that you dump at the end of the cycle. Nor am I talking about the clunkers with no life left in them that you sell at the local auction.

I’m talking about those that surfaced when you changed used car managers. Sorta like finally finding all the dead bodies. More often than not it’s in the $100,000 range of water going over the dam.

The dealer’s famous last words are “Oh crap, all these problem cars have been hidden by the previous used car manager. I’m gonna fix this once and for all. We’re gonna dump all these problem cars and start over.”

Really, really, really…why would you do that? Why would you want to lose $100,000 in an instant?

Let me give you some basic math. Let’s suppose you have 50 cars and you’re $2000 high in each car for a total of $100,000. In your brilliant thinking and with a mindset of starting over you take them to the auction and lose $100,000.

As much as none of us like writing inventory down, let’s pretend you decide to re-appraise those aged units and take the $100,000 worth of water and eat a bit of it each month, at the end of the year or whatever.

You now own the cars for the “real money.” The best part is that prior to taking this drastic step you developed some solid strategies and put into use Tommy Gibbs’ world famous “Life Cycle Management Process.”

You take each of these re-appraised units that are now on the money and give them a new birthdate, along with a life cycle exit strategy.

Since you are now “on the money” we can safely assume that the sales people are less likely to walk around them. Also, we can safely assume that we have a much better chance of retailing them now that we can price them right using the vAuto pricing tool.

I think it’s a safe bet that on these “on the money” units you will generate $70,000 or so in front gross profit.

Ok Einstein, how much money did you really lose versus taking them to the auction? $30,000. Would you rather lose $30,000 or $100,000? But wait there’s more! You didn’t have to truck 50 units to the auction and you didn’t have to pay auction fees on 50 units. Yes, you did have to pay commission on the 50 units you retailed. Tell me how retailing more cars and paying a commission is a bad thing!

Oh shucks, I failed to mention you might have some F&I income from those units. Oh darn, I also failed to mention that you might have a trade in on some of those 50 units. More darn, I almost forgot to mention the retail parts and service work that might come your way from having a retail customer. Oh, pooh, I also forgot to mention you have just captured a retail customer who might re-buy from you down the road, or they might even tell a relative or friend how awesome you are.

Yeah, go ahead and dump those 50 units at the auction. It’s faster, easier, and more fun…and you send a powerful message that you have finally gotten serious about the used car business. Works for me. That’s all I’m gonna say, Tommy Gibbs

I often hear dealers complain about the quality of the people coming into the business. They complain that it’s hard to find people willing to work and who want to make some real money. Could it be that dealers are trying to hire the same type of person they were trying to hire 20 years ago?

I’m betting that many of you have experienced sales people selling less than 8 units a month. How can someone come to work every day, and only sell 8 cars a month? You have to ask yourself how is that possible? Are you making excuses for their lack of performance? Have you accepted mediocrity?

There’s a difference between showing up for work and actually coming to work. I’ve told this story before but it’s worth telling again. Many years ago I had an outstanding salesman who worked for me by the name of Sam Newsome. One of the things I always said about Sam was that when he came to work each day, he “came to work.

You never saw Sam when he wasn’t busy. He was always doing something to create business. If he didn’t have a customer he was either on the phone trying to find one, walking through the service department looking for one or he was busy in the inventory making sure he knew exactly what we had in stock and where it was parked.

I don’t think there are many Sam Newsomes out there and the problem is many dealers are still looking for Sam. And the reason you continue to look for Sam is that you’re not willing to change the way you view and want to run this business.

The best way for you to start to raise the bar is to raise your standards for the type of people you hire and the type of processes you demand that your organization embraces.

Raising the bar is exhausting and hard work. Raising the bar means being committed to the hiring and training of a different type of sales person.

Raising the bar goes against the grain. Raising the bar requires one to be a student of the game and have the willingness to change the game knowing there will be serious opposition from the masses. Raising the bar means developing new and innovative pay plans. Raising the bar means changing the selling system to fit today’s buyer.

Today’s buyer is just like you. They would much rather do the majority of their shopping online. You cannot sell cars to the online shopper the same way you sold cars 20 years ago.

Changing the game means changing the rules. Changing the rules means holding more people accountable for raising the bar. The bar does not get raised and left in that position. The bar has to be raised every day if you are going to continue to play the game and be successful.

Realize that raising the bar even just a little bit gives you an edge. It’s easy to do because so many of your competitors are locked into lowering the bar and accepting the business as it is, not as it could be.

To raise the bar:

Do It With Enthusiasm
Have No Fear
Change The Expectations
Don’t Make Exceptions
Create Accountability
Penalize Non-compliance

So, the choices are easy, you can continue to lower the bar, you can raise the bar or you can head to the bar. That’s all I’m gonna say, Tommy Gibbs