#145 - The Best Of The IDP 2020

Hey, Happy Thanksgiving, Luke. What's going on, buddy? This thing's gonna happen. It's gonna air tomorrow on Thanksgiving. Thank you to everybody. Right?

We are really thankful, Jeff. We are thankful for all the dealers that listen, all the dealers that respond. We're thankful for our car business. We're thankful for our family. I can't. Yeah, it's great. I'm so thankful to everybody. Thankful to you, Jeff, for bringing me in on board on this. And this is two years, man. Two years in the book. The first one we ever recorded was the Wednesday before Thanksgiving two years ago. Here we are again. Yeah.

Yep.

That's probably one of the longest relationships I've had. I don't know, man. Jeez.

Hopefully it continues.

It's great. It is really, honestly, so fun. And it's fun for dealers to say stuff and just say that we've helped their business at all. Like to think that we just by us blabbing and interviewing other people that we've had some sort of impact on your business and well being and bottom line, like, just that blows my mind, you know, it's great.

It's humbling, for real.

It really is. And we really, really appreciate everyone who takes the time to give back and leave us a review. Obviously, we don't ask for anything so far. Luke's gonna ask for you to, like, put him up at your house when he comes visit you or something. But, you know, you deal with some of the ads. We've got some great sponsors that we love and that support us 100% and we love your reviews. So those of you that have taken the time to leave us an itunes or a Spotify review or YouTube or anything, we really, really appreciate that because obviously that helps us continue to grow the podcast and get it out to those handful of dealers that don't know about us.

Yeah.

So with that being said, Luke, this episode is going to be a little different. What are we doing?

Yep.

A little.

Best of. So Jeff and I went back and looked at all of our podcasts we've ever done and we picked out five different selections that hopefully you all like. And this is going to be. It's going to be something new. We hadn't done this before, so I hope you like it. It's five snippets from different podcasts we've done over the past two years. And we're going to kind of introduce them, let them play, then come back and introduce them again. So hopefully y' all like this. It's probably something we will do in the Future. So just. 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, Luke, who's the first one? You picked this episode?

Yeah, I did. And, you know, everybody's familiar with Dave Anderson. I think he's always a headliner or has been for the last two years at niada. And the one thing I always get out of Dave Anderson is accountability. How can we hold our employees accountable? How do we hold ourselves accountable? And that's what he really goes through in about 12, 15 minutes. 12 to 14 minutes here. Really listen to this. Take notes, because Dave Anderson is amazing.

It is. It's episode 112. If you want to go back and listen to the full thing, here's a couple minutes that we really like.

You know, you can be more accountable to yourselves by really modeling your values that you say are important. A lot of times we talk about them, but we're not modeling them. You know, being more accountable to ourselves is living up to the standard, really, that we create for others, but always surpassing it a little bit. I mean, if one of your values is integrity in your company and you come in late as a leader, you're not accountable to yourself, and you're making it easier for the team not to take you very seriously. You know, you've got to. You've got to set some goals for yourself. You've got to have a daily plan for yourself, and you review it at the end of the day, and you don't let yourself off the hook. If you didn't do, do what you said you'd do. If you don't do that with yourself, you're not going to do it for anybody else. I mean, we should hold ourselves and our other leaders to a higher standard than the people underneath them. I mean, to whom much is given, much is required. So it's living the values. It's living the standard. Be the example. You want to see other people to live. Like, you know, we talk about it, but people would rather see a sermon than hear one. And then you can feel good about talking to somebody when they're falling short, when you know that you're not doing that same thing, when you know that you're keeping your commitments, that you're on time, that you're using the right type of language, that you speak well about customers. Whatever you say is important to you. It's really hard to hold someone else accountable if we're not at least holding ourselves to that Standard.

Should we. Should we write down those things? I mean, is it something so that we. Does that help us hold ourselves accountable? Is that something that you'd recommend?

There's something about putting it down that creates a bit of a commitment. You know, it's like, if we're not even serious enough about it to put it. To write it down. Like, I asked people about their goals. Sometimes I say, can I see your goals? And they say, well, I got to memorize. It's. Oh, man, that's. That's. You got to write them down. You've got to review them. You've got to have them in front of you. So writing things down like that. I keep my goals, I keep my standards on my phone, and I review it in downtime. I mean, the more you look at it, the more you start to move towards it. And you can forget that stuff really quick. When it's out of sight, it really is out of mind. And so writing it down and then reviewing it, a lot of people write it down, then they never look at it. So you write it down and then reviewing it, and it's that old thing. You move towards what you think about, and as you're seeing it, it becomes more real, and you tend to do the things that take you there.

Yeah.

Dave, let me ask you a question along those lines of being the accountable and being. And setting yourself up as the standard. Standard for your dealership. I have a real issue, and I struggle with what I call boss guilt, where I feel like I can't ask you to do what I'm not willing to do. I don't want to come in on Memorial Day, so we got to be closed because I can't ask my guys to come in on Memorial Day. Or I don't want to work a Saturday, so I can't ask them to. Or I want to duck out early in golf, but I feel bad as I'm leaving with clubs over my shoulder. How do you reconcile that with the owner, the boss, but not let it create that culture of, like, oh, well, Jeff ducks out early every day, so I can duck out. Or he doesn't show up and he's doing other stuff so I can do other stuff.

You know, a lot of times people say, man, I wish I were able to do what you do. And I just asked him, I said, are you willing to do what I've done so I can do what I do okay? You know, there's a reason I can do what I do, and I wasn't able to do it. At your level, at your. At your stage. It took me years to get to this point, and so I think it's fantastic that you'd like to do what I do, but you gotta be willing to do what I did so I can get to the point, you know, to do what I do. And now you don't have a separate standard of values. You're still living with integrity, and you're doing those things. But as a boss, you're gonna have some responsibilities they don't have, and you're also gonna have some privileges they don't have. And so, you know, as long as you're. I'll bear more than my share of the responsibilities. When we had to cut pay around here, Covid thing, I went first. None of my people took a pay cut. Okay, I went for. I took an 85% pay cut. So they understand, as a leader, I'm willing to take the first hit, but I'm also going to have some privileges that I have earned over the years that help balance out some of those responsibilities. And so you don't have to feel bad about it if you're not violating the values you're still putting in the work. You're still keeping your commitments. You're still getting the things done you say you're going to get done. You've earned that. Enjoy it.

Is it communication? Is that it is a communication like, I have to. I need to be painting that picture like what you just said, and maybe during staff meetings, make sure they know, hey, you guys have only known me for the last six months or year, but I've been doing this for 15. And back in the day, it was just me seven days a week, 12 hours a day. You know, maybe that's what I'm. Disconnection there.

I think it's great. I think it's great to have those conversations, you know, especially. I like to try to have that when they're new and let them know the company history, let them know your journey, let them know your path, that you clean the toilets, that you've weeded the lot. You know, that you've washed the cars. And, you know, you could go back and do it all again if you needed to, but that's not where you're going to get the highest return on your time.

Let them see the amount of debt. Your name is signed on.

Yeah, that's it. You know, but this is how you connect with people. It's important to have that relationship with them. Do you. You listen to their stories, and they listen to yours. And then when you're communic, why you do what you do, I'll tell you where people have a problem is where if you tell me you're going to do something with me later today, if you're going to have a one on one with me and then you tell me you don't have time and then I look up and you're ducking out for golf, okay, that's where I'm going to have a problem with it. If you're, if you're doing it, but you're not keeping your commitments, you're not getting your job done, you're not taking care of the customer you said you were going to take care of, then I'm going to have an issue with that. And I have a right to have an issue with that, you know, as a team member. But as long as you're doing that other stuff, I don't apologize. I don't apologize. If I have somebody that comes into the office and they're from out of town, I don't apologize for going and taking them for a two hour lunch at the Four Seasons, okay? That's part of my job as part of my role as a business owner. Now they're only going to get an hour. If they want two hours, they're going to get docked for the other hour so they can have two hours. They got asked for it, it's going to cost them. But I don't apologize for that because that comes with my role, the relationship building, the customer relationships, the being a good host and so forth. When people come into town so they haven't done what you've done, they're not going to get to do what you do. But you've got to make sure you do what you say you're going to do and keep those commitments before you go do those things that might cause them to have a question mark. This is the age we live in though, guys. Everybody wants what you have, whether it's your kids or whatever. They want what you have, they want to drive what you drive, live where you live, wear what you wear, do what you do. And they want to do it all right away without doing what you done. Yeah, that's not how it works.

Awesome stuff from Dave Anderson again. If you have the opportunity, I know you guys got all week off, you're not going back into the office. So listen to episode 112 with Dave Anderson. That's one I could just put on repeat over and over. The guy's so motivating. Yeah, let's Go on. We're gonna reach really, really far back. Episode 29 yeah, I mean, this has got to be a year too old. Eric Freeman.

And look, I got my Freeman Motor Company hat on today. So you send me swag, I will wear it. By the way, I love Freeman Motor Company swag, so I always get it.

But.

So Eric's one of my best friends. You've heard him on, you've heard Marshall from Freeman Motor Company. And you know, everybody's always thinking about that second location. Jeff. Well, Eric Freeman's done it. They've got three locations. They opened some, they've closed some. But let me tell you, this guy, he's such a deep and critical thinker. He walks us through different pitfalls, things you should look for, and how to succeed at that second location. This is really good info. If you are thinking. If you aren't thinking about open second location, this is one you gotta listen to.

So I think the first question that I would think about at this point in time is as an owner, does my current store need me on a daily basis? So in other words, am I cog in the wheel or am I merely just a spoke doing some part of what my store requires each day? And so, you know, in further investigation, what we find is a lot of people, a lot of owners are working in their business and not necessarily on their business. And if that is the fact you are not ready to open a second store, that's huge.

So, Eric, that is so. That is so interesting. So right now I know that I don't need to open a second store, but could you go back to your first try at this with the Bend store and kind of tell us what happened there? I know you mentioned that it was a good ways away. Do you see a correlation in distance from your original location to the next location being a real hurdle?

Yeah, absolutely. I mean, we made it doubly challenging on ourselves in the first go around back in 2004 when we added a second store three hours away, we put newer employees on our newest opportunity, which was that Bend store. And unfortunately, we've got new demographic, new location, trying to figure out what kind of inventory would work well. And then we've got newer employees, and so there's just way too much new. There's no foundation. And so ultimately, two years later, we're going, oh, wow, something's starting to go awry. And of course, we all know what happened in 08. And so we ended up shutting that store down in the downturn.

So how long was that store Open.

Eric, the store was open about two and a half years.

When did you. When did you notice, you know, how long did it take you to figure out that. That it wasn't right? I mean, was it a feeling like the second month in or. Or how did you know when it was. How'd you know when something wasn't right?

Well, I think looking at the numbers was our biggest, you know, telltale that things were not going well. And one of the great lessons of that adventure was that we have to go in and look at a market before we even step foot thinking about that being a potential location. So in other words, you know, I'm doing business in Portland, Oregon. I've got millions of people here. I can do business because inevitably there are people always, every day, ready to buy a car. We went into Bend, Oregon, which is a very small town. And so you have a demographic. Now that we know, now that we've been there, we know, but we have a demographic that either has the money to buy a new vehicle, and Bend was well represented with both a Mercedes dealer, a BMW dealer, a Porsche dealer, or you have the flip side, which is you have working people who are really serving the other side of the demographic. And so there was not a lot of middle class, which is really what we serve. We serve in our business a group of people that want to drive a great car at a reduced cost. And so that demographic didn't exist in bending that time. So we did not do our due diligence, and therefore we failed.

That's so. That's so interesting about the demographics. And if you don't know what you're getting into, you know, our model may not. May not exist in that market. That's, you know, that's definitely something that we should all have on the forefront. But I don't even think about it. I just go, hey, well, my model's going to work, right?

Yeah. Optimism, which is beautiful.

I love optimism.

But optimism needs to be supported by wisdom, by thoughtful process of is this going to work for me? So, you know, based on that set of clear expectations and a roadmap to where I want my store to go, I was thinking when you shot me this topic about, you know, why do I need a second store? Why? And the thought process, I came up with a few reasonings that might make sense to those people out there listening. One is I want an additional brand. You know, I want to carry something that I don't particularly carry in the market I'm currently in. So that might be a reason I Might, might want to service a different location that I know has the potential to produce, you know, units and be very serviceable from a location standpoint, from where I am right now. So for instance, our store in Salem right Now is a 40 minute drive for me. Just perfect amount of time to listen to a great podcast, right, and get there. And I'm energized and I'm ready to go. So I love that. But it's not three hours away like Ben was number three. It offers additional positions in the company for some current employees that are ready to move up. And this was one of our large motivations. We opened up Salem. We had people that we knew had potential beyond where their positions were, but we didn't have anywhere to put them. And that's okay. You know, you have to make a choice to go, I'm ready to launch these people and let them go. Which is, you know, which is a fine choice too, for us. We said we want to retain these people. So what does that look like? So for us, it looked like, hey, let's look at what opening the second location would do. And so that offered additional positions where we could move people up. So that might be an idea for people.

Really interesting thought, Eric. It makes me think, like, if you've got key employees and they're growing to the point where it's almost like this guy's either going to spin off and open his own store because he knows and can do the whole operation start to finish, or I can give him this place to grow and provide him with his own lot that's still under my name. But maybe he goes from being the sales manager to the GM or the VP or whatever it is. Is that kind of what you did there?

Absolutely, yep. You bet. And so we. There was a lot of positions that opened up. And so it's exciting to watch now as Marshall begins to train people, moving up in all of those positions to see these people just blossom.

You didn't do that out of ego. You didn't do it because you wanted your name on a second store or a third store. You had 10 guys.

They have very little.

Grow them or lose them, you know?

Yeah, yeah, yeah, absolutely, Jeff. I mean, the reality of it is, you know, anybody, any man who has a good wife behind him, they're probably asking why or really. And so obviously Jenny was asking me that question. But this was for Marshall, for Kara and I, this was a. This was a move for employee growth.

Great stuff. Like, I replay that over and over and over again in my head when I thought about opening a second location and still sometimes dabble in this neighboring town of mine. And I just keep thinking, like, do I meet those qualifications? Do those apply to me? So again, episode 29, if you want to go back and listen to the full episode, a lot more great information from Eric. Real quick, Luke. Tax times coming up. We all know Tax Max has made us an awesome offer here at the podcast. 25% off when you use the promo code podcast. So get hooked up with Tax Max. For anyone that doesn't know you are able to file your customer's taxes in your office, when it goes over to Tax Max, they approve everything. They make sure it's 100% legitimate and in line. They send it into the IRS. The IRS says yes. The tax return comes, it comes to you, you print the check, you give them the debit card, you take your down payment out of it before you give them the rest.

So it's no more of this easy.

Trying to scramble when tax money hits. And you're trying to get as much as you can that Thursday, because it's all spent on Friday. No more of that.

No more of that. It's a very easy process. I did it years ago. We're going to do it again this year because it is so easy. So get signed up. Podcast is the promo code, right?

Yep.

And so this next One is episode 78, and this was with Jim Rhodes and I don't know how many of you guys, I hope you're active in the. In some of the Facebook groups and the independent dealer group and the other groups. Jim's not a dealer, so he's not allowed into that one, but he's in the other groups and he's very active. And I say that because he really, really cares. And I got that a lot from the podcast. He cares about the Buy Here, Pay Here dealer very specifically. His consulting group is all about helping you with your metrics and making sure your business is profitable. And this was a great little segment out of that episode where he talks about a couple of the major pitfalls that he sees Buy Here, Pay Here dealers doing. So take a listen to this one.

Yeah, Jim's great. It's so amazing that he cares and gives back as much as he does. He was supposed to come see me last week and didn't. So, Jim, you're on my bad list. But listen up.

So, Jim, what are some other, like, do you see any other real faux pas or bad things that Buy Here Pay Here dealers are doing that we need to Be aware of anything that you'd give us. Like, hey guys, just this is something that we see as chronic issue or has popped up. Just really, really beware of this or any kind of recommendations you could give those buy here, pay here dealers that.

Are just getting going, I would say yeah. The one thing I see is just, you know, what we might define as just kind of human greed. I mean, they tend to overcharge the customer in terms of price on the car. And for me, let's talk about that.

I know Luke's strong opinion on that. What is overcharged? Because we've all got friends and I have guys in my 20 group that they could gross 5, $6,000 per car, a full 150 or 200% markup, but they'd never collect it.

That's right. So there's no crystal ball. When if I'm working with a brand new dealer and I'm teaching them, I'm going to say, look, there's no crystal ball here. But when you set the price on the car, what I recommend for them is let's set a price that is sensible based on life expectancy of the car. So this is what I mean by no crystal ball. How can we know which car is going to last a year, which one's going to last three years? But when we price a car based on the age of the car, miles on the car, et cetera, we need to set a price that at the typical down payment and the typical payment, what does that term look like? And if that term is unreasonably long, I see two problems with that. Most of my clients have related finance companies, so we don't get too far off in the weeds in terms of taxation and that sort of thing. But I can just tell you, assuming there's no finance company in place, why would I want to put more gross profit on my books that I'm not going to collect? I'm going to pay tax on that profit. Why would I want to put profit out there that you know is not going to be bankable? That's just kind of hurting me two ways. The customer's not going to perform in the end, and I'm going to end up paying tax on money that I never collected. So I think it's a smarter approach to charge a reasonable markup, you're going to have that 18% to 20% interest on top of that, charge a reasonable markup and take enough care of your customers that at the end of two years, they're trading for something else. And Buying another one. So I never needed them to make it to the end of a 36 or 42 month contract or you know, that sort of thing. So that's kind of generally the approach that I recommend to my clients is keep it reasonable based on life expectancy of the car, take good care of the customer and then trade them before they leave your book of business and trade them into something else. If you take good care of them, they'll be happy to buy with you. Get it?

Again, I totally agree with you, Jim. It sounds like you and I come from the same school of thought there. Dealers don't think about the amount of cash flow that charging that much extra cost them in taxes. And I think that's a big deal that dealers don't think about. Also you talked earlier about being able to sell your paper. If you got this huge overvalued paper, that's just paper and you need to sell out, you're going to take such a haircut, it's not going to matter.

Sure, that's true. Yeah, you've got kind of some false profit in there. And I think in that way I'm always also telling my dealers, you know, I would like to be able to look at my balance sheet on any given day or any given month and know that my market value of my business is real. If I've got a bunch of, you know, fake profit in there, then I'm just kidding myself, you know, for sure. So I think I'd like to know that my profit is bankable. And while I recognize I may have to wait that 30 months or something to collect it over time, I want to know that my portfolio has got some real value and that I don't have something artificial in there that I'm looking at on my balance sheet.

So along with not overcharging for our cars and not undercharging for our interest, any other potholes you see dealers step in?

You know, it's just this is the kind of a big one that I realize I got dealers on the line going to listen to us. But I think what I see is dealers tend to be kind of this type A individual, right? And I love them, they're my clients. But what I see is that sometimes they're too slow to recognize that they've got a problem or admit that they've got a problem. And so when the wheels are wobbling on their buy here, pay your portfolio, they either obviously when we talk about dealer 20 groups, that's one of the values, as you can see. Kind of your performance. Other dealers and know that you're underperforming. But I find that dealers are just too slow to accept some help or go find some help when their portfolio is underperforming. They don't even really know what their performance metrics need to look like. And so that's, you know, I live in that space every day. We do weekly reporting for clients and we track collection efficiency and we just know what's possible in buyer payers. So I see all these dealers underperforming and high repo rates and, you know, really high delinquency and management problems, and they just don't, you know, go find the help that they need to get that problem solved. And I tell them, look, even if it's not me, you know, you find somebody who can help, you know, cut down. Because if you find somebody and help you save 10, 20 repos a year, that's a pretty big number. So, you know, and obviously most of us can help do more than that. But it's, it's like, you know, I would say it's a simple ego. It's like, you know, and we all have it. I've written articles on this. Ego is not a dirty word. It's just that we have to be prepared to admit when something's not working right and go find somebody to help us fix it.

Let's talk real quick about a wobbly wheel in a portfolio. What is the biggest. What's the biggest thing that jumps out to you if you're looking at, if you're coming in fresh or portfolio and you see this specific KPI, what is it? What would say, oh my goodness, yeah.

That for me is collection efficiency, which when I arrive in a new portfolio, sometimes hard to find. It may take some weeks to get to that number. Because most of my clients, a new client rather, is not used to tracking that number in the way that we do that. So I don't want to get too deep into numbers, but I would just tell you that basically is a measurement of how well did we collect cash or how well did we produce money out of the portfolio compared to what we were contractually expected to collect. So that's different from any kind of static pooling. That's different from delinquency. It's even different from these, what I call conversion rates. And you know, you can look at conversion rates where you look at how much cash did your portfolio generate as a percentage of where it started. And those kind of things are important over a longer range of time. But when we look at collection efficiency, we look at that number weekly. And so it's as simple as, you know, if I'm looking at your portfolio, Luke, you've got X number of contracts. Your Average payment is 350. You're expected to collect X amount of money next week. So we would measure that over a range of time and then come back and see, okay, how well did we do? How much of the money that we expected do we actually put in the bank? And that's what I call collection efficiency. And my argument is if we're doing well in that number, we're probably doing well in all the other. Recency, delinquency, all those numbers we want to talk about. If we're doing well in collection efficiency, we're probably doing okay in those other.

So, so interesting you say that. I. I put on a seminar. This has been years ago when I. When I just started doing some teaching, and I said, and I didn't probably know this, this name of collection efficiency. And I said, you should be collecting around 120% of your. Of your monthly payments of what you expect to collect each month. And everybody's like, well, how in the world can you do that? You should only be able to do 100. Well, I've tracked that over the years, and we essentially do 100 to 125% of what we should be doing each month. And I believe that's a really big indicator. And it's cool that you mentioned that. What is the number? Is it 100%, is 120%? Is it 150%?

Well, I think what I'm hearing is you're tracking it on a gross basis. And I'm used to tracking it on a net basis. So when I'm working with a dealer, I'm telling them to expect collect 93% net or above. We've got clients that have been with us for years. We track that number for them weekly, and they're collecting 95 to 96% net. So just a simple explanation is we would filter out any. What I call unexpected money. In other words, if a customer has a contractual payment of $100 this week, but they get an insurance settlement, and they come in and pay $4,500, pay off the account. We filter out that extra $4,400 that we didn't expect. And so that leads us to a net number. And that's the number I'm really talking about, Luke, is something that we measure the net number because we really want to see, because we're looking at performance of the collectors, how well did they collect what we expected them to collect? And so that's why we look at net instead that other money. I call it unexpected money. And so we filter it so you.

Don'T have a gross number, which I was talking about gross.

Of course, you know, I have that number in our portfolio or our spreadsheets, but I don't look at it just because it's sort of a, you know, it's a, almost an arbitrary number to me in that that's, that's just unexpected money. And I would agree with you that that number I would expect would track pretty close to 110, 120% if we didn't filter those things out. You know, to give you an example, we've got clients that we work with regularly got pretty good sized portfolios, you know, 1800 contracts, $12 million kind of portfolio. And they'll have on any given week, 30 to 40 grand of payments that we filter out. You know, so they're just, they're gonna have payoffs and they're gonna have unexpected things. And so, you know, we filter that out. So that obviously moves the needle quite a bit. Just that number alone, for sure.

I've always thought about filtering those numbers out to get that true number. And that does make sense. And it would really, it would show your collection efficient, your collectors efficient efficiency more than that gross number. Because they, unless they're out there making people total, I guess it doesn't make sense.

Right. So what is how well they collected what we really expected. And that then becomes pretty predictable, we can say. And your gross number is also something you can lean on to say, you know, we've consistently been at this kind of gross number. So for me it becomes about predictability. You know, when you think about, on the surface, we're dealing with a customer who's got poor credit, where you've got this, Everybody perceives it as really volatile, high risk portfolio. But I find this more predictable than people might expect. And so one of the things I'm always working to do is because in this business we have certain things that are unpredictable. I want us to work real hard to make sure that we project and predict those things that should be predictable. And that just kind of helps us know when we're cash flow forecasting and sitting down and budgeting and planning how many, whether it's growth or advertising or whatever we're looking to do. It just is helpful to be able to forecast six months out and have a pretty good idea what Your cash flow, your total bank deposit should run during that stretch of time. So that's what it's all about for me is getting more predictable.

So again, that was episode number 78. Jim Rhodes, go back and give the full thing a listen. Obviously, if you're a buy here, pay here dealer, there's so many great, great gems in there. Luke. Moving along, we're gonna jump forward to one of our more recent ones. This is episode 132. We spoke with Dan Gross, Verner Grossvener, Gross Werner. And I know Dan. He's a big. He's a big subscriber of the Rich Dealer program.

Super smart.

Only time I picture him, I picture him in like a pickle suit. For some reason. They are all about that. What? I don't even understand the pickle thing, but they're all about it. But he also subscribes to the EOS system, which is the entrepreneurial operating system. And the reason I picked this episode was, well, you guys know why I picked this one. We talk about it all the time. Don't let your business run you. You run your business. Take time out, go to convention, go have a sit down with your managers. Work on your business, not in your business.

And that's great.

All about.

It's all about that. I just started the book that got him into this traction. And it was funny when we were at 20 group last time, we were listening, we were talking about it, and my friend and a fellow 20 group members, Steve Greg subscribes to this thing too. And he's one of the most successful, you know, dealers that I know. So take a listen, learn, then look the book up.

So, yeah, and I'll try to explain the best I can too, but. But the visual does kind of help. So. So what it boils down to is, first of all, EOS Entrepreneurial Operating System. It is. It's based on a book by Geno Wickman. And what Gino Wickman has done is he's pretty much taken a lot of the things that a lot of other books that a lot of other people have written and kind of made it into kind of a, an actionable process. And so, you know you have Dave Anderson on, right? Everybody loves Dave Anderson. We subscribe to his training. I mean, we physically send managers. We. I personally go to his on site trainings or off site trainings. And he talks about culture and vision and all these things. How do you. Clarity? Absolutely. How do you do that? And so the, the, you know, a lot of the, the training that we listen to it's, it's the. On what you should do, but not as much of the how. And so what this program kind of does is it kind of breaks down the how, you know. So for instance, you know, the first point is, is the vision component of what you need to do. So it needs to be crystal clear, like Jeff just said. So, you know, what is your, what are your values? Right? Every organization has values. It's just, are they the ones you really want them to be? And who's dictating these values? So deciding exactly what is, what is it that your company stands for? Critical step one. I thought it was a bunch of Kumbaya crap that Boeing put on their investor reports. You know, these are our values, when in reality it is how we hire and fire and decide what we're going to do next. Another piece of it is, you know, of the vision is to what is your core purpose? What is your, what is your niche? What is it that you do? And so we had to kind of decide, you know, we were talking about before we got on here. You know, I'm part of the rich dealer group and a big part of the message is a subprime message. And so I would always struggle, as some of my other dealer friends would have this loud subprime message, well, you're really going to turn off a lot of the prime buyers. Well, with going through this process, I discovered, I don't care. They're not my buyer. So what is my, you know, now we can handle. We have the finance companies, we have the cars, and we have all the things we can sell a car to a fight, to a sub, to a prime buyer. But if I, if they're turned off by my message, they're not who I'm talking to anyway. My service department can't be everything to everybody, can't be all things to all people. And that's what so many folks try to do, you know, and you get chased off by shiny stuff like, you know, you know, do I want to start selling four wheelers on the lot? Well, could I do that?

Yeah.

But it takes away from the focus of what it is that we're here to do, which is to help folks with credit challenges get into nicer, newer cars in the St. Louis market. I'm not trying to sell cars outside the market. This is just, we're here. This is what we're, what we're focused on. Same with my service department. We don't want to do big jobs, we don't want to do service work Outside of our existing customer base, I don't really have the capacity, and it takes away the focus. I want to be able to service all of my customers we sold cars to and their households. That will keep my service department filled along with my reconditioning. I get to make money on them, and I keep them, my customer, forever. So that's what we decided our focus is. Right? So step one is to figure out what your vision, what your. What your values are. And then you. And then beyond that, you have to make sure the entire organization knows that's exactly who you are and that's the direction you want to go. Everyone's rowing in the same direction, in the same direction. They know what that direction is. And then the next step, to the right. Well, actually, I like to go to the left first. So the people component, we talked a little bit about that, getting the right people. So we hire and fire based on our values. And the EOS model uses what's called a people analyzer. And we made a couple of bad hires over the past few months. We hired a BDC manager and we hired a service manager. Historically, we would make a bad hire. We have a bad, you know, team member, just wasn't producing or just wasn't the right fit. We would leave that. We would keep that person for sometimes a year, right? And know we've all done it, know that, you know, this person just isn't right. But we just hang on to him just because he's always been here or, you know, he's going through a rough patch, whatever. So what this does is this gives you the ability to rank people. Do they follow the core values? You go one by one. Do they follow this value, yes or no? Do they follow this value, yes or no? And so on and so forth. And you figure out what your threshold is as to how often they break those values. Because no one's perfect, Right?

Yeah.

And then what's. So that's. Are they the right person, then? Are they on the right seat on the bus? Do they get it? Do they want it? And do they have the capacity to do it? So they call it GWC for short. Right? So do they get it? Is it in their DNA? Do they. Do they. Do they have what it takes to even be able to sell cars for 12 hours a day in the heat, cold, you know, the rejection, that kind of thing? Do they want it? I mean, do they actually show up and actually want to do this job? And then do they have the capacity to do it? I mean, can they actually Are they built to even do this to begin with? So we managed to say managed. It's, it's, it's a failure. But the fact that we identified within, within a matter of weeks. In particular, the service manager, he just wasn't right for this job where historically we would just drug on and try to make something work. So I'm going to flip back over here, over to the right to the vision component, or I'm sorry, over past the vision component, which is the data. So we talked a little bit about, you know, if you take a step back and so if you want to, if you were on a tropical island, right, you're sitting there, you're drinking your Mai Tai and you're on the beach, you know, what are the data points? What are the key performance indicators? What would you have to know about your business? You know, maybe 10, 15 things. It would tell you at a snapshot what the health of your business is. That's where these go. And so, you know, some of the things that we do, we talk about is, you know, what we're trending for the month as far as units, what we're trending for the month as far as gross. You know, how many cars do we get reconditioned last week? And it's looked at weekly, monthly or quarterly, depending on the metric. Most of these things are weekly. And then what also helped us move the service manager in particular along is the fact that we look at 13 weeks across the board and if the numbers aren't where they need to be and you don't see them trending in the right way, well, you can make decisions very quickly, very, without any emotion, without any. The data is the data, right? So that's another important piece of it. Next piece is.

Can I stop you for one second?

Yeah, sure.

You just said 13 weeks. Is that arbitrary or is that, I.

Mean, well, how I came up. Great, great question. So how we came up with, with 13 weeks is we use a software to help kind of implement, to help kind of organize this. It's called 90io and it is a EOS based software. There's a couple of them out there. We use 90 and 13 weeks is just the data, the data stream that it shows. There's, there's, I'm sure there's some science behind it. I don't know what it is, if there is. And I guess that's enough time to tell you, I guess short enough, I guess to do something about it, but far enough away to get actually maybe see Trends is probably the Reason behind it.

And, and so, and so you can hire a fire within those 13 weeks is what is what that factor is or that data is telling you well.

You know, you have a problem because it's, because it's not even necessarily about hiring fire. And we used it for that. We, you know, the gwc and the data wasn't our guy. And we knew it, we knew it very, very rapidly. In fact, he probably wouldn't made it that long. But I took a few days off and went to the lake and you know, so it kind of get put on the back burner.

Yeah.

So, you know, the next piece is processes. And this is something that we're terrible at. And most entrepreneurs are. It's the, it's the, your core processes should be written down and followed by everybody. So just like the vision, it's communicated with everyone. It's clear. Same with your processes. You know, there's a process for how you greet a customer, how you bring the customer in the office. I mean there's, there's a certain way that each of you in your dealership would like for it to be done. And unless it's really written down and you know, if you, unless you have, if you have an organization of any size which you talk about, how do you get from 17 employees, which I don't want to necessarily say the goal is to get to 50 employees. No, but how do you manage that if 50 employees, if your growth requires 50 employees, how do you do that? Well, you have to document your core processes though. You know, the name of my dealership is Five Star Auto Plaza. So it's the five star way. That's just the way we do it here. It's black and white. The, the over here to the left, it's the issues. Right. So this, this program has a very specific way of taking emotion out of things and having meetings done in a certain way. You've all been in meetings that just are meetings just for meeting sake. Right. That just. We're just gonna meet for the sake of getting together and just running down rabbit holes and having conversations about this, that or the other. You start talking about sales numbers, next thing you know you're, you're complaining because the porters didn't get the cars clean enough, you know, and you never really solved anything. So there is a very specific track in which you, you follow the, it's called a meeting pulse where you go down your, you know, are you following the vision? What are the data points? You don't discuss it. If there's A problem with the data at that point, a data point, you move it on to your issues list. This is really hard to explain just audio wise, but the idea behind it is you take your top issues, you as your, as your management team discuss them and they're solved forever. You never talk about them again. You start talking about what the Porters are doing. The reason why we're not selling many cars is. But you know, because, because, well, they're not clean enough. And then, well, I remember a time back in, you know, 1994 when I had a dirty car and, and Tauruses are always dirty, I've noticed. And you're talking about how we can't sell Tauruses and quit buying Taurus as well. So it's a very specific track on keeping the meetings.

And we, yeah, you know, we discussed this a couple weeks ago, Jeff, how you need to have, you know, meetings, need. If you're going to do sales training, needs to be sales training. If you're going to do service, meeting needs to be service. And if you're going to do housekeeping meetings, it should be housekeeping. And, and I really, I love what you're talking about here, Dan. It makes so much sense to me.

Yep, I listened to that. That was actually a very good, very good spot you guys did. And then kind of the final part there, it goes along with the meetings, you know, there's the traction component and what that is, is what are the company's rocks. And I don't know if you guys have read Seven Habits of Highly Effective People, but a big by Stephen Covey. But a big portion of this is based on a lot of Stephen Covey seven habits. And what the rocks are, is, you know, Stephen Covey years ago did an example. He took a glass cylinder and he had a, he had some large rocks, he had some gravel, he had some sand, he had some water and he brought some up on stage and said, okay, let's, you know, I want you to put all this in the glass cylinder. So people would pour the water and they'd pour the sand and they put the gravel in. Well, the rocks would never fit. Well, the long and short of it is if you put the big rocks in first, which is the idea behind the metaphor, behind it is your, your, you know, the important stuff in your life, the important stuff in your business, whatever the case may be, then you put the gravel in there. Right, that's, that's important, but not as big. Then the sand, then the water and it all fits in that cylinder. So the idea behind the rocks are what are the most important things for your business to get done for the next quarter? You usually have one, no more than two of the big things that you just have to tackle. And you know, you tackle it. Every quarter you have another set of rocks. Every quarter you have another set of rocks. Because what we have a habit of doing is trying to slay every dragon every day and what winds up happening. Nothing gets solved. Nothing gets fixed. How do you eat an elephant? One bite at a time.

Yeah.

My problem is I get so sick of moving large rocks that sometimes I just want to play in the sand for a while and then, then I get stuck just playing in the sand and I get all muddy and I realize no one moved any rocks around.

They're hard.

Alright, so that was episode number 132 with Dan Grossvener EOS system. Listen to that whole episode. That's one. I mean, I think there's a handful of episodes that could be entire podcasts on their own. And obviously that system itself is a huge business and can completely revolutionize your business if you decide to implement it as an entrepreneur. One other thing we think is obviously a game changer. Luke is the dealer, reprogram and the reinsurance.

Right, Reinsurance is a game changer. If you're not doing reinsurance, you got to do it today. Stop what you're doing. It's going to change your dealership, it's going to change your future way of life because it builds wealth like nothing else in our industry can do. Mm.

Yeah, get into it. Talk to the guys, Tim and Taylor, before the end of the year. I'm sure they could squeeze you in, get this thing set up. Start it January 1st. It's a clean break. It's a clean time. That's what I did. I started it right at the first, so I knew my books were going to be moving forward. Anyways, great opportunity. We're going to round out this episode Luke with episode number 82. And that is Joe Neiman. Probably, I mean, you know, he's probably one of the larger in from, you know, kind of characters or influential type people we've had on the podcast as far as those kind of reaching above our level. President of ACV Auctions. Did they just get bought out or they merge or what did I.

No, no, they trade drive. That was backlot, I think.

Backlot, okay.

Got bought by car. Car Joe. Joe's amazing. You know, he started out as a dealer just like us, so. And this, this is a snippet out of that, it talks about his evolution from being a small independent dealer, a curbstoner, actually from going from being a curbstoner to developing acv. And you know, I use acv. I didn't. What was funny is I wasn't using ACV when we had this conversation. Now I do and it's really, it's a, it's a game changer. They do it the right way. We're not sponsored by them. I'm just, I'm just putting that out there. And they could sponsor us, I guess they could give us a call. They got money. But anyway, it's a, it's a great episode. It's kind of a rags to riches story. And I really believe they're going to change our industry and I think they have changed our industry.

Started going to car auctions when I was a teenager. Skipping school one day a week, you know, maybe once or twice a month and going to the car auction with a friend's father and it just, I've always been the kid that was playing with, playing with the matchbox cars and then go karts and you know, some kids like sports, some, some kids like engines. I was a motorhead. Once I figured out how I could make some money doing it and get into the game, it was pretty exciting. So yeah, started going, I'll keep it short here.

But.

Bought one car at a time and just kind of advertised them out of my parents driveway and would sell them and then realized I could actually do all right at that and started buying more and more and did it all through college and yeah, fast forward a bit through my twenties. Grew a small independent into maybe a medium sized independent dealership, I guess you could say, you know, by the time I was like 26, we were selling probably 40 or 50 cars a month and kind of like a used car factory model. Right. We'd go source the cars at auctions and bring them back and recon them really to the, to the highest degree we could possibly do and then indoor photo room, hundred photos of the car, list them online, real thorough description and sell them all over the world. We sold a lot of cars on ebay and that was our, that was our shtick. But obsessed about inventory, turn time and just, you know, move them as quickly as possible. It's in my blood.

What changed?

Yeah, yeah. Did you go to do a short stint in a new car store after that?

Yeah, so I did. So I think I went through some of the growing pains that all of us probably do as independent dealers and hit some Glass ceilings. I mean, I was a young man and dozen employees, mid to late 20s. And what I found was it was getting harder and harder to source the kind of inventory I needed. I liked the niche vehicles. As my business grew, I had to travel further and spend more time on the road, which meant more time away from the dealership and having my hands on my business. And so I just, you know, really felt like I was getting spread thinner and thinner as I was trying to grow my business. And I'm a, I'm a growth minded guy. I think ACV is kind of indicative of that, but really kind of reached a point where I was fortunate in that I was getting recruited by a big new car group to be a part of their used car operation for a couple years and you know, struggled with the idea. And then I think like many business owners, small business owners, we probably reach a point where we're just like, you got to ring that bell and try something different. So that's exactly what I did. Did that for a short time. You know, I'm an entrepreneurial guy. I probably don't fit all that well in someone else's machine, but I gained a lot of awareness. I figured while I, while it didn't feel like a good fit for me, I'm at least going to, for the, you know, for the time that I'm going to be here, for the six months I'm going to commit to be here, I'll try and learn everything I can. And what really became obvious to me was as much as it was challenging as an independent dealer to source inventory at the auctions, it was really challenging and I had no awareness of this. It was really a challenge for these new car dealerships to liquidate their inventory. A lot of work, a lot of maybe lack of real auction knowledge about how to price cars appropriately. A lot of pressure to just put too much into these cars without really knowing what they're doing, going to cash for. So all of those lessons combined is what got me to the point of jumping full tilt into starting acv.

What was the turning point?

Where did you.

So I understand how, how it came about. Like one day you just woke up and said, okay, I think this is what dealers need and this is what the new car side needs. That's what the independent side needs. Where did this, I mean, how did you just all of a sudden wake up one day and go, let's roll?

Yeah, you know, there was definitely a turning point moment in 2014 where I was at the new car dealership and we were. I was appraising a trade and, you know, I always wear a new car dealer hat. Sorry for the dinging in the background. I always, you know, identify as a new or, I'm sorry, a used car dealer. And so as appraising trades, I'm always thinking of them as my own, even if they're for someone else's dealership. And in that moment, appraising a trade, calling a wholesaler on it and jealously thinking, man, I'd like a crack at that car, even though I didn't even have a dealership anymore, it just felt like, man, if we could market these cars in real time at the dealership, not only would that be great for the seller who's looking to get a fair market value, this would be a way for them to get a really fair market source value for the car, but also for the buyers that we all want to crack. Again, really the moment. I mean, it's kind of obvious now. And I talk to a lot of dealers and they say I had that exact idea. And I'm sure they did. Right. The idea is not the genius of it, it's that we've been very, very fortunate and able to execute and run really fast and gain some market share here.

Well, talking about the other people having the same idea, who was first. You were a trade rep.

So interesting. They were. I had no awareness of them. They were in Canada. But, yeah, no, I didn't. I didn't even know they were a thing. I became aware of them when, when the press release came out that car corporate bought 50% of them, which was. That was right around the time that we were just getting started.

Okay. Episode 82 with Joe Neiman. Again, Listen to the whole thing. That was just kind of the intro of his story to get to where he is today. Luke, that sets us up for the next five weeks of podcasts. Right. We've been busy at work recording our How I Built this series. So let's wrap up our Thanksgiving episode with a little foreshadow as to what the dealers are going to get over the next few weeks through the holiday season.

Yeah, you know, it's going to be a bunch of different type of dealers. Buy here, pay here. Only to people have these business models that are buy here, pay here retail, and a little bit of this, a little bit of that. But it's always wonderful to talk to other dealers and listen to their pitfalls, the things that made them successful, and just learn. And that's what we're here for, is to help you learn and grow and help us learn and grow as well.

Yeah, it's the theme of our whole show. Dealers helping dealers. Right. I mean, we're not. We don't have an agenda. We're not trying to hockey our product or anything. It's just fun and so informational to get dealers backstories. Right? I mean, Jesus. Like some of these guys. I'm listening. And it's like, that is my story. He literally went. Took the exact same path I did, but probably did it a little bit better because he's three times as big as I am now. But it lets you see that those are possible. So definitely tune in over the next couple of weeks. A couple great, great episodes. Dealers, east coast, west coast, like Luke said, big, small, everything. And keep subscribing, keep commenting, share us your ideas. We're looking forward to season three. Luke. Yep, we're gonna keep going. You ran out of stuff to talk about?

You know me, I never shut up.

So again, thank you, everybody. Hope you guys are having a happy and safe holiday season. Luke, anything to say before we close?

That's it, buddy.

Happy Thanksgiving, everybody.

Thank you for joining us today. Hope this episode inspired you to take positive action. Remember to subscribe so you get each episode the day it comes out, and we would love your help spreading the word. Leave us a review and share this podcast with your dealer friends. Dealers helping dealers learn and grow together.