#238 - Give Them Benefits, Key To Collections And Bulletproofing

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Yeah, it's not just for the car dealer. I know mostly only car dealers listening here, Jeff, but it's really about the owner and about managers, and it's about what we can do this week to be better at our job of managing people and developing processes. And, you know, it's quick video. I try to walk through five to eight, nine steps that can really benefit you as a manager, you as an owner.

Great stuff. So go to our website, sign up for the newsletter, and get educated. And here's our episode. You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson. Hello and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. Luke, we are smack dab coming up against fall here.

How are things going, man, I can't wait for fall. It's too fricking hot here. I know. It probably is there in the desert, too, Jeff. You know, it's. It's the same old same old that we've been dealing with. I do feel like prices are coming down, it's leveling out. Inventory is easier to find, but, man, I am struggling with hiring and keeping techs. If I could just get the same four or five texts to last for six months, man, I would just. I would do a backflip.

Yeah, it's so funny. We talk about that, like, when I speak with other dealers, it's like, what are you dealing with? And I'm like, well, it's the same five things that Luke and I have talked about every single week for the last three years. So it gets a little bit, like, redundant and continually beating the drum. But it's funny because it's the little tweaks, right? It's the little teeny tweaks that might make the difference for you. And I think you've identified one of them, which may be you might have to just bite the bullet and offer health benefits.

I'm going to have to bite the bullet. We. So when we do a pre interview, Jeff, a lot of times we, first of all, we want to see if we want to really interview them, right? Most of the time. And then we make, we make it known up front, hey, we don't have health insurance. It's. It's very costful. There's no good options for a company our size. And we just don't offer It. Well, unfortunately, I think I'm going to have to start offering it. And I don't know how many dealers out there are. There's probably some states that it's mandatory. There's some that aren't. South Carolina is not one of those that mandates it. But I'm to the point now. I don't have any choice. I've lost several new hirees because of it. I mean, what do you do, Jeff? How do you make this work?

So we offer a group health plan. The way I have my employees is we. We technically lease our employees. So I lease my employees from an employee payroll. Right.

That's called, what, a POA or. What is it called?

Yeah, I don't even know, but I think they're part of a bigger group. So I have my own health group. That's mine. Right. So what I. What we offer is we pay half of their individual premium.

Yep.

So we offer health insurance, but I don't cover all of it.

Yeah.

So that's the thing. I've got a plan. So the most I'm committed to any one employee is like 250 bucks a month. Right.

Well, that. Well, that's. You know, that seems cheaper than what I was figuring. So if it only cost me $250 per employee, I'm in for that.

But our whole plan is around, like, five grand a month. But our employees pay their portion of their plan. I pay. You know, I comp them that half of their individual premium. And then there's a couple employees that I pay their whole health insurance as part of their compensation package. Right. It's worked into the sauce there. But it is a huge thing just to say we offer it. We also have a health. A dental plan that they can buy into. It's like 30 bucks a month. Right. It's like, I don't pay for it. I could pay for it. It's not a big deal. But it's there for them. And so when they see that you have those benefits available, I don't think it always. Well, I can cover part of it or I can cover all of it, but that's going to affect your hourly wage, which is funny, because if I Pay An Extra $250 for your. That's like a dollar an hour. Right. A little bit more than a dollar an hour raise. But it carries so much more weight than me giving them one extra dollar an hour.

Hey, I got a question about that, Jeff. How about the people who. Who already have plans with their spouse? Do you ever get any pushback from those employees that say, hey, well, you're giving this person $250 a month. I should get a $250 a month raise. Do you see that or.

No, I haven't. I haven't seen that. And I will when they listen to this episode. But I don't think it registers with a lot of them that that's the difference. And a lot of times that happens at hiring, and that's what I tell even, you know, any of my managers that talk to the employees, it's like, look, that's an available benefit. But it's not just like given. It's not just like. It's not like everyone gets access to the drinking fountain and the sodas and the water and those things. This is part of your comp plan for me to cover a portion of your health insurance?

Yeah. Interesting. I've got a really good friend of mine who has a pretty big law firm, and this same topic came up with him the other day. And, man, I think it's pretty much general practice in that profession that you pay their whole health insurance plan, and he doesn't have any choice. If he wants to get the best attorneys to come work for him, that's what he's got to do. Anyway, he was telling me this number is just crazy, but their premium per year is $500,000.

Whoa.

Yeah. And his. And that includes some people's kids. So he doesn't pay the kids and stuff like that, But I mean, it's costing him something to the effect of $80,000. 80 to $100,000 a year just in health insurance, you know, So I guess it's. Maybe we just take it for granted in the car business that, that we don't have to do that, but maybe all the other professions are doing it.

Yeah. I think to the larger point you're getting at is what are those things that employees hook onto that either draws them in or keeps them there? Right. So we've got to look at those things because it is a changing workforce. It is more competitive. Sometimes it's just the hourly rate, and they're just looking straight up, what am I making? Hourly salary, flat rate. Some of them look at benefits. Some of them look at time off. They don't want to work weekends. Or maybe they want to work 4:12 instead of working 5 days a week. Maybe they want, you know, free sodas and snacks and back rubs on Friday. Like there's all these things that you look at. I mean, you look at the dot coms, right? Everyone hears the crazy stories about these.

These big crazy benefits.

Crazy benefits, free food, free lunches, catered healthcare, childcare. You know, all this nutso stuff that these dot coms have to do to attract top talent. I'm not saying we need to be that crazy, but, but there are small incremental things that don't cost us much, right? Like we keep a stocked fridge, we keep stocked cabinets, right? Not a big deal. Maybe two to three hundred dollars a month max. And we keep everyone wired on caffeine or coffee or whatever your choice is. So those little teeny things I think carry some weight. You know, the employee benefits, the camaraderie, having the glue within your organization. You know, we've got one guy that we hired a couple months ago that he'll. We'll just sit down and be like, oh yeah, so and so and I went to the lake the other day or so and so and I went out to dinner the other day. I'm like, he's just like hanging out with all the other employees. But it's so great because it creates that stickiness where everyone becomes more of a family. They're going to think twice before quitting because then they're also quitting their social circle for sure.

You know, in the, in the Monday minute video we did the other day, one of the last things we talked about on onboarding was a sign of buddy. And you may not have assigned him a buddy, but he got a buddy. But if you assign him up front and onboarding, man, I tell you, it goes a long way and it makes people stay.

As a side note, Luke, I think we've got a lot of people that signed up on that workstream company that doesn't sponsor us. I don't know them. I didn't sign up. I did the demo, but haven't taken that step yet. How's that going for you?

It's great. Workstream is a company that is actually, if you look on in link, LinkedIn. I said in link. That's funny. LinkedIn. You'll see me doing some promos for them.

But anyway, he is sponsored by them.

Well, I'm not sponsored by them yet, but tell them I sent you if you do sign up with them. But that's, you know, you said something earlier about maybe off air that, well, this guy decided not to come a week later. And you say after you've already taken the ad posting down. And what, what did I tell you?

I don't ever take them down.

I don't ever take them down. Yeah, and work Stream allows me to do that.

Super interesting, though, too. Let me ask you these questions then. If you never take the ad down, what happens when you get you. You filled the position? Say you've got four sales desks. All four have a body in them. But you get a rock star applicant. What do you do? Man, that's. It's such a weird thing for me.

Hire him. Hiring him or her.

And who do you let go? Like, all your guys are okay. They're all okay.

You like them, so you don't have to let them go. Jeff, you don't have to let somebody go.

Put them in the closet.

You could do that. Me, right now. If that happened to me, I would explore opening back up on Saturdays. That would be the first thing I would do. Or I would move one of those four people already have, maybe into a different role. It's. People aren't always in the right seat on the bus. We've talked about this so many times. And maybe you have a salesperson that's marginally good at sales, and he's a really good person. You don't want him to leave. I'd be willing to bet you you could find a better spot for him on. On your team. And that's what you do. You just move them around. You can't. In this environment, in any environment, you can't let good applicants leave. You just can't do it. You gotta hire them. And you know what? You may hire them and discover one of those four people you already got that you really thought were great. They just need to go away. Yeah, they just need to go away.

Yeah. I don't love the whole flooding the floor thing, especially as it goes to salesmen. And if you have, like, a real technical role, you know, say it's a service writer, or you're one collector and you get this great applicant and you're like, well, my collector's okay. But it's so funny because, like, our employees will quit us over $2 an hour, right? They'll quit us over thinking the grass is greener on the other side. And that's okay. They can come to us. Hey, you know, I need to put in my two weeks notice. I got this other job. It pays me more or they give me a T shirt with my name on it, like they're leaving us for the stupidest things. But if I went to him and I said, hey, Mr. Employee, hey, I got to let you go. Well, why? Well, we found someone better, I would get. I would get destroyed. He would be so mad they would storm out of here and burn the place down on their way out. Well, it doesn't go both ways.

It doesn't. But you know, going back to the Monday minute here, a couple episodes back, we were talking about firing. And typically you don't have to fire somebody every once in a while you do. But if you start over managing that person and bringing up everything that they need to improve on, they will start looking for another job nine times out of 10.

So trying to suffocate them until run.

Out, that's what you do. I got to have you doing this, this and this. If you don't do it, then you need to be looking. And so, you know, we got a.

Lot to cover here, so let me move on. Just great news, guys. Gold Star final finally came to us and gave us a.

Not gold star. What are you talking about, Jeff?

Not gold star. The other guys, Pastime Past time, the podcast that I should remember that I moved over from Gold Star to Pastime. So they are giving us. If you sign up with them, you're a new customer. You click the link in our podcast show notes, you go jump over to their website, you sign up, they give you one free unit when you buy a minimum of five.

That's awesome. You have to put in a code or anything.

I have no idea. I think you just follow the link and you say, hey man, I'm a new customer. Luke and Jeff sent me over. I'm going to order 10 units, give you guys a try. Give me a free one.

Yeah. And like I've said, Jeff, you moved from another company. I moved from another company years ago and two, two reasons I moved. One, the people at Pastime are amazing. Josh is a great guy. All their reps are great guys. Jake Frank is huge in the industry, helps us all and number two, their freaking devices are better than everyone else's. That makes a big difference.

That was my thing is they've been through two or three iterations of the wireless device and that made me comfortable. They've worked out the bugs. It's the same thing. We talk about buying electric cars or buying these things. I don't want the first version. I don't want your beta testing nonsense. That's going to be the biggest headache ever dealt with. So go with a company that's tried. They've been around for 30 plus years. They've been doing wireless for five or six years. I don't know how long, but they worked out the box. So, Luke, that leads me into collections, man. It's Getting tougher.

It is. It's been so easy for so long, Jeff. And we've, you know, we've talked about that. For two years, there was free money. And when people get free money, they pay their bills. It's amazing. But when that free money runs out and they're getting Covid and having to drop out of work for two weeks or whatever, man, it's a different ball game out there. Go ahead.

They were going to bring. I mean, the whole Fed met last week and talked about this whole thing and about how they're going to keep their rates, whatever, high and restrict money supply. And he said the word there's going to be pain. And they want. The unemployment rate would have to go from wherever it is, 3% now up to like 5 or 6%. Like, that's by design to slow down inflation. So we can pretty much take them for their word and expect our customers to be cut back, laid off, job changes. It's coming.

Yeah, I understand why the Fed would do that, but it's weird. You almost would want to think you want everybody working, but that's a different.

Well, to fight inflation, you need less people with money. You need money less available, you need less demand. So they're trying to, like, pull the demand side back.

Wouldn't it have been a lot easier just not to pass a $800 billion inflation stimulus bill anyway?

Yeah. So what are you doing in collection? Something different now to make sure.

I tell you, I've kind of forgotten how to collect. Right. Maybe not forgotten, but forgotten how to manage collections. So I would encourage everybody out there today, probably, to look at how you're managing your collectors, look at the metrics you're pulling. Are you pulling them daily? We went to a collector scoreboard that I created that it goes out every Monday morning. And I tell you, it is refreshing to look back at the improvement we've seen since. And I think I started worrying about this in May. The improvement I've seen in 90 days is dramatic. I mean, seriously dramatic. And it's all because of me managing my collectors better than I had been doing. We instituted some new procedures, went back to some old philosophy that we had. And I tell you, it is night and day now. Next month May change, but you could steadily see it from the end of May, where collections probably got the worst we've seen in a while. June was better, July was better. We're hitting all our targets in August, and I'm just. I'm really excited. And August is usually a really, really hard time of the year to come.

Yep. Everyone's spending money on back to school clothes and a million other things. And this is kind of the last. And then we run into Christmas and it's like, oh, geez, just make it to tax time. But that's the really interesting. Like when we talk about from buy here, pay here standpoint is what is your anticipated collections? You know, it's. So that's the point is how much cash is due and how much cash will become due this week, and what percentage of that are you getting? That's kind of the ultimate goal. Our delinquency and recency kind of is.

Yeah. And I, and I tell everybody that's one of my biggest things to look at is percentage of forecast collections. Right. And I think you should run over. You should run probably around 110% or their balances is what I've seen historically. And if you don't hit that 100% number, you're not. Something's not right.

Yeah, you're on the wrong direction. Right.

You're going. Yeah, going the wrong direction. Recency is huge. And I know that some people don't. They probably think about delinquency more than the recency. I'm a recency guy. And if your recency is 90% or higher for, you know, 30 days or higher, if you're on weekly payments, you know, for probably 10 days, but that's what you got to look at and that's what you got to manage to.

Yeah. And I think this applies to retail dealers, too. I know you guys all just checked out for the last five minutes, but it also contracts in transit. That's so huge, man. And deferred down payments, if you're allowed to do them, you can't be strung out 20 contracts for two weeks because these lenders are paying you slow or you're not getting your stips in in time. You know, I'm pulling that report almost daily to see what deals, what checks are due from what credit unions, and from credit acceptance. On a side note, Luke, I did about 50, 50 buy here, pay here to credit acceptance this month. So some of these guys are still buying. We do see interest rates ticking up on some of those credit unions. But.

I think credit acceptance is getting back into the game where they had pulled back over the last little bit or maybe not pull back. There was other banks buying better than credit acceptance was. And I believe that this is a indication to me that interest rates are heading back up. I mean, they are, of course, but that the customer is Getting worse. And some of those people who were prime dipping in the subprime have started to worry more about their prime business. So as we had predicted, this is coming and I can see it. So if you are a retail dealer who deals with a lot of these banks, you need to make sure you've got your ducks in a row.

And what's so interesting is when you look at these deals and I get a call from CAC and I'm like, okay, would I do that deal in house? Of course they know. I mean, they have all the algorithms, they know the math. They know that if this guy puts three grand down, he can afford a $800 payment for the next five years. I don't get it. I don't understand that. They know the math. They know that that's going to be successful. So I'm like, okay, you go ahead and take that risk. I'm going to roll that one with you. Because I wouldn't take an $800 payment for 18 years from this guy. I don't know what you guys are thinking.

Well, you know that what we just talked about, about the collection part of.

It.

They have a bank of collectors that that's all they do. They have collection managers that that's all they do is manage those collectors. They can collect money where sometimes some of us can't. And that's fine.

And they know that they can get to the point of it's a profitable deal. Right? That's the biggest thing that I've heard, or at least I understand. The secret sauce at CAC is what's the repo value of this? I know I can get this guy six to eight months down the road or 10 to 12 months, whatever. They know that repo drop off is going to be what is the collateral going to be worth? Okay, anything back past the 12th month is just kind of free, which is interesting. So we use the same underwriting system now and Neo is a sponsor of our newsletter, great company. And I'm just getting set up with the scoring side of it. I've only been on them for a couple of weeks. And so Naveen, their head guy there gets on and he's like, your guys's data is screwed up accent, you know, And I'm like, what do you mean? He's like, he's like, you actually repo people? What did he say? People with really long job times. Actually, it's a negative for you. So if someone has a long job time, they're actually more likely to repo. And if someone is over the age of 55, they're more likely to repo.

That's crazy.

So he dug apart my data and was like, he's like, why is that? And I was like, I don't know, man. So we sorted it in all different directions and tried to figure it out. And anecdotally I think it's just probably because we will take people with SSI income or disability and there's some reservations and some things like that around here where they get some tribal dividends. And so it shows that they've been getting this forever and they're older, but all they're doing is driving the wheels off these things. And because they're on a fixed income, they can't afford to fix them when something happens. That's my guess. But it is kind of interesting that you don't know those data points until you really dissect them and look at them. I would have thought that'd be the best customer for me. And so now I can be like, okay, pump the brakes. These guys are actually repoing at a higher rate than my 30 year old, six month on the job lady that's driving a minivan.

Yeah, I've never been crazy about those people who are getting government checks every month. Not that you can. Not that you can and should discriminate against them, but what you do have to remember is they have nothing else to do but ride all day. And so there is definitely some validity to that.

Yeah. Guys, Buckeye Dealership consulting sponsor of the podcast. Great guys and, and they do support the buy here pay industry, but they also have retail 20 groups.

They sure do. And our friend Dan Real is looking for some folks to help stock his retail 20 group. And I tell you, Dan is one of the best dealers out there. And if you want to go be a part of a 20 group that's going to make you some money and you're retail dealer selling 25 to 40 cars a month. You need to sign up and get on it right now. Call, call Dan Real, send him a Facebook message or something. I can tell you that guy will teach you how to make money.

Yeah, to take a quick jump. And the final point and things I want to bounce off you, Luke. Buy here, pay here super forum I think is what they're calling it. Coming up in October, November down in Austin, Texas, it's the fall buy here pay your convention. So it's all buy here pay here 100%. Whereas convention in Vegas a couple months ago was much more retail, much more balanced. I Would say less buy here, pay here than normal. So they push it all into the fall convention. We and or I, we're going to be leading a discussion on bulletproofing your dealership.

Yeah, I wish I was going to.

Be an interesting concept. I think we are. I don't know. It's not solid yet. Janet's going to get back to us, but I think that's something we're going to moderate. What does that mean?

It's something that you really need to talk about right now. But I think there's several ways to bulletproof your dealership, and we were discussing a little bit about this off the air. Number one is knowing your cash flow. You can be unprofitable, but cash flow positive and stay in business. What you can't be is profitable and cash flow negative and stay in business. It doesn't work that way. I've seen so many buy here, pay here dealers and retail dealers, for that matter, get in trouble with this and so know your cash flow because that's gonna, that's gonna bulletproof your dealership.

I think a lot of dealers don't really know what it costs them monthly. You know, do you really look at it and say, okay, if things got tough, if I had to shut the doors, if these things happened and I had no money coming in, what this place cost me monthly to just keep my doors open or have a minimum staff or do whatever I got to do if things got tough, you know, that's the number to know. What's your payroll? What's your overhead? What are your fixed expenses?

It's something my dad beat in our head, you know, from the word go. You know, what's funny is I remember that going, it cost us $20,000 a month to operate. You know, another day he said, how much does cost us a month? It's about 120 now. And he's like, what? You know, he's freaking out, but you got to know that number. And I tell you, I'm one of those in the, in the, in the buy here, pay here, space that says, you know, I think my interest income should cover our expenses, right? And I know people don't think about it that way, but that's kind of one of my things that I go out there and think about. But you've got to know that number. Because if you're a retail dealer and you know that you've got $100,000 overhead a month, you've got to make at least $100,000 in gross, gross profit before you made any money. And so if you're. If you're averaging 3,000 a copy, then you know, you've got to sell 33 cars a month, you know, or thereabout to get there. So. So you've got to know these numbers, then you can back into whatever's going on. And so if you see. You see that 33 number start to start to drop and stay consistently below 33, then you gotta make some changes. You gotta make them fast.

Yeah, I think part of doing bulletproof, too, is knowing, you know, if you have a flooring line and you gotta be prepared for curtailments, you gotta be prepared for calls, you gotta be prepared for these things. Because as inventory starts creeping down, if that turn time is not super tight and I'm seeing it more, and I know you and I talked about not getting into inventory costs this week because we do it every week, but I'm only buying stuff that's on offer. I'm not paying list price for anything right now. I'm seeing the prices. Oh, man, it was so soft yesterday. I watched a couple lanes on some cars. Everything was crazy soft. What happens if you've got a million dollars in floored vehicles and all of a sudden they lose 10, 20% over the course of 30 days?

It's a big deal.

I think.

I think, you know, probably number two for me, the biggest thing for bulletproof proofing your dealership would be to not have a floor plan. And I know some people can't do that. And I can get it. Some people can't do that. But that should be something that's a goal that you should work toward. Because if you can get there and shit starts hitting the fan or crap starts hitting the fan, you can try to sell some of that inventory to pay some bills. But what you can't do when you forward all those cars is if pay.

Inventory to pay the bills.

You can't do it because all you're going to do then is pay off your line. And sometimes you can't sell it for what you got in it, then you're really in trouble. So if you can get away from a floor plan, I would encourage you to do it.

The times of drastic inventory cost changes are when dealers get washed out because they sold a car. They have to pitch in a grand or two or five grand to pay off their flooring line to get the title. And so they're robbing from Paul to pay Peter. And that's when things start spiraling out of hand really quickly, Especially if you don't have tight, tight cash controls to know that you robbed Paul to pay Peter, because you all of a sudden have 20 deals where you stole from the left hand to pay off your flooring line, and you're in this negative cash flow situation.

You can't, you can't ride that all the way to the bottom because you'll end up in jail.

Yeah, yeah. And that's what happens during these times. I think that's. That's the problem. One other thing that it made me think of is I've got a buddy who's in the middle of selling his operation right now, and we'll have him on for a full episode once it closes. But one thing he mentioned was, man, you go through the process of selling a dealership, you really get reintroduced to the numbers. Because you've got to know. I mean, we kind of know our numbers, we know financial statements, but when you have to prove them to a buyer or a bank or a lending institution and you're not. I mean, he's like. It's been a crash course in things that I thought I knew. It's a reeducation. It's crazy.

I bet it is. You know, the last, you know, the last point I wanted to make about bulletproofing your dealership, and that's your location. If you own your location, you can, you don't have to pay rent every month. Right. So if things get tight and you own that location, you can stretch it out. So location's so important, and the faster you can buy it and own it, the better off you'll be in the future as well.

So if you were to reinvest your profits every month, would you say it's better off putting those towards your mortgage to get that paid off and own your property free and clear sooner or put that into your flooring line and try to get free of your flooring line sooner?

Floor line sooner. But yeah, for sure, for one, the interest rate on your dealership is probably much less. Yeah, maybe 5% at the max. And. And you have a real asset there. I mean, you know, you don't have an asset. You do have an asset with cars, but in this environment, I'm not sure, you know, how great of an asset that could be.

Your lender is less likely to come hook your car lot up to the back of a rig and tow it out in the middle of the night. You know, you could. What I'm saying is they're much willing to work with you or do some deferments or some. Whatever forbearances on your car lot because they don't want to take the car lot back either, I'm guessing, especially if you're SBA or a small local bank, they'll work with you. Whereas NextGear or some of these other guys, you miss those things and you get into fall, your shiz is gone. The next day, they're taking those assets and they're trying to turn them back into cash as quick as possible, you.

Know, and to that. To that fact, if you're not able to get traditional loans to a bank and you're in the business, this is an unsolicited plug. But primaland's doing a lot of stuff like that, so might be a company you look out for if you're trying to buy your property and need some help.

Yeah, great, Luke. Anything else, words of wisdom for this week? We're starting fourth quarter. Pretty excited.

Ah, super excited. Ready to. Ready to get going? I'll tell you, I'm ready for a very consistent car business, not this roller coaster we've been on for the last 24 months.

Yeah, I don't know if that'll ever happen. All right, talk to you next week. Dealers helping dealers. Please leave us a review and subscribe the independent dealer podcast.