#171 - Rollercoaster Life of A Car Dealer

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Welcome to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson. A podcast by Dealers for dealers. Here we go.

Hello, hello, hello.

Welcome to this episode of the Independent Dealer Podcast. If you are joining us on YouTube, you can see we have caught Luke in the back of a car. I don't even know what's going on. I'm not sure if he's heading to jail or if he's in an Uber or.

No, none of. None of that. On the road, trying to source some inventory that is impossible to find, impossible to buy. Jeff.

Yeah, Luke is in the trenches. That is what you guys get when you tune into the Independent Dealer Podcast. We are independent dealers. There is no production value, there is no timing. There is no rhyme or reason of this nonsense. I just text Luke with a zoom link, he jumps on and. And then we banter. And that's what you're going to get in this episode today, guys. We're going to cover a bunch of hot topics, things that are on our mind, things that have been in the forums and the groups. So hopefully we bring you guys some value. You jump on, you leave us a review on itunes or Spotify. Obviously, the podcast is still growing. We're super, super excited and very grateful for you guys tuning in and we look forward to seeing everyone at the various state and national conventions coming soon. And maybe your dealers. You know, Luke, Luke, I got a little rv, man. We could just hit the road and do a. Do a tour of the states and.

That would be pretty cool. I think we could, you know, just from maybe I drive to you, then you drive back to me or something, or fly to you, then we drive back across something like that, up to.

70, back down to 66, something like that. Yeah, we could probably hit a handful of dealers. So if we do that, we'll give a shout out and line that up.

We'll probably need a sponsor to sponsor all that.

I think just buy cars at the auction along the way. You know, Luke, that is, if I still have a dealership by the end of this week. I'm not saying I'm going to do this, but hypothetically, if someone were to burn this place down, the tips you have for insurances to make sure that I'm covered, I could just set sail and go to the Caribbean. It's definitely been one of those weeks, Luke, where I question why we get into this business model. There's so many moving pieces, there's so many touch points between employees and customers and cars, and definitely doing the buy here, pay here. That is like amplified. I mean, I have other businesses. I own a property management company. I own some student housing. I don't even give them a second thought. I can set them. I have a manager that runs them. It takes about an hour a month. And it's a huge machine. I mean, we're 500 beds. And I don't stress about it, this 500 accounts. And it keeps me up at night occasionally and stresses me out. Are we in the right business?

I don't think we are. I mean, I'll just say it like that. It's lucrative. Let's say that it's very lucrative. But there are so many moving parts and you've got to rely on. Let's just, let's start at the beginning. You got to rely on the right way to source cars, which right now is very difficult. Right? So then after we source the car, we've got to worry about reconditioning the car properly, right? Then we've got to worry about selling the car. And during the sales process, we also have to worry about underwriting the loan properly. Then when we sell the car, we've got to worry about it getting registered properly. Then we have to worry about collecting the account. Well, part of the collecting account is making sure that that car runs for the next 45 months or however long your average note is. So I don't know how many steps of that process I just went through. I even left out the marketing side of it. But. But you know, it's probably a 10 or 12 step process. Then you lay on a layer of the amount of staff you have to have to do all those things and staff who are willing to pull in the right direction. I'm not sure. I saw a friend of mine who's in the development business and I was talking about buying this building and doing some RV storage and this, that and the other. And. And he looked at me, he said, luke, how much do you think it's going to cost to do this? And I said, well, Harris, I. I don't know, maybe a million dollars. He said, well, what's your best case scenario? That you're gonna. That you're gonna net a month? I said, man, if this thing made 10 grand a month, I'd be happy. He said, well, hold on. Why don't you just give me, you know, $100,000? You don't have to touch anything. And within a couple of years it probably turns into five or six thousand dollars a month. So are we in the right business? I don't think so there's too many moving pieces. That's my whole point.

Yeah. Yeah. And I appreciate everyone sticking through us on this. We're going to be Debbie Downer for a couple of minutes here on this, this episode. But I want to take a little bit of an issue with your first comment, which was it's very lucrative. And I looked at last month, and I think. I don't know if it's so lucrative, man. We sell. I sold record cars. I had record low grosses and a record low net. Right. Because I had paid more for those cars, you know, the month before, I had some killer grosses because I was selling yesterday's cars at today's prices. Now I'm selling today's cars at today's prices, and my grosses are slimmed down and. Or gone. I'm spending more on recon, but. But yet my expenses are still up because I was pretty heavily staffed up until yesterday. I don't think I'm making any more money selling any more cars.

So there's a fine line there, and I've run into it before where you can sell your way to less profit because your expenses go up faster than your sales do. What typically happens is. What typically happens is you'll stay at that. That level for a little bit until your processes get a little ironed out, then you'll see a big jump in profit. So I think maybe what you saw was just the beginning of that second location and things like that and a weird market where there, you know, customers aren't willing to pay that extra money yet. So I think that's where you were.

And what I'm dealing with the last three weeks. You know, the first pay period of the month for my guys was pretty slim. The second one's a little slim, except for I've got one standout sales girl who's doing great. It's slimmed down a little bit, man. Things have slowed. And I think what happens is when that starts getting spread out, you know, salesmen start getting a little nervous. You know, they were. They were completely happy when they were, you know, cashing their eight $10,000 commission checks, you know, a couple months ago. But now that it's dropped down to three or four, now they're all looking other places. You know, they're going to stick with you when it's great, and when it gets bad, there's no loyalty.

And this job market is. I don't even know if I want to call it a job market. But this time in the economy, where people can make more money sometimes not being at work, there's creating some, some ripples. We lost, we lost four employees in two weeks. And for a business my size, that's 20% of our employees. Yeah, well that'll put a squeeze on you. And considering one of them has been with us for five years, she was our top salesperson, she just walked out, you know, so I don't get it. Yeah, I don't understand what's going on. But something in people and something in this economy is causing a stress level for the owners of the business that doesn't exist with our employees.

That's super funny. The observation I made as I went through the Del Taco drive thru yesterday and the guy on the phone, the guy on the mic, right. Speaking to me was just great, just amazing. And I'm like, this doesn't add up. So I get up to the window, sure enough, I guarantee it was the owner, it was the owner of the Del Taco working the window because he could not get anyone else to be there. So I think I've seen that in multiple businesses where you're like, you're not the typical counter help here and we're doing the same thing. I'm out there helping the guys detail. I'm running cars around and doing those things I wouldn't typically do because we end up shorthanded and, or I'm trying to train or I'm trying to take the stress off of a key employee who might be overwhelmed. Cause I don't want them to, you know, collapse and then bail and start looking other places. So.

And this, this leads, this leads into a topic that I've been thinking about for the last couple weeks. Well, when that salesperson left because typically our setup on a Saturday is a salesperson and a collector. That's our typical setup. And usually a detailer or something to that effect. Yeah. So when, during the slower times a year, during the busier times a year, we'll have almost full staff. But when that person left last Thursday, I had to be a salesperson on Saturday and, and I looked at the next three months and I'm going to have to be a salesperson, you know, every other Saturday.

Right.

I don't like selling cars. I've done it. I don't like it. I'm not working to leave during the week. So it's almost counterproductive for me to be there on a Saturday because I'm not setting appointments. It's just not, I don't have time to do that.

So what's Your pushover on the approvals. I know that you put me down in front of an applicant and guaranteed they're getting the car, you know, because I get emotionally invested in just making sure they roll out the door.

I don't. I don't grade the people. I just go, yeah, they're approved. Right? So, sure, but it's my money, so. Okay. Um, but I think what I said was, you know what? We're really low on inventory. We're really low on staff. So what I think we should do is close for the next six Saturdays. Now, it. It fell in a way that this was Memorial Day weekend. Memorial Day weekend. I'm not sure about other parts of the country, but in South Carolina, it's big. It's really big. People are traveling everywhere. We have beaches two hours away, so the whole weekend will be shut down. So we. We close Saturday of this week, and we actually also closed Memorial Day Monday. But then. Then we have the whole month of June where we're going to be low on inventory. I can already tell you that because I probably have about five cars in. In recon, and then we lead into July 3rd. Well, I'm not going to be open for July 3rd either. So I saw an opportunity to maybe garner some love from the employees we have remaining and say, you know what? We're going to close for next six Saturdays. I don't believe it's going to hurt sales, and I don't. I really don't believe it's going to hurt collections. But what I do think is going to happen is going to boost morale with the employees we currently have. And I can't afford to lose any more employees. So I've got to figure out a way to leverage what I do have, and that's the ability to close for certain days for the next little bit, and hopefully it works. I don't know if it works or not, but. But I'm willing to take a chance.

Yeah, that's a hard thing for me. I feel like having. You know, when you talk about the conversation of being closed on a Saturday or having irregular hours because you're short staffed, I worry so much that that is a slippery slope of losing credibility in the community or from the buyer base where they show up and they're like, well, I don't know if this place is open or closed. You know, their hours. Their Google sheet says they're supposed to be open, but they're not open. Their lot looks half empty. I'm calling, trying to get an appointment. I thought they'd be here at 5 and they're not, you know, do you worry about.

So yes, you do worry about that. But what you have to do is market that you aren't going to be there on these days. It should be all over your Facebook, your Google hours should be changed. And you've got to say, hey, this is the reason we're doing it. We need vacation time, we need a little time off. It's really hot in South Carolina. I mean it's going to be 100 degrees here tomorrow. You got all these things that you've got to take into account. And people understand June's a little, usually a slow month for us anyway. So because you guys, so much tourism going on in our state, I'm not saying it works, I'm not saying it works in Ohio because Ohio, June is probably pretty, pretty good month because they've just got out of winter. You know, people want to spend money. So I'm not sure it's, it'll work for everybody, but I think it works for our situation.

As a general rule of thumb though, people that think is Saturday a sales day? I used to be closed every Saturday because I was so short staffed that I wanted to be home with my family. I didn't want to be here working. Now I've gotten to the point where I have staff, we are open on Saturdays. Is it a buying day?

What we typically see on Saturdays? And I've broken this down by tracking the hours that people come in, the ups, what time ups come in on Saturdays and, and how did they get there? I've tracked this and the one thing I can tell you is if you have a really committed sales staff that works leads Properly, they set 10 appointments on Saturday. That's what should be going on. And typically those Saturday appointments show at a little higher rate than the weekday appointments. But the close rate on Saturday is lower for us. But what happens is the close rate ends up moving to Monday and Tuesday. So Saturday's a good day to show shopping day.

Yeah, they think about it on Sunday and they come in and do the paperwork on Monday.

So I think you could probably set it up so that they can look on Saturdays. And you know, I don't think it's going to cost sales. It may, you know, but if it cost two sales, I'm okay with it.

I always thought it was so funny that I was open, you know, in the past I was open, you know, 10 to 5 or 10 to 6 and, and I was like, my customer should be working. Like if I'm only open from 10 to 6, Monday through Friday. Every single one of my buyer bases should be at a job during that time because that is your typical 9 to 5, you know, 40 hour week worker. So I'm not open when they're off work. That just makes no sense. So it seems to me ultimately you'd be open from, you know, 3:00' clock to 10:00' clock at night and then all day Saturday, you know, um, yeah, be open when they're off work, but.

Whatever, that's, you know. But you know what you find is, is customers make time to do things during the week because they want weekends. That's right. Because they want weekends to be with their family, just like us, Jeff.

Yeah.

So I think, I think as long as you let customers know what you're doing and when your sales staff is making appointments, they let them know, hey, we're not going to be here Saturday for the next six weeks. And if it works, I may extend this all the way through the summer. I haven't decided.

Very interesting. What I found at my place is I have to be at about the 10 to 13 employee area headcount in order to have coverage as a buy here, pay here, you know, I've got to have a collector, I've got to have a receptionist, I've got to have two to three salespeople and F and I. And then my shop. So I guess if I got rid of the shop, I'd probably only need five to six people to make sure that everything's covered. When someone goes to lunch or someone gets sick or someone needs a vacation, I feel like anything less than that and you start having this overworked, overstressed situation.

Our number is about 20, so. Yeah, yeah.

But then in order to support that 20 employees with a shop, because you've got your full recon in the back, you've got to be selling 30 to 50amonth, right?

Well, I mean, I don't.

Let's say 30 to 40.

Yeah.

Three salesmen should be 15 each.

Yeah. But I don't have to sell that many to break even. So, you know, you gotta, that's the reason you gotta know your numbers. We talk about that so much. Jeff. My dad asked me the other day, so how many do we have to sell to be to break even? And you know, it's about 15. And so as long as we can stay at 15, we're fine. So I don't stress about it, but know your numbers so that you can make those decisions.

But what I look at Is I say, okay, I've got to. I mean, but if you're selling 15 cars with three salesmen, no one's making any money.

Well, you should.

So they're all just flunk out. Right? So. Well, that's what I'm saying is I've got to have two to three. I've got to have three salesmen in order to have someone covered. People here during the weekday and then a rotating Saturday salesman. So what I'm driving at is the lifestyle that I want to live at my dealership because I don't want to be here on Saturdays and I don't want to work these people to the bone. I've got to have 10 to 12 staff, right? That means I have to sell 30 to 40 vehicles because I've got three salesmen. So it almost like my design and my lifestyle forces me to sell X amount of cars. Now if I try to push above that, then I start getting nonsense like I did because now we're getting so desperate to buy that we're overpaying and my recon shops bogged down. And so, so I do feel like there's that magical number that I may have gotten a little bit ahead of myself on.

You've got to be willing not to sell cars. And that sounds counterintuitive, but when prices get like they are right now, you have to, you have to be willing to do it. There's been many a times before where I just said, you know, I've got to explain to the staff what's going to go on and they've got to make a decision where they're staying or leaving. But I'm not going to, I'm not going to press and I'm not going to make bad decisions because I've got to make sure A salesperson sells 15 cars a month. If I, if I've got to pay them an extra thousand dollars that month to stick around, then I might do that because I think that extra thousand dollars I give them may, or that extra time off I give them may end up saving me money in the long run.

Some turnover. Yeah, yeah, that's funny. So I had that exact conversation with a key salesman here two days ago. Things were a little slim for him. He was struggling. Right. I'm going to give you a guaranteed minimum. He's the one opening my second location. So I was, you know, I know that he's doing some stuff that's not directly sales related, you know, with the setup. And so I tell him I'll give him a Guaranteed minimum. And sure enough, the next day comes back and lets me know that he's accepted a job somewhere else and putting in his two weeks notice. So no good deed goes unpunished, that's for sure. When it comes to salesmen, no matter employees, no matter how loyal I think they say they are, as owners, we have to be ready to replace anyone anytime.

The only, there's only one person in your dealership that's not replaceable and that's you.

Yeah.

So you got to remember that. And you can't. You know, a problem we have. Where one employee left was, I decided to, I didn't decide person wasn't doing something properly. And I, and I explained to them how their job should be done and that they didn't, that they had been here long enough to know the way it should be done. And to, to them, that was me being a certain way like, you know, how are you, why are you, why are you talking to me like that? Well, I'm not talking to you in any way. I'm asking you to do your job properly.

Yeah.

And so when they get mad, you've got to be willing to put your foot down, say, you know what? This is enough, have a great life. Or if they go, I'm quitting, you go, well, have a great life. So you can't let the, the, the chickens run the coop. Right. You can't. You know, it'll put us in a saints out and you can't do it.

It's a really hard thing to do because you're trying to treat them with kid gloves, especially maybe some of your younger workers. You know, I've probably, I've never yelled at an employee, but I've gotten an, I've gotten stern with three, I think, in my 15 years. And one of them was two days ago, a separate employee doing something he wasn't supposed to be doing. And I was standing right next to him and he didn't listen the first time, didn't listen the second time, and the third time I yelled at him and I fired him yesterday. You know, nice kid. I need him here. But you, you, I mean, I don't yell at people. I don't get angry. I don't get mad if you push me to that point. You're not a fit. And as much as I need somebody here, it's like what you said, Luke, you do have to get to the point where you're putting your foot down with the nonsense. And it might mean you're short staffed, but it might. And to that point, I think my problem is onboarding. I definitely feel like I am so desperate sometimes that I bring these people in here, I show them where the bathroom is in the time card and I let them loose. And that not the way to do it because you're not building value in the, in. In the job, in the dealership. You're not building a brand with them. You're not training them. Right. So I walk out there and everything's being done wrong. And I'm like, well, it's the blind leading the blind. No one's been trained to do this right.

Of course that's hard. That's hard for a business our size, Jeff. It's hard for small businesses. I was listening to some podcast the other day and. And I can't remember the business because I wish I could, but the CEO still, once a month, brings all new hires in and into auditorium. This probably was before COVID and goes through the onboarding process. And it was just amazing to Hear a Fortune 500 company where the CEO still does that. And you think about the times we didn't do it and we should be doing it. I don't have the right answer, but we should be doing it.

Yeah, yeah. Documenting your processes, having a training manual.

Yeah.

And then just take time and say, man, the first, the first day, the first two days you're going to go through this training manual. You're going to watch these videos. You're going to, you know, this is going to be part of your hiring process. It's not just, you know, give you a rag and get you out there washing cars. I'm going to have you watch 10 videos on how to detail a car and the way we like to do it. And then we're going to get you in, which is creating the training materials and then updating it and requiring that they use it and that their supervisors make them use it and not just throwing people in, tossing them out there. So very frustrating stuff. Luke, like you said, I don't know the answer, but we'll get through this, right?

Yeah. We're not the only people dealing with it, Jeff. There's other dealers, there's other companies. Right now is, I think, a blip in the radar or in the timeline of our economy? That doesn't make sense to most anyone. And I believe that sooner than later, it's going to correct itself. Hopefully.

Yeah. It'll be interesting to see when the extended unemployment runs out here in our state. A couple more weeks, I think, and they're cutting it off. We'll see if that changes.

Ours ends, I think, June 15th.

Yeah, it'll be really interesting. You've got a lot of high school seniors entering the workforce. With graduation, we're a bit of a college town. So in a couple of weeks, couple of months, you know, school will kind of get starting back up again and kids will be looking for jobs. So we'll see how that goes. One other thing I want to touch on, Luke, a couple of other things since we're just kind of bitching and moaning today, guys. Facebook groups, great place, ask questions, get interactions. We love, you know, we try to help out and everything. My stick would just be really careful with the legal advice. Right. And same with this podcast. We are not attorneys. We are not legal advice. We every day I put this out or when we put these out, I think it's probably a little disclaimer we need to put at the end of each podcast. Hopefully people are not taking anything we say as law or accurate or straight.

Yeah.

Talk to someone who really knows for sure.

Good attorneys are worth their price. Okay. Good CPAs are worth their price. And you need to make sure that you're consulting the right people. Your state association really should be your go to. For now, I'm not gonna say for legal advice, but for the laws of doing business car business in your state. And if they don't know the answer, they should be able to point you to the people that do know the answer. Bankruptcy laws are federally mandated, but there are some caveats in states. Not a lot, though. You should always have a great bankruptcy attorney that you can call. You should have a great business attorney. You should call. And you should have a great insurance agent that you should call. Because most, you know, if you get into legal trouble, your insurance policies are going to cover a lot of it. If you've got a good insurance policy and you have a good agent. So, you know, make sure that. That you have the right people. And a CPA in our group, I mean, in our businesses is number one. You should not hire your friend that's a cpa. If they don't have knowledge our business. There's plenty of good ones out there. You should have them. They will know a tax attorney and they will know. Actually, attorneys in your state, they can probably help too. So make sure you don't take legal advice from Facebook groups or from your friend at the auction because they don't know.

Yeah. Or from Luke on a podcast or.

From Luke Gobbin on a podcast.

One more thing, Luke. I think it's quite obvious that stimulus checks are drying up. You know, our down payments are getting tighter and tighter. I have seen an uptick in my collection delinquencies as well. It flatlined the last two weeks, which has been good. But anecdotally I am, you know, we had a drop off. I've had two repos which I haven't had in like three months. So which I mean, unfortunately that's probably the best place to find inventory right now is just if I went up and picked up everyone that was a day or a dollar late, let's go on a repo spree and I could fill a lot up by the weekend. But not the smartest thing to do.

No. You know, late May, June, July, August are typically slow collection months. So don't. It's not, it's not unnormal. Right. We've been artificially inflated. Our collections have been artificially inflated for 12 months now. It's going to, you're going to get back to normal, that you're going to see your normal trends carry out. So I don't think, I don't think it's, I didn't, it was going to happen anyway. So, you know, it's nothing different. It's different than what we've seen in 12 months. It's not different than the last 10 years. So make sure you your backs and basics on collections, doing it the right way, doing it the legal way and I think you're going to be fine. Jeff, we didn't have any repos last month either, but we're going to take for this month so it will probably take you know, back to 10 next month or something to that effect. So I don't think it's going to be any different than what we've normally seen.

Yeah, the hardest part is that it's much, much harder to put a deal together now that everyone has, you know, 500 down and not 1500 down.

Well, you know what's weird is we saw we, the deals we have taken as month, we've seen a huge increase in down payment. I don't know, I don't know what, I don't know what to tell you. We've taken a lot more cash deals this month and we hadn't had a discount any cars period.

So do you feel like the bump we had the last two to three months was that pent up demand finally getting into the system and buying or do you think that is kind of a pre demand and now we're going to go into a bit of a Slump in the dog days of summer.

Yeah. So I've been preaching this, and I'm not an economist either, but I believe that you've had 18 to 24 months pulled forward into the last 12 months. That's what I believe. And so I believe that demand is going to not go in half, But I believe demand, you're going to see demand at about 70% of what it should be during this, during the next little bit. And a little bit by that, I mean six to 12 months. I think. I think it's time to really focus on the people who are paying off accounts. Time to focus on those people that are totally near cars, because that is who are going to make. That's who's going to make you the money in the next little bit. It's not going to be. It's not going to be all that marketing material that you're putting out on Facebook and radio or whatever. It's going to be. It's going to be the people you already have.

Interesting. Interesting. It'll be interesting to see how that plays out, for sure. I'm banking on it saying strong. So, listeners, if anyone has stuck with us this long, 30 or 45 minutes of nonsense. But what I want to do, Luke, is I want to play a little game. So if you have stuck with us through this point of the podcast, you are going to be. Have the opportunity to get on a podcast with us or whatever. I don't know, Luke's going to send you a T shirt or a hat or something. If you get in the comments of either the Facebook group or the YouTube or just email us and you can identify what car Luke is in.

Oh, he's not going to say it.

No, no, no, that's it.

No, no, no.

This is it.

Just the back seat.

Just the back seat. Based on the. The handle, the headrest, the split bench in the back.

You got an idea, Jeff?

You see the curtain in the back. You can see the door panel.

If you showed that my normal. It's not my normal rider, I can tell you that because I wasn't a thousand miles on my normal car.

Yeah. If you showed that. If you showed the stereo, it'd be a dead giveaway. So take a stab at it. See if anyone can guess it. If you do, we're going to do something special for you. I don't know, put you on a podcast. Luke will fly out and make you dinner. I don't know, something like that.

I'll send you a Gala Motors shirt for sure.

Yeah. All right. Luke. Have fun out there. Good luck in the trenches. Hope you come away with something.

Thanks Jeff.

Next week.

So glad you joined us. Please take a minute to leave us a review and share this podcast with a friend, the Independent Dealer Podcast Dealers Helping Dealers.

Sam.