#14 - 20 Group takeaways

Hey, guys. Welcome to the Independent Dealer Podcast here with Jeff and Luke. We appreciate you guys. We appreciate the growth of the podcast. We have been growing pretty substantially too. I mean, it's really exceeded like anything we thought it would do. So really, thank you very much. If you haven't told your friend, your neighbor, any other dealer that you know, your sales manager, your gm, let them know about the podcast and all the great information you're learning here. Be sure you're subscribing. And also we would love a review, Luke. Wouldn't we love a review, man?

I love five star reviews, baby.

Yeah. Awesome. What are we going to cover today, Luke?

So we're going to talk about what we took back from our 20 group we had last week. Hopefully all y' all listen to the awesome podcast we had with Chuck Bonanno. But what we're going to cover is what I got back in house approvals. Why were we conditioning so many apps what to do to fix that. Also an exercise we had on static pools is and how to really dig into rate of return and things like this. So we know that we're making money in the car business. And the last thing is, Jeff, it's one of your topics, man. Target Facebook ads. How can we target better to make sure we get the customers we want, man?

I am super, definitely anyone who knows me knows I'm passionate about, you know, the Facebook and Instagram and targeting your ads and the new media, getting your money out of it. So let's do this. All right. Welcome to the Independent Dealer podcast, the podcast for auto dealers to learn and grow together. Here you, your hosts, Luke Godwin and Jeff Watson. Okay, awesome. So we are going to talk about our 20 group notes from last week. Luke, give us a little bit of an update so people that don't know what a 20 group is or what we did last weekend, so they can kind of know, what are these things? Why do we do them?

So Jeff and I are members of NIADA Dealer 20 group. And Dealer 20 groups have been around forever, probably not ever, but for a long time. And the concept is to get 20 like size dealers in different markets. And you come together three times a year at a designated area and you discuss, you know, the different topics that need to be discussed within the industry. And every month you submit your numbers to the moderator and they compile a composite book of all your numbers so you can see how you're doing related to the other people in your group.

Awesome. And there are a couple different companies that formally set these up. Right.

Yeah. Yeah. So you Nada has it for new car stores, Niada for used car. And then there's. There's service groups, and there's also. There's another group out there, and I.

Can'T remember the name or something, I think.

Yeah. And I'm not even sure how big they are anymore.

Yeah, yeah. So there's a handful and then there's some informal ones. Right. I mean, there's informal 20 groups. Yeah. And the whole concept, like we talked about in our last episode, if you didn't listen to our previous episode, I think it was episode 13 with Chuck. He explained a little bit about why it's important to get formal training and not just talk to the guy down the street or the guy at the auction.

Yeah. You know, it's several takeaways, Jeff, you know, for me, that really matter in today's, you know, today's market. It's easy to talk to everybody at the auction. And if everybody's doing bad at the auction and you're doing bad, you're like, oh, okay, just. I'm just normal, right?

Yeah.

What if someone at auction is talking to you and they're doing great and you're like, oh, man, what's. What's wrong with me? You know? Well, the great thing about a 20 group is, you know, their numbers. If they're being truthful on their numbers, you know what they're talking about. And, you know, you do get some liars in 20 group, but I don't think that's. That's not the normal. But, you know, when you go to auction, this guy said, man, I'm selling 100 cars a month, and you had a bad month, it might make you feel bad, right?

Yeah.

But if you rely on the people that are your brothers inside the 20 group and that you see their numbers, you get a real feel for what's going on in the economy or in our market.

And the beauty is they're not your direct competitors. That's the beauty of the used car industry as it sits today. We are, you know, you're essentially geographically landlocked. You know, it's not like some of these other businesses where you can ship or it's a digital product. The beauty of the car. Used car industry is, yeah, I'm not competing with Luke. I can share with him all of my best tips, tricks, secrets, ideas. Show him my numbers, open my books to him, get feedback from him, and I don't have to worry about it hurting my sales. Whereas the guy at the auction, you want to feed them counter information. And that's something I've always done. I mean, I don't know truthful or honest or not, but even my sales guy, I tell them, if you ever talk to another salesman or dealership or anything, always tell them that things are bad. I say, always tell them that it's slow because it's either gonna a make them complacent and think, oh, yeah, well, you know, Jeff, in Four Seasons, they're struggling too. So it's okay that I only sold 20. I just want to lull them into a sense security. Because when I hear that the dealer down the street is doing amazing, man, I friggin kicking in high gear and I double down.

You know, that's funny, Jeff. You know, I had that thought process for a long time, but, you know, I'm always trying to be honest with people at the auction and other dealers. I mean, and I mean, hey, you're doing podcasts, you're involved in the dealer community, you want to help the other guy. But yeah, within your community, it's a little hard to give all the time the truthful story. But what I, you know, what I do is I tell people, hey, this is what we're doing. And if you have a question, if you want to do it, you know, if you want to figure out how we're doing it to a certain degree, I'll tell people at the auction. But that's what's great about 20 group. You get to really, you know, pull the towel off and tell people what you're really doing and try to make yourself better.

So, Luke, share with us, if you will, what are some of the key takeaways you had from last week? Maybe two or three top action items that you came back into your dealership and you just hit it ground running.

Man, I tell you, a big one. Number one was, why have we not sold more cars this year? We were expecting a 10% bump from previous year, and we were essentially dead. Even so, being at 20 Group, talking to people, talking to all y', all, I was like, you know, what's going on? What's going on? And it made us realize something. And Alexa may have been the one to figure it out when we were there, but. Well, actually, Chuck probably hit on it more than anybody, but problem we were having, we were letting too many people walk out the door, and we were not letting someone else look at the grading system before we turn them down or conditioned them. And so what we did when we came back is we made a rule where if you're gonna, if, if you're gonna turn someone down or if you're gonna condition them, someone else other than the person trying to sell the car needs to look at it. So if that's me, which for the last week it's been me, I wanted to see every, every deal that we had. Yeah, it was me. Or it could be, you know, the, the quasi finance manager or the other sales salesperson to look at it. I can tell you this. We say five deals since, since 20 grit.

Oh, really?

Five deals?

So who was conditioning them before? So we're turning them down.

I'm set up a little differently. So my, my salespeople go from, from up to, to close. Okay. They use a grading scale that I built to grade the customers. And what I think was happening is we, I mean, we harp on trying to get the right customer all the time. And maybe I got them a little scared to finance some people.

Yeah, yeah, yeah, yeah. Got them gun shy.

Got them gun shy. And so what I think happened is, you know, sometimes when you get in a bad mood, you grade someone maybe harsher than you should and you don't look at the full picture. But it's all subjective also. I mean, some things can be subjective. You may have a person that one salesperson grades as a 10 in a certain category and the next person may grade them as a seven. So, you know, you do a couple like that. Next thing you know, if it's a, you know, a 10, 10 tier grade, it changes the customer's grade 20 to 30 points.

Yep.

And that's the difference in finance and so on and not. So that's the one thing that, you know and I, you know, just like we talked about, what's the one thing that's gonna make you the money for what you're spending to go to 20 group? And it did it.

That was it right there.

It's right there. We didn't have to increase any expense to figure that out. We just had to have the people sitting in that room tell us what they were doing and what we might be doing wrong.

So that brings up two points that make me think, first off, you know, what is it that triggers that to say, hey, something in my operation is maybe a little bit out of whack. And what I'm driving at is sometimes people just say, well, what were your sales last month? Or what do you spend per dollar? Or how many apps did you have? Or, you know what I'm saying, when we are always qualifying things by dollars, even within our 20 group or within our group of peers of friends. It's never apples to apples because Luke's operation is a different size than Jeff's operation. So when Luke says, hey, you know, I only sold 30 cars last month, and it was, you know, not a good month for me. And I look at that and I say, well, maybe if I sold 30 cars, it could be an amazing month for me. If you say, hey, I looked at 200 applications and I only sold 20 cars, you know, you have to. You have to look at the ratios. What are the ratios? You know, per sale, not as an aggregate. So maybe you looked at that and you said, hey, Yeah, I got 200 apps, but I only delivered 20 cars. Well, maybe you're getting a little too. You know, maybe your underwriting is too strict.

That's exactly what happened, Jeff. So what I saw was our Internet ups compared to our Internet ups in February of 19, say, was 200 Internet ups.

Okay.

And we had 127 people step on the lot.

Mm.

Well, we keep seeing that within. That UPS are outrunning the lot ups. But I said, man, that's an awful big number to only deliver 33 cars. So what's going on here? And when you track your credit apps and you track your approves and you track your conditions, I saw that my conditional UPS was a huge number. Yeah, a huge number. And I said, hold on. You know, we're conditioning some people who probably should be buying cars from us, and we need to take those conditioned apps and transfer them into car sold. And I don't. And I don't think it's going to affect our. I don't think it's going to really affect our quality of customer and our repo rate.

Yeah, yeah. And you look at that, and some people would, at a first glance, say, well, just getting crappier applications. It's the market. It's that or the other. But until you dig deep into some sample applications, like you did, and you found out that you were grooming people that you probably shouldn't have been because of the stringent underwriting, now you get into it and say, wait a minute. You know, I'm pushing money off the lot here for no, no good reason.

100%. It's. That's exactly what happened. So what we did is Lexa, when she came back, she pulled some applications that we. That we had turned. That we had conditioned and turned down, and we let the other sales staff grade them, and we saw swings of 10 and 20 points right off the bat.

Yeah.

So we Knew right then that there was an issue.

Could have rolled a car. Great. I like that. I like that a lot. Make sure you are comparing apples to apples when you're diagnosing or getting into the nitty gritty of your business. And all of this really harks back to tracking. If you weren't tracking your applications, if you weren't tracking your turndowns and your approvals and your conditions and those types of things, you would never know this. You would never be able to look back. So you got to track it.

Our friend Tracy Myers told me years ago, I was sitting in a meeting with them and I tracy, how do I sell more cars? You know, and this is. I mean, I was green to it. And Tracy said, well, how many people are coming in your lot? And I said, I don't know. He said, well, I don't know. I don't know how to fix your problem, Luke, if you don't know what your problem is. And that's where, you know, we started tracking daily ups. We started tracking everything else. And once you do that, you can. You can fine tune it to make it work.

Yeah, yeah. Your house is flooding, all right. Where's the water coming from? You know, I don't know. Could be your roof, could be your plumbing, could be your sewer, you know? Yeah, yeah. You've got to know where that's coming. All right, Luke, take us to your second takeaway from last week.

So another takeaway was actually a homework assignment that they got us to do that I thought was. Was very interesting. And a lot of this stuff, of course, with our 20 groups gonna deal with buy here, pay here, but I think it can. You know, doing homework is not the end of the world for anybody to do. You know, when we did, Chuck got us to do how much do we really collect? You know, so it was a very good exercise in looking at back at the past. And I think we use March 2015, look at the amount of loans we originated, what we should have collected versus what we did collect, you know, how many charge offs did we have during that time? And what was the percentage, you know, of the whole net that we collected? How much money are we actually making on those deals we're putting out there? And what that did to me just kind of. I think his exercise was to make sure we were doing our job right. But also, in case you ever got into a buying and you needed to sell your accounts or something, you know, what are your accounts really worth? And just doing that exercise was really awesome, honestly. And so it made me think, hey, you know what? I probably need to do this. Need to track something like this monthly and go back and really dive into two months, you know, three and four years ago. How many cars did we sell? You know, what was the difference we were doing then compared to now? And if we had a good month, what were the underwriting criteria for that month? What cars did we sell? I think it's just something we can use to have more data. I mean, data's king.

Right.

So our data is even more valuable. So I think doing exercises like that is something I really enjoy in 20 group, and I think that it's something I'm going to really spend some time working on.

Yeah. In order to do something like that, like a static pool, you do need to have the information. And I think a lot of dealers, maybe they haven't been using a DMS or dealer management software. Either they don't have that kind of historical data in their system or they switched and they lost it. So doing that by hand is daunting tasks to say, like no one's gonna go through three years ago and look at every car they sold and track it through the history of the loan to see what they really made. Right. But if you have the right DMS and you've got the history in there, it should be a quick button, couple of little reports, and you can see, hey, you know, I'm cash in deal. This, my total face value of contract was X. I actually collected Y of after repo and disposal of the asset. What is my actual cash on cash return over the life of that section of loans? Some of them might still be in play. Some of them, you know, if you go back far enough, hopefully they're all, you know, termed out or expired. But that's really where you get an apples to apples. And I use that term too much. But comparison to what is my actual return on investment here, I think that's one thing that I have a little bit of a problem because in any, every other business that I run, it is, what is my cash return? What is my annual cash return? If I put 100 grand into a student housing complex, what am I getting back annually in that? And for some reason in the car business, or at least what I've experienced in my buy here pay here operations, that's. That's not always a number that we pay a lot of attention to.

You know, the one number that everybody pays attention to in the car business. Right.

Which one?

How many cars you sell last month?

Yeah.

You know, such A horrible way to look at it.

Exactly. I wanted to talk about that, too. When you're. Don't compare yourself to other people. I see people in the forum saying, I had a record month. I had a record month. I sold a ton of cars. I sold a ton of cars. Yeah, but that doesn't matter, man. I could sell. I could sell a hundred cars this month in April, and that would triple my volume. It doesn't mean I'm gonna make any money.

You might. You might lose your money. You might.

I could put myself out of business this month and sell a record number of vehicles. So it's just ridiculous, man. You guys, we've got to get away from that nonsense of how many did you sell? It doesn't matter. If you grossed a dollar on each one, then. Then you're out of business the next month.

That's, you know, that's why it's so important to be in 20 groups and things like this, because you make sure that you're doing business the right way and not just flinging spaghetti against the wall and see what's sticking.

Yeah, that's true. Because how long does it take you to figure out if that spaghetti is not good? It takes you a while, man. And that's when I got into the business. I was buying notes, just buying paper from random dealerships. And it took me, you know, three, four years to realize that that was a really bad idea. I took it. I took my lumps.

You know, Jeff, what's a good return on investment in our business, you think year over year?

Yeah, I wish I knew. Honestly, I wish I had a solid answer that you've got to get at least, I would think a 15. And that would be on the low side, because you're comparing that to any other option out there where I can take a million dollars, I can leverage that at 80% or 75% if it's commercial loan, I can go buy a commercial property or multifamily leverage it with the bank, and then I'm getting a 12% return if I'm finding something respectable. And that's it. That's a cash on cash. That doesn't account for my internal rate of return, because then I've got depreciation and appreciation and some other things that real estate gives you. But. So, yeah, ultimately, I think 15 would have to be the minimum, having done that exercise. Yeah, I was. That little section that I took From March of 2015, it was way, way more than that. I think I was at, like, 115%, because it was like a rock star group of loans that I had.

Yep.

So that makes me a little more excited.

I think. I think when Dave Keller and I look at that a few years ago, we were, we were in the 20s on doing that, which I was, he thought it was good, you know, not as, not as good as it could be. And I think that has to do with the price car we sell.

Yeah. Oh, for sure. You seen your numbers? No, you will not have that kind of return because you're giving cars away.

Well, I just, you know, I just like to take care of my customers, man.

But the way I look at it from a simple standpoint, when I try to explain this thing to people that are close to me, I say, hey, look, you know what I charge, There's a buy here, pay here. I charge, you know, 24.9 for my interest and that basically covers my bad debt. After that, I'm hoping to get cost times two on my car. So I'm essentially doubling my money on the sale of the vehicle. And if I have an average of a three year loan, then that means a 33% return minus overhead and expenses. So, yeah, probably somewhere in the 20s, I imagine.

So I guess looking at yours right here, it looks like you're about 35% maybe on that, that month.

35%.

135%, which would be.

Oh yeah. And if you divide that by the price, I mean, here's the thing, it's not a straight three year investment because those things are amortized and so they're paying out as it goes. My cash went in somewhere else again. So yeah, if you took the 133 and divide that, I mean that's, that's, again, that was a rock star group.

Loans, but yeah, anyway, that's, it's a great, it's something every buy here, pay here dealer needs to be doing. You know, whether you have a DMS or not, you need to figure out a way to make sure you're figuring out how much return on investment you're getting.

Mm. Yeah. Yeah, we don't need to go down. We can do a whole episode on that, on that one. So give me, give us one more good takeaway you had from last, last week.

Again, I think it was something you, you talked about and we talked about every week, but it's how to really target your Facebook ad campaign or your Google Ad campaign, whatever digital platform you use. But how, you know, we all know that we can dial it in to what we, what we're looking for. But if we can just make it, you know, if we can use certain ads to target. I think you were talking about where someone works or, you know, whatever. Where. Whatever you want to use to really target those people. We can do it now. And that's. I knew we could do it, but never thought about actually making it happen, you know?

Yeah. And to Luke's point, you've got to a. The Facebook platform, Facebook itself. I mean, from my feeling, we're probably coming down the tail side of Facebook's glory days. Right. That's just my vibe from the customers that the people that are using it that's gonna hopefully transition over to Instagram, which is probably at its peak right now. So you got to learn how to use that. But even within both those platforms, the Facebook corporation allows you to target people specifically based on interest, based on employment, based on language, based on these things. So what you're trying to do is cut through the noise, just being another ad in their newsfeed. You know, it's just a general ad. If you look through your newsfeed and you look at all the sponsored posts, you're getting those because of what you've clicked on or who you are or where you work, or I can't tell you how many car software ads I get. And, you know, associations and conferences and those things are. I mean, that's not what my wife's getting in her feed. So these guys are targeting us. So what we need to do is we need to cut through that. And, hey, Luke, did you know that we sell cars to people named Luke? You know what I'm saying? You get a Luke discount when you buy from Godwin Motors, you know, like. And so the employees of. Is a campaign that I've really liked where I target the big employers in town, you know, Walmart and some of the other employers, and I say, hey, Walmart employees discount at Four Seasons Auto. You know, and it kind of speaks directly through them. And the idea is that you're cutting through the noise to catch their attention. You know, what's.

Yeah. What's great about that? And I don't know if you've seen it, Jeff, but I know there are certain employees of certain companies in my town, in my community, that if I sell them a car, they're going to pay for there, because that employer only hires the best of the best.

Yep.

And so I know that when I. If I target that employer.

Mm.

Then we are gonna sell cars, we're gonna have great loans, and, man, it just really. I loved it. I love.

Yep. Yeah, there's some big employers, you know, that once they get their foot in the door at that company, they are sticking around. It's not a high turnover, you know, and so, so yeah, those, those leads or those sales are probably worth a lot more. And beauty is too, when you get in the door. And some of those, that person refers to their friends.

Yep, that's right.

Oh, man. So one thing along those lines that I did on the flight home was I built out a little chatbot on Facebook and that's been a lot of fun to play with the last little while. And maybe we'll do a webinar or something and show people the basics how to build their own. But basically it's just kind of a fun, engaging funnel that I can direct my Facebook traffic or ads to. That's non threatening. Sometimes people don't want to fill out an app or they don't want to call you, or they don't want to come into the lot yet. But if you can get them to go down a fun multiple choice route through Facebook messenger, it kind of opens up that door and you get some personal information from them, you maybe build some rapport with them. So it's been really fun. I'm excited to report back after I've had it run for a few more weeks to tell you guys what the stats are on those. Maybe it's the way things are going, maybe it's going to have a short life and people, you know, you know, don't want to interact with automated systems or bots. But I'll let you know, it's the future.

So I mean, people may not want to do it, but it's, that's what's going to happen. So I think what you were, what you were talking about and showing us is perfect. I mean, that's, that's the way of the future. So just get on the bus.

Yeah. I don't think that you can go wrong testing these things. You got to get into as many as you can to figure out what works, right?

Yep.

And, and, and you, we look on your return on investment and some people say, well, I don't, you know, I don't want to spend money here, there, the other, because it's not doing me any good. And again, it comes back to our very first point. You got to be tracking it.

You got to track it, man. You can't say if something's working if you're not tracking it. Mm.

Any other words of wisdom, Luke? You got for us, guys?

Just keep grinding this time of the year. It's hard to buy cars. It's hard to. To get things done that you need to get done. But just stick to your principles. Research your cars. You know, do what you always do. Don't press too hard to do things that you're not. You're not used to, because that can cause you trouble.

Excellent. All right, Thanks a lot. Thank you for listening to the Independent Dealer podcast. Remember, tell a friend, subscribe and leave us a review. We want to make sure you guys are aware we are not professionals. This is not legal advice. This is not accounting advice. Please consult a professional before you implement or change anything in your dealership.