Are You Responsible?

Seth Godin one of my favorite writers recently wrote:

“Accountability is done to you. It’s done by the industrial system, by those that want to create blame.

Responsibility is done by you. It’s voluntary. You can take as much of it as you want.”

I like the way Seth has stated this in such simple terms. If you’re in a leadership position, it’s your responsibility to hold yourself and those around you accountable. To Seth’s point, you get to pick just how responsible you’re going to be and that applies to holding people accountable.

Not taking responsibility for what goes on in your dealership is one of the biggest flaws of people in leadership positions. I stated it that way for a reason.

Some people are in leadership positions and they aren’t leaders. In some cases, they got there by default, family, next in line, or other reasons you would be familiar with. There are times when the decision makers have convinced themselves they can’t do better.

The reality is you can do better. You just have to take the responsibility to do so. That’s all I’m gonna say, Tommy Gibbs

Inventory Up-Volume Not?

I’m often asked by dealers, “Why hasn’t my volume increased in proportion to my increased inventory levels?”

More than likely your house wasn’t in order when you went off the deep end. You probably had aged units and didn’t address the problem before you amped up your inventory levels.

Your sales staff are putting all their efforts into selling the fresher pieces and letting all your old crap sit. Grosses will continue to erode.

The reality is your volume isn’t increasing and you’ve only made your problem worse.

Before you increased your inventory, you should have looked at a couple years history to see where the peaks and valleys were with volume. Had you done so, you would have discovered trends that would have served you well.

Dealers often increase their inventories based on the past couple months sales. Let’s say you had good sales in August and September and you live in the northeast. If you carry that same amount of inventory into the fall and early winter, you’re going to get crushed. You should have been paying attention to your sales history and cutting back vs. adding to.

Unless you’ve decided to be a total market disrupter, you have to be realistic about how much you can actually increase your sales.

You didn’t analyze your inventory based on turn. If you’re not getting close to 12 turns a year, you need to follow Dale Pollak’s advice and go on a diet. One out. Zero in. Or one out, one in until you get it squared away.

Until you increase your turn, you shouldn’t increase your inventory. Once you get to the 12 turn mark, you can add a few units.

Here’s another way to think about it; stock about what you’ve been selling over the last 60 days running average but be aware of your annual sales trends.

When you start adding inventory, the odds are likely that most of it will come from outside purchases. You cannot treat purchase units like you treat a nice trade. It’s likely that what you’re buying has a high cost to market and a high day’s supply.

One of the reasons you’ve not gotten the results you wanted when you increased your inventory is you weren’t willing to price those outside purchases competitive to the market.

You cannot expect to make as much gross on them as you would with a nice trade. My life-cycle process and UpYourGross software are great tools to help you take control of your inventory, increase turn, increase gross, and eliminate wholesale losses.

Isn’t it funny how common sense isn’t so common? That’s all I’m gonna say. Tommy Gibbs

Are You Running a Business or Democracy?

I’m a big fan of making the team inclusive of what’s going on. I’m a big fan of educating the team. I’m a big fan of getting insight from those who are in the trenches. I’m a big fan of listening to the troops.

But, I’m not a big fan of rule by committee. Ruling by committee is an easy way to avoid accountability.

Ruling by committee allows us to blame no one when it fails. Ruling by committee is a sickness designed to allow those in charge to accept responsibility for nothing.

Ruling by committee is a way to hide in the back room. Ruling by committee is peeking through the closet door.

Step out of the closet, come into the room and be counted. If you’re ruling by committee, stop it!

You’re not running a democracy, you’re running a business.

Who’s deciding how your used car department is going to be run? It’s your money.

That’s all I’m gonna say, Tommy Gibbs

Rocket Science?

Nope, it’s not rocket science. It’s easy stuff you can do that will make you better.

1. 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 $19,000 today, do what you can to get it to $18,500 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.

2. 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% ROI. By knowing your ROI you will know what’s working and what’s not.

3. 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. Make sure the service manager gets a copy of the list each day and create a sense of urgency to get any of those through the shop quickly.

4. Focus on Look-to-Book-When you improve your look to book you improve your odds of selling more cars. You sell a car and you get a car. Maybe this is rocket science.

5. Life Cycle Management-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.”

Utilizing life-cycle management will help you quickly identify profitable units and problematic units. It’s critical to know which units create the most risk for you.

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-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. The lot walk gets your entire team to know and understand your used car inventory. The more knowledge they have the more they sell. (Einstein, this is different than the trade walk.)

7. 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? You would sell a lot more of these wholesale pieces if you had more flexibility from your parts and service department on what they charge to your used car department. Is it time for two-tiered pricing?

Yep, this stuff is definitely rocket science. That’s all I’m gonna say, Tommy Gibbs

Are You Hiding?

Are you running a business or a democracy?

I’m a big fan of making the team inclusive of what’s going on. I’m a big fan of educating the team. I’m a big fan of getting insight from those who are in the trenches. I’m a big fan of listening to the troops.

But, I’m not a big fan of rule by committee. Ruling by committee is an easy way to avoid accountability.

Ruling by committee allows us to blame no one when it fails. Ruling by committee is a sickness designed to allow those in charge to accept responsibility for nothing.

Ruling by committee is a way to hide in the back room. Ruling by committee is peeking through the closet door.

Step out of the closet, come into the room and be counted. If you’re ruling by committee, stop it!

You’re not running a democracy, you’re running a business.

Who’s deciding how your used car department is going to be run? It’s your money.

That’s all I’m gonna say, Tommy Gibbs

Lack of Decision Making

How long does it take to know if they can do it? Do what?

Do whatever it is you’ve hired someone to do.

Does it take a week?
Does it take a month?
Does it take 90 days?
Does it take 6 months?
Does it take 6 years?

How long does it take you to figure out if you’ve got the right person or the wrong person in the job?

Part of that decision-making process might depend on:

1. How much have you invested in the selection process of putting the right person in the right job?

2. Did you put someone in the job because they were the “next up?”

3. How much have you invested in their training and development?

4. How much have you invested of your own time coaching and teaching the person?

5. Does your organization give people the tools they need in order to be successful?

6. Do you make the effort to get legitimate feedback from those around you that “know” about how this person is performing?

It’s amazing how long some people get to stay in a position and bring nothing to the table but loyalty. Happens a lot with second-generation dealers. The second generation is dealing with the first generation’s “has-beens, that never were.”

How long does it take for you to figure out if they can or will do it? That’s all I’m gonna say, Tommy Gibbs

What Does a Bear Do In The Woods?

Eats corn.

My business partner for most of my adult life has been Ashton Lewis, Sr. an amazing human and Automobile Dealer in the Hampton Roads area of VA.

Ashton grew up in both the automobile and farming business. One of Ashton’s farms was located adjacent to the Great Dismal Swamp in Chesapeake, VA where corn was a primary crop.

As Ashton tells the story, he would observe a bear come out of the woods, pick an armful of corn to take back into the woods to eat or share with his friends and family.

The bear would sometimes drop an ear of corn and rather than continue into the woods, the bear would put down the armful of corn and then re-gather them all up just to save one ear of corn.

That’s what it’s like when you keep hanging onto that aged unit that you’re never going to make any money on. You spend too much time trying to make money on an aged unit and not enough time figuring out how to make money on the fresher pieces.

Your window of opportunity to make money on a used car is about 40 days or less and that’s a stretch.

Had you been smart enough to identify units that have little or no profit potential on day 1 then you wouldn’t be looking at a stone-cold loser on day 61.

The Bear-Drops ear of corn. Throws down all the others. Wastes time and energy re-gathering the ears of corn.

You-Do not identify problematic units on day 1. You waste time and money struggling with aged units on day 61. Grosses go south because you’re selling too many units late in the life-cycle. You never reach your full potential because you’re thinking like a bear.

Had the bear paid closer attention to how many ears of corn he/she could actually carry then the bear would not have wasted time and energy dealing with one stupid ear of corn.

Had you paid closer attention to what you were dealing with on day 1 you wouldn’t be beating your head against the wall trying to figure out what to do with an aged unit on day 61.

My life-cycle management process makes you a much smarter bear. That’s all I’m gonna say, Tommy Gibbs

What Are Your Intentions?

There are a lot of common problems when it comes to the used car operations for new car dealers.

But of all the problems and challenges that dealers face, the number one problem is that dealers trade or buy a unit and have a lack of “intent.”

Most would say, “Of course I have intent. I intend to sell this unit and make some money.” That makes total sense, but the problem is, it’s far too general.

That’s like saying you’re going to drive from NY to LA without a plan on how you intend to get there.

How many of you have ever heard the saying, “Every used car has to stand on its own?” If you’ve been around long enough you understand the term and can probably agree with the statement.

That being true, how can you give them all the same shelf life?

How can you not have a specific intent for each unit? Most managers don’t think, “What’s my intent,” when a unit comes into their inventory. They paint them all with the same broad brush, which doesn’t make a lot of sense.

Intent starts with the appraisal and is finalized during the trade walk, where the “final intent” is determined.

If dealership managers would look at each unit and clearly state their intent, they would have fewer inventory problems, turn would improve, and average gross, volume and ROI would go up.

I’m not going to go into the details here in this newsletter, but my life cycle management process gives you the disciplines to determine and carry out your “intent.”

My intent with this article is not to try to sell you something. My intent is to get you to think harder about what your own intent happens to be when you bring units into your inventory.

That’s all I’m gonna say, Tommy Gibbs

Maybe You Should?

If you’re not increasing your volume, you should.

If you’re not attacking ROI, you should.

If you’re not improving your gross profit, you should.

If you’re not pressing your cost down, you should.

If you’re not tracking 30/30, you should.

If you’re not attacking your most expensive units, you should.

If you’re not doing a lot walk, you should.

If you’re not using my life cycle management process, you should.

If you’re not paying attention to look-to-book, you should.

If you’re not doing a trade walk, you should.

If you’re not doing a save-a-deal meeting, you should.

If you’re not on a 60-day turn, you should.

If you don’t have a plan to extract the water, you should.

If you don’t have a photo booth, you should.

If you’ve not hired me, you should.

That’s all I’m gonna say. Tommy Gibbs

Do You Own It?

If you’re a sports fan, you’ve probably heard a reporter say that the player “owned it” when they acknowledged that they made a mistake, blunder and/or just screwed something up that cost their team a win.

The Tampa Bay Rays lost a game to the Red Sox this past weekend at the very end with a boneheaded play by Tommy Pham, one of my favorite players. He’s a favorite of mine because of the intensity upon which he attacks the game.

The Rays are down one run in the bottom of the ninth, two runners on, two outs, a base hit ties the game, a double or more wins it. Pham gets picked off at first base by a throw from the catcher. Yes, from the catcher. Good Golly Miss Molly. What the heck!

In an interview after the game, Pham said he “just messed up.” The media was kind to him saying he “owned it.”

Really? What else could he do? He totally screwed it up. Nothing more, nothing less. Of course, his intention moving forward is to not make the same mistake again.

The problem in some dealerships is that nobody, and I mean nobody, owns the used car inventory.

Not the Dealer.
Not the GM.
Not the GSM
Not the Used Car Manager.

How do I know that to be true? Because if anyone owned it, they wouldn’t have aged units that they keep making excuses for.

I’m amazed at all the excuses I hear for having units over 60 days. As an old friend of mine used to say, “You can justify anything you want to justify.”

Hey Einstein, there’s no logic and no money to be made past 60 days. Betting you will make money on a 60-day old unit is a really bad bet. So why do you keep doing it? Beats the heck out of me.

Clearly, understand I’m not in favor of you dumping a 60-day old unit in the wholesale market. But, I’m highly in favor of you
finding a retail buyer before you get to the 60-day mark.

There’s a number that somebody will pay for it at retail. The problem is you keep holding out thinking you can make X. More often than not, the unit that just hit 60 days was a problematic unit from jump street, but you didn’t bother to identify it and take action to make it go away.

It goes without saying, but I’ll say it anyway, “It starts at the top.” If you’re the Dealer or GM, shame on you, shame, shame on you. That’s all I’m gonna say, Tommy Gibbs