#288 - Key Performance Indicators - Housekeeping Series

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, this week we're gonna roll right on, man. The housekeeping series that we've been doing all of August, the dog days of summer, things slow down. This is the time to get your house in order, look at your processes, fine tune them. Yeah.

You know, and, and we're going to talk about something this week with KPIs, that's really, I love them. And so it's something that you really need to key on. And every dealership has different KPIs, Jeff. And so make sure that, you know, we're going to bring up some things today that you may not, that you may not track. There's other things you may track, things you may track maybe better than what we track. So there's all kind of things going on here, but make sure that you're tracking something.

Yeah. So, Luke, when we talk about KPIs, guys, if you don't know, it's the key performance indicators, right? It's kind of a short term or acronym for what? If you were on a desert island, Luke, you're, you're on vacation, you're in the mountain, you get, you get one text a day. That's all that comes through. What are the 5 to 8 to maybe 10 numbers or trackable quantities that you would need to know so that you can determine the health of your business?

And, and what's very important here is you want to track leading indicators compared to lagging indicators. And so, Jeff, people may say, well, what's the difference? A lagging indicator is how many cars we sold this month. That is, that is a lagging indicator.

Okay.

Or how much did we collect this month? That's a lagging indicator. You need to find those numbers, those key numbers that will predict how many cars you're going to sell this month and predict how much you're going to collect this month or whatever. Because if you don't, if you don't see it at the beginning, it's going to be too late at the end and a lot of people forget about that. Well, how many cards you sell this month or last month? Well, that really doesn't matter now, Right.

I think part of that is your timeliness. So let's talk about the time, you know, when I say, hey, what are the KPIs that you need? You've got daily KPIs, you've got weekly KPIs you've got monthly KPIs, so you could have different frequencies of what these numbers are based on the readiness to pull them. Right. The availability. So like with me, you know, in my DMS, I have a dashboard and I have certain KPIs that I look at daily. Right. Vehicle sold, you know, collection dollar amounts, collections, past due, units in inventory, units that are available verse, check in, you know, what cars we've sold in the last seven days. And then of course, on the sales side, we've got all the applications. And those are numbers that for the most part, I'm kind of checking in on daily. Right. Because like you talked about, they're leading indicators. It's very, very important to know how our, how many leads did we get in yesterday and what percentage did we set as appointments or how many text messages went out yesterday. You know, that's going to determine what happens tomorrow.

Yeah, for sure. So, Jeff, we're going to ask you, what are the five you look at every day that, that you think are the most important in your dealership?

So those are the ones that I, the ones I just mentioned are the ones that I look at daily. Right. That's my dashboard inside my dms. The ones that we look at weekly that I would call my scorecard. Right. That's what my entire team is responsible for reporting. And that might be a different question than what you asked, but weekly, every manager has a section in my spreadsheet. We track this inside of Google Docs. They have a different section and each of them have three to four numbers that they have to report on every week. Right. So of course, you know, we have our Google reviews and that's kind of our office manager, she reports on all our Google reviews. We have my recon manager reports on cars and inventory cars in recon, check in status, the days they've been there. And then he also reports on dollars spent for recon, goodwill and warranty work. Of course, my sales manager, he reports on how many vehicles he has available for sale, the days, average days in stock for those vehicles. And then we look at total leads, total leads scored. And then we look at total sales. So those are kind of the basic, basic numbers. Then of course, I've got collections numbers too that we won't go into. But those are my basic, basic, what I call, my scorecard numbers that are reported weekly to me by my managers.

Yeah. And so Jeff, you, you asked your managers to compile those numbers. You're not compiling them yourself.

Correct, correct. Those ones I do not compile. They are put into a shared Google Drive. Everyone's responsible to have them into the sheet by 9:30 on, by 9:00 clock on Monday morning.

Okay. Do you have data that you, that you provide?

I, I don't contribute anything to that report. But yes, I do have my own data. So if you're talking about the things that I look at, it's back to mostly my dashboard in my dms and then I also look at the reports inside of our CRM to look at. Like I said earlier, it's okay. How much dollars did we collect this month or this today? Well, what's our current daily past due? Where are we at sales wise? And for me, because I'm the inventory buyer, I look at what cars we sold in the last seven days, right? I want to know not only what our sales numbers were, but I want to know like, hey, you know, we sold all of our Honda Accords in the last three, four days. Like I don't, I don't want to wait till Monday morning meeting to hear that from the sales team that they're getting Honda Accords. I want to see that, that Honda Accord in that price point went out yesterday. I should have it replaced.

Yeah. That's interesting. So I have key performance indicators that, that we have and I, I build scoreboards that go out Monday morning at 9am and there'll be a presentation that y', all, y' all hear in a couple weeks that I did that really dives into that. The key performance indicators that I look at, number one, are for sales. I should say number one is how many applications are we getting, right? And then, and then how many are we approving? And then out of the approved, how many are we selling and how many we're conditioning and how many are we turning down? So I think that's how I look. So I don't even look at leads anymore because I've kind of, kind of made this adjustment in my mind that I don't care about leads, I care about applications. And so, so we, we essentially I can look at application, I can look at leads, but what I really care about is applications. So if I'm getting a ton of leads and not a lot of applications and I have a problem too, but, but so that's what I'm looking at when it comes to sales. And then to dig deeper into sales, okay, how many touches are the sales staff making on those applications? How many are, are we scoring all those, are we scoring all those inside of Neo? Are we getting a number so that we can sell the car. Getting a letter so that we can sell the car. How many times are they touching those applications? How many times are they touching those people? So I kind of get really, really specific on that and that. That's kind of my sales side. Collection collections. I know you didn't go deep into collections, but I do. And so my biggest KPI for collections are promised pace because I believe our customers are going to be late no matter what. That's kind of the. That's.

That's how you run your business.

We know that that's how we run our business, and that is the customer we have decided to have. And so if, if you're a buy here, pay here store, and you think that, you think that your customers aren't gonna be late, I got another thing. I've got another story to tell you. So we track, promise to pay, promise to pay percentages. And we look at those daily and we make sure that we're tracking properly. I had a. I had a deal last Monday morning where our promise to pays have been garbage. And I look back and I look and see, okay, are my collectors doing their job? So the way I look at that, how many accounts that our collectors touched last week? How many attempts did they make? And you know what I discovered, Jeff? We made 60% of the attempts we're supposed to make. So guess what I have to do? Have to call those people in. I guarantee you that number this week will be double what it was last week. But if you're not tracking these things, let me tell you what would happen at the end of my promise to pay. Percentage will be way down, and our total collection would be way down. That would be a lagging indicator. But if I'm on top of it to start with, I'm turning this, what could have been a bad collection month into a good collection month. So I stay on top of these things.

Yeah.

And go ahead, Sergeant.

I just want to, you know, this is a good time to plug Primal end. Obviously, you guys know, if you listen to the podcast, they're a sponsor, great guys here to help you with money. They are the guys to go to, but they also have a lot of the data too. So not only are they really, really good at making sure that, you know, you can be funded and that your structure is good, but they have this type of info, right? You have a relationship with them, and you put these models in front of them and you look at your tracking numbers and they can say, hey, man, you're. You're Way off here like this. This delinquency recency thing is not good. Or hey, your applications leads to application conversion is way out of whack from the industry. So guys like that are great to have relationships with.

Yeah, they have so much knowledge because they, they service so many dealers, right?

Yeah.

The knowledge you have and the KPIs you have are your numbers. They could probably tell you some others from other dealers that they're watching that are high performers that you should be looking at. It's great. It would be great just to have a bank to give you money, but it's even better to have a relationship and somebody is going to help you because the local bank can't help you here. But primal and can.

Yeah. So look, the only way I would push back on what you're talking about is for dealers that are out there that aren't doing this at all. Just start with the most important five.

Yes.

Eight numbers. Right. Because Luke's getting deep here and he's saying he's tracking promise to pays, he's tracking applications and turndowns and yeah, that gets. And if you're putting all those into a spreadsheet now all of a sudden you're tracking a spreadsheet and trying to make trends off 50 different numbers that you have to update every single week or every single day. That's a full time job. And Luke loves it. He's a spreadsheet jockey. That's the thing that he does. So he really, really likes doing that. And maybe you've got to the point in your dealership, in your life where that's what you enjoy doing and that's what you're going to spend your time on. But if you're still operating and just trying to fit this in after hours, I would say definitely like pick off the top five to eight that are important to you and sometimes they're not always, you know, like Luke said. Yeah, it's maybe not even like I not going to track this tiny, tiny little number. But what I'm going to do is track a number that means a lot to me. I'm going to track it often so that yes, if sales are off, I can correct it and then dig in a little bit deeper for the week. You know, like, whoa, whoa, whoa, why are we only at this many sales and it's a Wednesday? What happened? Oh, our leads are off or oh, our scoring, you know, we're not, we're not converting these to appointments. Then you can dig a little bit deeper when you, when you start to see smoke.

Yeah, for sure. You know Tracy Myers, a friend of the podcast and a friend to a lot of dealers out there. I remember 15 years ago, probably one of the first times I met him. And he was a big marketing guy, right? And I was like, man, I just need to spend more money on marketing. We're not selling cars. He looks at me and he says, well, how many leads are you getting? And I go, well, I don't know. He said, what are you gonna spend more money for if you don't know that? So when it comes to sales, the first thing you should track are your leads or ups. I don't even know if people get ups anymore. But leads are ups. You got to track them. That is the simplest form, and it's very easy to do. So start there if you need a place to start, Right?

Yeah. And you can say, what are those? You know, I've got my leads and I've got my sales. Right. So I know that out of this many leads, I get this many sales and everything in between. That is whatever. Right. And then we can start digging into the minutiae of why that's a bad ratio, or maybe it's a great ratio, you know, and you're like, hey, awesome, I'm converting my leads at a very high rate. I don't need to go any further.

And that's. Well, that's something simple to make a spreadsheet about. You talk about maybe a spreadsheet jockey.

Yeah.

But you can make a simple spreadsheet, Jeff, daily, that tracks this daily, and you can see the ebb and flow during the month. What this could lead to is you may not need to be open on Saturday if you're currently open, because, hey, we're not getting any leads on Saturday. Right? Not getting up. So Saturday college football is here. Nobody's coming out in the South. Nobody's coming out on Saturday to buy a car. During college football season, it just really doesn't happen. And you start to look at these trends and then you can figure out the best way to increase it or to close or whatever you want to do.

Yeah, that is a good point. You know, we talked about, like, you know, seasonal and. And market type trends. Right. A lot of times. And that's. It's probably one of the hardest things to wrap your head around as a dealer and not a. Use it as an excuse or a crutch or a reason to just throw your hands up in the air and be like, oh, it's college football season. We're not Going to sell cars on Saturday, you know, or. Oh, you know, it's just the economy's horrible and nobody's got any money, and that's why we're not selling anything. There, there is a, there is a factor where you say, yes, of course, it's tax time, cars are going through the roof, or, oh, it's back to school right now, nobody's buying a car. It's been crickets around here that. There may be some truth to that. But, but what you've got to know is if you think you're slow because it's college football season, that doesn't mean the guy down the street slow, he could be selling the crap out of him on Saturdays or whatever. Or, you know, the, the inventory shortage isn't affecting him a lot of times. It's only bad in between your own years. Right?

Yeah, we were, you know, we were at, we were at convention a couple weeks ago, Jeff, and so it was Sean Peterson was, was doing the session and, and it was kind of a, you know, car business bs, right? And I, I had the mic and, and somebody was like, are these prices ever going to come down and say, I can't find inventory this, that and other. And, and I just had to say, because that's what I do sometimes. Y', all, this, y' all are crying about something that, that doesn't matter here because it's, you're deciding because you're not tracking and you're not making a decision to buy more inventory. That business is horrible when there's tons of people sitting in this classroom that can tell you business is good. Right? So you gotta, you gotta make sure that you, that you're, you're aware of seasonality, but you also gotta be aware of your tracking. So if you put all that together, you can figure out, well, is the reason I'm not selling cars because I don't have the right inventory or not enough inventory. Right. Which happened to me in 2021, 2022. But you've got to track these things. If you don't track them, you're. It's not even worth. I don't need. Why are you doing business? Are you not tracking these things and determine. Determining the seasonality from what you're tracking, Right?

Yeah. And you mentioned Sean Peterson. It's a good time to plug Buckeye. They are the company to go to for your reinsurance products. Right. So as you start digging into these KPIs, deeper and deeper and deeper, you're going to start looking at, okay, hey, I Want to start tracking my, my warranty penetration, you know, like, am I upselling warranties on what percentage of my deals and what's my gross and, you know, what's my profitability on the gap and the warranty? What's my charge off? So you start tracking those and you start doing maybe some static pools and say, oh, maybe, yeah, I don't really want to push gap during tax time. Like, it's not good for me, you know, or maybe, hey, I really need to start pushing more cpi because I'm not tracking the fact that my CPI program is underwater, you know, because I'm not, I'm, I'm not going full speed into it. So that's part of the importance of tracking these things is just knowing to make business decisions.

Yeah, good thing. Berkshire Riffs now under Buckeye will tell you if your CPI is underwater. Because I've, I've seen those emails before. But Buckeye, when you want to talk about selling extra product and selling vehicle service contracts and keeping that money for yourself, tracking that penetration, it is so important, it will make you money. Reinsurance, Jeff. I say over and over and over, it's the way you build wealth in this business. If not, you're spinning your wheels. It's a tax saver and it's a moneymaker. So if you're not doing it, stop what you're doing. Today we're getting close to that fourth quarter and I promise you, some of you are going to need some tax write offs. Let's get this done. Quit waiting.

Yeah. One thing I want to talk about with these KPIs too is I know sometimes we talk about all these numbers and it's hard. You're like, okay, man, how am I going to take an extra 30 minutes of my day or my week and compile all these numbers? What I've done is a lot of my KPIs are tied to bonuses, right? For managers or employees. So if I have certain numbers that are really important to me, and Obviously my top five KPIs are very important to me, you should have someone's bonus tied to those numbers in an effort to make sure that those numbers get reported right. So put it on them. Hey, man, you know, you're in this spreadsheet with me. I need you to report on these three numbers every single week or every single month or every single pay period, because you're now going to be bonused. As long as they reach this ratio or this number or whatever you guys agree on is accurate. It's A good way to make sure that those are tracked over time. Because I guarantee you like my collections, my collector is bonused on recency and delinquency. Those numbers are always in there. Every single week those numbers go in there because she wants to get paid.

So I'm a pushback. You know, I think bonuses are garbage. And so two things here, Jeff. If you're tying bonuses to KPI, are you verifying all these numbers they're putting in?

Of course.

I'm gonna look at you again. I'm not sure. Every month, every month you're verifying all these numbers?

I'm not verifying every number, but yes, I spot check those numbers. And there's a lot of numbers that just can't be lied because you can print them out of your dms. So if she's the one printing them out of the DMS and then she's entering them on a summary spreadsheet so that I can put trends and track them in charts, then yeah, there's. If you're worried about them lying to you and you're not spot checking it, yes, things could go off the rail. If they're lying about the KPIs to hit bonuses, you probably got a bigger problem.

Yes, but it can happen. These are, these are people that work in a car business.

You just never know what KPI could you not pull up if you wanted to spot check? Right. So if I want to spot check my recon number, I can spot check that real easily. Right. And he actually has reports and the reports are in the, you know, they're there. So yeah, things could be fudged. And yes, there are definitely when, when people are bonused in a certain way, they will find a way to work that bonus. Right. Whether they're hiding things as recon instead of post sale, or whether they're, you know, moving people into collections queues that might be hidden or factoring something else.

Out or putting extensions on payments, all these things. So my argument is, is this, use these KPIs as scoreboards and training tools so we don't have bonuses in our dealership. And I've, I've been on this kick for a while, but it's an expectation that these numbers are hit. And so Monday morning when I send that scoreboard. This past week, the email was tough and it said, hey, you get paid your job to do it properly. These are numbers I expect you've got to do it. And so when people don't do it, you have KPIs allow you to Manage properly. And whether it's tied to a bonus, which Jeff is doing, or to me, it's tied to their salary. If you are not hitting your, your key performance indicators, then we have a problem. And so what this allows you to do is to bring people in for one on ones. Bring people in to write them up, Bring people in, you know, to fire them. If you have these numbers, you're tracking these numbers, you're able to manage properly and you're able to get rid of people who aren't hitting these numbers. And really and truly that's what it's about. Or you may have to check yourself and say, are my KPIs that I'm expecting actually what can happen in my dealership? Sometimes they are, sometimes they aren't. You have to make, you have to make an adjustment. Whatever you're doing, track them and do it. Because if you don't, you're flying blind.

Yes. Yeah, definitely. Overall, you don't you bonus your team on Google reviews.

Nobody gets bonus on anything in my dealership anymore.

Nobody gets bonus on anything. So that's why you've only had five reviews in the last month, huh?

So, so I'm glad you, I'm glad you brought that. You know what happened? The process was broken. And you know how I figured out the process was broken is I was sitting in the dealership Monday morning of this week. This is no lie. I'm glad you brought this up. And as a car was sold and the guy was walking out the door, my salesman said, hey, I just sent you that link. Make sure you do a review. So Jeff, did that person do a review?

Of course not.

Of course not. So I had to retrain on the process. The process is you asked three times. Because we asked three times on everything we do, Jeff. And number, number one, the time, the first time you ask for it is when you give them the Carfax and they're signing, going over to Carfax and signing it. That's right after we've decided on a payment, after the six square before the Carfax. So you ask for review that then after that you do it before you sign papers.

I get it.

And so anyway, the process was broken. And so that's what happens. And sometimes you have to be there listening to make sure a process is broken.

And the reason he threw it out is because you were there listening. And the reason they stopped asking for the review is because it don't affect them. They don't get bonused on it. They don't make Any money, they just let it go. And. And that's why. Well, so.

Well, yeah.

Salespeople, they don't get. They're not commission based either.

Not at all.

Salary or hourly.

Yep.

So. So whether they sell or not, it doesn't matter.

It does, because if they. Because if they don't hit their numbers, they get brought in. If they don't hit the next month, they get brought in again. And on the third, on the 90 day, if they're not at their numbers, they get fired. So then we move on.

By that time, they've already milked the system and found another job. But that's interesting. Interesting. I want to know. I know that's something that you kind of converted over to like 12 months ago or so, maybe two years ago. You read.

Drive. I think. I think we decided to make that switch. No, that's right. In Covid. It was in Covid because we couldn't hire anybody. They wouldn't work for the. They would come in for the interview. But then our. Our commission structure was so messed up. Not messed up, but confusing. They couldn't see how they could make 80 grand a year, so they wouldn't take the job anyway.

Yeah, now you just pay them 80 grand to hang out with. You sell a couple, don't sell a.

Couple, Whatever we pay them, we pay them less than that. And they are still averaging 18 cars a month, so. Per salesperson.

I know, I know. I'm just giving you a hard time, but yeah, we went off the rails, guys. Hope you got something out of this episode. Hope you guys are putting together, you know, whether it's on a napkin or a spreadsheet or a piece of paper or whatever it is. Like Luke was saying, obviously it's super important to track these things so you know what you're doing.

So that's the episode Dealers helping dealers. Please leave us a review and subscribe the independent dealer podcast.