How I Mastered Dealership Financials!

Welcome everybody to the big show. Today we're going to be talking about how I learned financial statements. I meet somebody who used to be on the Kansas City Chiefs and Hoagie and I talk about that. And we talk about fatalism and patriotism in America today and much, much more. I'm Chris Collins. Hoagie's here. Adam's here. Coming up right now on Service Drive Revolution. So we are going back in time and we're kind of going through how we got to where we are. It's something that happens a lot when people are like, hey, how did you get to this point? How did you get started? And there's a lot of twists and turns to it. So we've gone through the first 2 episodes. The last episode we did, we talked about how we created the best advisor training out there. And that's a fun one. And, um, today we're gonna be discussing how I learned financial statements. And it's an interesting story. It's kind of, kind of fun. It is in, um, probably in any way, shape, or form how you would think somebody would learn something. But we'll, we'll go through it. All of this is in, uh, in the buildup to something we're launching called the Service Drive Revolution Academy, where we are going to go live and train on financial statements, train on systems in your service drive, train you how to run a profitable, healthy business that's growing and thriving in a world where most service departments barely break even. The average service department out there barely breaks even. Most of, most of the departments we see are losing money and there's no reason for that to happen. Service departments have, were designed to be very profitable and be the backbone of the dealership. And, uh, you know, on the other side of that too, dealerships lose 80% of their clients to independents. And that's an interesting stat.

That's crazy is the word. Yeah, it's a crazy stat.

And there's a lot of great independents out there and they do a great job, but the dealerships have home field advantage and they lose that home field advantage by indifference. Right. It's kind of funny, Hoagie, I did an interview for Books That Changed My Life yesterday with somebody from your NFL team. So I don't know if you, if you know who he is because he was a long snapper for the Chiefs. Andrew East. Have you ever heard of Andrew East?

Oh, yeah.

Yeah.

He's married to Shawn Johnson, the gymnastic girl. Yeah. Oh, yeah, of course.

So they wrote a, they wrote a book together and they came in and did, did Books That Changed Their Life. And then we talked about their book, which is really good.

Well, they have a book coming out. Right? Or do they already—

or is it— it might be coming out, but we, we get it early from the publisher because we time the release of the episode to when their book's launched. But we film it way ahead of time most of the time. So a lot of times we have the books before they're, you know, they're out there. But he, uh, he— their book talks, you know, about— and one of the subjects that came, came up is Indifference is a choice. Mm-hmm. When you're indifferent about something, you're still making a choice. That's still a decision that you're endorsing. You're choosing. Just ignoring it or not caring about it is still a choice.

Yeah.

And, uh, I've always thought that. I've always thought people that don't stand up for what is right, people that don't try to improve and get better, And it happens a lot in fixed ops where, you know, there's a lot of people that think it's okay that we're, that we're running the same system we ran 100 years ago. They think it's okay that we're not profitable. And they'll give you a long resume statement about how great and how important they are, but they're really not that great or important if they're not running a healthy department that's profitable, growing, and taking care of customers. And so you can tell me how long you've been doing something, you can tell me how great you are, but at the end of the day, the report card says something else. And the only measurement that matters is, am I successful in running a healthy department that, you know, is doing great things, improving, getting better, growing future leaders, all, you know, all of that. So, um, it was a, it was a great conversation. You would've loved it. I thought about you many times. So I asked him, And there was no, there was no prompt for this. Completely cold. But I had you in the back of my head, Hoagie, because he's played for like, he played for like 6 teams, I think, or something. And one of the teams was the Seahawks. Very briefly, he, he went to training camp for the Seahawks but didn't make, didn't make the team. But I said, of all the, the coaches you played for, Who was the best coach, like the leader of men, the one that, like, you know, really blew you away? And guess who he said? By the way, he went to Vanderbilt, so that was in the equation too.

Hmm. Interesting. Interesting. Who do you say? Andy Reid? Yeah.

Not Pete Carroll. Because he, he, he was trying— was on the Seahawks when it was under Pete. Yeah. And he had a bunch of stuff to say about Andy too that was great. He just said Andy's got this way of approaching things where he's, he's very intentional and serious about what he does, but he's also fun and like lighthearted. And he said the first season, before the first game He expected Andy to give like this big speech, and Andy said, uh, something to the effect— his pregame speech was something like, hey, uh, we're, we're getting cheeseburgers for everybody after the game, so let's go, let's go win this and then eat some cheeseburgers.

Break. Yeah, so, so funny. Yeah, he, he does, you know, on the, um, like, I don't know if you guys pay attention to those player rankings, but they've been doing those player rankings that come out after the season and, uh, where the players rank the team, right?

So they rank the—

yeah, they rank ownership, facilities.

Yeah.

And so, um, yeah, you know, coaching always scores really high since Andy Reid's been there. Like, facilities, obviously they're trying to get new facilities, they'll always score really low. And Um, but yeah, he consistently ranks really high amongst, uh, amongst the players, which, um, you know, has to say something, right?

Like, well, you know what, but that's interesting. Says something is all those Super Bowl rings.

That's fair. That, that is, uh, that's probably the outcome you're looking for most of all, for sure.

Well, because that's one conversation we had was about, you know, in business even, how there's a lot of people that pride themselves on being a players coach. And I think the subject came up because I was giving him a hard time about servant leadership because I don't— whenever somebody says servant leadership, I'm like, oh boy, here we go. The self-help, I'm not really a leader, I want to feel good stuff that people say just drives me crazy. And I'm like, you know, I just told him, like, I've been in many situations where the leaders were really tough and hard. And they got better results than the soft players' coach. And so, you know, what's, what's in— what's the most important measurable here, that everybody is happy or that you're getting the best out of everybody?

Yeah, yeah.

And then, you know, he, he was quiet and stared at me for a while like, who's this guy?

Doesn't he know number one to effective leadership is loving yourself? Like, I thought everybody—

oh my gosh, thank God that wasn't in anything. That's for listeners. This might be more of an inside thing. I don't know if we've ever talked about this on SDR, but there's a lot of people that the book that changes their life is something to the effect of you got to love yourself. And I've personally never seen anybody who tried to love themself figure it out. They usually end up really miserable because it's You know, you, you, your happiness is, is derived more from what you contribute and your expectations of things. And loving yourself is an impossible thing to do because, and I've, I have a book that I've been working on about the subject in the sense that the, the most successful people that I would pattern that I think have a healthy balance like themselves. But they also can be brutally honest with themselves. And when you love yourself, you'd have to break up with yourself, get back together. The bar is just too high. It's just too high. You want to root for yourself, you want to like yourself, but you got to have a sense of humor about what a clown you can be too and how you can make mistakes.

Yeah, you become the crazy one in your own relationship in a weird way. It reminds me of Like, uh, one thing I learned from you years ago, we were talking about work-life balance, and, um, and I've always thought that was an important thing, uh, but you're like, Hoagie, if you notice, most people that, uh, want a lot of work-life balance aren't effective in their job. People that are really effective in their job have a work-life balance. And in a way, that's what we want to give clients too. Like, we talk to service managers about, hey, there's a world where you don't have to 14-hour days. Like if the department, if you have good culture, what needs to happen happens when you're not there and your department's producing the outcomes that it needs. There is a world where you don't have to be the last one to leave every day and work 70 hours a week or whatever. And I don't know that that ties into that conversation completely, but as it relates to a lot of conversations I have with a lot of of dealers, GMs, and service managers, yeah, it's a weird thing where they're wanting work-life balance and they're not doing anything to truly work towards that. But like the bumper sticker talk slogan stuff in the leadership world is all that stuff. Like you can scroll LinkedIn for 5 minutes and I just have to turn it off. Like there's so much of it, it's nauseating.

Yeah, they call that clickbait. There's just so much clickbait that's out there, right?

Yeah, yeah, yeah. It's funny, the stuff that, that gets clicks or that people buy, like, you know, leadership training about servant leadership or loving yourself, that sort of stuff, but it really is nonsense. It's total nonsense. Yeah, yeah, it's not that cool.

You're just Yeah, it's like, I mean, it's just like any other relationship you have in life. And maybe this gets, uh, too deep for Service Drive Talk or whatever, but like, just in a marriage or anything else like that, it's, it's, uh, it's usually the things that nobody can see that, uh, mean you're a good partner in that relationship, right? And, and, uh, all the self, the self-help stuff, like, it's all, like I said, I feel like it just belongs on on a bumper sticker. Like, it's a quote on a wall, but it doesn't actually, uh, fix anything or, or improve your life or, or those around you. Um, but yeah, it is, it's, it's, uh, it's, it's funny. It's a funny thing to kind of put your thumb on and, uh, and have a guided discovery conversation with people because there's so much, uh, you know, working against you to to have honest conversations like that.

Yeah, it's also, you know, in a lot of the training that I've, that I've been to, one of the things that is very clear is people just want to be told what to do. People don't want to take responsibility for themselves. And even at the highest levels, even in the military, like People are very opinionated, but at the end of the day, they don't want the buck to stop with them. It's their superior ultimately that is the one that takes the fall. And there's a lot of interesting studies in that about war where these soldiers do terrible things and then they're like, well, I was ordered to do that., right? And so where does that responsibility stop? If you are a soldier in Germany and you're told to kill certain people because of their race and you do that, is that your fault or is it the fault of the commander who told you to do that? And that's the extreme human behavior. Science part of it, but just when you talk about running a department, like, how many times is it never their fault that their department isn't good? It's never their fault that they don't recruit good people. It's not like that. Dave Anderson line always cracks me up. He's like, yeah, when you say your people suck, they're your— like, you're saying you suck. Your people, like, It's confessing, right? And so it's that sort of thing that, that has always blown me away about leadership is, and those are the same people that are like, oh, I just read a book on servant leadership, or I just went to this leadership workshop and the results never change. And it's like, okay, well you did all this, but if you want to be a more effective leader, leadership is about getting people to put aside what their personal agenda is and commit to a mutual goal that everybody's kind of established. Established and go after that. And most of the time that, that vision doesn't even exist. Like, there isn't even a goal of, hey, we want to be the best, or we want to be better than we are, we want to be profitable, or we want to have the best customer experience. Usually that's not even a— that's not even a topic. Just— yeah, it's just funny. People are funny. Yeah, we're funny. I mean, we're really funny.

Yeah. I think the key is to, uh, realize you're not normal. I think it's the people that think they're normal or the ones you got to worry about.

For sure. We're the— we say it all the time, we're the island of misfit toys.

Misfit toys, absolutely.

So we, we ended the last one talking about advisor training, and I was, you know, I was a service advisor and how, how I came up with that. From, from that point, I, you know, I wanted to figure out how to, how to advance. And I remember very specifically standing in the alley of that dealership with another employee there. He was the general sales manager and the owner of the dealership. And I remember asking the owner of the dealership how much a dealership like that cost. Like in my head, I was thinking like, hey, if I want to be a dealer someday, how much money do I have to come up with? And I remember him saying like $7 or $8 million. And I remember going, okay, how do I— how would I come up with that? Like, I just thought in my head that was possible. Like, for some— there's something in me and I'm not quite sure what it was, but the fact that I would ask him how much the dealership was worth and then that my reaction wasn't, oh, I could never do that. Or I could never be a dealer. It was just like, oh, okay, so I got to come up with $7 or $8 million. How would I figure that out? Like, that was just my natural process, the kind of the default setting, which is definitely different than, than most people. And so in my head, I kind of started having this narrative of, well, someday I want to own a dealership. And, you know, I'm just an advisor. I mean, I'm in my early 20s, like I'm 21. Probably 22 at this time. And the thing, the thing that I understood or became very obvious to me is that most of the people in the dealership didn't understand what the numbers were. And my first insight into this was when I got promoted to be a service advisor. And I'd, I'd been passed over a bunch of times. So it was really a big deal to me when I, when I finally got my own advisor number and I got my own desk and I, you know, I was on the schedule, I was an advisor. My service manager said to me, if you drop below 2.5 hours per arrow, you're fired. And you're going back to the, to the lot, to being a lot attendant.. And so I asked everybody, what, what are hours per RO? And I got a different answer. Nobody could explain to me how to calculate the thing that I thought I was going to get fired for. Then I would ask like, hey, what are my hours per RO? And nobody could, nobody would tell me. So I'm living in this constant fear and everybody I asked to help me doesn't understand really what it is. Like, they'll give you an answer, right? Like, you, you, you've both experienced this in many different scenarios. When it comes to numbers, you ask somebody like, okay, what is gross profit? And they, they give you some crazy answer, but they don't really understand what gross profit is. Or you ask somebody, how is effective labor, or how is ELR calculated? They don't really know how ELR is. They don't know how it's calculated. They kind of know what it is. But they don't know how it's calculated. You ask somebody about net to gross, like just the other day I asked somebody, I go, I was on a job interview and I go, so what was your net to gross there at that store you were running? And he goes, oh, 85%. I'm like, that wasn't your net to gross. Damn.

Like, he didn't know. That's even— that's also like, hey, what, what's What's the benchmark or the gold standard or guide? The same thing, even if they'll just throw out a number because they know like that's kind of what maybe it should be, but you can throw it out, just out there, not even knowing what really drives it, right?

Yeah. And whenever I would ask somebody, like I would ask my boss, like, hey, can we sit down and can you explain to me how to figure out hours per row? Yeah, yeah, we will. We will. But it never, never happened. Like I could never tie anybody down to really explain the numbers to me. So it just became very evident to me that the secret was understanding the numbers. Like you needed to understand the numbers. Cause I felt like every day I was going to get fired over something I didn't understand, which is a terrible place to be. I, I just, I, I, uh, I hated everything about that. And I have always kept that in mind with our training and like our approach to things is like, people are empowered when they understand what it is they're doing and how you win or lose. But I didn't understand how I would win or lose because I didn't know how to keep score. I didn't know what the game was, right? You gotta know what the game is in order to create some sort of plan to win the game. If you don't know how you score or how you lose, then you really have no point of reference or where to start. And so I, you know, I had this in my head now at this, at the same time that, this consulting company that had come into the dealership that I was working in had asked me to talk to some advisors, and I had created some advisor training. And I told that story, but they started paying me to go do advisor training in other dealerships in off time. So I would either leave early and go do it, or I would do it on a Saturday and I would, you know, on my day off. And I do think at the time I was on 4 10s too, as an advisor, which isn't something I recommend, but we were doing that and I would do it a couple of times. I did it on my rotating day off during the week and they were paying me like $1,500 to do it or so, which is pretty good, pretty good money back then for me. And I'd maybe do like 1 or 2, 1 or 2 a month.. And, uh, you know, I started to like them and I knew that they knew how to read financial statements. So I asked them, I said, hey, would you guys teach me the financial statement? Like explain it to me and I will do the advisor training for free. Like I will trade my advisor training that you're paying me $1,500. And I figured like, I don't know, I'd do 5 of them for 'em for free. Like I wanted to make it. Worth their while, like something that they wouldn't say no to. Because I'm a 20— like, you got— you also kind of have to keep in mind, I'm a 21, 22-year-old kid asking to learn financials. Like, nobody takes me seriously. Like, I'm an advisor to— I'm already thinking of myself as, as a dealer someday, but they see me as an advisor. I'm not— I'm not second generation. Like, I don't have a dad that owns a dealership. Like, I'm, I'm self-made. Like, this is all me. And so, you know, I'm used to people not taking me serious. So I'm trying to make them an offer that they, they can't refuse. And invariably I trade a couple, but they're not, you know, they're not really training me on the financial. They're explaining different things. So I learned hours per hour. I learned that sort of stuff. Stuff, but I still didn't, didn't quite understand the financial. What, what happens is I asked them, I'm like, hey, I want to come work for you guys. Like, I want to come fix stores, you know, and they, they were hiring, they were growing, the company was growing. And they said, well, we can't hire you from a current client. So you would have to leave the job you're in and go somewhere else and work for a year. So I started applying at other places. To work as an advisor for a year so I could go do this. Like, I, I thought, like, this is a, you know, this is a thing that I really want to do. I want to learn how to fix businesses like these guys are. While this is going on, I own a flower shop in the mall there in Bellevue, Washington. So there's a big mall there called Bellevue Square. I owned a flower shop. And so I was trying to figure out business with that too, because of the flower shop. Was a completely different type of business because you had perishables. Like when you, when you bought flowers, if you didn't sell them, they went bad. And so that you kind of have perishables in the shop in the sense of unproductive wages in a way. But yeah, sure. I didn't understand unproductive wages at that time. I just knew that we would time things wrong. Like on Valentine's Day, you have to buy enough flowers in order to fulfill the possibility of sales. But if you overbuy and, you know, the wholesalers raise their prices on flowers during holidays, if you overbuy, you, you know, you basically break even because you, you had a lot of waste that you didn't sell. So I'm very interested in business and how numbers work. And I, you know, I thought that it would all apply. And I also thought like I could fix stores and also own other businesses. Was, was kind of in my head too. So what happened, I applied for some jobs and then one of the, I had applied for a job, I think not knowing that the consulting company was in that store. And so the guy that owned the consulting company goes, hey, you applied at one of our clients for an advisor. And, uh, I told him, you know, I told him to interview you or whatever. So I go to an interview during my lunch break. I come back from my interview and my boss, the service manager, calls me in and he goes, uh, how was your interview? And I was like, oh no, like, how does he know? And he goes, uh, I'm going to make this easy for you, you're fired. And he fired me, like, right on the spot.. And, uh, that was a, that was a really eye-opening experience because I had kind of trusted this consulting company. Clearly he had told them that I'm interviewing and maybe he was trying to get me pushed out the door. I'm not sure, but I hadn't planned on getting fired. That wasn't something that, that was in, you know, in the cards. So then now I'm really looking for a job. That was, that was, that was a really hard moment because I went through all the stages of mourning. Like I was mad, you know, how could you fire me? I'm your top, you know, advisor, that sort of thing. Um, and you're, you're, you know, if we go back in time a little bit too, there was an interesting thing that happened was that manager was not very good. He wasn't a very good service manager. And all of the advisors had gotten together and created this letter that they wrote that basically was asking for the service manager to be fired, that he was incompetent because the place was a mess. Like, we opened the doors at 7 and it was just hold on for your life. And then, you know, go after work, go to a bar and drink as much as you can so you can sleep. And get up and do it again. Like, that literally was kind of everybody's routine. And so they, they'd written this letter and they had all signed it except for me, and they presented it to me and I said I didn't want to sign it. And I think I just didn't want to sign it because I didn't think that anything would happen. And they pressured me and I eventually signed this letter. So this letter goes to the owner of the dealership You know, basically saying that this manager's incompetent. But, you know, if we go back in time, I think I talked about how the manager would show up at 10, leave at 3. Like, he wasn't, you know, he wasn't that great. So the owner gets this letter, calls us all up to his office, all the advisors. We go up to his office and the manager's there, and basically nothing happens. But the fact that I signed that letter was always in the back of my head, that the reason why he fired me was because I signed that letter. And he had, you know, I was kind of his kid in a sense, that I started off as a porter and he, you know, he had allowed me to get promoted and move up. And granted, like, most of that was me kicking and fighting and proving myself, but he, he he would take credit for that and say that, you know, he, he was the one that got me to where I was or whatever, because that's just how people are. So I'm fired. I don't have a job. And I, you know, I double down trying to, to find a job as an advisor. Now kind of everything is off, off the table. Like, I'm not thinking about working for this consulting company because they told me they wouldn't hire me unless I'd been somewhere else for a year. I don't have income. And I went for, uh, for almost like a month and a half without a job or without income. So I'd work, you know, I worked in the flower shop more and just applied everywhere I could. But eventually that, that job that I interviewed for, I got, I got hired there and that was in Bellevue. And I worked there for a year. And it basically, when I got hired, it was understood that after a year I was gonna leave and go work for this consulting company. And that's exactly what happened. I, I worked there for a year and did a really good job, you know, learned a lot. But at the end of a year, I, uh, I, you know, I was done. Now, in the meantime, during that year, the consulting company grows a little bit and they have more consultants. And when it, when it comes time for me to work for the consulting company, they tell me that I can't work in the state of Washington. So I have to move to Oregon if I want, if I want to be a consultant or if I want to learn. So I'm faced with selling the flower shop, which I ended up doing. I sold the flower shop and I couldn't sell the actual business. I sold the accounts because the, the the mall had first right of refusal for anybody new going in there, and they wouldn't approve anybody that I, that I presented as a buyer. But I sold the flower shop, packed up everything, moved to Portland, Oregon. And their, their plan was I was going to spend 6 months training and then I would start going out, you know, in the field and that sort of thing. And this was kind of a new thing that they had started where There were two partners in this consulting company. One of the partners was just going to stay put in, in basically Vancouver, Washington, which is the other side of the river from Portland, but they're next to each other, was going to train coaches or train consultants while the other, the other one was out in the field kind of growing the business. That was their deal. And so I'm introduced to this other partner who I'd never met, never, never seen him. Um, pretty disruptive to move all the way to Portland. Portland is a different world when you live in Seattle. It's just, it's smaller, rain, oddly rains there more. It's just different. But I, uh, I'm going to do 3 months in a classroom with him, which by classroom, it was a tiny little office, they, a temporary office they'd rented in this office building, like It was a, it was a desk, a table, and that, that was kind of it. It was very, it was very small. And so I was going to show up there every day. And to, to his credit, he had a pretty good plan laid out for me. And right out of the gate, it was financial statements. Now I was told that at the end of the 3 months of the financial statement training, I was going to be given a test and the test was going to consist of a financial statement that had issues and inconsistencies. And I had to know how to read a financial statement so well that I would be able to see those. If I did not point out those inconsistencies in my analysis of the financial statement, I would have to go back through the training and I wouldn't be able to go out and work and make money. One other part of this, I guess, that, that I should kind of clarify too, is in order for me to get the opportunity to do this, I had to have, I think it was $15,000 in the bank. I had to have a car that was newer than 5 years. I had to have a laptop that was, you know, a certain spec. And, um, maybe that was it, but there were some, there were some qualifications. I had to have enough money to live the 6 months without worrying about money. And, you know, when I would go to dealerships, I had to have a car that was presentable. They looked good, that sort of thing. So I had, I'd lined all that up. I had my savings and I proved that to them. I got a new Ford Explorer that was 3 years old, and I got a— what were those IBM laptops that were like indestructible? What were those things?

The Toughbook?

Yeah, the Toughbook. So I had an IBM Toughbook, so I was ready to go. So I show up and we start doing this training every day., and we're learning the financial statement as a whole. It's not just fixed ops. So I'm learning how sales plays into that, how used cars, how recon, F&I, how extended warranties play into it. Oh, you know, I'm being taught the grand strategy of a dealership, not just fixed ops, with the understanding that our role is fixed ops, but it's part of the part of a bigger thing. And, um, at the, at the same time, I'm learning Excel. So it was very important that you knew Excel back then because you would build projections. And they were using me kind of as a guinea pig to create projection templates for the rest of the company. So, you know, uh, a Chrysler financial statement is different than a GM financial statement. That's different than a Mercedes financial. That's way different than a Ford financial. Right? So what would happen is I would get a Ford financial and I had to create a projection for the Ford financial. So consultants could just go to the zip, the little zip drive, and click on the Ford one and fill in the numbers and it would work. And so the, basically the way that they sold their services is they would go into a dealership, they would get a financial and some other, you know, measurables like effective labor rate, how many techs do you have, that sort of thing. And then they would, they would plug all those numbers into the left side of the projection. And then on the right side, you would change the numbers to what you thought. So if I added 2 techs, if I increase the hours per row by half an hour, if I raise the labor rate by this, if I cut the expenses by this much, this is— there would be a before and after kind of contrast, right? A gap of here's where you are, here's where we think you could be. Sort of thing. And then the, the contract was a 14-month agreement that 2 months were research and planning, and then it was 12 months of commission, and you were, uh, you know, basically compensated on the increase year over year that they did in customer pay sales. So if they were doing $100,000 in customer pay sales for the month of January, you know, 1992. In 1993, if you did $200,000, you got paid the difference, a percentage of the difference of the $100,000. Does that make sense? But besides the signup fee, which was nominal, you only made money if you increased the sales of the, of the dealership, the customer pay sales. So internal would go up, warranty would go up, but we never, you know, smartly never wanted to have those go up because it was something we were doing besides, you know, making their systems better. But the real measurement of us improving things was did their retail sales increase? And we were compensated off the retail sales. If their retail sales went down or stayed the same, we did all that work for nothing. And so these consultants are out there in the field doing this, And I was building these spreadsheets. So the, you know, kind of the first thing was I got to learn all the different financial statements, which, and then they're all very different and nuanced, right? I think a lot of people in our industry have only worked for Ford and that's their, that's kind of their default. We have dealers that their first store was a Ford statement. And so they run their whole dealer group off of a Ford statement when GM and BMW and other brands just don't fit into that, but that's how they understand the financial. So that's how they run their whole business, right? It's just funny that way, but that's how it is. So the first thing I had to do is build these spreadsheets kind of showing like, hey, if you added a couple more techs, if you got personnel expense, a bit, you know, a big thing right away you would see was the personnel expense. Like advisors were 12% of the gross, you know, you could say, well, hey, if I get that down to 8, that goes right to the bottom. And so you, you would be able to build that in, in these, these spreadsheets and projections. Then kind of the next part was to make that spreadsheet even more in-depth where you add in days of the week. So if you can imagine, I'm learning Excel, I'm learning how to write these formulas in order to take a spreadsheet and now say not just If we add 2 technicians, but what if we are open Saturdays? What if we go to 4 tents? How would you build that into the spreadsheet? So the spreadsheet went from 1 page to 3 pages because you had to, you had to have an input page and then you just had another page that kind of had, uh, you know, the before and after, which you would present to the dealer. And then you had a 3rd page, which was just other numbers that we cared about., but would confuse everybody else. Right. So it, it kind of evolved over time. And then I did learn that through that process, I learned the financials. Now I remember many times driving home from Vancouver, Washington to Portland and wanting to quit. Like my head hurts so bad learning these formulas and all of the different variables. And it wasn't natural for me.

Me.

Like, it was not intuitive in any way for me to build these sheets. Like, it was really hard. Like, I, I'm not the kind of person that can sit still and stare at a screen all day. It's just not me. Like, I want to put, you know, I, I do this to you guys all the time, right? Like, I just want things on a card in front of me. I want, like, we talked about this, Hoagie, when we're doing the hour of labor at boot camp. I'm like, why don't you just hand them $100 and show where the $100 goes. Like, that's just how I think. Like, I, I'm tactile. Like, I want something in front of me. I'm not— if I buy something at IKEA, I never open the instructions unless I'm stuck. Like, I just figure out how to put it together by looking at it and touching it. And I learn by doing things. I learn by watching. So staring at the screen all day, learning these complicated formulas, that, you know, how do you get the whole thing to move just by changing to 4 tens? How would you do— like, how do you even approach that? And now everything else you built before has to be undone, and you're almost better just starting from scratch with the sheet than trying to change the sheet you did last week. Right. And it was very, you know, it was a, it was a growth opportunity for me to really be disciplined about numbers and and understand something that didn't— math came natural to me, but the programming of an Excel spreadsheet and the different formulas did not. And it, you know, you would build this thing for a couple days and then it didn't work and you, you'd have to try to figure out why it wasn't working. And there's all these weird nuances about Excel. And back then computers aren't what they are now. Like, Sometimes Google it. Yeah. Sometimes it was just the, oh no. Have you ever seen those books that you would use to do Excel?

Like, oh yeah, I have some.

Oh my gosh. Yeah. It's crazy. Huh?

What was it like, Excel for Idiots or something? Or was this before that, Chris? I'm more curious about how, how did you break through some of that knowing that, what was your approach? Just like the discipline. Like, how did you just, like, overcome all that?

Well, one thing I got to say is he was very patient with me. Like, I think he really liked me. And I, you know, I think people saw my potential in that way. He was very patient because I, I, I struggled at first. The thing with, with me is like, I will struggle with something, but once I get it, then I can make it something even better usually. But that in-between where I'm trying to understand it, right, is always the, the rub where I, you know, I have to have it explained to me over and over again, which is one of the reasons why I really feel— and we, we intentionally try to create an environment where there's no stupid questions and people can ask the same thing 5 times. And like, the only goal is for you to understand it however it is you learn. It's a safe place. There's no judgment because I experienced that and that's how I learned. You know, I didn't— I tell people all the time, and I don't think they really believe me when I say this, but it took me 5 or 10 times to learn some of this stuff. I, I took it on myself to seek it out, right? And we're sometimes in a different situation with teaching where the people that we're teaching aren't seeking it out. They're here because their dealer sent them. They don't really care if they get better or if they improve the business. They're just here because their dealer said, go to the Chris Collins thing and I want you to learn that. But they, you know, I was very intentional, like I wanted to understand this, I wanted to learn. So that was part of it. And then he was very patient with me. And also just keep in mind the part I'm saying about I was building things for them that they were using with the other with the other consultants, which was very helpful for them to scale and to be more efficient. Does that make sense?

Mm-hmm.

And so, you know, the, the magic behind those spreadsheets was understand— like, I remember the first thing that kind of blew me away, and you could, you could do this to any service manager and kind of, you know, kind of put them in a, in a position of I need— I could definitely improve or get better. Can you guys guess what that is? Like if you did one, one exercise with a service manager that every— just about every service manager out there has a huge gap in where they are now, even the best ones, where they are now and where they could be, what that measurement is. This is one of the first things he taught me.

Oof, man. I think there's a few of them.

But there's one that stands above everything else. Shop capacity.

Yeah, that's what I was going to say. Probably hiring techs.

No, just shop capacity. So if you have 12— and the thing he said to me is rent goes on 24 hours a day. So if you, if like, just think about how service managers used to function back then, we're talking about early '90s, they were open Monday through Friday. It was, it was, uh, cutting edge to be open on Saturday. And a lot of the, like, for a long time I would go into stores and they're like, oh yeah, we tried Saturdays, it doesn't work. And it's like, yeah, it doesn't work because you don't want it to work. But okay, like, people are definitely off on Saturdays. Like if you go by Jiffy Lube, there's a line of people on Saturday, but okay, it doesn't work. I got it. But if you do that exercise with anybody where you do shop capacity and what your techs are actually producing. Now, the other thing about this, the enemy of shop capacity is when techs have two stalls because a tech can, can never run at 200% efficiency. And so when you do shop capacity, like let's say you go into a shop with, you know, 30 stalls and let's just say I'm just making up a number, they're doing $400,000 a month in sales. Their shop capacity probably says they could do $800,000 even without being open 24 hours a day. Like the, the gap is just so huge. And if you, if you got a bunch, if out of those 30 techs, 5 of them have 2 stalls, you're, you, you're dead in the water. Like you just, you can never make up for that lost capacity when you talk about stalls in the shop.

Yeah. Yeah. I have that conversation a lot. And, um, I don't know. One, one way I've, I've had success in kind of illustrating it is, uh, we'll say they're like, hey, You know, Adam gets 2 stalls, but he's also, you know, 125% efficient or whatever. I'm like, okay, so if you have a tech that's 100% efficient in one stall and you have the tech next to him in a stall that's 25% efficient, what are you going to do with the tech that's 25% efficient? I'm like, oh, I'd get rid of him. I'm like, okay. So, you know, it's always kind of an interesting conversation. Um, and the techs do a good job too of convincing them that, uh, you know, that they need the extra stall for, for whatever, whatever reasons.

And, um, well, you can do the other math too, Hoagie, right? Is like, if you have a guy in 2 stalls doing 125%, would you take 2 techs doing 70%? Yeah, because it's more, right? Because you're at 140 with two, you know, milquetoast techs that aren't even that good doing 70. But now, could you hire two techs to do 80? Well, yeah, of course. Oh, okay. Like, we're almost doubling our capacity just by that. And then when you, when you talk about 410s, like, that, that was the thing, you know, that really made sense to me is like, okay, now you got these things run— these stalls are running longer. And even if you're shop efficiency goes down a little bit on 410s, you pick up so much it makes up for it like dramatically, right? And then, I mean, there are stores that, you know, run 24 hours and that's even more fun or run two shifts. You can run another shift, that sort of thing. But yeah, that whole, that whole part of it was like, okay, I'm, you know, I'm starting to understand this and then He explained to me the chart of accounts. So basically the chart of accounts, and I was in my training, I was given a chart of accounts and I used to go into dealerships and ask the office manager for their chart of accounts, which isn't something that you hear anybody talk about anymore. But basically a chart of accounts is every line on the financial is explained how it is, you know, how it is derived and what it means and what you find on the chart of accounts. Is a lot of times the default setting from the DMS is wrong and you start finding that people, you know, techs are in the wrong spot. The way that they're calculating unproductive is in the wrong spot. You know, a lot of times also what I'd find is sales advertising wasn't fixed ops advertising. Like I look at advertising costs and I'd be like, How, how would we spend $20,000 a month? And oh, we're paying for the used car ads in the newspaper. What, you know, you just like, one thing that happens in dealerships is they, once the DMS is kind of launched, it's rare that anybody goes back and looks and you could be going for 10 years and have the financials be wrong. Like the calculations wrong. To the positive or the negative. It, you know, goes both ways. But, you know, going into the chart of accounts, then another thing that we would do is get all of the vendor contracts. So you would— because this is one thing that would happen quite often is we would find that the office manager was embezzling money. Like, I literally in my career, 2 office managers taken out in handcuffs. And probably another 10 that should have been, that for some reason, you know, they— the dealer, you know, the, the office manager had naked pictures of the dealer, something going on where it was like, you can't work here anymore, but I'm not going to have you arrested. That happened more than the arresting thing. But, um, and used car managers and office managers in tandem embezzling money. What would happen is the used car manager would get somebody to set up a used car wholesale company, and then they would wholesale cars to that company and take, you know, take some sort of margin, and the office manager would be in on it. And so, um, and you know, you know what's funny too is a lot of times they weren't even smart enough not to put their name on these corporations that they were doing this with. Like, you literally can go find the filing of who set up these corporations, and they weren't even smart enough to put it like 3 layers down into another corporation and then another. Like, literally their name is on the corporation. It's just so funny. But, you know, so learning the chart of accounts, which is a lot because you have the, the sales side of the financial, the revenue side, and then you have the the expense side. And they, you know, they kind of operate differently. And, um, so I would start building these spreadsheets that were also this, like every line of the financial statement, what was the expense as a percentage of gross? What would happen if we increase sales? And, you know, the thing that you find out very quickly when you're doing these sort of exercises is that the quickest path to any sort of profitability is increasing sales, not cutting expenses. Like, you need to run expenses tight. You need to be a good steward of them and understand them. But I mean, I don't know how many times I've gone into a dealership that's losing money and it's like, we don't have, uh, anybody washing cars anymore. We don't have anybody answering the phone. And it's like, okay, can we hire all those people back? We will increase We can only increase sales if, you know, we, we are functioning like a true business. And that, I mean, the amount of times that that's happened, I wouldn't even be able to count. So learning chart of accounts, learning the financial, and then learning the different financials was, you know, at the end of the, at the end of that 3 months, I passed my test. I came up with things that weren't even on their list. Looking at the financial statements. So once I got it, it was really fun. Like I really started to, you know, even to this day, we, we love when we get a financial from, from a potential client that we're going to work with and just looking at their numbers, just really fun. And you can, you can pretty much tell what's going on by looking at the financial that, you know, that was the other big takeaway and something that was kind of said, but became very, very true, is you can tell the culture of a dealership by the financials without ever meeting a person. If it's sloppy, if things don't make sense on the financial, the business is probably sloppy. If, if they're losing a lot of money and, you know, the numbers are just— nobody's paying attention to the important measurables. The rest of the business is that way. There's no accountability. If there's no accountability on the financial statement, there's no accountability in the service driver, the shop. Yeah, it just goes hand in hand.

Warranty receivables, parts inventory, like it all tells a story, right?

Unapplied time.

Yeah.

And, uh, if it's tracked, that's kind of, that's kind of an interesting thing.

It's always been fascinating to me in the sense of you can tell human behavior by the report card, the financial statements, the report card, and you never have to meet the humans. And when you meet the humans, they do everything they can to tell you that that thing isn't really that thing the way that it— it's really— that's really not it. We're not, we're not really losing money. You're like, okay, what are we talking about? We're not really losing money. You know, but it's funny. It's super funny. Yeah. So locked in that, locked in that office, that little tiny office in Vancouver, Washington for 3 months. And then I got my test and I, you know, I passed my test with flying colors and the test was on the full financial. So it was every department. It wasn't just fixed ops. And then I just remember like everything made sense. Like all of my questions and everything that I, you know, thought was a secret behind a veil in the Wizard of Oz kind of a thing. It was like, oh, once you meet Oz, it's not so scary. Like this is, this is re, you know, really simple. Warren Buffett says, you know, business and numbers are easy. It's the people that are complicated. Yeah.. And that was really, you know, that was really it. The knowing the financials is really important. But you know, if anybody asks me and I tell people all the time, like, hey, what should I go to college for? I say psychology, cuz psychology is more important in fixing a business or running a successful business than the numbers. The numbers actually are pretty easy once you understand them. It's the, it's the psychology of the customer and the employees. Like, you got to understand how to move a market to action. And that's psychology. Marketing is psychology. But then also how to get people to do the thing you want them to do. Uh, yeah. So that, that was my, uh, that was my experience. And there's lots of like funny stories that I can't talk about. On here that happened during that time too. I mean, I don't know, I don't know if you guys know this, but at the time Portland had the most, uh, adult dance clubs.

Okay, did not know.

Yeah, there was a lot of funny conversations and things that happened that you just kind of like shake your head.

It was a different time. You can just say '90s car business and most people have an idea of Magic receipts. What? Maybe we can, uh, maybe we can make a Netflix special.

Um, people went to lunch and didn't come back for the day, let's put it that way.

It was for the, uh, this, the steak buffet.

Yeah, steak and a glass of milk and a table dance. Pretty funny.

Well, I think the, I think the, um, you know, a piece of, a piece of your story that's always resonated with me on a high level is, um, uh, like I just learned, I've learned through, um, you know, working with you over the years and then even as a client years ago, um, to ask questions. Like this whole story started with you, uh, Hey, I don't understand financial statements and I'm going to ask. Making them an offer they couldn't refuse so somebody would take you serious enough to teach it to you and then going through what you had to, to get to the point where you could learn them. And yeah, I just like looking back, wonder how much less collateral damage I would have had and how much more effective I could have been. As a 26-year-old service manager if I, uh, would have known to ask questions. Like, I was, I was terrified of our controller. I just didn't want to be in her office for any reason. If I was in her office, it was because something was wrong and I was in trouble. And that's the default setting for, for a service manager today. And if you can just push through that and just ask questions, um, yeah, I just remember like figuring out, I, you know, for for months, people talking about unapplied time and cost to sell and hoping that soon I would figure out what that was like. And instead of just asking, and then the other thing, you know, you were talking about at the beginning with when we were talking about What's the guy's name you interviewed? Aaron or Eric? Sean's— and don't tell him I called him Sean's husband because that's really how I remember him. Andrew. But the thing about indifference is like, you know, I don't know. I don't know if it's from— since I've seen a lot of people from a bunch of different areas and I'm from the Midwest and I recognize it in in my people, but we're really bad in the Midwest of having indifference, of like not wanting to— just like I was just describing myself, that's really what that was, is I was indifferent and I was just hoping that I would figure out soon.

And, uh, it takes too long. I agree with you.

It's a weird thing where like, um, when people are more honest instead of doing the Midwest thing where you just kind of okie-dokum and say, okay, yeah, yeah, yeah, yeah. Um, if you disagree, figure it out. Yeah, say you disagree. If you agree, that's great, like, let's go. Um, but indifference is the enemy. And, um, yeah, it's, it's odd the lengths people will go to to not have an honest conversation.

Yeah, indifference is a position. You are putting your flag in the ground when you're indifferent.

Yeah.

The one thing that also kind of on the flip side, when it stuck out for me in your story, Chris, too, is that like, and we've encountered this in years past, is just like the ownership, the leadership, the senior leadership. When someone is asking the questions about financials, not to take it as far as a defense, right? Of asking, someone's willing to ask those questions. Open it up for somebody that they could actually be an opportunity to increase the business. I think that is what's crucial too, because how many times have we came out and met with owners or even GMs and saying like, oh yeah, we share these 2, 3 things for the information, what they need to do. They have everything in order to run their business, to run their shop. I don't know if that's really truthful. Honestly, because I think, you know, when I finally— I had to ask the questions and I had to go and seek the education on financials. Just if I would have known even earlier stage in my career, I think would have been eye-opening. And you're right. I'm just kind of hopeful of figuring it out. And I think finally seeking out some of the questions, but I think still continuing to ask those questions are important too as well. But also from the top. Recognizing someone's asking questions to better themselves for the betterment of the business and the customers. How can you say no to that?

Yeah, it's, it's, it's interesting too. And my, my, uh, head goes like even deeper in the sense, like I, I was having this, this conversation with, with Andrew. He was saying that, uh, they posted something online about Memorial Day. And, um, you know, American flag, that sort of thing. And they got a bunch of backlash on social media, like, how could you be posting that when America is so terrible? And, and I'm just like— and the, the default thing for these people that think this way, like, is they attack your character, right? That's what they do. So they don't agree with you, but they don't understand that they hate themselves. Like, if you're in America and you're an American and you're not proud of the flag flag. Like somebody asked me today, they go, would you get mad if somebody burned a flag? And I'm like, yeah, I don't like watching somebody burn the flag. Like, okay, they have the right to do it. I get that. But I don't agree with it. Like you are in America and it's our responsibility to make America what we want it to be. And by hating America, you hate yourself and you're just a fatalist. Like you have no No point of view that there is a future. The only future is death and destruction. That's basically how you see the world and that's the context that you're walking around. And then if anybody agrees with you or if anybody disagrees with you and they are proud to be an American, they want to make this better, then they attack your character and it's like, oh, you're MAGA or you're this or you're you're that. And it's like, no, I'm an American. Like, no, that's, you know, I get that the whole, like, we have a whole section right here in the library on cults. And one of the techniques that cults do is they isolate people, right? And then they attack the character of anybody that disagrees with them because they can't talk about the issues. They can't talk about what's really going on. So the only way to discredit somebody is to attack their character and get, you know, you're that, you're this, you're, You know, an extremist or, you know, whatever it is. And it's like, no, I'm not. Like, you're, you are in a cult. That's what it is you are is like you are in a death cult and you want America to die. And there's a bunch of countries in the Middle East that would, you know, they won't take you, but they're your people basically, you know, in that way. And I just feel very strongly about the, the idea of waking up every day and rooting for your, your country, rooting for yourself and wanting it to be better, accepting it. For its flaws, and we could do better, you know, in many ways. And we have done better. If you, if you look at the country, you know, our country in the '50s and where we are now, we've improved in so many different areas. And capitalism, although not always fair, and there, there are issues with capitalism that we could address, is the best system by far. The most innovation, the, you know, the, the most progress comes out of this this system that we're running. You can't present something better than, than the system. And the same thing happened to me when I started fixing stores, right? As I would go in and you want to talk about getting better. And then they would just attack my character. They'd be like, oh, well, you're from California. Oh, you're young. What do you know? And, and it's just like, whoa, I thought I— hey, like, if we just did some simple things a little different, we'd have a much better outcome for you and for everybody. Like, this business would would thrive. Like you would be a hero. You would absolutely be a hero, but you want to, you want to hate you. You hate yourself. If you're working in a business and you don't think it can be better and you can't look at it for what it is and be honest about it. And your only option is to attack somebody's character that is positive and wants to make it better. You know, it's, it's a, it's a chase to the bottom. It's an odd thing that has never made any sense to me. But, you know, I mean, I, I started fixing stores, I was 24. So you imagine me going into an apartment and the— you got the 50-year-old service manager with the bottle of whiskey in his drawer and a stack of ROs hidden in the ceiling that he can't get claimed under warranty. And I'm in there talking about, you know, how we bring in more traffic, add some tax, and like we could put a real system in place. And what do you know? You're from California and it's like you don't understand. People are different here. And it's like, really?

Are they?

No, Chris, he's just—

he's just like, I need a bigger bottle and I need more ceiling tile to hold up the arrows.

I'm pretty sure people like everywhere just want to be, you know, validated and recognized. They want to be treated like they, they mean something. Like, that's at the core of human nature, is to want to, you know, matter. And then, uh, they want a fair deal. They want to feel like whatever it is they're doing was worth what they pay. Um, it's— the bar is low. It's not hard to exceed that. Yeah, but, oh, you're from California, you, you, you know, you don't know what you're doing. You're young, you're a kid, you're this, you're that. It's like, okay, I guess, but you don't want to talk about the real thing that's going on.

Yeah, yeah. And it's interesting you tie it to like, um, you know, them, them hating themselves. Like, it, it's, uh, it's kind of funny and it sounds extreme, but it couldn't be more true. One of, one of my favorite, uh, quotes from, uh, The Six Pillars of Self-Esteem, a book we we did— the coaches did a book report on, um, is, uh, he, he says in there, um, uh, the human being's the only creature on Earth that finds out what is good for it and then goes and does the opposite thing.

Yeah, so good.

You're presented with information that you know, and by definition, like, it's not a feeling, it's not an emotion, it's just the fact that if you want to put up enough walls against that thing and you can go about that. The human mind goes about that in a lot of different ways. But yeah, it's an odd thing where in our world, we just, we view everything as criticism instead of strategy where like, it doesn't, it doesn't have to be that way.

Yeah.

Yeah. Well, your body rewards you, right? Like if you, if you file it in here in one of these buckets, that, hey, this guy has a funny beard and he's from California. Your, your body rewards you with that and there's finality to it. And then you, you know, whoa, whoa, whoa, funny beard.

I was like, I've got— did I say that out loud? There's a beard. If there's a beard contest, I think I would win 9 out of 10 times. Like, please show me the person who has a better beard No, I'm kidding. No, I knew that one would stick. No. And when you meet these people that hate themselves, that are so negative and so like anti-whatever, you know, it is, and they're in that cult, the thing that they need more than anything is a hug. They need to be told it's okay because, you know, and we talk about this in the leadership training, is when you externalize control to else, to a— when you relinquish control for your life to a higher power like the government, God, fate, luck, whatever it is, the path is fatalism because you have no control or say over your life. And until you take responsibility for your life, you take responsibility for what happens to you. You know, if you, if, if you don't like the weather, then move. Like you ultimately, your decide, your indifference is still a decision. And the people that externalize control and blame, you know, it's, oh, I just have bad luck, or it's the government's fault. You know, those people end up acquiring a fatalistic point of view on life because that's the only perspective you can have if you have no control or say over the outcome. Yeah, it's, you know, it's— they need a hug. It really, at the end of the day, that's what they need is they need a hug and they need to be told it's okay. And you got— you gotta, in, you know, unindoctrinate them in the— in this cult. Things are just way more simpler and it's not— it's not so linear, you know.

Yeah, well said. Well said, for sure.

Wow. What did you— what did you say about my beard? The weird beard? Funny. Funny. Funny beard. Funny. I wish I could do that Joe Pesci from Casino. Funny. I'm funny. How am I funny?

I'm funny to you.

Oh, it's so good. It's great. Well, thanks, you guys, for hanging out with us and letting us talk. It was good. Don't forget, if you're not signed up for SDR Live, We're going to be starting that here at the beginning of June. Make sure you sign up. We've priced it so anybody can afford it. You're worth investing in and learning. And we will unveil a lot of these secrets that our industry has kept behind closed doors that will be your superpower. They will, they will help you find the leverage. So we'll see you next time on Service Drive Revolution. Thanks so much for watching this episode of Service Drive Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 833-ASK-SDR and we'll answer your question on the show. That's 833-ASK-SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com. Now that's offers. Chriscollinsinc.com. I'm Chris Collins, and I'll see you in the next video.