#195 - The Power Of A 20 Group

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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 and welcome to this episode of the Independent Dealer Podcast, brought to you by Buckeye Dealership Consulting.

Very good.

Live in Atlanta, Georgia.

We're in a cave.

We're in a stolen conference room. Reporting to you for this week's episode. Coming straight out of 20 group. Luke, what a great couple of days. We got together with some of our favorite dealer friends. We shared ideas.

We did. And you know, Jeff, you and I have been in 20 group together. We were in opposite, not opposite, other 20 groups before now, but the power of the 20 group or the dealer performance group, whatever you want to call it, whoever you're going with is so powerful. The things we've learned and take away make us, made us millions of dollars, have done things that we would normally think is the right way to go, but once you listen to other people who've deployed them, you figure out is the right way to go and things you do other dealers don't do. It's a great way to learn and it's so powerful. What else can we say about joining one?

We use this phrase all the time and you guys know it. You don't know what you don't know and you just don't. I mean, that's the. That's surprises me what there's the stat that they shared with us was 60,000 independent dealers or something, and 12,000 of them are maybe a part of an association.

Yep.

And out of that, a couple hundred.

Are maybe in 20 groups.

A 20 group or a dealer performance group. So it is a rare, rare breed that cares to learn and get better.

Yeah. And actually on that note, we are needing some members in our 20 group.

Yeah. Yeah. Well, we take a couple.

We'll take a couple.

If you guys are listeners to the podcast, if you're buy here, pay here and you got, you know, upward of a 500 accounts.

500 plus.

Yeah. Plus 5, 3 million plus receivables. Yeah. Reach out to us, Luke, me through the podcast. Yeah, we would take a couple of good.

Yeah, a couple good dealers would be great in our 20 group because we need a view. A few more.

More you can never have. You can't have too many.

You can't.

But you find that great mix and it goes forward. So, Luke, let's share with the audience a couple of the takeaways we had from this week these last couple of days. Some of the. Your notes, my notes that really, really hit home Stuff we're going to do the second we get home. A1 priorities.

Yeah. So everybody out there, no matter if you're buy here, pay here, store or retail, store, whatever, you know, it's all about recon. How fast can we get our cars line, Especially with as much as they're costing us right now. And it's really hard to get inventory. So whatever you got, you need to make sure it's out there. And I've gone back and forth on how to best decide which cars we do first. And you know, it comes down to one thing and it's a consensus, it sounds like. And it's first car in, first car out, and there's no wavering from that.

It's a hard thing to grasp because I have been of the mentality of get out the fast ones. You know, hey, we just bought four or five and I know two or three just need a quick detail and I can get them to the front line. I am, I have a problem with fast tracking cars because I need them to my front line. I'm so desperate to get cars on the lot. My manager just sent me a picture of our front line this morning. It looks like a ghost town. Yeah, we're dead empty. So my anxiety would be to get those cars detailed, throw some brakes on them real quick, maybe a set of tires and get them out there because they're quick ones. But you're saying not smart. Why is that not smart?

Well, the reason I didn't smart is because it creates a backlog of things that need a lot of recon. And so not only does it slow down the entire process, it neglects the entire process. The next thing you know, you could have, you know, 15 cars and need engines or transmissions or a check engine light that you can't figure out when you should have. Probably if that were the issue, you should have farmed it out, Let you know, do your internal work and farm the issue out or something to that effect. But if you take the car you bought yesterday and put it to the front of the line, next thing you know you're going to have 30 cars over 30 days sitting in that recon line. So it's hard to get our head wrapped around it. And I'm one to advertise the car before it's ready. And if we get a deposit, it comes to the front line. But I may have to readjust that thought process. I still think you need them more market them, but you can set an expectation for the customer. Hey, I understand you want that car. In that line. But I can tell you where that car is sitting in line. It's going to be 12 days before it's ready. And the customer can say, actually that's great because it's going to take me another 12 days to get the rest of my down payment. Or you can move them to something else that's similar and they'll buy what's already ready, which is really what you should be trying to do.

Right? Yeah. My salesmen are not allowed to look behind the fence. They're not allowed to look at things that aren't ready yet. But definitely, if I have something that I feel like, you know, my goal is to get them inspected within 24 hours of hitting the ground. Right. Because I do have some green lights on some of them and some five day guarantees that I need to figure out quickly. So we get them inspected right when they hit the ground. And it is, it's hard for the shop manager, the mechanics to not say, well, I'm inspecting this thing, let me just throw a set of tires on it and brakes and we'll just get it done.

Yeah.

You know, and that becomes two cars and three cars. And then yes, all of a sudden the priority for the day gets put to the back and. And yes, then I end up with a whole stack of builder cars taking up my whole back lot and they don't ever want to tackle them. And so unless you have just a really, really fine tuned process where nothing's sitting around, I guess you could jump right on the five cars that just came off the truck. But you got to be very careful about leaving the projects and always pushing them to the back and pushing them to the back.

And I believe in one thing as well, and I haven't been doing this, but we're going to focus on it is one internal tech and that's all it's going to be. And the reason there is, I believe if you let multiple technicians do your internal work, you're going to get multiple grades. Right. The inspection is not going to be the same. I think your recon cost could go up. So I think it's a way to limit recon costs. And if you teach that one guy that, hey, this is what we're doing, this is how we're going to do it, it should get done quicker and better. We look back at a bunch of our tickets and we average them out over I think about 90 days. And we found that we had 5.7 hours per internal recon car on each ticket and you start breaking that down, you can figure it out. But it kind of reinforced what I already thought, that one internal tech could get 40 cars ready a month, and that's where we need to be and that's where we're going to get to. So if I can get 40 done every month and we're selling 40, then we're right on target.

Yeah, yeah, that'd be a great goal. That would be huge. I like the idea of having the one tech that you can really keep. You know, we talked about how each tech, sometimes they just have a disposition towards certain things. You know, they think every Chrysler needs ball joints. They think every this is gonna need a transmission. They think. Of course, all techs think everything needs an air filter and a cabin air filter because it flats well. But it's easier to keep tabs on those things. And then you look at that and are you tracking that inside of your management software? Does it have the ability to say, hey, I'm going to look at the last six months and see what percentage of my vehicles, how many of them did I put batteries in, what percentage did I do air filters, what percentage did I do brakes and ball joints? Is that, Is that on? Is that in line with what it should be? Is that a historical average that I'm doing 80% air filters? Well, that can't be right. You know, I'm obviously getting crazy, so.

But, you know, the one I was.

By design, but.

But the one other thing this could do is something that our moderator brought up was your returns, your policy. We owes warranty issues in the first 90 days should be less than 30% of the cars you sold. So you should only get those comebacks 30% of the time or less. And if you have the same technician doing it exactly the same way and it goes over that 30%, then you could say, hey, we have an internal problem.

Right?

There's a process that's fixed and you're not pointing the finger at different technicians, hey, let's train on this. Let's get this better. So I think controls are really good, and a big way to control this is to have one person that only does internal. But that doesn't mean that you can't have another tech do an internal. But I think if it's over that internal tech's position, then you could schedule it in better and maybe not screw your shop up.

Yeah, yeah, that makes a lot of sense. Another topic that I find really interesting is what they referred to as kind of a path to approval. And, you know, we all have. If you're a buy here, pay here dealer. And even if you're a subprime, you've got turndowns, right? You've got folks that are coming in, you're taking all the steps, you're hoping for the best and you gotta turn them down. And a lot of times we just kinda say, hey, sorry I couldn't get you approved, or you know, I got you approved. But CAC is asking for five grand down, which is essentially a see you later, you know, and they get a little angry and maybe leave. Are we doing a good enough job of giving these guys a game plan? Hey, I couldn't get you approved today. My in house program or my subprime lender says you need a little more time on your job, you need to work to a little more down payment. How are we going to get there?

That is so interesting. We've always done this. I don't necessarily flat turn anybody down unless they flat need to be turned down, right? So what we'll do is we look and we look at the application and we go, hey, you know, and we see this, I mean we see this a lot with younger people. They see the cars we have advertised and they're like, I want that car. Well, we say, well, you're working at McDonald's and you're making maybe $15 an hour at this point. Maybe it's whatever it is. We say, you've only been there a month, you really can't afford this car. But what we're going to do is we're going to show you how you can get there. You stay at McDonald's a year, maybe you get into management, you make a little more money, you can save up that money. Right now the best thing you can do is buy a car for cash or get somebody to take you to work right this second. But let's look to the future. How can we get you in a car next year or later this year? What is the best way? What does that look like for you? You don't get angry turndowns in that situation, you don't get people leaving you bad reviews because you advertise, everybody rides. It says, okay, you're not approved today, but that doesn't mean you're not approved next week, next month, next year. You've got to role play that with your finance director or your salespeople, whoever's doing the approval. The more you do that, the better reviews you're going to get from turndowns. The more repeat business you're going to get from turndowns.

Maybe that'd be interesting. Yeah.

Or comeback.

Are your turndowns referring their friends and family to you? Because even though they didn't buy a car, they had a great experience and.

That was another something interesting that came up there. If you could take that turn down or that, that person that you gave a path to approval and say, hey, in the meantime, you know, people that do need a car and actually, you know what our program looks right now? I tell you what, we got an approval, we got a referral program, and if you bring me a customer, I'm going to give you $100.

Yeah.

And that's the easy way for you to maybe make your down payment money, right?

Yeah. Start putting your down payment.

I mean that, I mean, that's a great way to. If you could, if you could harness that, I think that'd go a long way.

Yeah. And I think it's the overall philosophy. If you are a buy here, pay here dealer or even subprime and you're helping these people get back on track, you know, is that really your goal to get these people's credit built up to get them back on track, to get them graduated into whatever, you know, low interest rate or cuddle credit union type deal. Is that really your goal?

Honestly, that should be every buy here successful buy here, pay here store. I believe their goal should be that is to improve that person's credit to help them get to work, to help them get their kids to soccer practice or whatever. I mean, I really think that that should be a goal of everybody doing this business.

Yeah. So a lot of the way to get there. Obviously, guys, if you listen to our Tax Max episode a couple months, weeks ago, tax season's coming. Now is the time. Get yourself signed up with Tax Max. I'm going home this week. One of my big priorities is going to get my guys trained on the fourth quarter program. I'm going to start pushing that out to my prime customers, you know, my current customers, second vehicles, previous purchases, low balance. I have a relationship.

Yeah. Low balance people.

Low balance folks that maybe they need some tax time money to really get into a new car or get out of the negative equity they got on their own. But the ones I have a relationship with are much, much less risky and scary to do a fourth quarter program with because, you know, they're not, you know, fly by nights that are just trying to fleece you. So that's a great place to start the fourth quarter program.

Yeah. Tax Max. We're going to do it this year. We already Started training, we'll get up and rolling. But yeah, for sure, right now is a great time to go ahead and start preparing people. And if you can get those people out early enough and the car is worth reselling again, you're going to get most of the money for it. So trade them up with the fourth quarter program and then start working on your tax time program.

Yeah, yeah, we definitely need the trade ins right now. We know that cars are not getting any easier to find, that's for sure.

Yep.

Yeah. Luke, what else did you. Were you taking home? What do you. What are you tackling this week?

I tell you, it's, It's. It's always about pay plans and things like that. That, that you come back and you go, huh, what? How can I motivate my people a little better?

Right? Yeah.

And so there was a lot of talk about sales program or sales pay pay plans here. And the one thing, two things I never even thought about, and that was tie in a single salesperson's plan to the sales goal of the dealership. And I don't know why, I don't know why I haven't thought about that, but it could make the team work better. And if you. I mean, somebody set up that 33% of a salesperson's commission be tied to the total goal of the dealership sales goal, I mean, that's a big deal. And I think. I think it's something I've never looked at.

Yeah. So in my store, I have team bonuses. After a certain volume, everyone gets 500. After a certain volume, if everyone gets a thousand. So the idea behind it is, of course, hey, if you're at lunch and your customer comes in, or if it's your day off, we're still gonna sell that car. And maybe it's a split, but the overall goal is to get to those store goals, or the team bonuses that I call them. We know dealers that do it for every position, Sales service, lot porters. Everyone gets a bonus when the store hits their numbers.

Yeah.

And that's kind of an interesting philosophy too, because then you get service, you get detailers, you get tax, you get clerks all pushing the same direction, asking.

How many cars or so. Right.

Yeah. Trying to get you to that goal every single month because they know that, you know, up to 30% of their pay, you know, could be based on hitting those goals.

Yeah. And another thing, we haven't gone to this yet, but bonusing your salespeople on credit apps, one thing that we track and what I believe is the Fundamental, I guess, best way to see how your marketing is working is how many apps we get every month. Right. And some people will say, well, we don't get that many apps. And I think what could be happening there is your salespeople are booming the customer pre qualifying them before they get application. So one thing I may look at, I don't think we have that problem at our dealership, but maybe we do have it because we get a good many applications. But bonus in our salespeople on how many credit apps they get as well because that's just extra opportunities. It's just like bonusing them on appointment sets or what shows, whatever. But the more the basis here is the more applications you get, the more chances you get to sell a car.

Yeah, absolutely. And it's a number you should be tracking anyway.

Oh yeah.

It should be a very easy number to pull up and throw a dollar amount to it and it stops the pre qualifying. I guarantee if you get, look at more of those apps, you're gonna have more sales.

If you get, if you get a salesperson that comes to you and said, hey, I had 20, 20 applications last month and I sold 20 cars, that's not a good thing. Good thing selling 20 cars. But they also probably eliminated another 40 applications you could have taken and you probably could have sold, you know, 10 of those next 40 applications.

Yeah, yeah, yeah. The headaches, the, the one offs, the people that just looked at them a little bit sideways and they sent them hiking.

Yep.

Along those lines I was thinking I've got to be more aggressive with my pricing. I don't know if you got that it's a little bit harder because our cars are costing us more. And so it's shrinking my gross margins because I'm too scared to ask for that additional, you know, 10% over book value or retail, J.D. power, whatever. And I think I'm leaving a lot on the table.

Well, you know, it depends on what your model is, I believe, and it depends on how you look at it. I'm one to think that I should price my car to what the market value of that car is. If I pay too much for the car, then so be it. It's going to still be at market value because it's all about getting cars out the door is my opinion. Getting $400 every month recurring income. So you can see, maybe you do have an extra 500,000 you could charge and, and you could do it simply by going in and up and all your cars, $500 and see what happens.

I Guess what also interests me is when you talk about the folks that have kind of the V auto type model in their business where it's make a little teeny bit on the front end and then try to make it all up on the back end sometimes as buy here, pay here dealers. And I think to a degree subprime. It definitely, definitely helps to have a reinsurance company because now I would argue I could almost run a buy here pay here model with a little slimmer upfront gross, but then be able to add the back end products through my reinsurance company that would make up for my grosses. And yes, these are, those are, you know, they're put into my reinsurance company. And yes, they're, they're refundable, you know, if the car is sold or cancelled or repoed or whatever, the customer could ask for that refund if they trade the car in somewhere else. Because it's an industry, it's a service contract or something. Yeah, but that's kind of, that's the model. There's opportunity there.

Yeah. And I've been doing sort of this model for about two or three years and my grosses actually they went down to start with, but they come back up and my back end, that was never there, is now there. And it's making us a good bit of money to our reinsurance company. And, you know, good thing about that, lot of that money, well, it makes money for the dealership and the reinsurance company. And yes, that's a good problem to have, right, Is getting that back in money. But you've got to have a process in place to make sure your salespeople are selling every product you have. And I'll say this, I've always said this, 100% of the product, 100% of the time, no questions asked. Even if the customer says, that's all the, all the payment I can handle, you go, all right, Mr. Customer, I understand that's all the payments you can handle, but let me show you the products we have and the payments that that'll take into account. And you have to explain to them the value of paying $15 more a month instead of having a motor that's going to cost you $4,000. And so it's all about value add. And the best way to do that is to present it properly on the back end.

And of course from a dealer, when it is a reinsurance product, it's in your reinsurance company that's deferred revenue, right. Or maybe never realized revenue, depending on how you run Your reinsurance company. Of course, the guys at Buckeye are sponsors of the podcast. Great company to go with if you're looking to add reinsurance, for sure.

And that's a great segue. But Buckeye Dealership Consultant is a company that will help you set up the reinsurance company, teach you how to sell product like I was talking about there, and introduce you to products that you may not even know exist. And we think as dealers that we know everything. But I can tell you what, so many vendors can help you make more money, and Buckeye definitely is one of those companies.

Yeah, yeah, put the money away. And along those lines, Luke, I realized that my, my cpi, my collateral protection insurance, that is a huge revenue source. Right. Because it's not that. And I call it revenue because it's actually money that would have been going to, you know, Geico Allstate, someone else is now being redirected to your company. Right?

Yeah. CPI is something I've been really looking into and I kind of, for years kind of put it off to the side. Well, my car has too high an acv. It's not going to work. Not going to work. And in the past year I've really started to rethink that because I have someone in house that all she does as insurance. So we've started tracking some different things and I truly believe that. And after talking to so many other people in 20 group, that CPI is a product that will make us lot of money.

Yeah. And what I like about it is it's like with my reinsurance, my service contracts, my gap, I've got to front that money. Right. So I'm kind of, I'm kind of pay, I'm fronting it for the customer and I'm sending it to my reinsurance company and I may be slowly collecting it over time, hopefully. The beauty of that CPI is it is literally money that's being redirected elsewhere. Your customers are paying it anyways to somebody. So why not send it to you? I mean, the numbers are huge, Huge.

And what's also interesting is you're going to probably save your customer money. So some people's insurance, some people's full coverage insurance is as much as their car payment. And so if you can reduce that cost for your customer, how better your accounts going to collect out? And they're making it at one spot. They're not having to wait for this check to pay this. And they're just doing it one time. It's so interesting. I hope people out there and there's probably People out there listening way smarter than we are that's already done this and it's taken us this long to figure it out.

Right? Yeah, yeah, yeah. I just. That was one of my large takeaways is I need to make sure I'm not only using it as an option at the time of sale to eliminate their full coverage requirement, but also force placing it after the fact more aggressively. Being on top of people that are dropping their coverage or having the wrong deductibles. Force placing my CPI and then following through on actually collecting it and making it.

I think the force place is a little harder to collect, but if you get your collectors on board and your insurance people on board and they explain it to the customer, you can get it done.

Yeah. Luke, any other takeaways?

You know, it's. We're a lot of sales focused here in talking about setting appointments, which we. We know is big. I think we've gone over that a little bit. But what's your opinion right now? Because we're still. I mean, we're still talking about COVID I don't know how much Covid is affecting people out there, but it's all about setting the appointment, getting people in. Are you okay with that right now? Or, you know, where are you?

I'm in the state of Utah, so I'm wide open. We don't have any restrictions anymore. I have an interesting philosophy on it. I do. Anecdotally, I don't have evidence to back this up. I feel like my sales have been hurt because my salesmen are trying to communicate our program via text message or via email or maybe on the phone to a degree. And they're wanting to get these people fully approved before they even walk on the lot. Right. And that we kind of talk about that. What is this fully approval before you come here? You know what I think is, I think we might be losing out on some incremental sales for people that don't buy the vision or don't get it over the phone or by text or don't see, or they're just kind of getting that information and they're moving on to the next one, seeing how many.

Approvals they can get.

My appointment to sell ratio is huge. Right, right. And that's the point. Like, hey, you're already approved. Just show up. Okay. I got an appointment for tomorrow for you to pick up your car. Of course, my appointment to delivery ratio is going to be large. My problem is my application to appointment, I think, is struggling because my guys are just not able it's just impossible to communicate a buy here, pay here program via text message. You know, to sell the value, to give them the vision, to get the emotions going. So I do think I might start pushing back the other way and just go back to the old adage of, hey, get them on the phone and get an appointment. Don't talk about the program, don't gather stips, don't try to do anything. Just tell them to come in with their pay stubs and their down payment.

I think there's a fine line we gotta walk here. You know, during. During the first part of COVID we did a strictly do not walk, do not come to this store if you're not approved. Right. We actually followed that for six months. It was probably six best months of sales we've ever had. So, yeah, I don't know. I don't know what it is. I think there's a. There's a fine line we need to walk. We need a process in place. And you can test this, by the way. You can look at, you know, getting people in there and see setting the appointment first and approve them there, see what happens. You can do that for a month and you can do the other for a month and see which works best. But it's an interesting concept that I'm not necessarily going to adopt yet, but I might. You never know.

Yeah, yeah. I definitely think there is some power of having the customer in front of you, you know, selling the vision, selling the car, following your process. So I don't know, I think sometimes we look at some of these things we did during COVID look like they paid off. You know, they look like, hey, I did a complete virtual deliveries and it was amazing. And hey, I took all my collectors and outsourced everything to Taiwan. And my collections are awesome. But what you've got to understand is everyone's sales were amazing for a season. Yeah, everyone's collections were amazing for a season. So not. Some of that is not necessarily due to your policy changes. It could be due to just the market factors in general. And now that we're back to slugging it out like it was, you know, like. Like your normal times. Maybe we need to go back to some of those tried and true methods.

That is very interesting. It's almost back to basics. And the basics are, you know, you use the phone to get an appointment. You get the appointment to close the deal, Right?

Yeah.

And so maybe it is back to basics. And not to say that the way we were doing it won't continue to work, but get back to basics. Role play, train. Take yourself to conventions, join a 20 group. Our dealer performance group. Talk to other dealers, listen to podcasts, get better. Know what you're doing, right?

Yep. That is awesome, Luke. I think that's the biggest takeaway is just stay at it.

That's it.

That's it.

All right, buddy. Tech travels.

Yeah. Yeah, you too.

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