The number one killer of your ability to improve gross and volume is your lack of speed. Your inability to move fast is a killer for your used car business. Moving fast puts you in the winner’s circle. Not moving fast puts you in the loser’s circle.

The speed of your service department has a direct impact on your ability to produce gross in the used car department.

I’d be preaching to the choir, if I went over all the reasons the service department needs to cooperate and get your used cars through service just as quickly as possible. Unfortunately most service managers don’t have a clear understanding of what’s supposed to be happening or don’t care that your inventory is costing you a lot of money when it’s sitting.

Don’t misinterpret my message here about your service manager. I have the utmost respect for the very difficult job they do. The bottom line is they are only doing what they have been trained to do and what they perceive is in the best interest of the company. The problem is that it’s not been explained to them what’s really in the best interest of the company.

In some cases they get caught up in the day-to-day issues with your retail customers and they don’t pay attention to what’s going on with your used cars. They need to be continuously educated about how fast the market can change on a used car and what it does to your bottom line.

Delays in your service, clean up and the taking of photos are often compounded and tied to your poor display of used cars on your website. It is not unusual to have used cars in inventory for a week or two and they are still not properly represented on your website.

When I look at the websites of some of the top used car performers around the country most of their websites are very easy to maneuver through with only a couple of clicks. That is not the case for most new car dealer’s websites.

How many of you actually click onto your own website and attempt to shop for a used car? I will bet in most cases you are not going to be pleased. My research tells me that most of the time you require far too many clicks for me to see what I want to see.
Some of the typical issues are:

1. The lack of quality pictures. (You need your own photo booth!)
2. The lack of quantity. You need 40 plus pictures for each car to be competitive in today’s market.
3. Too many clicks to see each individual photo? Do your customers have to click on each photo or can they proceed from one to another by clicking the arrow? The arrow is much more effective.
4. The posting of stock photos. (You’ve got to be kidding!)
5. Description of cars with no photos or saying “photos coming soon.” (Another you’ve got to be kidding!)

These issues are often because someone doesn’t care, someone is lazy or someone just doesn’t have a clue. Regardless of the reason, it gets back to lack of speed being the killer and speed making you a winner.

You have to decide how serious you are about this business. If you’re dead serious you will get off your duff and get these things fixed. If you’re not then you and your business will continue to ride along in the slow lane. That’s all I’m gonna say, Tommy Gibbs

The Japanese word "Kaizen," means Continuous Improvement.  Kaizen is a Japanese philosophy that focuses on continuous improvement throughout all aspects of life. When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. 

By improving standardized activities and processes, Kaizen aims to eliminate waste. Kaizen was first implemented in several Japanese businesses, including Toyota, during the country’s recovery after World War II, and has since spread to businesses throughout the world.

If you’re going to have Continuous Improvement you first have to get back to the basics.  You can’t improve very much if your foundation is not solid. 

As I travel the country, without exception, every dealer and manager tell me they are working a sales system/selling process. They also tell me they have a 60 day turn policy on used cars. At the very least they are lying to themselves. The selling processes they think they are working are not the ones they are working.

One of my favorite sayings is "You need to know what you don’t know." In this case, it’s probably more about facing some reality. The processes you started way back yonder have evaporated. If I gave a quiz to all your managers and sales people, and asked them to list the steps in their selling system I would get as many different answers as you have people. 

Furthermore, even if they listed them correctly, then my observation is they are not doing it…they talk the talk, but trust me, they ain’t walking the walk.

Historically, over time these processes have evaporated; then what happens is one day the dealer wakes up and hires another training company to come in and revamp the system. Then X number of years down the road the dealer does it all over again.

You’re sitting there once again thinking, "Ok big mouth Tommy, what’s the answer?"  First thing is you need to open your eyes, use your peripheral vision and see if what I just said is true. Once you come down off the ceiling from the shock you’re in, then meet with your key managers and determine just what system you are supposed to be using. Re-write the mess. Then go on a major retraining mission to get everyone back on track.

Will you please quit worrying about some of your old goats quitting. They may not be necessarily old in age, but they have old stinky thinking. The fact is they are running your dealership into the ground. A lot of them are selling 4 to 8 cars a month and you are worried whether your superstar is going to quit if you put some disciplines in place. Rock on Insanity, rock on.

Maybe what the store really needs is a fire lit under your butt. Some people think they are burnt out…how can you be burnt out if you’ve never been on fire? 

Look, I’m trying to poke a little fun at you, but odds are you really need to take a hard look at your operation. Once that’s done you need to take some action and put a game plan in place. Then you need to put "Kaizen" thinking into place.  Are you continuously improving? If you are not moving forward then the odds are pretty good that you’re going backward. That’s all I’m gonna say, Tommy Gibbs

A conversation came up recently about the validity of keeping cars longer because either the dealership is very small and/or can’t find replacement vehicles. Take a look at the chart and the bullet points below.

1. The first one is a car that you make $1200 on, hold 25 days and end up in the sweet spot of 117% (Sweet spot 110 to 120%)

2. The second one shows that if you keep that same car for 60 days that in order to achieve the same ROI you would need to make $2900 in order to get to the 118%. Is that doable?

3. The 3rd example shows that if you hold that same car 60 days, make $1200 on it that you end up with an ROI of 49%…not good, but if you held it 60 days you are probably happy to make the $1200?

4. The 4th example shows that if you make a $1200 gross on a car that you hold for 90 days you end up with a horrible 32% ROI…is that a good use of your money?

5. The last example shows that if you hold that same car for 90 days that in order to hit the sweet spot you would need to make $4300 gross. Can you really do that after 90 days?

I do understand the challenges of being a smaller dealer, smaller inventory…I’m also convinced that if you sell cars sooner/faster that you will figure a way to replenish your inventory.

Holding cars based on the theory that you can’t replace them is what I call “false justification.” I once had a dealer friend who used to say “you can justify anything you want to justify.”

Sometimes when we justify things in our own mind, we are simply lying to ourselves and those around us. That’s all I’m gonna say, Tommy Gibbs

Well, here we are. It’s spring time. Trees, flowers and your excitement about the “selling season” are starting to bloom.

Are you running your used car department the same old way expecting different results?
 
1. Re-evaluate-Take a minute and go walk your lot. Take the blinders off. First thing you have to ask yourself is “Does it look like Nordstrom?” Ok, maybe it’s not going to look like Nordstrom, but does it look like Walmart after a big sale? You know, everything is just thrown everywhere. Let’s do a little checklist:

• Are the vehicles in straight lines?
• When was the last time the entire lot was rotated?
• Are you using angles to display your inventory?
• If you are using license plates, do they all have one or do some have them on the front, some on the rear and some not at all? Some cars do not have a bracket on the front. Why would you even bother if you can’t put a license plate on all units?
• Do they all have your decal on the rear of the vehicles?
• Are all old decals removed?
• Do you have fresh FTC stickers on each vehicle?
• Do you have fresh window stickers on each vehicle?
• Do you have the year of each vehicle on the front and rear windshield? Yes, front and rear.
• If you have other decals or markings on the windshields, do they all have same or similar markings?
• Do you have hang tags? If so, do they all have hang tags? Are some lying on the floor?
• Do they all have at least a quarter of a tank of gas in them?
• Are they nasty, dirty on the outside?
• Are you making use of your entire front row for used vehicles?
• When the public rides by or pulls onto your lot can they easily identify where the used cars are?

2. Refocus-To be successful in the used car business you have to be well focused on it and be totally committed. Your entire management team has to understand your commitment to the used car business. This doesn’t happen through osmosis and a meeting every six months. When I say entire management team I mean just that. All Sales, F&I Management, Service Management, Parts Management, Body Shop Management and the Controller. Little Johnny, the lot attendant, needs to be a part of this as well. For the next 60 days, meet with these key staff members twice a week to discuss where you are and where you’re going. Tuesdays and Fridays are best. Make sure on Fridays that they are all included in a lot walk. Do not miss a used car on this lot walk. Every car in your inventory must be touched. If it’s in service, touch it. If it’s in prep, touch it. If it’s in the budget center, touch it. Everybody touches it. You will come across issues you never knew were there and better yet you will solve them immediately. (Don’t let anyone miss these walks.) Make sure a part of that conversation includes everyone knowing how much money you have tied up in used cars and how many of those dollars are over 60 days. Yes, they need to know the dollars, not just the number of units. Make sure they also know what percentage is dead money over 60 days. Example: You have $1,000,000 in used. $600,000 is over 60 days. Make sure they understand that 60% of your money is dead and eroding fast.

3. Re-Recon-Take every unit over 30 days old back through a recon process. (You’ve already missed your best window of opportunity to make gross; that would be the first 20 days.) Most of them should not need mechanical work done, but if they do, get it handled. Most importantly, put a full clean up back on them. Whatever you have to spend, it’s going to be worth it.

4. Re-Invest-in yourself and your management team. Do something to gain some knowledge. Hire me, visit CarMax, or visit a dealer friend in another state that does a good job in used. Attend a workshop. Join a Twenty Group. Join a Used Car Twenty Group. Do something besides sitting there and waiting for something to happen. You may think you already know all there is to know about the used car business and you will just be wasting your money. The fact is maybe you actually know a lot, but you need something to jar your brain and get it going again. You have become real good at talking the talk, but you may not be walking the walk.

5. Re-think- your management team. Do you really have the right person running your used car operation?  Yes, that person may have been with you for years. Loyalty sometimes equals mediocrity. Maybe they have some great skills, but the fact may be that you are not making the best use of their talents. Used car managers today have to be “Asset Managers.”  It is not a matter of just being a “Car Guy.”  They have to have a good blend of common sense and ability to make use of technology. In my travels, about 75% of the dealers have the wrong person managing their used car operation and they wonder why they are not maximizing their full potential? (Even if you have the right person, they have to have the right tools, processes and your full support to be successful.)

A special note to those of you in management that feel somewhat frustrated by the lack of support from your Dealer or General Manager. You may have some things you want to do, but the Dealer or General Manager keeps rejecting your ideas. Next time you have a brilliant idea, don’t just discuss it with your Dealer or General Manager, put your idea in the form of a proposal totally written out with every detail. Present it to the Dealer or General Manager and ask for 90 days to make your plan work. When you give it to them, tell them not to make a decision right away. Ask them to review it and make a decision within the next 48 hours. Most of the time, a dealer with half a brain will let you go with it, unless it’s just totally out there in left field. If your request is reasonable and the Dealer or GM rejects it, you might want to start looking for someplace else to hang out because you are fighting a losing battle. That’s all I’m gonna say, Tommy Gibbs

I know what you’re thinking and that’s not what I mean. I’m talking about "Execution Dysfunction?" Sure you’ve got a plan, maybe even an awesome strategy, but it’s not worth much if you can’t or won’t execute it. How many times have you seen your organization lay out a great roadmap of what they want to do and then 6 months later ask yourself "What happened to that?"

In a meeting a few years ago with two executives from AutoNation they stated that they had the best processes of anyone in the automobile business. In that same conversation a competitor’s name, CarMax, came up. They said "The biggest difference between CarMax and AutoNation is that CarMax actually executes their processes." Shocker. What a shocker. 

That wasn’t a slip of tongue, they were simply being truthful. They are no different than many of you, you know what to do, you know how to do it, but you just don’t get it done. You can increase your odds of defeating ED by paying attention to some of the following.

1. Get "buy in"-from staff members-Nine times out of ten ED happens when staff members don’t get a real sense of commitment from the top. They hear you say it, but they don’t see you live it.
2. Create Accountability-You need to have systems in place to measure what’s supposed to be taking place. Even more important, impose penalties if the measured targets are not achieved.
3. Kill the Cancer-There are always those that are naysayers, determined to undermine any changes you bring to the table. Negativity is like a cancer that will destroy the health of your business, and there comes a point where you have to cut out the cancer if the rest of the body is to live. There are some people you need to replace and you must have the courage to do so.
4. Properly Train and Re-train-If you think you can put a process in place, train the staff and walk away, you are dead wrong. Training or coaching has to take place every day. There are some aspects of training that have to take place monthly, quarterly or annually. Far too often business leaders want the "shake and bake" method. Shake it up, put it in the oven and that’s the end of it. You have to be willing to train and allocate a certain amount of resources for continued training.
5. Develop Your Own-In the example of AutoNation vs. CarMax, the biggest difference between the two is that AutoNation has purchased many dealerships and attempted either to re-train the previous staff or hire people from other dealerships. In the case of CarMax, each time they build a new store they hire new people and train them their way. If you are ever going to grow and remain successful, you have to develop your own staff.
6. Celebrate Success-Look for opportunities to applaud people and their "wins." I don’t mean just a pat on the back. Maybe it’s the employee of the month. Maybe it’s a lunch party for the office staff for closing the month out after a hectic last minute rush. Maybe it’s a record month in widget sales. Doesn’t really matter. Find a reason to celebrate.
7. Employees are more Important than the Customers-It’s a fact, if you want happy customers then you have to have happy employees. Yes, you want happy customers, but you will never have them unless you can get to the heart and soul of your employees.
8. Have a Sense of Humor-It’s ok to laugh at yourself. If your organization has gotten to the point where they can’t laugh and smile then they will have some very miserable days. A lot of miserable days is a formula for failure.

 

ED isn’t a laughing matter. The best processes in the world are just file drawer filler if you don’t have committed, trained, positive people executing them.
Recap:

1. Create Buy-In, Then Live It
2. Develop your Own. Train those that you can, unload those that you can’t
3. Celebrating and Laughter is good for the soul.

I wish there was a magical pill I could give you for ED,
but there isn’t. It takes hard work and paying attention. That’s all I’m gonna say, Tommy Gibbs

As I’m sure you may be aware the final four for the NCAA basketball championship is this weekend in Atlanta, GA.

More often than not these games are won on defense and a full court press is often a major part of a defensive strategy. A full-court press is a basketball term that refers to a defensive style in which the defense applies man-to-man or zone defense to pressure the offensive team the entire length of the court before and after the inbound pass. Some presses attempt to deny the initial inbound pass and trap ball handlers either in the backcourt or at midcourt. Defenses not employing a full-court press generally allow the offensive team to get halfway down the court (a half-court press) or near the basket before applying strong defensive pressure.

A full-court press takes a great deal of effort, but can be an effective tactic. Often when teams are behind late in a game, they will apply full-court pressure as a means of attempting to produce turnovers as well as tire opponents. Certain teams, such as those coached by Rick Pitino, are known for applying full-court pressure during most of the game. Presses are especially effective against teams with poor ball handlers, shallow benches (since players become more fatigued attacking a press), or teams with deliberate offenses (since taking the ball up the court can waste a substantial portion of the shot clock).

A team with less talent can beat a talented team by utilizing a full court press for the entire game. It doesn’t take talent, but it takes a lot of heart and desire to play an “in your face” defense for the entire length of the court for a full forty minutes.  Teams that apply this strategy are constantly running fresh players into the game that eventually wear the opposing team down and cause them to make mistakes resulting in easy baskets for the pressing team. 

If you’re in the car business today you need to be in a full court press. You may very well be behind in the game. Be it good or bad, in the car business every day is a full court press day. Every minute of every day it needs to be an “in your face” approach.

I know you think you’re doing all you can, but you aren’t, there is always more. If you’ve played sports you know that is true. How can you do more? Start by writing it down. Make a list of all the basic things you know about this business. Things you now do, things you used to do and things you’ve heard that others do. Once you make the list, make a commitment to go into a full court press for a minimum of the next 21 days.

Why 21 days? Research has proven it takes 21 days to create a new habit. The reality is if you will focus on this list for the next 21 days good things will happen. I’m trying to press you to take action. I’m pressing you to get after it. I’m pressing you to take stock of what you do and how you do it.

I think of every minute of my life as a full court press. Press on. That’s all I’m gonna say, Tommy Gibbs

 

The more I’m involved with the automobile business and the more I observe other businesses, the more I realize we in the business world have got it all wrong when it comes to management. Specifically the word manager.

In business, people are often given the title of "Manager." Sometimes it’s truly a gift because they were next "up," and sometimes they worked very hard to get it. Most people who are managers think of themselves as, well, uhh, managers. They’ve been told they are a manager so they go about their business of managing people, systems, and processes.

I looked the word manager up and here’s what I found: "Somebody who is responsible for directing and controlling the work and staff of a business, or of a department within it."

I can’t argue that is more or less the definition that most people work from. When working with and leading people I believe we would be much better served by replacing the word "manager" with the word "coach."

Like many of you reading this, my life has been impacted in one way or another by sports. Whether you played sports or if you are simply a sports fan, the odds are you can relate to the field of sports and the influence it has had on you one way or another.

When I first got out of college I was a head football coach at a private military academy, Frederick Military Academy in Portsmouth, VA. The reality is that all throughout my career I’ve always seen myself as a coach not a manager.

If you think about what we do, at least those who do it well, we are always coaching. It’s just like being a head football coach. As a head coach your focus is to coach the players and the assistant coaches.  It never ends. If you have a coaches meeting then you are reviewing the practice, schedule, game plan, etc.  When you’re on the field with the players you are coaching technique, disciplines, conditioning, teamwork, attitudes, and the importance of "getting it right." 

Coaching takes place on and off the field just as it does with you in the dealership. Coaching is nothing but "selling." If you’re a coach of an athletic team you are selling players and assistant coaches on why they need to buy into whatever it is you’re trying to get across. This is no different than the business you’re in. You’re constantly selling someone on your team as to how and why to do things a certain way.

So, how much better off would we be if we all really took it to heart that we are no longer managers but "coaches" and that every minute that we are in front of our team our number one focus is to coach, coach and coach some more?

Top coaches are always looking for that competitive edge. 
Getting a competitive edge means seeking information, testing the waters, trying a new play, attending a coaching workshop, and pushing yourself harder than you’re pushing the team.
Top coaches communicate with other top coaches. (20 Groups.) Top coaches hire other coaches who are smarter than they are with specific skills to help the team win. Top coaches know what they don’t know. Top coaches hire me.

Here’s a little sidebar that you may find interesting. I’ve been in the used car and leadership training business now going on 11 years. During those 11 years, of the thousands of dealers and managers who I’ve trained I can only think of a couple that were really struggling and in the end just didn’t make it.

It’s really strange that dealers who are unsuccessful don’t hire me and those who hire me are already successful. They are already making money. Like any good coach they know they can do better. They know there is more to be had. They know the team needs to hear it from an outside coach once in a while.

Great coaches are givers of information and they seek information to make them and their team better.

Coach, thanks for reading my material. That’s all I’m gonna say. Coach Gibbs

In my workshop I give dealers a lot of information fully realizing they can’t or won’t do it all. And no doubt, I give away a lot of free information in my newsletters, which I’m ok with, as I’m a believer it all comes back around.

Either my ego or my wisdom tells me that for each item I can convince a dealer to do, their business will improve by at least 10%. So, if a dealer does 10 things I put on the table then their business could actually double from their current production.

I’m going to share 10 relatively simple things I’ve picked from the many I present in my workshops for you to dwell on and for you to consider doing.

Let’s pretend you are now selling 100 used cars a month. Doing all 10 suggested processes will get you to 200. If you’re not selling 100 just make the adjustment based on 10% for each process you are willing to commit to on a consistent basis. Here you go:

1. Study The Data– Be a student of the game. Use Auto Count’s Reports each month to confirm what’s selling and what’s not. Use vAuto’s stocking tool to determine the fastest moving units to stock. Combine those reports with Auto Trader’s reports and you will have a competitive edge. Make sure you keep these lists at the tower/desk so when one comes to the door to be appraised you step up and make a deal on a car that you are going to be able to retail in short order. The more units you step up on the more cars you sell at retail. Take a hard look at Auction Genius to help you find the cars you need in the most efficient manner possible.

2. Press Your Cost Down-This is probably the simplest and most effective thing you can do to improve your business. Know what your average cost per unit is every day and do what you can to reduce it. If you are at $15,000 today, do what you can to get it to $14,500 and so on.  There is no magical number. It’s about keeping the less expensive units and making sure the more expensive ones turn fast. 

3. Know Your ROI-Every deal should be tracked for ROI. As you are working a deal you not only need to know how much gross you have, but what the ROI is. Go to FixROI.com and plug in three numbers. Your cost, your gross, and the number of days the unit has been in stock. Bingo, you have your ROI. Shoot for 110 to 120 ROI. By knowing your ROI you will know what’s working and what’s not. 

4. Attack the 10 Most Expensive Units in Stock-Make a list each day of your 10 most expensive units in stock. With one exception make sure they are priced really, really right. The one exception is if you know you always make money on a unit that’s on the list then use some common sense, don’t give it away. Consider putting bonus money on those 10 units regardless of the number of days they have been in stock. Sooner rather than later. Most dealers bonus their sales staff when the units have aged. Do it early, you will be much better off. Lastly, make sure the service manager gets that list each day and if one of those units happens to be in the service department the service manager has to understand they must get it out of the shop in a hurry because it’s one of your 10 most expensive units. You have lots and lots at risk with these units.  

5. Life Cycle Management-Read this statement then read it again. There is nothing, absolutely nothing, you can do that will improve all aspects of your used car business more than understanding my process of "Life Cycle Management." Think Fast, Be Fast-You are working with a depreciating asset. Everything, including decisions on what to keep and not keep has to be done fast. Pull the trigger quickly on units that you are suspicious about. Don’t hang on to them hoping and wishing something good is going to happen. Early losses are far better than late losses. If you are paying attention and recognizing problem units early in the life cycle then you will have a lot less need to take units to the auction and lose money on them at 45
or 60 days. There are certain "Trigger Points" you need to focus on during your daily "Trade Walk." Knowing how to use EWR (Early Warning Radar) pays big dividends.

6. Lot Walk-Nothing new here. If you do a lot walk once a week with all the members of your sales and management team then without a doubt you will sell more units. And, you’re going to see a lot of things you’re not going to like. Do you remember doing "Phone POPS?" You know, it’s the deal where they place mystery phone calls to your sales department then play the results back to you. They are never, never, never very good. Makes you just want to scream. So, initially you will have the same feeling when you do the lot walk. But, the bottom line on the lot walk is it gets your entire team to know and understand your used car inventory. The more knowledge they have the more they sell. 

7. Daily Inventory Pricing-The market changes every day and so should your pricing. Sometimes you can ask more, sometimes you can ask less. You cannot and will not achieve maximum results by changing prices every 10 to 20 days. Pricing takes intense management. It’s not something you do when you get around to it. You would be far better off if someone priced the car who is not in charge of appraising and buying them. 

8. Analyze Your Wholesale Pieces-Look at the numbers. How many units are you wholesaling each month? Go over each unit. How many of them could you have retailed if you opened your mind a bit either relative to pricing and/or the type of product you’re willing to keep? Are they early wholesale units or late wholesale units? You need to know the difference between the two. If you have lots of units being wholesaled late (at the end of the cycle) the odds are you are either stocking the wrong stuff or pricing them wrong. If you are wholesaling a lot of units early in the cycle it’s probably because someone on your staff doesn’t want to "mess" with certain types of cars. The probability is there may be a problem getting them through service in a timely manner or the used car department feels ripped off by your service department. The good news in in either case it’s a fixable problem. You just have to want to fix it. 

9. Photo Booth-and 40 pictures per car. If there is one thing I would do if I opened a dealership today it would be to do whatever it takes to have a photo booth. If you haven’t accepted the fact that the Internet is your new showroom then you are doomed. You cannot and will not be able to remain competitive until you get with it. It’s the biggest no brainer since the invention of the wheel.

10. SETS & SUBSETS-simply put, SETS is an easy way to set up a price leader with several other vehicles for the customer to pick from when they show up. SETS & SUBSETS are designed to drive traffic and increase volume. You can do as few as two cars in a SET, but never more than five. It’s not as complicated as it first appears. Don’t over think this. 

Here’s a bonus one for you. It’s called Save-a Deal-It’s the basic of all basics. From the first day I got in the business we did a save-a-deal meeting every morning. Back it those days we didn’t call it that. I learned that term back in the 80s from my good friend Mike Casey with JM&A. Call it whatever you want, but it’s an easy way to increase your business another 10%. Simply put, you go through all your pending deals and ups from previous days. You will always find that two heads, three heads, etc. are better than one.

Suppose I’m wrong? Maybe you won’t hit 110% increase in sales. Maybe you will only get half that? Not so bad! It takes 21 days to create a new habit. How many of these are you willing to focus on for the next 21 days? Today is day one. Go do it.

That’s all I’m going to say. Tommy Gibbs

The number one reason you can’t buy used cars is that you can’t and won’t pay the price. It’s that simple. You and your used car manager can spin it anyway you want, but the bottom line is when you or they see a car that you would like to have on your lot you will not step up and pay the price. There are logical reasons for this, most of which need to go away.

For many of you the reasons may go away in six months, a year, two years or three years but it’s going to happen and for the sake of your operation I hope it’s sooner rather than later.

Let me dissect this deal for you. The odds are pretty good that your internal labor rate is $75 to $125 depending on what part of the country you are in. Your average reconditioning costs are running $800 to $1400 depending on a couple of things.

One of those things would be that you are in the "Newscar" business as opposed to being in the "Used Car Business." Oh, I know you think you are in the used car business, but you aren’t. "Newscars" is when you carry a lot of late model stuff. 

Sure your recon cost is lower because you’re not spending a lot of money on these cars as they still have factory warranty. (Bad strategy that happens when your used car manager gets tired of getting killed every time he/she sends an older car into service.)

Or, if you are a big time "Certified Dealer" then your cost per unit would be higher because of the factory requirements.

So let’s round the reconditioning number off to a nice $1000 per copy. (Do your own math if you don’t like mine.)

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the "Pack Generation." Always loved them. The business has changed. I’ve changed and you should change too.

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add my little rounded off numbers from the reconditioning and packs you have a total of $1800. (The problem with the pack and recon "drug," is that it still sorta works and you can shake ‘da habit.)

So as I often say, "Here’s the deal." You are starting off from "jump street" with an $1800 cost disadvantage against those dealers who aren’t doing it the old fashioned way. (CarMax and Texas Direct to name just two of them.)

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail (or close to full retail) that they will just give it away in the sales department is "old, tired and a worn out" theory. (I know, I know, it’s still sorta working.)

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

Propping up service is much like the unemployment checks people have been getting the last few years. As long as the government keeps handing them checks then there isn’t much sense in them getting out and looking for a job.

What compounds the problem is your pay plan. As long as you keep paying sales people and sales managers on gross you are going to fight a losing battle. Yes, this is a hard one for you to get your head around, but sooner or later you gotta "get real." 

Just think about it for a minute. You put killer used car prices on the Internet and now you’re starting to put killer new car prices on the Internet. Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? Ok, they have some, but not as much as they used to have.

What if you changed the pay plan and took gross out of the equation? Under that scenario what you charged in service and the need for packs would be irrelevant.

What if you thought of reconditioning as simply another line item expense on your statement just like you think of advertising or supplies? Keep in mind this article is all about "Why you can’t buy more cars."

If reconditioning and packs were not screwing up your "cost basis" then you could absolutely buy more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition. When I say you can buy more cars, I’m also talking about buying more "trade ins," which obviously allows you to make both more new and used car retail deals.

There is no doubt this is a difficult cultural shift for your business just like what’s happening to you with the Internet moving you towards "One Price." You’ve been successful doing it the "Old Fashioned Way," but you are going to find it harder and harder to do so.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world?   That’s all I’m gonna say, Tommy Gibbs

Business is the most competitive sport hands down. And of all the competitive sports the automobile business is by far the most competitive. Nothing even comes close to equaling it. There is always someone wanting to take your championship ring from you.

The challenge for those in the automobile business has been and always will be figuring out the next step in order to stay ahead. There’s an old saying "Lead, follow or get the hell out of the way."

That should be your motto. And to that point, in order to lead something you have to take risks. You cannot afford to sit back and wait for others to make the bold moves. The ones who have the courage to step out of the box first are the big winners.

Sure, stepping out of the box has risks. You may fail at first and you may have to hit the rewind button a few times, but in the end you win. It’s all about winning. You can’t win sitting on the sidelines waiting for someone else to figure it out. Winning means getting on the field and getting your face dirty and smashed once in a while.

Winning means doing those things others can’t or won’t do. Winning means removing things (and in some cases people) blocking your progress and getting on with it. Winning means trying things you don’t yet totally believe in, but knowing what you’re currently doing isn’t going to keep you in first place.

Sometimes blind luck (the right franchise at the right time and the right place) will get you in first place, but blind luck will only last for so long. At some point you have to make your own luck by doing things that make you uncomfortable. Being uncomfortable is never easy, but losing first place is even less so.

Continue to do what you’ve always done feels warm and fuzzy until you wake up one day and someone has taken your fuzzy ball and bat from you.

The car business isn’t a game. It’s a tough competitive sport and that’s what makes it such a great business to be in. 

Remember, "You never get it right and there’s always more to do and something to fix." Now go fix something even if it’s not broken.

That’s all I’m gonna say. Tommy Gibbs