Should You Shoot The Moon?

There’s a lot of talk these days about the “Velocity Method” of selling used cars and trucks.

There are some that would define Velocity as: “A method of giving your cars away so as to impact your gross to a point of a substandard amount that will make you want to throw up your hands, beat yourself over the head, and barf.”

My definition for the word Velocity: the whipping boy of the auto industry that can be blamed when we use software pricing tools as the Bible, don’t use our brains and don’t use the tool as it was intended in the first place. Software is a tool. It’s not a genie in a bottle.

If you’re in a favorable market day’s supply position, why would you not shoot the moon on certain units for 10 to 20 days? If you use your vAuto pricing tool and apply some common sense your odds of improving gross profit and volume increase.

That being said, dealers today have never been smarter when it comes to understanding inventory turn. By and large, most dealers really do “get it.”

You don’t have to give all your units away, but you have to be smart enough to know how to turn your inventory. Being smart means knowing when to pull the trigger.

Dealers often miss the chance to take a shot at making some big grosses because their vehicles are hung up in recon for the first 10 to 20 days of their shelf-life. Those first 20 days are always when you make the most money.

As you move forward, think about the choices you have:

1. Hold a high gross profit per unit.
2. Improve your volume with lower grosses.
3. Improve your volume and be smarter about pricing and gross profit.

In today’s market, your best chance is #3. That’s all I’m gonna say, Tommy Gibbs

Are You Efficient?

If you’re going to continue to make money, and hopefully make even more money, you will have to become more efficient.

Your processes will need to become more efficient. Your management team will need to become more efficient. Your entire dealership will need to become more efficient.

You will have to become more efficient when it comes to managing your expenses. And, you must become more efficient when it comes to speed and cost of your reconditioning. I know it’s a sore subject for some of you, but the sooner you address it the sooner you will move forward.

There are many issues dealers are scrambling to deal with as we move into the most competitive environment in the history of the automobile business.

In order to do volume in used cars you need to have a “costing advantage.” By “costing advantage” I mean what’s added to the car once you own it, which includes packs and reconditioning.

To have a costing advantage you have to re-think your packs (which usually gets down to pay plans) and most importantly, what you charge the used car department from your shop.

If you know your history, you know that a couple of the reasons dealers added packs and charged full retail from the service department was because sales managers worked from cost up.

This is no longer true. Your sales managers don’t have control over gross as they did 20 years ago. The market conditions such as days supply are having an impact on how you price your vehicles.

More and more dealers are moving toward becoming one-price dealers and saying “no” when the customer shows up and wants a discount. (In the near future our UpYourGross software will track this for you.)

Becoming more efficient means improving the amount of time it takes to get a unit through recon and to the front line. Every day that a unit is not on your front line available for sale is costing you money.

Sadly, most dealers do not actually know how long it takes. And even when they do, they turn a blind eye toward the problem. They let the proverbial tail continue to wag the dog when
it comes to fixing the service timeline problem.

If you’re going to do more volume you need to have an advantage when it comes to getting cars through your system and the cost tied to doing so. You must become more efficient.

The pain of efficiency, or the pain of regret. You’re going to have one or the other and the cool thing is you get to pick. That’s all I’m gonna say, Tommy Gibbs

Phrases That Make You Better

1. I trust your good judgment.

2. How can I help?

3. What do you think?

4. I’m proud of you.

5. We can fix this.

6. You’re important to our team.

7. It’s not a problem. It’s an opportunity.

8. I need your help.

9. How can we get faster and better?

10. Tell me more.

11. What do you want to be when you grow up?

12. Whatcha got?

13. What’s working?

14. What’s not working?

15. What’s the number one complaint you’re hearing?

16. You have my full support.

17. What else?

18. You’re the best.

19. Love ‘ya.

20. Let’s go to work.

That’s all I’m gonna say, Tommy Gibbs

What Choice Do You Have?

There’s a lot of talk these days about the “Velocity Method” of selling used cars and trucks.

There are some that would define Velocity as: “A method of giving your cars away so as to impact your gross to a point of a substandard amount that will make you want to throw up your hands, beat yourself over the head, and barf.”

My definition for the word Velocity: the whipping boy of the auto industry that can be blamed when we use software pricing tools as the Bible, don’t use our brains and don’t use the tool as it was intended in the first place. Software is a tool. It’s not a genie in a bottle.

I’ve come to believe that the disconnect with the Velocity method of selling vehicles is the thinking that you have to give everything away. That’s just not true.

While I’m a big fan of pricing your vehicles “to the market,” I also believe that you have to be willing to shoot the moon on certain units for some period of time. Maybe it’s 15 days or maybe it’s 20. You know your inventory, you get to pick.

The problem is you often miss the chance to take a shot at making some big grosses because your vehicles are hung up in recon for the first 10 days of their life-cycle. You make your best grosses in the first 10 days or so. It’s as true today as it was 25 years ago.

It can often be painful when you’re trying to move to the “Velocity Method” because you already have a bunch of stuff over 60. The grosses on those units aren’t going to be pretty. And now you’re trying to speed up things on the fresh pieces and the picture gets double ugly.

If you’re trying to get things sorted out, there’s going to be some serious pain to endure. Sort of like getting a bad tooth pulled. It’s not going to get any better until you deal with it.

As you move forward, think about the choices you have:

1. Hold a high gross profit per unit.
2. Improve your volume with lower grosses.
3. Improve your volume and be smarter about gross.

In today’s market, your best chance is going to be #3. The longer you wait to adapt, the more pain that tooth is going to give you. That’s all I’m gonna say, Tommy Gibbs

When Do You Make The Money?

There’s an old adage that you make your money on a used vehicle when you buy it. It’s a true statement to a point. It certainly stands to reason that if you pay too much, you don’t have a chance. When you buy it right you’re half-way home!

There are times when having a mindset of “buying right” costs you a deal. It happens more frequently at the front door than the auction block. You always over-pay at the auction block, but you try to steal them at the front door.

Stealing a unit once in a while is ok, but if you have a mindset of stealing at the front door in order to “buy right,” you may not be as smart as you think.

One of the best strategies you can put into play is to keep an eye on your look-to-book and press the percentage up. If you’re going to over-pay, over-pay at the front door. At least you sold a unit by doing so.

I’m going to challenge the statement that “You make the money when you buy a unit.”

The reality is you make the real money when you sell the unit. Your ability to market and sell a unit faster is what makes you the most money. If you own it right and it takes too long to get it to the front line, and you fail to price it right soon enough, then you blew the whole “owning it right” concept.

Just because you’re half way home doesn’t mean you’re there yet. You won’t make any money until you’re smart enough to find a retail buyer.

Be smart. Understand when you make the money. That’s all I’m gonna say, Tommy Gibbs

Where Can I Buy Cars?

If I get asked this question once a week, I get asked this question 100 times a week. It’s generally phrased as, “We can’t find inventory, do you have any suggestions?”

These are smart, intelligent dealers and managers asking the question. These are people who are true “car guys and gals.” They are not new to the game and they know what end is up, yet they still ask the question.

They know the answer. But they hold out for a miracle that I have a secret tunnel that I can connect them to that has some gold at the end.

To quote my good friend and mentor Dale Pollak:

“The reality is that there are plenty of cars available in the
wholesale market, but the margin opportunity for most is very, very small.”

So there you have it. Dale has spoken and I shall interpret. There’s inventory out there, but you can’t or won’t pay the price.

You won’t pay the price because:

You haven’t accepted the fact that units you purchase aren’t going to have much of a profit margin.

You haven’t accepted the fact that you will need to turn and burn those units.

You haven’t accepted the fact that total gross is more important acceptedverage gross.

You haven’t accept the fact that packs and high recon costs are adding to your woes of paying the price.

You haven’t accepted the fact that paying on gross profit further complicates the retail selling process.

You haven’t accepted the fact that you need to create a greater awareness on look-to-book.

You haven’t accepted the fact that mining your customer base for potential sellers is worth more than a 60-day trial run.

You haven’t accepted the fact that the number one issue of low grosses is you sell too many units late in the life-cycle.

You haven’t accepted the fact that many good things come to the table when you find a retail buyer at some number.

These are just a few of the things you haven’t accepted, that are causing you not to be able to find the inventory you need.

It’s important to know where to buy cars. It’s even more important to know why you aren’t. That’s all I’m gonna say, Tommy Gibbs

What Are You Guarding?

1. Guard Against The “Peter Principle”-Don’t promote people based strictly on how they have performed in their current role. Promote them to their ability to perform in their new role. People are often promoted to their level of incompetence.

2. Guard The Processes-The team with the best and most consistent processes wins the most often.

3. Guard The Team-It really is about the team. You need team players. If they aren’t on the same team you cannot afford to keep them on the team. They will destroy morale and production

4. Guard The Customers-When you protect your customers, you build your business and set the bar for the team to do the same. The team is watching and emulating how you deal with customer issues.

5. Guard The Vendors-You must demand the same high quality and standards from your vendors as you demand from your team. Don’t lower your standards because you’re saving a few bucks.

6. Guard The Culture-There’s nothing more important that you can do than guard your culture. You cannot afford to hire people who aren’t of the same mindset. If you make that mistake you will wake up one day and there is no culture.

7. Guard Against Legacy Thinking-Just because you’ve always done it that way doesn’t mean it’s the best way. Stop looking back. Look forward.

8. Guard Against Making The Same Mistakes-Mistakes are a part of growing, but what you cannot allow is the same mistakes happening over and over again.

9. Guard The Training-You cannot train too much. It’s not “redundant training” until the team is perfect. The team isn’t perfect.

10. Guard The Passion-Don’t let anyone steal or drain your passion and don’t be afraid to show your passion for all the above.

That’s all I’m gonna say, Tommy Gibbs

When Will You Fix It?

“Some people will not change until the pain is so great that they have to.”

One of the more interesting things I see in my line of work is dealers and managers often know they have a problem, but don’t do what’s necessary to fix it. These are smart people with years of experience and plenty of data and information to conclude that something isn’t working as well as it should or could.

They know there’s a better way, but stay on a road named “frustration.” When your staff becomes frustrated, the growth of your organization is stymied, and your bottom line impacted.

The two examples I see most often are:

1. The relationship between the parts and service departments and the used car department. Sometimes it’s the cost of parts and repairs and sometimes it’s workflow.

Never forget that you can’t sell them and make the most money if you can’t get them to the front line in a timely manner. Nothing drives sales management crazier than seeing units sitting out back waiting to go through recon.

A large percentage of the dealers don’t know where the bottleneck is or how long it takes to get units through the system and ready for retail. They know they have a problem, they just don’t know how big it is and how much it’s hurting their bottom line.

Each department is a separate business and there’s pressure on each department/business to make a profit. Therefore, it often feels like our business model, by design, is set up for the departments to work against each other.

2. Overaged used cars. Dealers know it’s not profitable to keep used cars past 60 days. Most know the profit starts to take a serious dip on day 30. Profit and ROI are going south, and the dealer looks the other way. How such intelligent people allow this to go on and on is extremely hard to understand.

Ignoring the problem creates a culture that lacks discipline, which over the course of time will vibrate throughout the store. You cannot win on a consistent basis when there’s a breakdown of discipline.

More often than not we know how to fix the problem. And, more often than not we don’t fix it. We don’t address the problem due to fear. Fear can be real or imaginary. We often fear that if we attack the problem that someone will quit because they can’t live with the new approach.

If you fear asking people to change to something that’s going to make you, them and your organization better, then there may be an even bigger problem that needs fixing. Maybe you need to fix your thinking.

That’s all I’m gonna say, Tommy Gibbs

Do You Have A Buyer

As we all know, there are as many pay plans as there are dealerships. If you’ve ever heard me speak, you know I’m not a big fan of having buyers out on the streets running around buying cars and trucks.

My evidence is most of the time the units that end up aging on you are those that you purchased from the auctions by your buyers or those units brought to you by “Bubba,” the wholesaler. Those are always your biggest wholesale losses.

The odds of you being successful with these purchase units would go way up if you used my lifecycle management process. But, that’s not the subject of today’s article.

The subject today is that if you’re going to have outside buyers, what’s the best way to pay them?

Most outside buyers are paid based on so much per unit purchased. If you are of that mindset, here’s my suggestion:

The buyer only gets paid when you retail it at a profit or breakeven. They get nothing for buying the unit. They only get paid when you retail the unit.

Trust me, here’s what’s going to happen:

A. At first, your buyer isn’t going to like the new plan. To make it a little easier to swallow, up the ante on what you’re now paying your buyer. If you’re paying $200 a unit, make it $300.

B. Your buyer is going to take an even more serious interest in every unit that’s on the lot that’s in his/her inventory.

If it’s tied up in service, your buyer is going to be pushing it through.

If it’s dirty, they are going to be getting out the washrags.

If it doesn’t have fuel, they are going to get fuel in it.

If its photos are lousy, they are going to start taking pictures.

If the pricing isn’t getting changed, they are going to be having a conversation with the price changing person.

I would further suggest that you add the fee to the cost of each unit that’s purchased. Thus when you retail it and pay your buyer, you’ve already expensed your acquisition cost.

You can apply this concept to a company employee/buyer or a true outside buyer.

If you’re gonna have a buyer, turn them into a retail buyer. That’s all I’m gonna say, Tommy Gibbs