Would You Like an Open Point?

Given the chance, most people I know would jump at the chance to get an open point.

If you have the assets to make it happen, the only drawback for you would be staffing and no units in operation to support your fixed operations.

Even with those obstacles, most people will figure a way to make it happen

This type of opportunity doesn’t come along often so your decision is understandable.

Since the odds are not in your favor of getting an open point, why not invest in your used car operation?

Your new car volume isn’t likely to improve all that much with the numbers nationally hovering around 17 million. Cranking up used cars makes a lot of sense.

Of course, I think you should invest in my training and invest in increasing your enthusiasm and passion for the used car business.

That said, perhaps the best investment for you would be in a standalone recon/service center. Your first reaction is it doesn’t make financial sense. Let’s look a little deeper.

If you have two or more stores or if your stand-alone store is selling 100 plus used a month maybe it’s an investment you need to give serious consideration to.

If your current service department is operating at close to 100% efficiency, you are more than likely losing customer pay because you’re not able to service those customers in a timely manner.

We live in a world of “now.” If you can’t get them in right now, you may very well lose them forever.

With your used cars not clogging up your service operation, you should be able to quickly work your way back to 100% efficiency in the service department.

By having a separate recon car operation you’re going to shave a number of days off the number of days tied up in recon.

Every day you save makes you money. Forget about the savings in holding costs. Your grosses are the best in the first 10 days you sell a car. Faster is better.

With a recon car operation, you’re likely to be more flexible about how you price labor and parts to the used car department.

That’s especially true when it comes to keeping some of the older, cheaper, high mileage stuff, etc.

Retailing a unit vs. wholesaling a unit is always a winning proposition for you.

If you don’t have room to build a building, then look for something you can rent or buy within a 5-mile radius of your store or stores. Yes, you will have to shuffle them back and forth, but you can figure that out.

Some questions you should ask:

How much internal work are you now doing?

What’s the impact of moving that from your service department?

Can your service department make up the difference?

How many additional units will you have to sell for the recon center to more than pay for itself?

By opening a separate recon center what’s the message you are sending your organization?

Now is the time to invest in your used car operation. That’s all I’m gonna say, Tommy Gibbs

 

Overeducated?

“The overeducated are worse off than the undereducated, having traded common sense for the illusion of knowledge.” Naval Ravikant

I saw this quote and it was a good reminder that we have to be careful in the automobile business to not let data be the only decision-making factor to determine a strategy for each used car in our stock portfolio.

I’m constantly reminding my audiences that every used car is different and has to be fully evaluated as the unique beast it is.

Your skill, your knowledge, your experience, and good common sense play a major role in your success.

Never sell yourself short. Then on the other hand never sell yourself on being too smart.

Software is a tool and a guide that should help point you in the right direction, but at the end of the day, it’s your decision making that’s going to make a big difference.

Show me someone that “gets” the car business and understands how to analyze data, and I’ll show you someone managing a used car department that’s rocking.

Rock your used car department by using common sense and technology. That’s all I’m gonna say, Tommy Gibbs

WHY?

If what you’re doing isn’t working, why do you keep doing what you’re doing?

Maybe you don’t know it’s not working? Nah.

Could it be you know it’s not working, but keep thinking if you stay the course that it eventually will work?

I’m all for staying the course, but how long can you stand to stay the course? The sad part of this story is there are those around you, some not even as smart as you, and they know it’s not working.

They are embarrassed for you, but they are afraid to speak up.

They know you already know it’s not working, but they don’t want to make you mad by telling you something they think you already know.

Only an idiot stays the course when they know it’s the wrong course. You’re not an idiot. For gosh sakes, do the right thing and change directions.

The worst that can happen is it doesn’t work. What you’re doing ain’t working.

Changing the miserable course that you are on will energize your team and when you energize the team anything is possible.

Be energized, That’s all I’m gonna say, Tommy

Speed & Leadership

There’s a lot of discussions these days about the number of days it’s reasonable to hold a used unit before retailing it.

In the past, 60 days was the timeline most successful dealers worked with. Dale Pollak wrote recently about the new normal being 30 days.

Every piece of data I’ve looked at over the past 17 years validates that Dale is spot on.

If nothing else, dealers have come to understand the necessity of the Velocity concept and turning inventory. Of course, today dealers are working a tick harder to ensure they make the most money possible on units that they have a favorable cost to market and day’s supply in their favor.

That being said, any way you want to slice and dice it, speed to the front-line has never been more important than it is today.

If you’re not using a recon tool to track and zero in on where you’re not efficient and where you need to make some improvements, then it’s doubtful you will ever get close to the new normal of 30 days and gone. 30 days and gone doesn’t mean dumping units in the wholesale market. It means finding a retail buyer within that 30-day time frame.

There’s an underlying problem when it comes to 30, 60 or whatever. It’s the failure of upper management to communicate to service management the importance of the relationship and impact the entire recon operation has on the success of the used car department.

The reality is that lack of understanding also impacts the new car department. The used car department will miss trades and lose new car deals when they have a lack of confidence in the support of service management.

Issues will come and go in your recon operation. Lifts break down, technician shortages, a slug of used cars hit the ground, and an overload of retail customers are things that are going to occur.

The strategy of upper management should be to keep everyone informed and educated about what’s going on and what the expectations happen to be.

Everything that happens in your dealership, good and bad, is a result of great leadership.

Great leadership understands the need for speed, daily communication and keeping the team on the same page.

Great leadership doesn’t just talk the talk.

Great leadership walks the walk.

Be Great. Start walking or in the case of recon, you need to start running. That’s all I’m gonna say, Tommy Gibbs

How Was Last Year?

I’m thinking most of you had a very good 2019.

Even though margins are being compressed, most of the reports I’m getting are that dealers are making more money than even when margins were high.

That being true would suggest dealers have gotten smarter and smarter when it comes to running more efficient operations.

Never in the history of the automobile business have dealers been as well informed and educated as they are today. If nothing else, technology has made it so much easier to figure things out.

The standard in the business has been that we should make at least 2% net profit to sales dollars generated.

If business has been as good as initial reports, and you didn’t make well above 2%, then you may need to re-evaluate what you did last year.

Dealers who made in the 4 to 6% range are in a far better position to weather a storm, than those chugging along in the average zone of 2% or less.

While I realize you did a lot of planning getting ready for 2020, you would be wise on a monthly basis to check off the following, regardless of where your percentage ended up in 2019.

10 Monthly Bullet Points:

1. Re-define and focus on your basics.
2. Evaluate your expenses monthly.
3. Stick to your used car and new car inventory turn timelines.
4. Evaluate the inventory on hand vs. anticipated selling rate.
5. Examine every process from front to back.
6. Don’t let legacy thinking control your thinking.
7. Don’t be afraid to fail; try something different.
8. Study the best of the best.
9. Seek to improve your leadership skills.
10. Don’t think you have it figured out because you don’t.

Last year is history. Learn from your history. Get better. That’s all I’m gonna say, Tommy Gibbs

Are You Running?

It’s January and we’re off and running. Actually, some of you are running, some of you are walking. The runners have been training hard for the last few months. The walkers have been talking about training hard.

The runners were getting into shape back in November and December by laying down “the plan” for 2020. The walkers were thinking they needed to get in shape and get a plan for 2020.

Runners are never happy. I’ve never seen a runner smile. Walkers are well, walkers. They often smile because they are dreaming of the things they would like to do. Whatever they are dreaming stays in their dreams.

The runners have a firm plan going into 2020. The walkers have a “kind-a-sort-a” plan going into 2020. Walkers talk about a plan, runners actually execute the plan.

Walkers are afraid if they make a plan they might have to change it. Runners know there are mud puddles and they just have to jump over a few to get where they want to go.

Runners like challenging their leadership skills by changing the plan.

Walkers are afraid of change and would rather go with the
flow than rock the ship.

Runners love Dave Anderson’s book “If You Don’t Make Waves You Will Drown.” Walkers would rather read “Winnie the Pooh” and dream about Pooh Bear.

When I do a workshop, I recommend, suggest, and urge those in attendance to write out an action plan for the next 90 days using the top 3 or 4 processes from the workshop. At the end of 90 days re-write the action plan adding 3 or 4 more processes to it.

Any time you’re planning, there should be 30 day, 90 day, 180 day and 365-day action plans. The weather and the terrain are going to change and you need to be ready for a change.

Walking along whistling a happy tune will make you feel good for that one little moment in time. Running hard with a flexible plan will exhilarate your soul and brain and will allow your team to leap tall buildings with a single bound for a long time to come.

Runners take money to the bank. Walkers go to the bank to borrow money so they don’t go out of business…yet.

Becoming a runner means harder training, greater commitment, and disciplines that most people don’t have and will never have.

That’s why there is so much room at the top. Some will, most won’t.

It’s very simple to go from being a walker to a runner. Just do it. That’s all I’m gonna say, Tommy Gibbs

Showing Up

Showing up” is a term that is sometimes used in sports when a player performs well, has an exceptional game, or makes ESPN’s top ten plays.

In reality, it doesn’t actually mean what it says.
Anybody can “show up.” People show up every day. Sometimes you wonder why they even bothered to show up.

Showing up and performing, excelling, kicking butt and taking names is a whole different kettle of fish.

Great players and great leaders “show up” every day for every play. The great ones don’t pick and choose which day or which game they intend to excel in. It’s ingrained in their DNA to “show up.”

They don’t say to themselves, “Hey, I like this day, I think I’ll show up.” They say, “I’m here, let’s get on with it.”

Of course, they have days when they don’t feel like giving 110%, but they dig in, they grind it out, they push through the mess and they make it happen.

The automobile business is a tough game. If you’re going to have sustained success you have got to show up every day and “get after it.”

Getting after it means guarding the processes.

Getting after it means creating high energy.

Getting after it means holding yourself and others accountable.

Getting after it means removing those obstacles that keep your team from reaching their goals.

Getting after it means making those tough personnel decisions that you know you need to make.

Getting after it means amping up your training to be the best you can be.

Getting after it means paying attention to what’s going on around you.

Getting after it means not ignoring “the elephant” in the
room.

If you’ve not been showing up, maybe it’s time you did. That’s all I’m gonna say, Tommy Gibbs

Is It Your Fault?

Frequently in my training sessions, I’ll ask the question, “How many of you agree that we do a lousy job of holding people accountable in the automobile business?” Without exception, they will all raise their hands.

Leaders that have figured out how to hold people accountable are the most successful when it comes to developing a culture of leaders and achieving high results.

Holding people accountable doesn’t have to be a negative experience. When people understand the expectations, they will seek to achieve those expectations, goals, objectives, culture or however you might want to frame it.

People tend to do the right thing when they know it’s in their best interest, not when you have to hit them over the head
with a baseball bat.

Your job as a leader is to sell the team the idea that the things the organization deems to be in the best interest of the organization is actually in their best interest too. Achieving expectations means they win, we win and we all have more success.

Easy tips:

1. Make sure everyone is reminded of the expectations. Yes, that seems elementary, but the evaporation factor is always in play. Either as a direct message or subliminally, leaders must constantly remind the troops of what’s expected and what’s important.

2. Get on it right now. Far too often when there’s a lapse in achievement, leaders let things drag on and on. The more things are allowed to slip, the more those things become a habit, and the more the expectations are lowered.

3. You don’t have to be mean to enforce expectations. People like to work in a well-run, well-disciplined organization. This isn’t about screaming and hollering at someone about their failures. It is about letting them know quickly we’re not on track; you and your team are not getting it done, whatever “getting it done” might mean to you.

At some point, there must be consequences for those who cannot live up to reasonable expectations. The ultimate consequence is they get to go to work someplace else.

4. Be consistent in your actions and statements. The easiest way for expectations to fall apart is that you are all over the place. You let some things slide for some people and not for others. You cannot be Dr. Jekyll and Mr. Hyde. Selective enforcement with just a few people will destroy the morale and productivity of the team.

5. There are times when you need to figure out the real root of why expectations aren’t being met. What’s the real problem? Leadership sometimes will set the wrong expectations. Setting the wrong expectations is just as bad as not having any.

6. In order to hold others accountable, we too have to hold ourselves accountable. We should make it a daily practice of looking in the mirror and being honest with ourselves.

A part of holding yourself accountable is never to forget, “Familiarity breeds contempt.” The closer you become with people the more difficult you make your responsibility of holding them accountable.

I’m holding you accountable. That’s all I’m gonna say, Tommy

I Don’t Hate Packs

Ok, I don’t hate them, but I’m becoming less and less of a fan of them and I question if they are working as well as you might think they are.

As a new car dealer for over 20 years I found packs to be a useful and profitable tool to increase profits and flexibility.

Dealers that have packs use them in a variety of ways.

My favorite as a dealer was to use the pack money to step up on trades when we needed to make a deal. We all think differently when it comes to how to make best use of them.

As for being against packs, if they are still working, stay with them. I just question if they are working as well
as some dealers think they are.

I believe that in the big picture they have outlived their usefulness. If you review the history of packs, they came about in part because managers worked from cost up. Dealers figured out that if the manager’s target for front gross was $1000, that they would hit that number if they had packs or not.

It’s very much in the family of why we charge full retail in the service department to the used car department. Over the course of time charging full retail and packs didn’t hurt front gross and it actually made the dealership more money. Over time packs have become their own profit center.

These theories and concepts have worked well for a long period of time. The Internet has dramatically changed the game. More and more dealers are pricing to market vs pricing based on what they have in the car.

They are not working from cost up like they did in the good old days. And, the salesperson has very little control over grosses, as the price has been set before the customer even shows up.

As more and more dealers move away from paying salespeople on gross it makes very little sense to add packs to your vehicles.

As my good friend Dale Pollak likes to point out, packs are
nothing but a tax on your vehicle. You are taxing yourself and making it that much more difficult to be competitive.

As more and more of the likes of CarMax, Varoom, Echo Park, Texas Direct, Carvana, Penske, Auto Nation USA get into the game, the less relevant packs (taxes) will become.

When you’re being charged full retail in service and you also have packs, you are adding additional cost to your inventory that others don’t have.

Every time you go to appraise a unit or go to the auction, those additional charges are running around in your head and are making it that much harder to acquire inventory.

I do believe that with better strategies dealers can improve their average gross profit…but, not by much…thus the only way to win the game today is to sell more used cars.

To sell more used cars you have to be able to get more used cars. To get more used cars you have to have an acquisition advantage. Packs create a disadvantage in today’s market.

If you’re still using packs keep using them if they are working.

But, you should keep asking yourself if they are really working as well as you think and if they are putting you at a disadvantage in the marketplace.

I don’t hate packs, but I do hate it when we lie to ourselves. That’s all I’m gonna say, Tommy Gibbs

If You’re In Charge…Be In Charge

Dealers are always asking “How can we sell more used cars?” The answer is “the dealer.” Yep, the dealer is the answer to selling more used cars. Always has been, always will be.

The definition I’m going to use for the dealer in this article is the PIC (Person in Charge.) In almost all cases the PIC has a used car manager or management team that they have high expectations of and continue to be frustrated with in terms of production and profits.

The common theme among dealerships is that they need a used car manager/used car department that can get the job done.

There are a few used car managers that can actually “get it done.” They understand both the technology side and the common sense side of the business and the dealer knows how to lead these special people. These are few and far between.

The answer to fixing your used car business is the PIC. The PIC is who can improve the used car numbers the fastest. Most PICs want to sit in their offices and push buttons. If you are the PIC and want to take a major leap with your used car business then you need to become the used car manager. You read that right, become the used car manager.

I don’t buy your excuse that you don’t have the time. Most dealers have a good Comptroller, a good Parts Manager, a good Body Shop Manager, a Good Service Manager, and a Good Sales Manager. Most of these departments run better when you keep your nose out of their business.

You have the time if you want to make the time. Far too often the PIC wants to be just that…the Person in Charge…they don’t want to dirty their little pawpaws with the day to day issues of the used car department and market.

In all my travels around the country, the number one common thread for the Cracker Jack used car operations is the PIC.

When you’re the PIC you know anything and everything that goes on in the used car department. When your typical used car manager makes a mistake he/she can’t always fix it without the wrath of the boss coming down on them.

If you’re the used car manager you are operating under a handicap. It’s called experience. Not your experience, but the experience of the PIC. The PIC has been burned so many times with other used car managers they have tied your hands to the point that no matter what you may think or want to do/try they just can’t turn you loose.

So, even though they themselves won’t dig in they won’t let you dig in but so much. But, they still have these grandiose expectations of what they want out of the used car department.

I can tell you until the PIC becomes the used car manager and actually takes the reins it’s never going to happen. And, knowing human nature the odds are about 90% that it’s not going to happen.

So Mr. or Ms. PIC it’s a matter of choice. You can choose to make it happen or sit around and wish for the “Superman Used Car Manager” to show up at your front door.

And even if they do show up, they will leap a few tall buildings, might even run faster than a speeding bullet, but for sure they will eventually hit a brick wall. They can’t jump as high as you and they can’t run as fast as you. That’s all I’m gonna say, Tommy Gibbs