#144 Crafting A Pay Plan For Salesmen w/ Marshall Zoerner

Good morning, everyone. We have a really special episode today. We've had a lot of people reach out going, y' all need to have someone on or y' all need to discuss pay plans. And so I went to the. To the source of my pay plan, Marshall Zollner. Thanks for being here, Marshall.

Hey, thanks for having me.

We go over a lot of great stuff today. I mean, we talk about, you know, setting up a pay plan, setting up the expectation, the tasks. We talk about different ways to spiff f and I and salesman and not to be afraid to change your plan if you need to or put in a new one within certain reasons. Right, guys?

But don't change it all the time.

Yeah, don't change it all the time. Hopefully my voice sounds better than last week. And before we jump into the episode, I want to thank everyone for the Google reviews or the itunes reviews, all the reviews that you guys give us. You're not going to get spiffed on Google reviews for the podcast, but you will if you get spiffed for selling a car. But so keep it up. Share this with your friends. And here we go.

You are listening to the independent dealer podcast with hosts Luke Godwin and Jeff Watson. Thank you so much for tuning in. Let's do this.

All right, Marshall, of course. Thank you again for joining us. Let's get into it real quick. For those of the listeners who don't know who you are and haven't listened to your episode, I think it was clear.

Clear the beginning several episodes.

Yeah, Marshall is definitely a friend of the show. Give us a real quick introduction to yourself.

Okay. My name is Marshall and I have a dealership in Portland, Oregon. Actually, we have a couple of them. We have everything from sales to service to auto body. And we have about. Right now, Covid staff is about 60 people. And so we have a good sales staff, good F and I staff, and good service staff.

The reason I bring Marshall in on something like this because I may seem really smart to the listeners out there. Maybe not, Jeff. I don't know. But a lot of the things I've learned come from Marshall. And Marshall has created processes at their stores in Oregon that are just. I mean, they're right on, you know, and it's helped me to make our dealership run better. So when we've got a very specific topic like we've got today and pay plans, I think it's really important to bring someone in who's developed pay plans at a different level compared to what, you know, I've created at my Level. And the ones I have honestly are stolen from what he did, but applied to buy here, pay here store. So anyway, with that being said, because Marshall is retail, not buy here, pay here. But that being said, I came up y' all with five primary keys to building an effective pay plan. And we're going to go through these, then we're going to talk about how to implement them into a sales staff pay plan. So, number one, y' all is pretty important. How much should that position earn, don't you think?

Yeah, yeah. And Luke, I can touch on that a little bit. I mean, if you don't have, what should that pay plan earn? Ultimately, you're going to be negotiating that a lot for a long period of time. And the nice part is, I mean, I think most of us have been in business a of lot long enough to go we know what a salesperson's capable of, and so we know what we think they should sell. And sometimes we also fall into the trap of what we sell they should be able to sell. Yeah, like if you can sell 20 cars, Luke, of course you can. But can somebody below you sell 20 cars? Right.

And, you know, I think this is pretty consistent across the country, what a 15 car a month guy should earn compared to a 20 car month, you know, and I think we can. We can kind of get that. So, Marshall, in your area on the northwest, what should a 15 car a month person make?

15 cars makes about $7,000 a month.

7,000Amonth.

We have a few tier. He's just gonna divide it by looking good money.

466 a car.

Okay. Yeah, well, and then we have a bunch of bonuses and stuff. And I'm sure we'll get into it. But if you're. We have a couple tiers figures. 15 is that tier 17 bumps you up, you know, should be about 8. And then if you're a 20 car person, you should be making 10 grand a month.

I agree. And that's if you look across the board, even at new car stores, and it might be a little bit more. But if you're selling 20amonth, it's 10 grand. And y' all need to think about that when you're looking at your pay plans.

Can I jump in here, Luke? And it's gonna lead you into your second point, though. I think it's so hard for us dealers to just be like, oh, what's your pay plan? What's your pay plan? It's never apples to apples, right? Because a buy here, pay here salesman that also has a BDC department who also has a desker and also has a service writer is gonna have way, way, way less responsibilities and tasks than the three man shop that is doing everything from posting to the Internet and cleaning it and scraping snow and, you know, dealing with heat cases afterwards. So I think we have to like, you know, you gotta obviously put context as to what the responsibilities are gonna be.

And Marshall, Marcia, y' all do not have a bdc, correct? They handle leads from cradle to grave, correct?

Yes, but they don't handle. We have an F and I department, Right, Right.

Okay. So they're gonna work the leads and they're gonna sell the car and then they're gonna take it to F and I from that point, right?

Correct.

So my 15 month person does not make $84,000 a year. Okay. It's not going to happen. I'm a buy here, pay your store. It's not as hard to sell the car on the front end. It's just harder to collect it on the back end. So this will, you know, this will move, I think in the buy here, pay here, you know, spear that someone should make probably 60 grand a year if they're selling 15 cars a month. That's my opinion. We do not have a bdc. So just put that out there. If you do have a bdc, I think it gets lower because you've got to cut, you've got to cut your BDC staff in on some of that. Yep.

So is there a round number you would say? I mean, maybe this is getting way too far ahead of ourselves, but is there a dollar amount where you say from, from start to finish, I should be paying X amount in compensation to my bdc, to my salesman, to my finance manager. Is there like an all in number that we can find somewhere to say? However, I'm going to divide up these responsibilities, whether it's three people doing all these tasks or whether I have one salesman doing it start to finish, I'm going to pay what, 500, $600 to sell a car in commissions?

It'd be a percentage of gross, right, Marshall?

Yeah, always.

Right.

Well, I mean, something I was taught a while ago. Between your F and I and your sales staff and whatever falls in that bucket there, it's about 30% of your gross, right?

30% of your gross on the sale of that car or just as a general, as general rule of thumb for the month.

Correct. So I take my, I take my sales department gross and I look at that and I divide it by 30%. I go, I'm Falling within line.

And just since we're talking about that gross, how much of your overhead should be within that gross to Marshall?

How much of your overhead?

How much is overhead inside the. So you've got 30% that goes to sales staff. What's the overhead percentage of the gross?

You mean as far as expenses go, like, what should your total overall expenses be?

Yeah, you know that number.

I don't. I mean, I know that you should. I know that you should probably be making, you know, you should somewhere between 20 and 30% of net.

Right.

Should be net.

Right. So another 30%, probably 30 to 35% falls in.

Yeah, you could probably do 30.

30.

30, right.

Yeah.

Yeah. I mean, there's a. I have a. We have a list of metrics and you can get. If you do all of the metrics, like, you know, your rent should be about 8%. You know, there's all. If you add up all those percentages, it's not going to be a perfect box that you fit in. See, I use all these percentages as guidelines and go, man, If I'm running 40%, I'm way out of line. If I'm running 20%, I'm probably cheap. I'm probably getting my staff for too cheap. Right. And that I don't have enough staff.

That 30% is not going to include your support staff. Right. That's not going to include your receptionist and your social media girl and Luke's heavy salary. Right. Those are going to be outside. 30% is just sales and f and I salaries and commissions to sell.

Sell the car. That's it.

Sales and f and I. But I mean, if you have a collections department, you might throw it in there. One thing you also, again, when you're looking at metrics, or I try to remind people when they're looking at metrics, like when you say a social media person, there's not. There's not this metric for that person. So they have to fit into.

Well, they would fit in.

I put, like, for instance, for us, we put the people that go into that category are sales. F and I. And I put our buyers in that category. Interesting. Because they're related to sales.

Yeah.

Yeah, it's a good idea. All right, go ahead, Luke. What do you got? Number two.

I was going number two. And you know, this is really important too. What do you want that employee to come to accomplish? Because building a pay plan should go into. You should shape the pay plan to make sure to lead, you know, to lead them down a path. And so you've got to make sure that that pay plan is built to make sure they accomplish their goal. Right, Marshall?

Yeah. So one of the things that we do with almost all of our positions, and I think I may have mentioned this in the past, but specifically with our sales staff, we took everything we want them to do because, you know, we get a lot of people go, oh, how do you make, get them to make phone calls? And how do you get them to, you know, make. Make sure they help a customer? And some of these things that seem pretty obvious to a salesperson that you want to be aggressive and do all their work, but how do you make sure they input stuff into their CRM? I get that complaint a lot. Well, they just don't use their CRM properly. And how do you get them to come to work on time? Whatever. Like the simplest thing of coming to work on time, entering stuff in their CRM and making those 30 phone calls, we. That's part of their job, and it has to be part of their pay plan. And so whatever, you know, maybe for instance, with our guys, they get 250 a car. They have a bonus plan in place that they can get a percentage of F and I if they, if they accomplish these tasks. So basically every day they come in, they do these tasks, they get a green light for the day. If they get a, if they don't do one of those tasks, they get a red light and they lose, they lose part of that bonus. So if you want them to do their job, just put some sort of bonus plan incentive place. Say, this is for you doing your job. Every time you don't do your job, you're five minutes late to work, it's, you know, a percentage off that you don't get anymore.

And that's huge. In any position, sales position, collections position, whatever, you've got to make sure that your pay plan pushes them to do their job as we intended their job to be done. I mean, it's just that simple.

Where's the balance between. Sorry, go ahead, Marshall.

I was going to say, for our F and I positioned, we're very big into menus, you know, letting every customer know that, you know, selling 100% of the product 100% of the time, 100% of our customers, they have to, you know, if we don't do a menu and they're like, well, I'm really good at selling service contracts without a menu. I go, but I have four other things in that menu that have to be presented to them. And I don't want to Be pushy. But if I get a complaint later saying, oh, that was never offered to me. You know, when they're saying, you know, my paint's peeling or something, and I go, well, we have a ceramic coating. We sell and they're going to. Well, that was never offered to me. Well, that needs to be offered 100% of the time. So if a menu is not in my finance manager's folder or the packet when it's all done, that can also earn yourself a red light.

I was just saying, Luke, where's the balance between having to incentivize every task to get it done and just saying, hey, man, that's part of my job description. Like, you get here on time, and if you're not here on time, you're not working here anymore.

It's just gotta be defined. That's right. It's. Everything has to be defined, right, Marshall? If it's not.

But do we have to compensate it? All right, does it all. You'd be tied to a bonus.

But listen to what Marshall said. It's not that he's compensating everybody for doing their job. It's the. If they don't hit certain metrics, they get uncompensated. So they start loser.

I'm just not going to account for that into my pay plan. I'm not going to show up on time. I missed out on that day or this day, I guess.

That's a valid point, Jeff. That is a valid point. It's like the. The way Luke and I are looking is it's a part of their pay plan. It's something for them to lose. It's not something extra. And the problem is you do run into what you're talking about. You get this complacency in some of these people, and especially late. I don't know what's going on. They see this pay plan down the road where somebody else is going, I'm going to pay you X. And they're going, well, that's more. Because I lose my bonus every month because I can't get to work on time, and I can't seem to do my job. So I'm losing portions of this bonus. And all of a sudden I'm making 35 to $404,000 a month, you know, and they're going, some guy down the street's going to pay me $400 a car. So I'm going there, let them go. No accountability. But they're going to hate it. So you just have to establish who you are.

Right. Yeah.

I stick with that and have everybody. Hopefully, you know, that's not the culture you're producing.

No. And that's, that's. I mean, we talk about culture so much, Jeff. And we were. We were in a 20 group back last month and we were talking about. I got think it came up how some people were having a real difficult time hiring and keeping and it's all about culture. If you let things like this pervade and just sit there and eat at your dealership because your. Your culture is so bad, you're gonna fail either way. So when people start not showing up for work, they're gonna fire themselves under our pay plans. Right, Marshall? Or you're gonna have to fire them. So I would much rather somebody fire themselves than me. Had to.

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Yep.

Yeah.

And that leads to your third point, Luke, where you talk about what is the most important thing in that sales position. Right. What is their ultimate goal? And what are those key metrics you really going to hold them accountable to?

That's right. What's important to my business from that position. Right. And. And we can talk about all. All the things that are. But it's different for every dealership. You know what? My. My collector comes in late most every day and I've tried to fix that problem and there's nothing I can do to fix it. But guess what? She doesn't use all her vacation days and she stays late a lot. So what do I care that she comes in 15 minutes late? No, not really. So you got to figure out what's really, really, really important.

I have somebody like that Luke in our department. It's not in the sales. They're in the contracts department. And they're late every day. And it sends kind of a bad message to you, the rest of the staff. But it's in her pay plan. So you can fix this with anybody. If you pay somebody, you know, $15 an hour, and, you know, they want to. They want to make $15 an hour, that's what the position pays. We'll pay them $12 an hour, and they get $166 bonus or a $250 bonus for following these outlined rules. And one of which is coming to work on time. And every time they're late, they lose $25 of that. And then, I mean, whatever the number equates to. To get you to that 15, but you're paying a little bit less, and you're just showing them that in the bonus. So it's, again, not more money. It's just figuring out how to.

Yeah.

Where to place that incentive.

Right. And you gotta. And you gotta make sure what's important. Because getting to work on time may not be important to everybody, but it might be important to some people, like the Dave Anderson. Dave Anderson said, you know, somebody's late three times, they get fired no matter how great they are.

Did everybody that hears that just go, oh, I'm firing everybody?

Yeah, I'm gonna have no one here on Monday.

Oh, my gosh. Oh, my gosh.

What's interesting, though, I mean, sometimes I look at these pay plans that come out, and, you know, I've looked at some friends and some other dealers, and some of them get really confusing. I mean, there's like 15 ways for this salesman to get comped or not comped. And, you know, there. I think there's a fine line between what is having incentives and having these little line items for spiffs and aged units and hat tricks and fast start bonuses and slow start bonuses and king of the hill and bottom of the hill and all this nonsense.

But it's.

I think, to a degree, they're good because you're continually moving that mark. Right. Like this month, I really want to get out my aged units. Right. I really, really want to get them out of here because I plan on replacing them with cheaper cars. Right. Than the crap I bought three months ago that was all inflated. Or I'm really, really focused on getting Google reviews. So I really, really want to incentivize that for the next six months. And so I think if you have some of those little things, that you can change them. Every so often, salesmen don't get super, super complacent thinking that they're just going to be able to run the status quo. Right, Luke? They start to work the system, they're going to work your pay plan to maximize it. They've got to know that it's going to change every six months. I don't know, Marshall, is that good or bad?

Well, it's bad. I mean, anytime you change a pay plan, it's demotivating, you know, And I think one of that old adage is if you want to motivate your people, just remove the demotivators. And changing pay plans can be very demotivating. So, yeah, and I'm going to say we fell victim to it a lot, and we probably still do. It's something we have to just be very cognizant of and go, you know, what is this going to do? Even if it's for the better, we picture it for the better. It's still a change, and they don't like that. And I will say our pay plan is. I don't like the word convoluted, but it's got a lot in it. It's got a lot of meat in there. And if you just look at it, you would go, I don't know what I'm doing. It has to be walked through with the salesperson. But the reason why I, I have it the way that it is is it's designed to be worked. It's designed to be taken advantage of so that they can maximize their profits, what. What they can make, and it maximizes the profits for us.

So number four.

What's that? Let's just.

Number four is what are the ways employees can manipulate the plan? So let's. Let's go into how that works, Marshall. Cause that's what you're talking about.

You definitely want them to manipulate it. Cause they're going to. If they're a good enough salesperson, they're going to. The problem is some of us have like the, the old age bonuses. Well, you don't want them manipulating that pay plan. You're never gonna sell any of your new stuff. You're gonna sell your old stuff, and they're just gonna take them right to the old stuff or vice versa, the new stuff. I mean, if you have. If you have pay plans incentivized by certain inventory, I don't know that that is advantageous to you. Mine is pretty much across the board. I incentivize our guys with volume of inventory, how they take in trades. That's a huge one for me. So in relation to Kelley Blue Book, they get a certain dollar amount if it's under Kelley Blue Book Fair, right. At Kelley Blue Book Fair, a certain dollar amount above. And, man, I'll tell you what, I had a guy, one of I was pretty proud of him at the same time going, do I like this? I mean, I appraised a trade, and he comes in, he gets his trade spiff signed, and I go, hey, man, this. He gives me the Kelley Blue Book. And I go, it books for like $1,000 more than what you had before. He goes, oh, yeah, I didn't put all the options in. He goes, I just wanted to praise it. Initially, you gave me the value. Now I took the car in. Now I put all the options in. And he max his pay plan. And I was thinking, I don't hate that. I mean, he's working his pay plan. He's really trying to figure out how to make more money. And so that's really what you want out of your people.

Well, Marshall, how many trades did you miss? Because that guy doing that.

Oh, well, that brings up a different problem that you have to, you know, identify and go over and 100%, because then my screwings and you're low ball.

And all these customers.

Yeah. Missing them. And we always are evaluating, look to book. I mean, how many cars did we evaluate versus how many we took in? And you would look at that with that gentleman and go, oh, he appraised, you know, 10 cars and he took eight in. We're doing okay. Or appraised 10 and took two in. We're not doing okay. So something you have to look at, and everything needs a checks and balance. And that's usually why you have a sales manager to go through all that stuff.

Hopefully everybody out there listening what Marshall just talked about, when you have to make sure that if you're incentivizing somebody to do something, that you're studying your actual numbers of what's happening. Because if this particular Salesperson was the 2 to 10 ratio on trades, and as dealerships run at 6 to 10 ratio on trades, then we really have a problem. And so either we've got to reprimand the salesperson at that point with a different structure in that pay plan, or we've got to, you know, we've got to make sure that we're appraising the cars and he's not. Right.

Right.

Or something to that yeah.

Or I'm booking them out versus him. Yeah, that's right.

So the last thing. And I think it's. And we're gonna go through some of this a little more in depth, but what are some unintention, unintentional consequences of the plan? Because we all know that that happens. We may do something, and then something else happens. Do you have any feedback on that, Marshall?

A little bit of what we just stated. You know, I mean, your unintended consequences are one, not if you don't measure it and compare it to what your metrics are, then you could be missing out on sales. You could be incentivizing them to sell the wrong inventory. The other thing, too, is if you don't. If it's not explained properly. And this is a lot of just us, you know, we have a big training man. Excuse me, A big training manual that I've gone over with you guys before, and some of my staff has said, hey, if somebody else gets that, you know, that's. That's some proprietary information. And same thing with our pay plan. I go, it's. It needs explanation behind it, and if nobody explains it, then, you know, then it's really no good. I mean, I can. I think I threw Luke my pay plan a long time ago, and I was like, hey, do you have time for a phone call? Because it takes some explanation. But it doesn't just take an explanation the first time they get that pay plan. It takes an explanation every week, every pay period, every month. You got to go over that. And I've had to remind our guys, hey, you're not taking advantage of this part of your pay plan or this part of your pay plan, and then also at the beginning of the month and then reviewing it every week. And if you guys are really good, they will view it every day. What are their goals, and how is that aligning with their goals? You know, I mean, if you. If you get incentivized on trades, I mean, is that part of your goals that you set up at the beginning of the month? I want to appraise a certain amount of trades. So those are some of the things I think you can fall into if you don't. If you're not careful or not managing your business or managing your people.

Marshall, is your sales manager going to each salesperson at the beginning of each month and helping them with their goals, or is this something that they. They are submitting to you?

Oh, yeah, no, no, no.

They.

Well, I'll go over it with them, but yeah, they Go over their individual goals and they have to be realistic. They look at their 90 day averages and go, okay, I sell 17 cars a month, I'm going to try to get to 20 this month. But if they sell 12amonth and they say, I'm going to try to get to 20, that's where we kind of align them properly. And then we go over it every week. And actually something that, you know, Covid, when things got really crazy and we got had to like scale down our staff, that's one of the things that we actually threw out mistakenly, you know, just because we got so busy. And then we're sitting there one day going, man, why? Why did we not stop doing that? And you could see the effects of it. It was crazy. And we brought our books back where they track everything and, you know, monitor stuff and look at where they're at in relation to their goal and their sales manager looks at it and it was just, it was like revolutionary for us to go, this is so dumb that we stopped doing this. It's so important for them. It's important for our sales manager. It's important to productivity. One of the things I learned the most was don't stop doing your job during COVID It's easy to just like throw everything out the window and go, I'm too busy for it. And we fell victim to that too.

You're so right there. That's something that I've not done, is help salespeople set goals. And I'm actually writing myself a note right now to do that. Do you do that the first day of the month or the end of the previous month?

Okay, that's a good question. So we have two days. They have. The sales consultants have to put all their numbers together and come up with a game plan. It's a, it's a one pager. It's got about five different questions on how much you want to earn, how are you gonna get there? What cars? How many people you need to see? How many car sales do you need to have? How many test drives need to go on? There's, I don't know, there's five different things they work through. And then it kind of has, what do you have going into this month? And then they take that to the sales manager. They've got two days to do it because, you know, there might be a weekend or something that falls in there. And then my sales manager goes over it with them, make sure it's good, you know, that they weren't unrealistic or, you know, Shorting themselves and then, then they come up with a great action plan. And then he kind of submits all that and goes, okay, based off of the people that I have. So, you know, I got four people and these are the goals that they have and this is what's realistic. And the store goal is, you know, here, Mike, I have about five cars to make up based off of the goals that I think are achievable for my staff. Then I have to have this conversation. My sales manager go, alright, well where's the, where are those four sales coming from? Because you're not just gonna magically go sell more cars, guys. I mean, they can. And that does happen. And because that does happen every once in a while we go, we'll do it again. Right, but that's kind of like happenstance. So we have to manage that and go, all right, where, where's that gap? Getting, getting fixed.

Very good.

And we, along those lines, we need to have minimal acceptable goals. Right. You know, I think about it like my desk, that cubicle, computer, telephone, it needs to make me X amount of dollars every single month at the absolute minimum. So yeah, there are, we need to have times where we, where we fire those salesmen and say, last month I had to let someone go because they were good, but they weren't great. They did the minimum, but they weren't excelling. And it was like, dude, I just, I can't just have, I can't have mediocrity sitting in that cuticle month after month after month.

Well, let's, let's dig into Marshall's pay plan and kind of the way mine works. Because this is how you do it. So in my opinion, this is how you, this is how you.

Yeah.

So Marshall has a tiered system and I have a tiered system. Correct, Marshall, it's based on 90 day average. Okay. And the first average is a training portion.

Right.

So you hire a new salesperson and they've gone through Your, was it 30 day training program, Marshall?

Correct.

Okay. After they graduate out of that training program, they, they're sitting at zero cars a month, essentially.

So yeah, they can't have a 90 day average until they've been there for three months. Right.

So they have zero. So their base bay plan is whatever percentage, right, Marshall, is that the way it works?

Yeah, they get in, they get a flat 250A car.

Okay. So in mind, if you're in that, you get a, you get a base salary. You don't get base salaries. We can go into that. But a Base salary a week and then you get one. I think it's 121, maybe 100 a car for mine, the first that, that at that training period. So let's say they move from that training to their 90 day average is running 16 or 15. But then all of a sudden, like Jeff is talking about, they fall and they're, they're back into that training. What do you do with those, those people, Marshall, or they're just not hitting the marks?

Well, I think it all depends on who that person is. As long as they're improving in an area. And this is where we kind of fall victim to, we kind of fall victim to managing by feeling rather than by numbers. And because we're all kind of small and we're not big and we're not corporate and we don't have, you know, this line of people waiting to come in to work for us, everything we do is kind of negotiable, right? So if somebody's not performing, like you said, if they're coming in late, I mean, that's a negotiable thing, right? I mean, it's not in your mind? No, people need to come to work on time, but when you allow it, it's, it's technically negotiable. So every position that we have is kind of negotiable. I mean, they're not performing, so you know, they need to go, except you don't let them go and you keep letting them stay at a low level. So again, everything is negotiable. And because we haven't set out what we want them to do, even with our sales managers and F9 and the marks that we want them to hit, you know, we've kind of made it tiered to that person going, well, this is what they're good at. And because they're good at this, I'm not going to worry about this. And so our positions, and we're kind of stuck in that because we're, we're small, we're independent. Like I said, we don't have this laundry list of people waiting to come in. So everything we do is kind of a little bit negotiable. But if we're gonna, if we're gonna try to fix some of that, what we've got to do is we've got to track some things to make sure that they're getting better. So if somebody isn't selling 15 cars a month, Jeff, is that, Excuse me, I don't know what my cough is this morning. If, if somebody's selling 15 car. Yeah, it's not. I don't fever or anything. I'm at home. I don't think you guys can get it if somebody's not selling 15 cars a month. You know what, what else are you tracking? Is it. Is it because they don't have the leads? Is it because they're just really sucking at their test drives? Is it. You know, they're just not seeing enough people? And if we can track that, like, we had a guy one time and he just was like this bump on the log, he'd sell 12 cars a month. Dude, get up. Get up. What? What is wrong with you? And. And when contemplating, should we move on with him and get somebody else here? Because we might be missing opportunities?

You.

We then said, well, are we missing opportunities? And we looked in and the guy wasn't aggressive. He just didn't go out and help people. So he would see probably 20% less people than everybody else. He just didn't get out of his seat. And so then you go, well, I'm not missing opportunities because he's not helping them. So his ratio was. His closing ratio was in line with everybody else's, maybe even slightly higher. But we wouldn't have known that unless.

He was cherry picking.

Was he cherry picking?

He was cherry picking, right. His closing ratios were good because he wasn't helping as many people because he wouldn't go out there and up the customers that he thought maybe he was.

Just only cherry pick if you know how to properly.

Or he was skating people or he was qualifying them on the lot, or he was. So did you keep him?

Could be, yeah. We kept him well for other reasons, but yeah.

Great. Okay, so he quit you.

But the best thing is when those people aren't performing, you got to look at your numbers. Number one, Marshall.

Right?

Then if you see that his closing is not good, he's seen a lot of people. Maybe you need to retrain. Right?

Yeah. And we look at that. So if your guy's not doing good, what does he need help with? Does he need help with when a customer comes in to get him on the test drive, does he need help from the test drive to get him to the desk? Does he need help once he's at the desk to close? And another guy that we have right now, we were able to identify that everybody gets to the desk. He just isn't good at closing them. He gets people at the desk. And so we said, you know what? From now on, the rule is when somebody comes to the desk, which I really don't love this rule because it's very new car ish. But you have to have a manager come out and he's got to touch your customer.

But sometimes you have to do that because you may be really good at getting them to the desk which you're talking about. People, people are real cordial. I can get them to there, but I'm not good at closing. Maybe I freak out, maybe I start sweating.

Until you can identify how to get them there. Cause I can't come to we're not going to do your job for you. We're going to help you be better at it and we'll do it for a little bit. And eventually, you know, you got to fly yourself. And so if that guy can't close after, you know, a certain period of time, then he's not the right guy.

Yeah. So we figure out we. I like tiered system because it entices your, entices your sales staff to get better and get better and get better. You know, at some point they're going to plateau probably, but, but that's fine. If they plateau at, you know, 18 cars a month or 27 cars a month, that's great.

Right?

And they keep churning those numbers, turning those numbers. They're going to make a really good living. So I can live with that. What, what are some other things I bonus on getting good Google reviews because I really want, I really want that out there. Marshall. I give a $25 per Google review. It's tiered as well because I used to do just $25 per and then somebody was taking advantage of it or somebody wasn't working very hard. So you've got to hit a number before you get any bonus. Do you do anything like that?

They're just making a living off Google reviews.

Yeah, it was four reviews a day.

It was weird. So anyway, but, but you know, we give a pretty significant bonus for hitting milestones. And I think that's really, I mean, we've sitting on almost 700, you know, Google reviews and I think that's very important to us. And salespeople see it after a while that they start getting people coming in saying, I want to see such and such. Because I see all these people saying how great you are, y'. All.

Yeah, I think incentivizing on Google reviews is really good. I think another important aspect, Luke, is what number do you. If you guys think 15 is the minimum, whatever number it is, maybe 12 at your store, I think it's 10.

It's 10 at our store.

I think yeah, and at our store, 15 is kind of the number to hit. And so we give flats. But at 15 cars you get your thousand dollar bonus. So once you get to 15 cars, that's the number. And if somebody's at 14 cars, I mean that's $1,250 essentially that they did.

Not make by that, that 15th car is worth $1,250 to them, not just the regular 250 flat.

And those individual bonuses are huge because you're right, Marshall, they are scrambling on that last day to get another sale. Right? They're calling everybody they can find.

Luke, I think your review thing is great because you want your salesman and we talked to just spaced his name, but you want your salesman to build their brand inside your dealership. Right? I mean that's the ultimate salesman where his name is as big or bigger than your dealership and people are coming to see him because he's getting Google reviews and he's got a social media presence and the customers like him, they send their friends and family. I mean that's really what that Google review incentive. It helps your dealership. But you're also, I mean a good salesman is like, hey, put my name in that Google review five times. So that when people see it, they come in looking for Jeff because Jeff took such great care.

It happens, happens every day at my dealership. That happens every day.

So are we incentivizing our salesmen to build their brand? Are we trying to get them to build our brand?

You know, yeah, you got to do.

It within because I mean they are your customers. But we have a guy who's been with us for 10 years, he's amazing and he sends out thank you cards and I tell the guys, you know, we pay for stamps. So if you don't send out thank you cards, so what Jason does, you know, in his and he's a consistent 23 cars a month is what he sells on average. What he does in the busy times are the same things he does in the slow times. And the reason why he doesn't have as many slow times is because he keeps up with the busy stuff. So when it comes to thank you cards and those thank you phone calls and all that, I mean he sends out stacks of them. The problem is when a sales guy gets really busy and they're like, I sold 20 cars but I didn't have time to do that, then there's slow times, they're like, what do I do? Well, I'm going to start sending out my thank you cards, but those don't have an immediate reward. And so he's keeping up with that stuff in the busy time. So when it is slow, his. His slow is like just a small little curve at the downward turn.

Marshall, you told me. Oh my gosh. I just totally went blank on. It was an antidote that I was going to say that you told me years ago. So anyway, I forgot it. I'll come back.

He says so many Marshall's full of one liners.

Let's talk about F and I. Marshall and I know you have your reinsurance company and you, you probably sell other products too. Can you talk about how you compensate those? Because we don't have. We have F and I and I. My salespeople sell F and I and they get a flat per extended service contract and gap. Can we talk about how you handle that?

Sure. And I think what's important to know is our sales guys have a. They get incentivized. Part of their bonus plan is for F and I. It's not per contract or anything. It's. It's a total amount of the F and I produced at that store. They get a percentage of depending on what level they are, which helps them set up F and I. It helps them, you know, maybe drop a line on a product or something and then rather than doing an improper handoff, so it incentivize the handoff and then my F and I people. And it's pretty simple as far as their pay structure is just a percentage of what they produce. But like I told you earlier, they do have to have the menu in there and they do have to represent all the products. But then I put bonuses in there based off of how many warranties they sell. And we sell reinsurance warranties and then we have other warranties as well and other products. I have to carry all of them because I want to be able to sell them on everything. And my reinsurance doesn't necessarily cover everything or sometimes it's cheaper to get a different warranty. And so we just put a pretty hefty bonus on them getting 10 contracts or more than 15 contracts or more or 20. It's tiered within that. So if you. But only on our reinsured service contract.

Okay, so you're heavily incentivizing them to make sure they sell your reinsurance is what you're saying.

Yeah. So if they sold 15 warranties and six of them were some other product and nine of them were our reinsurance, well, then they're not getting that bonus. But if they, you know, but if 10 of them were, boom, they hit that bonus.

Who do you guys use for your reinsurance?

Southwest Re. Wrong answer.

Luke and I, of course, this is our opportunity to plug Dealer Re. Get your reinsurance company set up, go with the guys at Dealer Re, incentivize that, just like Marshall said. Right. Because as the owner of the reinsurance company, I want to fund my reinsurance company. I don't want to fund, you know, Wins or Guardian or some other nonsensical warranty company. And you have to incentivize it or they're just not going to do it because it's difficult, it's hard, it's uncomfortable at times to sell these back end products. A lot of the salesman and f and guy guys, they just, they want to sign the paperwork and move on to the next one.

And what's important to think about with when you have your reinsurance coming, we're talking about. Marshall sells really high end cars, right. And when they break, it's expensive to get fixed. So it shows you that reinsurance can work from buy here, Pay here, selling 12 cars a month to really high end European stores selling 100 to 200 cars a month. So reinsurance is for everybody, guys and gals, not just for big or small. It doesn't matter. You're making money in reinsurance and we recommend Dealer Re. There's plenty of good ones out there. But Dealer Re is our people.

Marshall, while we're on that topic, as of incentives, do you have many, many products that you incentivize or is it just a service contract? You incentivize for all the sale of all products? Right.

Yeah. And just to, just to piggyback on what Luke said before, that, you know, we, we looked into reinsurance a long time ago and said, no, it doesn't pencil for us. It's too expensive. You know, we sell European. And they kept saying, you know, just, you got to start it, you got to start it. And finally we did start it. And yes, the reward isn't immediate. And, but after two years, three years, we're five years down the road going, that was the smartest thing we've ever done. So if you're in that same boat and you're listening to this. Yeah. You need to just, just start it and then don't even think about it for a little while. And then, you know, a year or two years from now, you'll be feeling like you're the smartest man on earth. Sorry, I just wanted to make sure I put that in there?

No. Thank you.

But going back to your question, Jeff, which was what I was just saying.

Do you incentivize on the total products or do you just say, hey, my service contracts, my most important. I'm gonna bonus on that one. Or is it just an aggregate of all and you guys, you do some fancy stuff. I imagine you're trying to keep European cars, European, etching, all that nonsense.

Yeah, we have about five different products and some of them are reinsured and some of them aren't. And in short answer, it's mostly service contracts because one, they're reinsured, but two, they protect the customer. So less heat on my end. But we have a service contract. We have gap, we have a ceramic coating, we have a clear bra, and then we have a tire and wheel package. Now, depending on what I feel like needs more love or it needs more attention because we're just not doing enough of the product, then I'll throw an incentive for a month and say, hey guys, if you do five tire and wheel, you'll get a bonus. Or like ceramic coating and clear bra or for our detail department and maybe they're slow and they need some work. So I'll say, hey guys, if you can sell five of these ceramics, you know, you'll get an incentive there so I can get my detail department busy.

You throw in some little spiffs every so often.

Yeah. And let me ask you guys, that changes month to month, the consistency is the service contract.

Right, Right. So you're not changing their pay plan. You're just spiffing certain things at certain times to incentivize the growth in that area. So to my point, Luke and you guys touched on it earlier, so maybe we're circling back around. But whatever. I bonus on aged units. And my philosophy is this. Tell me why I'm wrong and why I need to get it out of my pay plan. If I've got a car that has been here too long, I definitely want to get rid of it. Right. So I bonus on that unit. And you guys say, well, if you're bonusing on aged units, then they're only going to sell aged units. And I say, great, get rid of my aged units until there are no more aged units.

There will never not be.

Isn't it a win win?

Yeah, it's going to be an aged unit store.

Yeah. So the problem is they won't have.

Any because they're going to sell them all this month because they're bonus to sell them.

No, what you should be doing is Writing down your inventory number one so that they're not aged right. Or finding out what's wrong with that unit. Not making sure. There's always something typically wrong with the agent.

It's a 2001 Malibu.

Can I ask Jeff, why is your. Why would a sales guy sell an aged inventory over something else?

How big is the bonus?

Yeah, it's a hundred free every hundred days right now.

And they know which ones are aged on the lot?

Yeah, yeah.

How do they know that?

It's in the inventory report they get.

So they look that up every morning and they.

Yeah, and they'll know, like, hey, I've got three cars that I know are. I don't want to admit this on air, but I have three cars that are over 300 days in inventory.

Those are.

It sounds like your incentive plans are working.

Damn it, Marshall. Yeah, so. But no.

No.

You're just telling me no.

Yeah, because number one, they're walking straight to those age units and probably pressuring people to buy those age units.

I wish they were or they wouldn't be here.

No. So you're probably missing sales on newer units. Right.

And I did sell the new shiny ones because they just got here and everyone loves them.

And, man, I. I did this before. Let me tell you. As soon as I put a big number on a car, it got sold. Well, that tells me the salesperson just wasn't doing their job to start with. And that kind of makes me angry. Right.

Their job is not to sell the oldest car in inventory. Their job is to sell the car that sells. Right. To make them money.

You just answer your own question. Right.

But if you bonus it, their job is to make themselves money. So if that car is going to make them more money, wouldn't they then push that car?

An age unit is your problem, not the salesperson's problem problem. Like either you did a bad buy or it just. The market fell out on it. It's not necessarily the salesperson. They want to sell cars. Right. Their job is to sell cars. And I'm not sure they're biased on which car they're selling. They want to go out there. Unless you have. Unless they know gross in every car and they're a percentage of gross. But if you. Most of you guys work on flats of some sort, I think.

Yeah, well, I buy here, pay here. We work on flats, but. So apply that same philosophy to someone who pays on gross. If you knew that this white car had a 5,000 gross and this blue car had a 1,000 gross, I don't believe. Pushing the white car. Right.

Yeah, but I'm not a believer in gross because again, that's within the buy. Are they making $5,000 on the car because they did a really good job selling it, or are they making 5,000 because you bought it? Right.

Because you bought it. Right, of course, but.

Right then the same applies to why you're losing $5,000 in the car is because you bought it. Wrong.

Yeah, and they should.

You're incentivizing because of that.

They should. Yeah, but they won't be right.

But.

But I'm just saying, again, you have built a pay plan even. You incentivize for things that you want done. Right. You incentivize for reviews, you incentivize for volume. You incentivize for.

I don't incentivize for our mistakes.

Right, right.

I'm not saying that that Toyota Sienna is a mistake. I'm just saying that maybe it has a drop.

Drop the price, redetail it, make you drive it home, make sure it's okay. Because something is wrong with that unit, and it's typically price. And that's what I typically see. If I have a age unit, it's price.

So in the buy here, pay here world.

Yes, 100%. I know people don't believe that price matters in buy here, pay here, but it does. So just get that out of your mind.

That's so funny. So I'm 100%. Well, I firmly believe that we sell the cars that we get behind. Right. As a salesman, you have the ability to steer the customers definitely in the buy here, pay here world, towards the cars that you really love. Back in the day, my salesman absolutely loved the Ford Focus, and we would sell tons of them because he could get so excited about it and explain all the benefits of my Ford Focus is the best car to buy, blah, blah, blah. You know what I'm saying? So if I have a salesman that's like, you don't really want an suv. What you want is this Toyota Sienna right here. Because of X, Y and Z reasons, he's helping steer them towards something that's gonna.

We have that in our. In our world as well. You know, we have. I mean, I can. I get really passionate about certain cars and.

Me too.

You know, maybe I'm stuck in the past a little bit on some and we'll get them in. And my sales staff, the car just ages. And I go, what the heck? That's such a cool car. I mean, I can remember very distinctly a 911 Turbo that I got was, you know, an older one, and our sales staff hated it, and they wouldn't sell it. And I was like, you realize how good of a deal this is? But then you. You do have to realize what your sales staff loves and what they're good at selling. And so I don't put those in there anymore because they just. They don't like them. So they'll age. And so if they don't like Toyota Sienna's, well, you know, there's enough money on.

If there's a bounty on that Sienna, they're gonna love it.

They're gonna walk around there, they're gonna find the easiest thing for them to sell. Jeff, that's typically what salespeople do to the path of least resistance.

Right.

And so you know what an age on me is A Ford Fusion, a really nice Ford Fusion may age. It might be the best value on the lot. Yeah. But they don't really like selling it. They much rather walk to the Honda Accord and sell it or the Nissan Maximus. So, you know, price matters on what you got sitting on your lot.

Okay. But if you tint it and put wheels and tires on it, they may sell it.

They might sell it. Who knows?

The customer will want it at that point. So maybe that's a better place for me to be putting my incentives is in a tint package. Wheels and tires on that Toyota Sienna, we went way off Paperland.

Way off. Well, Marshall, thank you so much for being with us today, and hopefully there's a lot to be learned here. Pay plans are difficult, and don't think you can build it overnight. And it'd be effective. You know, build a pay plan. See how it works. Run examples. Run examples with your staff so they won't be shocked. And if you do need to change it, don't. Don't be upset to change it. Don't do a wholesale change. Maybe change it a little bit so that it incentivizes them or disincentivizes them them. But paid plans are difficult. Write one today, try it out, see what happens. Right?

Yeah. I don't think you should be afraid of change. Just be careful that you're not changing it too often and think about the last time you did change it and what was entailed in doing so.

Yep, I agree.

Awesome. Thanks, guys.

Hey, thanks, guys. Thanks for having me on.

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