Have you ever heard or used the following quote: “Gross is a state of mind.” Or how about “Sales people control volume; the desk or manager controls gross.” Many of us have used those adages for years. With each passing moment they become less and less of a reality.
I’m not saying that talent at the desk and your positive thinking doesn’t have some impact, but what I am saying is that it becomes less and less of a factor due to the Internet. Our new and used car business is very transparent.
Although there are extenuating sets of circumstances where there is a hot franchise in a market with few dealers, these days you can’t often achieve both high gross and high volume. You have a far better chance of improving your volume than you do gross even in a down market. As my good friend Dale Pollak points out an “efficient market,” is when buyers and sellers have equal knowledge about choices and alternatives. The principles that govern all efficient markets are supply, demand and price sensitivity. If that doesn’t describe the automobile market today I don’t know what does.
While I’m a big proponent of Twenty Groups, they have in some ways skewed our thinking about gross profit. We all want to be top dog in average gross per unit. You might want to adjust that thinking to being top dog in inventory/money turn which results in a high ROI and much higher volume. How does a dealer in Peoria IL sell 300 used a month? How does a dealer in Louisville KY sell 600 used a month? They understand turn and the impact that effective internet pricing has on their ROI.
This is a changing and evolving business. If you don’t change you will become a dinosaur. I don’t know much about dinosaurs, but I suspect that part of what killed them off was the changing temperature of the earth and their surroundings. If you don’t adjust to the current changes the heat and your surroundings (competition) are going to make you extinct.
It’s interesting to talk to dealers who have made the adjustment. They will all tell you that they were doing this and that and then all of a sudden they “Got it”. There is no one thing they are doing. How about you, have you “Got it”? There is no magic bullet. Here’s the deal in the nutshell:
1. They use Dale Pollak’s vAuto Tool and my common sense approach to the business.
2. They have a sense of urgency from the time the car gets purchased/traded to the time it gets on line.
3. They get the car on the Internet way sooner than it gets physically on the front row.
4. They have moved away from conventional pay plans tailored to gross profit to a combination of salary and volume bonuses.
5. Their managers understand that they have to work harder and smarter than ever before to earn the same money they did a few years ago.
6. Focus, Discipline and Processes. These are my three favorite words. Many talk the talk, but few walk the walk.
7. They are intense and have a sense of urgency.
8. They are always in a hurry. Hurry up and get it shipped. Hurry up and get it off the truck. Hurry up and get it out of service. Hurry up and get it on the front row. Hurry up and get it sold. Hurry up and get it delivered. Hurry up and turn that baby into cash!
I’ve never been as excited about the car business and especially the used car business as I am today. Next time you think gross is a state of mind, thing of it as gross is a state of volume and how many times you can turn the money over in a year. Or think of it like this “Gross is a state of turn.” That’s all I’m gonna say,
Tommy Gibbs