#203 - What We Learned In 2021

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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 broadcast, brought to you by Buckeye Dealership Consulting. Luke, it is the end of 2021.

Man, I can say, thank God.

So excited to be done with 2021. Everyone wanted to crap on 2020 and now we want to crap on 2021. And who knows, 2022 will be probably a big old storm anyway, so. But we have learned some great things this year, Luke. I cannot say that it hasn't been a year of growth.

Well, it's been a year of personal growth. I'm not sure there's been a year of dealership growth. In my, in my opinion and in my experience, we. 2020, Jeff, is what, you know, I was expecting all these horrible things for 2020, business wise, and that didn't materialize. You know, we had a great 2020, probably the best year. Well, I know the best year we've ever had. And so I was, I thought that we had everything down pat. You know, our. We didn't lose any employees in 2020. We had it down to a science. Everything was rocking and rolling. And then 2021, oh, buddy, that was a doozy. And so it's not the worst year we've ever had. But man, I've learned some really valuable lessons and hopefully I take all what I learned from 2020, the good things and the bad things I learned from 2020. Maybe mush them together and have a pretty good 2022.

Yeah, yeah, exactly. I think most dealers feel that way. So a couple of things I want to recap. And for those listening, we're going to get into our kind of our. Some of our favorite episodes of last year, the clips we're going to play, the highlights like we always do at the end of the year. Some of our best listened to episodes and some that we just liked personally. So we're going to share those with you. But before we get into it, Luke, let's recap 2021. What key takeaways do you feel like you learned from 2021 that all of us dealers can learn from? Anything stick out to you?

You know, the main thing that sticks out to me is that you kind of have to follow the market and not your gut when it comes to buying. I sat back and relaxed a little bit because I thought prices were going to spike and then come back down. And I just ignored all cues that the prices are going to continue up and so we got caught with our pants down and we didn't have inventory to sell. And so, you know, sometimes it's best to follow the guides, the books and auction prices than your gut. I guess maybe that won't always be the case, but this past year it was. So I guess it's to be more. More in touch with the actual market than what your gut tells you maybe is the right way to go with this.

And I would probably sum that up from your standpoint is don't be so stubborn. You know, I think. I think a lot of car dealers, I think we like to be stubborn and we like to think we know, oh, this is ridiculous, or, oh, this can't last, or, oh, I know better, or so. So we got to know the difference between, hey, what is a. What is a motivation coming out of fear and what is a motivation coming out of, you know, a hope for the future? Because a lot of. I think a lot of people might say, hey, you know, my instincts were to go all in during this time. My instincts were to see prices rising still and inflation happening and. And just the demand and the cash on the street is going to cause these cars to go up. I'm going to go all in now and ride this wave. One thing that that puts into perspective for me is, you know, we know that bad times can put dealers out of business, but it's really unique that good times, quote, unquote, good times can put dealers out of business. Right? And maybe it's the transition from good to bad or the transition from bad to good that can put dealers out of business. Because I think you have a lot of dealers that they had that same mentality of like, hey, I'm not going to pay that money for that car. And they just didn't buy the car. And then guess what? They didn't sell anything. And guess what, they didn't make any money. And guess what? They couldn't keep the lights on, and then they just decided to get out of the business. So you would rather shut your doors and be out of the business than pay this quote, unquote, inflated price because you think you can't sell it tomorrow and make money. And that's what we lost out on. Hey, man, the cars that I bought six months ago, I thought I overpaid for. Guess what? I would love to have every single one of those today. Every single if bid that I did not step up on, every counteroffer that I did not buy six months ago, I would buy hands down right now because I Was so scared that I couldn't flip it and make money by the time I got transported to my lot.

Yeah, that's interesting. You know, we always knew in the buy here, pay here industry that good, too good of times could put you out of business. Cause you could oversell and not have the cash to stay in business. And you never really thought about that when it comes to retail. And what you're talking about is exactly what has happened to the good time in this retail portion is that people got so scared they didn't buy, they missed the market, they missed the uptick. So they had, you know, if they, they didn't do anything, they ended up without inventory. And in the retail space, if you don't have inventory, you're not selling cars. You go out of business really quickly and for sure that is something I never thought would happen. And that's exactly what happened to some people this year.

Yeah, and it's really funny because, you know, sometimes I make fun of the, you know, V auto type model of, you know, trying to churn this thing within 15 or 30 days. But really you look at it right now and you say, okay, yeah, you turned those cars 12 months ago and you missed out on profit, had you sat on it for six months. But we're going to say the same thing. If this does level off or take a downturn, you knew you bought it high. So make sure you're getting off those things quick because you don't want to have an 120 day car in inventory when this thing starts to kind of go back to a normal depreciation level. Whenever that happens, I'm not going to make any predictions. Hey, so real quick, got to make sure you guys know our episode sponsor for the last three, four months and maybe forward for a couple months. Luke, these are great guys. They're huge supporters of the independent community. Buckeye, Buckeye Dealership consulting, Luke. They have thrown their full weight behind independent dealers in 2021.

Yeah. And you know, Buckeye dealership consultant, they've got so many things planned this year. Them and our other sponsor, Tax Max, about to put on this, this convention in April for Buy Here, Pay Here, United. They are committed, like Jeff says, to, to reinsurance, to educating, to all these type things. It's too late this year to put it to set up your reinsurance company.

Probably too late. Yeah.

But yeah, everybody out there has got to make sure that come January, you reach out to these guys, get your reinsurance company set up, start saving that money, not giving it to other Vendors.

Yep, yep. Get it going now, guys. Another point, Luke, I wanted to bring up with you is I've learned in 2021 that you pay for competency.

Oh, yeah.

Pay the money it takes to get competent people. And that both comes from an employee standpoint and a vendor standpoint. Right. You, you get what you pay for most of the time. And also if you're not paying them from an employee standpoint, you're going to lose those competent employees. You know, have the conversations with them, have the tough, you know, sit downs, the employee reviews, and don't be afraid to give them raises because someone else is probably trying to hire them away from you.

Yeah. You know, this really is important in the service department, and I've already talk about this with, you know, with the podcast community, but we've had just a bear of a year in our service department and I want to, I don't, it's hard to say pay the right money for competent people because I'm willing to pay the right money for competent people but can't find them, you know, and it's, that is, that's what's very frustrating when you, when you, you're willing to do it, you're searching like crazy and you can't get it done. I don't even know what to say then. But if you do happen to have a good tech and they know what they're doing and you have a, you know, have a garage full of them, pay them whatever it takes to keep them is what I'm going to tell you. Because right now it's impossible to find them. And the market changes so quickly. If you're not talking, it has changed so quickly this year. If you're not talking to other people about what they're paying for the position you have, you need to do that today because if you aren't paying them, you know, close to what they're worth or more than they're worth, they're probably looking for another job. Jeff?

Yeah, absolutely. And it's funny you say that. I had this exact situation a week ago before I left for Christmas break. I just kept having this feeling like I needed to sit down. One of my, you know, very, very loyal mechanics, he's been with me as a service rider. He's a mechanic now, and he's growing and just really investing in himself. So I sat him down and I said, hey, man, you know, I'd like to, you know, I appreciate your work. I'd like to give you a raise, you know, X amount. And he's like, hey, I, you know, I really appreciate that but you know, it's, it's way too low. I was like, really? I was like, oh, I kind of thought I was being generous by being proactive here. And he's like, no, he's like, he's like, you know, I've been invested in myself. You know, I'm this, that and the other. I need to be here. And it was about a 25% raise on top of where he was. And, and you know, I can't argue with the fact that he was right. And I said, hey man, I'm cool with it. And I'm. When I get back, we're going to sit down, I'm going to ask for some things and I'm going to set up a little more of a stringent, you know, some of the things I need him to do. So it's not going to be all one sided here, but I'm going to step up and I'm going to end up, you know, paying in the upper 20s, you know, lower 30s for this guy as a B mechanic with no certifications, but growing and getting better every day, you know.

Yeah. And you know, even, even the people in your office, collectors and you know, your comptrollers and things like this, you need to feel what the market's like. And if you don't know, ask people that are, that are paying the same position. And you can't, you can't just, you can't talk about different towns either. You really need to talk to people really close to you to see what people are actually paying in your community. Because when someone's paying in ten bucks to Michigan is probably different than what someone's paying in South Carolina is different than what somebody's paying in St. George, Utah. So you really need to have your finger on the pulse in your community.

It's super easy to get on indeed and do a search for your key positions or anyone in that ballpark and you'll see what you should be paying or could be paying them. And a lot of it is coming down and talking to them. And again, maybe you are overpaying, but they are here, they are experienced, you are keeping them happy.

So, Luke, this is going to lead.

Us into our first clip. This comes from episode 169. It is an episode we did on called Fixing the Mechanic Shortage. And this was, I mean, we did this. You guys are listening to this. We talk about this for months. Sorry for beating the drum here, but Michael Molecule, he came from the repair industry and Started a dealership. So he's very, very heavy mechanic at his dealership. And in this little clip we're going to play a couple minutes, he really talks a lot about being smart and exactly what we said, paying what it takes to get a good mechanic. You got to step up. And he also has some ideas for pay, right, Luke? I think some flat rate ideas, things like that.

Yeah. And that's another thing. Not even just what you're paying, but how you're paying technicians matters too. And Michael goes through that, you know, and I guess one of the things was that he is, he is so in tune with what technicians are making in his area and he knows that he has to find the right ones, keep the right ones, pay them what they're worth, you know, money wise and time wise. And, you know, that's really all it's about. If you can find the right one.

Yep. Okay, guys. And here is the clip.

Well, Michael, if. If we aren't master techs and we've never set that up, what are some of the things that we should make sure that, that our shop is doing to be tech friendly?

Yeah, I think that understanding the value of their time is a big, big part of that. And so all of our guys just to dip into pay plan for a little bit and maybe, you know, we can put a pin in that and come back to it if you want to. But all of our guys are paid flat rate now. We have guarantees and things like that, so they're not taking all the risk if it's slow. And we can come back to that if you want to. But so they're making money by being productive. And so what that means is that you've got to honor their time and treat their time as being incredibly valuable, not just to them, but to you as the business owner, whether you're a repair shop like us, where their time is your bread and butter, or whether you're a dealer where you know you're. You've got them as a service center that's doing recon on your vehicles or repairs for your customers. You know, you've got them for eight, nine, ten hours a day. So that, that is your inventory that you can sell one tech eight hours. So of that inventory, you can never get that day back. You can never get those eight hours back. So how do you make the most out of that time? And so even asking that question, starting to think about that is something that adds a ton of value. And going to your really good texts and saying, hey, this is a thing that I've been thinking about. You know, I think that I'm wasting a lot of your time by not being as efficient as I can. Just be brutally honest with me and tell me how I can make us be more efficient and, you know, waste less of your time. Because I know you're, you're coming here. These guys got into this business. Techs got into the business because they like to fix cars. They like to solve people's problems and then see that car drive away. That's why these guys got into the business. From a little kid, they were good at fixing stuff. And so he doesn't want to deal with bs. He doesn't want to deal with talking to people with the computer with all that stuff. He wants to fix cars. So if you go to him and you say, hey, you know, Mr. John Atec at, you know, my shop, what can I do to waste less of your time? I've been kind of thinking about how much of your time I probably waste. You tell me how we can be more efficient and he'll tell you. He'll have a list of stuff that's been irritating him for sure. And then, then it's on you to do some of that stuff and to show him that you're making an effort. But the things, the things that we think about. There's another time when Jack, you know, got really after me. One time when I was still fairly new at it. There was a job that we were doing. I don't know what it was. Let's say. Let's say it was an alternator. And there's an alternator for sale from one vendor, that's 220 bucks. And an alternator for sale from another vendor, that's 190 bucks. And so it's $30 difference. Well, the more expensive one I can get today and the cheaper one I can get tomorrow. Car's on the lift. I call the customer and I say, hey, this is what it is. And I price it out based on the less expensive alternator. It's going to save them a couple of bucks. Maybe we make a couple of bucks more of gross profit on the deal. Hey, I can get this part tomorrow. We'll get it done for you tomorrow. So I got there and tell Jack, hey, you know, part's going to be here tomorrow on that alternator. And he's like, oh man, you can't get it today. Like, this is a car. You would think you would be able to get it today. I was like, well, I can, but you know, it's like 30 bucks more expensive. He just looked at me like I was the biggest idiot in the world. And he's like, so I'm going to pull this car out, and then tomorrow I'm going to get my jump box, I'm going to go out there and jump it again and drive it back in here, where right now, it's on my lift right now. I can tear this thing down by the time you have the alternator here, had this done and never touched this car again. What are we doing? Find a way to make the $30. And so, you know, things like that where you optimize for the wrong things, just call the customer back and say, hey, you know, it's going to be 50 bucks more, but I can have it done today. Like, well, yeah, they'll probably pay 50 bucks to get their car done today. And so things like that, you know, if you show your techs that you're really honoring their time, they're going to respond well to that. And that creates this culture of, you know, productivity and efficiency where, I mean, our best techs are averaging, averaging 60 plus hours booked a week, and they're in our building 40 hours a week. And so, you know, that's impressive. That's average. I mean, you know, our payroll is nuts for these guys during the summer. I mean, they're turning 60, 70, 80 hours a week, and they're never in our building more than 40, 45 hours a week.

Michael, he's such a smart guy. I took a ton away from this episode. It's probably the one that I've listened to the most. You know, I do. I go through and I re. Listen to our episod because in the moment, I don't really absorb it all, but I've listened to this one a couple of times, and I've tried to put a lot of his advice in to play at my dealership. Yeah, Luke, what was one of your top episodes?

Well, I think the next one was when we had Andrew street on and talking about advertising. And I think the original reason we had him on was because Facebook was changing or Apple changed some of their privacy things, and everybody was up in arms that, oh, my gosh, Facebook advertising is not going to work anymore. And, you know, honestly, that's really all the advertising we do anymore is Facebook. And so super interested in this, in this episode. And, you know, it's so funny that Alexa and I were actually talking about this this morning about owning our own customers data and how to just zoom in and be super specific on who you're actually advertising to. And this is what Andrew talks about. And this is so important. We can spend thousands of dollars every month targeting the wrong people. If you use your data, as long as you have a good way to collect your data and market to your people and market to your people's friends, you're going to spend way less money and have way more success in your marketing.

Yeah, that is so smart. And I think what's interesting is, you know, this is a side note, but we talk so much about how it is getting harder and harder to reach those audiences. Right. With Facebook and tracking and even with marketplace kind of falling apart and being a big mess right now, dealerships, we're looking like, well, where do we go? You know, what's going to be the next thing? Is it going to be back to cars.com, is it going to be offer up? Is it going to be some hybrid Facebook page, catalog in line ad that we're all trying to figure out right now. So I think 2022 is going to bring us a lot of that transition where maybe dealers kind of settle in on, hey, you know, here's how we finally figured out this Facebook Marketplace thing. Or hey, you know what, we all went back to Craigslist. But overall you don't have to worry about it if you're collecting your customers data outside of these platforms. Right. And I think that's what this is about. We just got to remember that our customers are ad spending our leads. Find a way to get that data and keep it. Right.

Yep. And Andrew's a genius at this. So this is a good clip to listen to.

You're there, you can, you know everything about that first party data and third party data.

Right.

And, and a lot of guys talk about, hey, if you're just built, if you only have a Facebook website and you don't have your own website, not a good idea. If you're not getting people's personal data in to your CRM where you own the data and you control their name, address, email and you can build lists to remarket, you're absolutely crazy.

Right.

You're building your house on someone else's land.

Not a good idea. Right.

So talk to us about that. How important is that that we find a way to bring these people in and all this information in from Instagram and Facebook and Snapchat and TikTok and our website and bring it into our own, our own little purse.

You are asking the right question. Like we're hiring, by the way. You're speaking my language on the dealer side. There's a lot of misconceptions right now in the independent dealer space. And it's so hard for them to be staffed appropriately, to be able to have, you know, a digital marketing director and some of these nice things that big, big stores have.

But for them to now need to.

Be able to rely on their vendors to tell them what's working and ultimately, you know, signing up for products that might be developed more for franchise stores or they look shiny to the dealer. They're $999, which is a lot, but.

It'S not gonna break the bank maybe.

And then they're dependent on the vendor telling them how many cars they sold. And I've seen a lot of this and it's hard for them to look at the analytics and the clicks and the whatever and say, is this money well spent? How many people do we reach? How many people came on my website? How many people filled out their credit app? How many people came in and drove off the lot? What data are they using? So a lot of our conversation is going to be like you mentioned about the difference with data sources. I think the huge, huge, huge play that's going to separate independent dealers from other independent dealers is their ability, if they've been around for more than a year, their ability to leverage their first party data, their own data. That's going to be their CRM, it's going to be their customer database, and that's going to be their website traffic.

Mm.

To be able to own that niche, you can pay your mortgage for the rest of your life. If you can just own your customer base and not defect them to other stores and let their friends go all over the place, but really start to hone in on that customer list. And so it can be just from phone calls to email marketing to the next step with that first party data is going to be uploading that list into Facebook to where now instead of I live in Austin, I've got 1.9 million people in a 50 mile radius of my office that are on Facebook every day. It would cost me about $19,000 to reach everybody once. No, like if I've got my CRM as a thousand people, that's gonna cost me $10 to reach them once. Okay, let's get in front of them 10 times. Okay, that's a hundred dollar ad campaign and I'm going through that person's phone every time they're getting on Instagram or Facebook or Snapchat or whatever to where we're really starting to hone in on our own customer base if their lease is coming up or, you know, if we've got a referral program, things like that, to start to own those relationships.

It really just drives home that I need to get back on in this stuff. It's so funny, man. I listen to these episodes and I go over them and over and over them, and then I get reinvigorated to be like, man, yeah, what am I doing? Where have I dropped this ball?

You know, one thing that. That Andrew talks about in other parts of this episode, actually you and Andrew went over it was. We're just talking about how we all talked about. It's not about our car, you know, and I think you and I have talked about that so much. There's some people out there that are big independent stores. It's about their car, right? Car, car, car. But for most of us mom and pop, smaller dealers, it's about what we do. And so just remember that advertising on Craigslist or advertising on Facebook Marketplace may not be the right strategy for you and your dealership. It may be about branding, about getting your message out. So always keep that in mind when you're advertising, too.

Hey, everybody.

So obviously you guys know I'm a big Tax Max fan. It's the end of the year, and we are in the midst of tax season right now. So we've done. I think we've got seven. We're about to close our eight deal with a deferred down payment. It's our fourth quarter program. We're averaging about $2,000. Some are a little bit more. I've got a $3,500 deferred down that we did for a couple that's bought a car from us just last year during tax time with 3,500 down. So we've got people that are using their tax returns every single year to upgrade their car or buy a second vehicle. So Tax Max is the way we're doing it.

It's going to be a great tax season. We've already been told that, Jeff. So let's get out there. Let's find a way to get as much of this tax money as possible.

Absolutely. Moving on. Episode 180. It was kind of a unique one. It was very popular. But, you know, I'm going to. I'm going to probably caveat these next two episodes that we talk about, and you guys know as the podcast, we try to stay impartial, right? We have a handful of sponsors, we have a handful of vendors that. Come on. Sometimes our episodes get a little too vendor y. And Luke and I are huge, huge advocates of making sure that all dealer led education is not a sales pitch. Whether that's convention or our podcast. Hopefully these two got a little vendor. Yeah. So I'm going to put that out there, just so you guys know. But Luke, episode 180, we talked about sourcing inventory. What about that is one of our best.

A couple of things about this episode. The. This was taped live at Tiada, so please bear with the audio. It's not the best. We are hopefully going to try to redo this episode at some point in the future. But we had two people who buy cars two totally different ways. Chad is a traditional buyer that buys from all over the country. But one thing I got from him was talking about how he had to pivot during COVID And we all did. But one thing he did, I thought that really, maybe it brought me to realize what I was doing wrong, is that we have to use every possible online brick and mortar, every possible auction scenario to make sure we try to get every piece of inventory we need. If that's ACV or Backlot or Mannheim or DESA or independent auctions, you got to use all of them. And you can't be just beholden to one because if you are, you're probably not going to get all the inventory you need. And, and just Chad talking about how he had to diversify quickly was very neat.

So, you know, as you mentioned, you know, we're pretty, pretty old school when it comes to purchasing traditionally, and we do a lot of auction purchases, a lot of brick and mortar, but we also do a lot of online. Especially at the beginning of COVID we had to really pivot and start looking at the other sources, whether it was backlog or ACV or different things. And we have a lot of success there. But I believe for us to be successful when this is just, just speaking for us, I think we have to be, you know, if you're a baseball fan, you've probably heard of the term a five tool player. I think in our sourcing, especially in today's environment, we've got to be able to do everything. I think we have to be able to be at the auction physically, you know, whatever that means, whatever it looks like. I think we have to be, you know, in front of the public. I think we have to be online, you know, whether that's, you pick one source that you like or maybe it's, maybe it's all of them. But I Think we have to be. Have to have that mentality of I'm going to do whatever it takes to source the amount of inventory that I need to not just survive, but thrive as you succeed. And that's kind of the attitude that we've taken is, you know, especially at the beginning of COVID you know, a lot of dealers said, I want to look at. Doesn't look like these prices are going crazy. I'm just going to sit here and point this out. And we did that for about a week.

So are you saying the days of showing up to the auction on Friday, filling up two carriers, that's not.

No, no.

I used to let you just go and, you know, it was. I show up and I spend all day at the auction, but I pull.

Up to 30 or 40 cars. Right.

And that's just not happening.

So, yeah, a lot of that drives home the point that you do need to look at this as like, it's almost like our advertising, Right. We're not just going to cars.com, we're not just going to these one platforms. We're not just going to Facebook ads and getting everything we need. And that's transitioning, I think. Same with our buying. Yeah. This morning, Luke, I was on ove. I was putting proxy bids on Manheim. I'm on Backlot. I'm looking at. I'm jumping on my local Facebook and running my Vincue searches to try to buy stuff from private party. So I'm doing everything I can to try to find cars. You know, that just. Just. That's the way it is these days, huh?

It is. You know, and. And that leads us into the next clip from. From Danny. And Danny has a totally different way to buy cars than. Than really has been imagined, which is super neat. And y' all can see Danny in a bunch of different places. But an acronym he uses was war, which I thought was really neat. And it's wholesale auction retail. Now, most people would think wholesale and auction be the same thing, but it's actually a different mindset. But it's about try to buy everything that will actually make you money and that you can turn quickly and make your dealership money your wholesale. And it's talking about buying from the public, have a strategy for that wholesale, the ones that don't fit your. Your model. And retail is the one retail, the ones that do and have different avenues to do that. And so, you know, it's just all about any possible way to source cars. And people out there know how much their car's worth. Now we've got to make sure that we offer them a good amount, get the cars in, check them out, cut down our transportation, cut down our recon, and move those cars quickly. Danny, same question to you. You're an expert in sourcing cars from individuals off the street. Is that. Are you focused mainly on that, or do you buy from auctions as well? How do you see this moving forward?

So a little bit of both. So I'll tell you a quick story. My dad, we're immigrants. My dad came over in 79. And when he got into the car business in the mid-80s, in the late 80s, earlier 90s, you guys remember when next telephones came out, My dad bought some next telephones, and he said, I'm gonna go pass them around to a couple new car stores. And he convinced them. He said, when you're trading for a car, page me, I'll tell you what it's worth, and I'll come buy it, and I'll buy everything. The good, bad, the ugly. And at the time, we called it war wholesale auction, retail. So wholesale, if we're gonna wholesale to another dealer, auction for an auction, retail for retail. And so early on, we figured out if we can create these partnerships and buy cars from other dealers and then buy in packages, move money around, and then sell it, we have some strategy there. So we started doing that. And we found out also that there were a bunch of power sports stores. And we do this to this day. Harley Davidson stores, RV stores, they trade for cars all the time. And so we buy it all. And he taught me as a kid, you know, they don't make money, we don't make money. So we paid for things what they're worth. But it was still less expensive than going to the auction. But my dad continued to go to the auction, and I never liked it. I pretended to like it when I was a kid, and I just felt stupid. I felt stupid because I'd have to raise my hand and be the last guy paying the most, competing with other experts. And so about six years ago, unfortunately, my dad had a stroke. He's still pretty good, but it took him out of a game for buying. And I decided, I'm not going to continue doing this auction thing. So we created a vehicle buying center, and I'll talk more about it, but today we buy about 120 cars a month directly from the public. And then I got a small team doing that. We still buy a little bit at the auction, but still have the deal network.

Okay, so that was episode 180, sourcing inventory in a post Covid world. Again, apologize for the audio being a little rough, but the message is there. Using all your options, picking up these cars, sending them the right locations, doing what you gotta do to get what you need on your lot.

But, Jeff, before we leave that episode.

Okay, you got one more.

I got one more. And because, you know, I usually don't give you props, Jeff, but I had to give you props here because in the same episode you brought up something and it's thinking differently about the buy in process. And you pointed this out and Danny had touched on it, but you kind of really, really went down on this. And it was talking about treating the buying process like the selling process and how we have to track everything. You know, we have to develop a pay plan for our buyers that makes sense, just like we do with people selling cars and track everything, know what's working, know what's not working, word tracks that work, word tracks that don't work to make sure you can buy those cars off the street.

Yeah, it's funny you say that, and I appreciate the, you know, pat on the back there, Luke. What. We all know it. What is the most important thing as a used car dealer? The most important step in the process is buying the right car. Right? We all say it every single time. It all starts with the right car, good car. So why is it that that's like one of the least attentioned side of our dealership, Right. We, like expect to jump on the auction Friday morning and pick up 10.

You know, and it's the one.

The dealers don't give it up. You know, to our credit, that's the last thing that. The last thing a dealer will give handover, which I think is to our credit.

It's. We understand it's the most important. That's the reason so many of us hang on to it with a death grip until we're all done. Because we know it's just an old adage in the car business. The money's made at the time of purchase, right? And we just all hold onto it. But we never develop a process that's in our brain. So it's hard to pass it on to somebody. So I encourage everybody this year to write the process in your brain when you go to buy cars. Put it on a piece of paper and train on it and bring a buyer up.

We're going to move on.

Episode 194. This was our best performing on YouTube. It's fractional CFO and a couple of gentlemen Chad and JP jumped on with us and talked about a service they provide, which is fractional CFO for your dealership. Right. Like I said, little vendorish. But we pull out some very, very important tips here and huge reminders for me, and I think why this was so important for me is because I've been in the business 15 years, and there's still so many things I don't know that I don't know. You know, I think that I'm doing a fine job making sure my deposits make it into the bank, but I don't know everything. I don't know all the angles. I don't know that someone can book a payment and unbook a payment today and tomorrow, and it won't show up in my cash drawer. Or if sometimes they take a payment that's supposed to go into the RFC but it comes into the dealership, I've got some stuff. And so the thought of saying, wow, man. One of the very important things is to know what's going on with your business financially, both from a daily cash standpoint than to a, you know, weekly forecasting, monthly forecasting, and then checking your actuals against your forecasts. It's just something that I think so few of us actually sit down. We're so caught up in, like, okay, did I sell cars? Did I not sell cars? Did I have a gross? Did I not have a gross?

Great.

Did the money make it into the bank? And I have money to keep going tomorrow, and I'm getting where I want to go. That whole concept of having this forecast and having this game plan and then continually checking in against it, it's just. I mean, it's huge.

Yeah. And, you know, so many of us get into the business as car salespeople.

Right.

We know how to buy a car and sell a car. Most of us. Yeah, most of us didn't go to business school. I've got a biology degree, for God's sakes. Right, that's even for it. Yeah, exactly. So I've had to learn this, but I've had 20 years of doing it every day to learn it. And I had a great mentor in Dave Keller to show. Show me how to do this. But still, I'm a month behind on getting all this reconciled and doing it the right way. This fractional CFO thing is something that's very new to the market. I didn't even know what it was, Jeff, when you, you know, when you brought these guys on, so very enlightening. And I think there's so much need for this in our industry that, you know, these guys might not be right for you, but like you and I preach all the time, hire a CPA that is car oriented. Make sure your books are right, because if your business is too good this year in 2021, you may have a tax burden that you can't even imagine how to pay. And so that'll put you out of business, too. So make sure that you're doing things the right way with people that knowledgeable in our industry. That's interesting that y' all set up the policies and procedures or train the staff to do it, because I. I feel like I could probably train my staff to do it, but maybe not 100% right. And I think that I could see how that could be very helpful because like you said earlier, sometimes you don't know what you don't know. But the real question, I mean, being honest, can you, can you really do 20 group numbers for Jeff? Because we got to get this done.

I can't trade my staff to do anything.

I'm watching my latex blow rocks all over the parking lot right now.

Apparently I have no idea what I'm doing and I have no ability to teach people. So, guys, give us some tips, give us some. Give us some actionable items right now. What, what do dealers need to do if maybe they don't know if they're at the level to call you yet? But there's things that you see are just like these blatant faux pas that we're doing as dealers. What do we need to kind of have on our radar and either start digging into it and learn or at least be able to see.

Hey, this is a complete blind spot.

I had no idea that I wasn't doing this or that I was supposed.

To be doing this, and I need to figure this out.

Sure. You know, I think, I think a couple key areas I would look at is probably, you know, what are you doing on a monthly basis? Right. To reconcile your accounts. Luke, you mentioned that you're doing some of that hands on work right now and you're looking at the numbers and you're diving into some of the detail. But is somebody doing that? You know, if you're just blatantly taking the numbers out of your DMS or QuickBooks and there's no one really reviewing, maybe not even reconciling cash, which is, you know, kind of that quintessential daily activity, but if those things aren't being done, you know, daily or monthly, there's probably a problem. And we need to, you know, to look, you know, at what's going on. I think budgeting and forecasting is key. And I can't produce a set of numbers monthly, then not have something to compare it to and feel good about that. You know, one of the first things somebody, as a fractional CFO controller should be doing is sitting down and picking the dealer's brain on, you know, how do you think your business is running? What are the key metrics that you measure your business by, and where do you think the business stands? And then, lo and behold, when you go and you do a model and you plug all those numbers in, nine times out of ten, you're miles off.

Right.

A dealer has an inflated perception of how their business is really performing, and they're really not understanding what to measure their business against. And so having that budget or forecast to compare actuals to and look on, you know, having, you know, a goal to get to, you know, in the next 12 months, I think is essential to be a successful, you know, business owner slash dealer right now.

So, again, Luke, what this draws to my attention is. Yeah, whether you're outsourcing or insourcing or using these guys or using anybody else, you've just got to be paying attention to this stuff and repaying attention, because I guarantee you, we've all done a forecast at some point. You guys all hopefully did it with us last January or the January before that when we had our forecasting episode. But you got to revisit it. It's got to be a weekly monthly thing where you continually look at what you're trying to get to, what your numbers are. If you're on track, off track, readjusting it. Cause guess what? All of our ACVs went up. None of our ACVs match the model that we built out last year or this year even.

So what's funny, I do a forecast every year. Hadn't done it yet for 2022, but I'll do it here in the next couple days. But my 2020 forecast was way over.

Right.

My 2021 is going to be way under.

Yeah.

And so, but, but if I probably, if I, if I mash them both together, they'll probably be about. About right.

Right.

So just because you do a forecast and you missed doesn't mean you did it wrong. Right? Yeah.

But it also means did you track.

It along the way and notice when you were in trouble? You know, if you try to adjust your forecast, is that bad? You know, and is there anything you could have done six months ago or two months ago to try to mitigate the fact that, wow, you just got slapped with a $300,000 tax burden because you did have a really good year. But guess what? Right now, you're cash strapped, you know.

Yeah. And you can't really do anything about it on the 30th of the year. So anyway, two, two things I want to just point out to talking about controlling of cash retail dealers, contracts in transit. If you don't know that, you need to go figure out what that is. Buy here, pay here, dealers undeposited funds. You don't know what that is. You need to figure it out in the next couple of days. Ask us if you don't know, and I'll break that down for you. But those are the two things that can put both of those dealers out of business. Okay.

Excellent knowledge, Luke. So we've got a lot to do, got a lot to tackle, guys. Next week we are going to talk about some forecasting and goal setting. But, Luke, to wrap this one up, to wrap up 2021 advice, words of wisdom you like to share with everybody.

Just keep plugging along. Don't get so frustrated because something didn't go right. If you do have problems in your dealership, approach them. And I'm talking about employees. Sit down with people, manage people. Don't just continue to let things go unnoticed because the more that happens. This is hard for me, too. The more this happens, the worse shape your dealership will be in.

Yeah. And my word of advice for everyone would be the same. It's been, I think every six to 12 months is enjoy your job, enjoy what you do. Enjoy being an independent dealer. Find a way to make sure that it's fun daily, weekly, at least monthly. You know, and whether that's you like to go out and turn wrenches or you like to go pick up trash on the lot, or you like to go down to the lanes, or you like to take vacations. Whatever it is, make sure you're doing those things to keep your sanity. Because I've said it before, this business has a lot of nuts and bolts. It has a lot of moving parts. It's not absentee owner very well, in my opinion. I know there's some guys that have figured it out and they're off sailing in a boat somewhere and they're not listening to this podcast. But for the rest of us, we're in it every day because we know this thing needs constant attention. So find the way to keep your sanity. Hopefully we've brought you some education and some sanity this year in 2021, and we're committed to 2022 to keep it going.

Yep, we're going to be all around, hopefully if Covid doesn't put us back on the sidelines. But we're going to be, we're going to be everywhere this year, so we look forward to meeting and seeing everybody out there.

All right. Happy New Year.

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.