You probably fit into one of two categories. Either you are not happy with your average gross per unit or you are not happy with the volume of your used car department. In either case you also may not be happy with the total gross being generated.

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 slight 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 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…”

If you are going to improve volume you absolutely must develop a sound acquisition strategy other than just going out and buying more cars. Without allocating the right resources and strategy then going out and buying more inventory is the kiss of death. All that’s going to happen is it’s going to age on you and you’re going to be real unhappy a few months down the road.

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.

Here’s A Ten Step Plan to Success:

1. Take over your used car department. If you’ve not read my article on this subject click here. Read Full Article
2. Restructure your management team or at least re-think the duties of your current staff. If you are going to acquire the right cars then someone is going to have to do the research that’s necessary to get the job done.
3. Learn all you can about the vAuto stocking tool, Auto Trader, and Auto Count USA. You need a geeky person to study the data and make recommendations on a daily basis.
4. Once you’ve done the research you have to have a plan of acquisition based on who and how you will acquire the inventory.  Elements of the plan:
5. Purchasing units from private individuals.
6. Mining your database for hot sellers.
7. Purchasing cars at auctions.
8. Purchasing cars online which may include proxy bidding.
9. Taking an aggressive approach to trade-ins.
10. Move from paying on gross to paying on volume for sales staff and sales management. Is it time to re-think “One Price?” The Internet is creating a one price environment. Twenty years ago when a lot of dealers tried “One Price” the Internet was not a factor. One of the major frustrations your sales staff continues to have is when the customer shows up at the front door with a price off the internet your sales staff has no control over gross.
11. Re-evaluate how you are charging for reconditioning.  Is it time to re-think the age old concept of charging full retail to the used car department? (If you move away from paying sales people and sales management on gross profit then the concept of charging them full retail because they are going to just give it away becomes irrelevant.) You can keep doing it your way, but you will be at a disadvantage in the Internet world pricing game.
12. Get rid of packs and all the silly things you add to the cost of your used cars. All you are doing is putting yourself at a pricing disadvantage. Reread numbers 5 & 6.
13. You need to price your inventory online immediately and then re-price it as the market is moving.  Determine if your pricing should be under or over the market from day one.  The more days you are over market, the more days are being eaten up and ROI goes south. And most important who will be doing the pricing? The last person in the world that you want doing the pricing is the person who’s actually doing the buying. Their egos and feelings get involved. This is not about egos and feelings; it’s about pricing the vehicles based on the market and about turning them as fast as possible.
14. Invest in your own photo booth and commit to posting 40 plus pictures on every unit. You must set yourself apart from the competition. Having pictures that have “changed seasons” is just plain ignorant for more reasons than just the pictures. (Get it?) There should never be a day that you have cars online without pictures.
15. Use the vAuto Internet pricing tool. There is no excuse for having a car without a price on it. Post prices online and on the cars. Get rid of all the excuses as to why you don’t want to put prices on the cars. It’s just plain silliness not to.

So, let me give you a quick review. 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 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

When it comes to pricing and re-pricing used cars most dealers are using some sort of a bucket system. If you’re not familiar with it, it is simply a process of changing pricing on a scheduled basis reducing the pricing as each unit jumps into a different bucket. An example would be that from 1 to 15 days a dealer has his/her inventory priced at 105% over the market and on day 16 reduces the pricing to 100%. The next bucket jump would occur at 30 days whereby the dealer would reduce the price to 95% of market and so on. In the first bucket, the 1 to 15 days, I would call that “shooting the moon” or hoping to get “real lucky.” 

I would never tell you that you are wrong to shoot the moon in the first bucket, but I think you have to ask yourself are you helping or hurting the final results by doing so. Does shooting the moon slow the whole turn process down? Would you be better off to start out under the market from day one? Are you simply taking yourself out of the market for the first 15 days?

The more times a vehicle jumps into another bucket (bucket jumpers) the less likely you are not only to make a decent profit, but also the less likely you are to make a lucrative ROI. One of your goals should be to figure out how to reduce the number of “bucket jumpers.”

There are more and more dealers taking an aggressive approach with the first bucket because what they have found out is they end up selling their units faster and getting a greater return on investment (ROI.) One of the most important things that also happens with this approach is they are selling units in the “current market.” The buzz these days is all about how fast the market can turn on you. When it turns and you are sitting there with a lot of units 30 plus days old you are now at a tremendous disadvantage. Lord help you if you have 60 day old and beyond units in stock.

This is not a perfect science so to put too much stock in either position may be the wrong thing to do. There will always be that really, really hot car that you can shoot the moon with. But, when your overall strategy is to “go for it” right out of the gate you may put yourself at a disadvantage in the ever changing, fast paced used car world.

If you stay hard and firm on being over the average market price in your first bucket, you will soon find yourself drowning in a “bucket of water.” That’s all I’m gonna say. Tommy Gibbs

Belief is a fleeting thing at times. Whenever I speak to a 20 group I always ask them by a show of hands how many of them have a plan in place whereby they do not allow their used car manager to have a unit over a given number of days like 60, 75, or 90 days. After asking that question I ask them how many of them have a unit over that assigned number of days. Almost without exception they all keep their hands in the air. Look, you are either pregnant or you are not. Many people say they believe in something, but most don’t really live it. They talk the talk, but don’t walk the walk.

Why would you state a policy and not enforce it? Do you not have any backbone or spine? I have to assume you end up letting your used car manager give you a lot of excuses for keeping those units around. There is no excuse for letting a depreciating asset sit on the shelf.

I want to give you some advice on how to fix the problem and get on a path to glory. Do not take those old age units to the auction and dump them. If you can make some adjustments to their cost then do so.

In most cases adjusting units is better than putting bonus money on them. Sales people tend to walk around them when you are high in them. You can believe what you want, but when you put bonus money on those aged units the managers have nothing to gain and they walk around them as well.

The most important thing to do is to start to massage the time line. If you are a 90 day guy/gal and you have units over 90 days, the focus cannot be on just those units over 90 days. The focus would have to be on those at 75 days. The same holds true if you are a 60 day wonder person. Your focus would need to be on those at the 45 day mark and beyond. What you have to remember is there are a bunch of vehicles coming like a locomotive down a railroad track wanting to bump up against your number whatever the number happens to be.

If you’ve heard me speak or read previous articles I’ve written you know the real number should be 45 days and gone. That does not mean dumping units at 45 days and losing a lot of money. What it means is aggressively pricing your units from day one and reducing the pricing until they are sold at some retail number.

The biggest problem I continue to observe is that used car managers do not recognize they have a problem unit on their hands until 60 days and beyond. If you go back and review your oldest units they all have a story line tied to them. 99% of the time it was a problem from day one and nobody recognized it for what it was.

I believe you can do better, but it doesn’t matter what I believe. What matters is what you believe and that’s all I’m gonna say, Tommy Gibbs

Rory Vaden is a young dynamic speaker whose theme is “Take The Stairs.” To summarize his concept for you it simply means taking the harder way. (Click Here to See His Video) Most people would rather take the escalator than walk up the stairs. Human nature is to go the easy route. The route of least resistance. Many of you fall into that category. You won’t take the hard way. It’s so much easier to stay with what you’ve got. “Don’t dare take the stairs.”

Here are four examples:

1. Your reluctance to go to an “up system.” If you have half a brain 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. You have to agree that if you think through all the elements of an up system it makes total sense. “Don’t dare take the stairs.”
2. 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.”

3. You continue to focus on average gross profit vs. ROI. You would rather live in the past of an imaginary concept of getting both high grosses and high volume. The easy way is to beat your management team up about how bad their grosses are. The harder way is for you and your team to understand the importance of tracking ROI and the role it plays in your bottom line. (FixRoi.com) “Don’t dare take the stairs.”
4. Bubba still works for you. 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 all 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 says it’s not his fault the numbers suck because the market is so screwed up. Bubba keeps telling you he’s all over the new age technology concept, but the reality is nothing is changing for you except your numbers keep going further in the tank.

One of Bubba’s biggest attributes over the years has been his ability to “sell.” Especially selling you. You like being sold. We all like being sold. 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.”

There are many other examples and you know as well as I what they are. Taking the stairs requires pain and discipline. You get to choose whether to take the stairs or not. For me, I’m done writing this. I have a bunch of stairs to go climb. That’s all I’m gonna say. Tommy Gibbs 

I’m not much of a golfer. I’ve only played a few times. (But, I do have a hole in one, nah, nah, nah.) Just never had the time or patience to take the game up. I think one of the intriguing things about golf is you never get it right. There are so many elements to the swing that it’s almost impossible to perfect it. I’ve heard it said that what’s going on between the ears plays a big part in that game. I have way too much other stuff going on between my ears to ever give it the effort that would make me a good player.

Driving the golf ball reminds me of a new car dealer who loves the glory of selling new cars. It’s a great show. You may not score well but you get some great oohs and aahs. Some dealers just love the whole idea of being the top dog in new car sales regardless whether it’s really making them money or not. They love the pats on the back given by the hot shots from the factory. They love being able to say they are number one, blah, blah, blah.

I know it sometimes sounds like I’m against the new car business and nothing could be further from the truth. Being a new car dealer is who you are. It’s what made you great. It’s what overall has made you money. Without new car sales you don’t have the trades you need. Without new car sales you don’t have much of a parts and service business. So, I really do “get it.”

But what I don’t get is the lack of attention and focus on the used car department. Many talk the talk, but few walk the walk. I think dealers sometimes forget that it’s the used car department that has the potential not only to drive the rest of the dealership, but to be a consistent money maker.

If your used car department is rocking you are going to sell more new cars because of your ability to step up to the trades. 60 to 65% of every deal you work at the door has a trade in involved in the process. The more new cars you put into the street the more customers you will have coming back into your service department for parts and service sales.

Selling lots of used cars can also really drive the parts and service business. The average hours per repair order on a customer pay ticket is 1.7. The average hours per repair order on a used car ticket is 4.0. The more used car tickets, the more money you make, plain and simple.

So, selling new cars is the driving for “show” part of the golf game. Selling used cars is like putting for dough.   You can’t spend "show,” you can sure spend the “dough.” That’s all I’m gonna say, Tommy Gibbs

Many years ago my office at my dealership was located on the second floor in the service building directly behind the showroom. The good news and bad news is it looked out over the entire inventory and showroom so I could see when a salesman was walking out to help a customer or going from one building to another. If you know my personality, then I’m sure you can imagine how many times a day I called the sales managers about customers not being helped. (Amazing, that by going to an “up system” how fast that problem got solved, but that’s another story for another day.)

What I always found interesting was the speed by which people moved. I could tell you if a person was going to be successful based on their movement. Nine times out of ten a person who moved very quickly had a pretty good chance of doing well. The ones that just sort of poked and plodded along never had a chance.

I’ve always been a fast walker and a fast talker. I know where the fast walking comes from. As a little kid I hung around with the older, bigger guys, thus had to take two steps for every one they took. As for the fast talker, I’d like to think it’s just plain enthusiasm, because I’m from VA and it’s not exactly a state with a fast talking dialect.

How fast are you walking? How much of a hurry are you in? Unless you have some physical reason you can’t walk fast then the odds are pretty good that your brain is moving at the speed of your feet. If you’re not a fast mover maybe you’re just tired and worn out from so many years in the business. Maybe you’re just burned out. (Someone once said, “How can you be burned out, if you’ve never been on fire.” Gotta love that one!)

If that’s the case you’re only hurting yourself and those around you by not turning the reins over to someone who can give it some punch. It could be that you’re hanging on to the “hoping and praying” theory. If you’re hoping and praying the market is going to come back to you, it just isn’t gonna happen. You’ve got to go get it and you need to do it fast.

To be successful in any business you have to have a sense of urgency about you that drills down to each and every team member on your staff. If you look at your staff the odds are pretty good that they are more than likely following your lead. There’s an old saying “speed of the boss, speed of the crew.” If you’re not “with it” then you can bet the rest of the team isn’t either.

Tips to pick up the tempo:

1. Act enthusiastic, fake it till you make it.
2. Get off your butt and get moving.
3. Shake things up a bit.
4. Aggravate some people by stirring things up.
5. Get some spring in your step.
6. Stop procrastinating; make some decisions even if they are wrong.

“There is no speed limit on the road to success. You can go as fast as you want to go.” That’s all I’m gonna say. Tommy Gibbs

In last week’s article I talked about how the speed of a person’s feet determines their success. If you’ve not read the article, click here. Now I want to talk about you getting off your butt and taking three walks.

1. The Team Walk-The first walk occurs each day as soon as you arrive at the dealership. Generally speaking I’m directing most of my writings at the dealer and/or General Manager of the dealership, but in this specific case it can apply to anyone and will pay huge dividends regardless of your position.

Start at the back of the dealership and work your way toward the front. Your mission should be to speak to as many team members (call them what you want) as possible. Over time you should get to know them.

Make it a point to stop and talk to every technician, every porter, every service writer, etc. Work your way into the body and parts departments and do the same. Then visit the office staff and sales department. Of course the sequence may depend on your actual job and role in the operation, but you get the point. In time you need to at least learn the following:

1. Their name. (Duh!)
2. Where are they originally from?
3. How long have they worked there?
4. What drew them to the type of work they are doing and to the company?
5. Married/single?
6. Spouse’s name?
7. Children, ages/boy/girl?
8. Hobbies/what do they like to do in free time?
9. What are their long term goals in life?
10. Find out something from them that others would be surprised about?

As I was writing this I considered explaining the benefits of taking a “team walk” each day, but concluded that if you can’t figure it out yourself it’s hopeless and you might be in the wrong business.

2. The Trade Walk-there should be a staging area where all trades are parked. On the side window each vehicle should be marked with four items. Who traded it, who appraised it, today’s date, and the customer’s name who traded it. (Also, put today’s date in the upper right hand corner of the windshield and leave it there until the car goes on line.) All members of management must go on the trade walk every day at a specific time, preferably after your “save-a-deal meeting.” All managers means GM, GSM, Used Car Manager, F&I Manager, BDC Manager, Internet Manager, New Car Manager and most importantly the Service Manager. Stop at each car and talk about the car. You will be amazed at how many more trades you will end up keeping and how many more deals you actually are able to put together by getting insight and suggestions from the various members of your management team. It is very foolish to allow one person to make decisions on which trades to keep and not keep. The concessions and input you will get from your service manager will pay valuable dividends. It’s a total no brainer.

3. The Lot Walk-The lot walk takes place once a week preferably after your weekend kick off sales meeting which should be on Friday. (I’ve never understand the concept of having a kick off sales meeting on a Saturday.) After the meeting all sales people and all the members of the management team including the service manager will take a lot walk. Stop at each vehicle on the lot and talk about the unit. This is how you get your entire sales team involved in selling more used cars. The more they know about your inventory the more they will sell. You have to force feed them. You will find out why certain cars have not sold because as you stop to talk about the specific cars the sales people will tell you why that car is still sitting there getting stale. Oftentimes there is an issue with a car as to why it has not sold. By having the service manager on the walk he/she will jump all over the issue and get it handled for you. It’s called the “embarrassment factor.”

So, here’s the bottom line. Start walking. Walking is good for your health. Walking is good for your business. That’s all I’m gonna say, Tommy Gibbs

Gross profit continues to be an issue for dealers around the country. Many dealers complain that it’s due to the stress put on gross by the Internet and Internet pricing. With more and more dealers understanding that more than 80% of the people who shop a used car shop on the Internet, there will continue to be even greater stress on gross profit. Get used to it, it’s not going to change.

Since it’s a given that a large number of people show up at your door on a used car because you listed it at a good price, then it should be obvious that you cannot afford to continue to serve up big discounts after you’ve already dropped your pants on the Internet. Many dealers are using some sort of Internet or Market Value pricing statement that’s presented to the customer when they land in the store and have found it to be most helpful. (Made world famous by the Swope organization, Louisville, KY) But, even that does not cure the problem because both the salesman and the customer still tend to want to negotiate.

A question you have to ask yourself is how much focus and training are you putting on not giving up additional discounts once the customer shows up?  It’s fundamental stuff. Fundamental processes, but the bottom line is salespeople and managers get lazy if they are not constantly reminded of what’s important. Over time your processes simply evaporate.

Your old timers like to complain they don’t have the margins to work with on used cars because you are giving it up with your Internet pricing. Just remember, most of your sales people are in sales because they like negotiating. So they still want to “do it.”

So, what’s GAP?  GAP stands for Give Away Profit. Simply put it’s the difference between the Internet Price and the Transaction Price. You need to track this on every deal even if it’s not a lead that came in directly from the Internet. The odds are pretty good that your sales staff is quoting whatever you’ve got posted on the Internet as a starting point on most transactions.

Thus, you should track them all. I mean come on, how simple is that? All you have to do when you deliver a unit is to check what you have it on the Internet for against what you just sold it for. Track the amount given up and what percentage it is. Set up an excel spreadsheet for each sales person and one that shows the total for the dealership.

Once you start tracking your sales staff your grosses will go up. I can bet you that you already know who’s screwing it up. You know who the give-a-way artists are. Tracking GAP will provide you the proof and a roadmap to improvement. You can’t manage what you don’t know. Stop complaining, start tracking and watch your grosses go up. That’s all I’m gonna say, Tommy Gibbs

Did you see the movie Forrest Gump?  Forrest Gump was not projected as a really smart person, but he certainly made some very smart quotes such as “stupid is as stupid does.”

Sometimes, we in the automobile business think our business is totally different than other types of businesses. I really kind of doubt it. We sell products and services. We excel when we provide the customer with a good product and excellent service.

One of the things I’ve noticed about the automobile business over the years is that dealers make the most money when they are coming off of hard times. They get back to fundamentals and then as business starts to get better the bottom line rocks. But, the better and better business gets the sloppier and sloppier dealers tend to get.

Right now a lot of dealers are seeing an improvement in sales and profits. Many dealers have learned hard lessons about what I would refer to as “stupid spending” and “stupid thinking.”

Since things are getting better now, dealers will be tempted to add staff and advertising expense. People like my parents, who lived through the great depression were in one way or another marked for life. I’m hopeful that dealers have learned some valuable lessons through these tough times and never go back to those old stupid ways of spend, spend, spend.

Dealers who are learning to effectively use the Internet and Social Media are going to be the big winners. Dealers who can fight the temptation to go back to their old ways will be the ones with the big bottom lines. Never forget that temptation is your enemy.

You’ve said:

• never again will you let your expenses get out of control
• never again will you go back to your old ways
• never again will you carry inventory you don’t need
• never again will you let used cars get out of control
• never again will you keep people you should not keep
• never again will you let ups leave without a TO
• never again will you not require sales people to log all customers
• never again will you not require your sales staff to follow the road to the sale
• never again will you keep used cars over 45 days.

So, once “again” I want to remind you of things that are “never again.”

“Smart is as smart does.” Be smart!  That’s all I’m gonna say. Tommy Gibbs

Did you miss me last week? Well, did ‘ya? I didn’t send a Zinger last week. I was busy attending a “Buy Here Pay Here” workshop put on by Leedom & Associates out of Sarasota, FL. Chuck Bonanno, the presenter, did a great job.

I’ve always been a “Buy Here Pay Here” advocate. It’s a part of the business you have to at least consider. It’s an easy business to get into; not such an easy business to be successful in, especially if you don’t have the right template and lots of cash. The reality is that nothing that’s worth anything is easy. If all things were easy everyone would be in your business and mine.

I’ve always believed that one of the intriguing things about this business is that there is always something to fix. You never get it right all of the time and that’s a good thing. It makes you continue to strive for perfection. Trust me, when you get one department in a dealership working well, one of the others develops problems.

Here’s a tip. If you have to make a decision, get all the facts you can and get on with it. Do it now, not after your coffee, not after lunch, not after you check your email, not later, not tomorrow. Just do it now! A worthy goal would be to be known as someone who gets things handled immediately.  

So, if you’re thinking about “Buy Here, Pay Here,” make a decision and get on with it. If you’re thinking about making some management changes, make a decision and get on with it. If you’re thinking about joining a twenty group, make a decision and get on with it. If you’re thinking about getting more serious about used cars, new cars, parts, service, or whatever, then make a decision and get on with it.

I’m amazed at how people wander around “thinking” about making a decision. Six months later they have done nothing and then they wonder why they are still are struggling with the same old problems.

There is something special about you and that’s why you get to make so many decisions. Since you’ve been so blessed to be put into such a position why not just get on with it? Are you going to make some bad decisions? Of course you are, but that’s ok because then you get to make some more and fix whatever you didn’t get right the first time. 

Someday is not a day of the week. That’s all I’m gonna say. Tommy

William Penn said, “Even if you’re on the right track, you’ll get run over if you just sit there."

Napoleon Hill said “Procrastination is the bad habit of putting off until the day after tomorrow what should have been done the day before yesterday.”