#355 - How I Built This: Michael West Follow Up

This is the Independent Dealer Podcast, Education by Dealers for Dealers. Now here are your hosts, Luke Godwin and Jeff Watson.

Hello and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. We're going to kick off the month of December with our How I Built this Revisited or Follow up episodes. Luke, we've had a lot, a lot of great How I Built this episodes, and it's obviously our most popular episodes that we do. When you hear about how dealers have been, what they've been through to get to where they are, but where are they now?

Yeah, I mean, we've had. And there's so many dealers we still want to talk to. So we just figured at this point, after six years of doing this, we'd go back and see what happened to folks because it's super interesting to figure that out. And this is our favorite time of the year. We learn so much. Listen to other dealers. And one dealer that we really wanted to go back and check in on was Michael West. And Michael was on episode 198. So I want everybody to stop now. If you're not listen to every episode. I know most of you have listened to every episode we've done, but if you haven't listened to this when you don't remember, go back to 198. Listen to Michael's story. It is a story of resilience, of battling back after hurricanes, recessions, and all these great things. And Michael is, is on a trajectory just to continue to climb. So I'm glad we're revisiting. Michael. Thank you. Introduce yourself to the listeners.

Hey, guys, I'm Michael West. First of all, Jeff, Luke, thank you all very much for having me back. I really enjoy doing this. I really enjoy sharing my story. If it can help somebody, I hope it does. So not to spoil episode 198, but to give you just a little brief introduction, my name is Michael West. I've been in the business for 19 years, since I was 20 years old. Had a real rough go at it in the beginning until I kind of figured out what was going on and built the business, built it up to two stores and a recon center. About to buy my, I guess it would be my third full sales location. And I'm going to get rid of my, my recon center and just move that over to my sales locate, to the new sales location. But about eight months ago, I purchased a franchise dealership and I think we're going to be speaking a little bit about that today. Probably. Go ahead.

No, I'm just glad the knowledge that we brought you on that episode of 198 led you to do all these great things.

Yes. No, there's no doubt. I would never have been able to become a franchise dealer without the independent dealer.

No chance.

No chance.

That's great.

So.

So, Michael, so paint us the picture. After we checked in with you on the 198, what have you been doing? Obviously, we know the end game is you just got yourself knee deep in some crazy new car. Oem relationships there. But what else has been going on over these last couple of years? Did you. Have you grown sales? Did you. Did you grow locations? Did you have some team turnover? Like what. What kind of happened in those last. Last little while?

So, Jeff, let's get a time frame here. Was that. We did that episode in late 21 maybe?

Yeah, we were kind of just coming out of the COVID nonsense. Okay.

Okay.

All right. Yeah. So sorry, guys. Get some messages here. I'm gonna get rid of them. So after our conversation, probably late 21, things still picked up. We actually increased our. Our volume at our. At our independent stores. We got up to somewhere around averaging about 140 cars a month. I think we're down a little bit right now. Kind of weird times. It has a little bit to do with maybe lack of inventory and maybe the bank's kind of tightening up a little bit on. Still got a lot of customers. Our customer count is still very, very high or elite count. Still have the same team. There's a couple of people have kind of. Kind of come and gone, but team is about the same. We're doing the same thing every single day. There's. There's really nothing pretty about what we do other than just get in there and grind every day and just work the process that we know that works all the time. So just minor changes due to the market, really.

And it looks like you had about 40 staff member back then. You still have 40 at your independent stores?

Yeah, it's right at 40. We haven't. We actually. We're training some people and for sales, but a lot of them didn't cut it. So here we are back looking for some new people. So we'll be right about the same. The same market.

How far is the new car store from your other stores?

It is three hours.

Oh, wow.

Okay. I'm interested to know how that we're going to get into that story. I don't want to. I don't. That is such a. Such an awesome situation there. And I want to know how that came about. But in your, in your current stores, did you continue on the path of your. What was your financing mix? Did you feel like you had to pivot towards subprime or prime or.

How's that last couple years, about 90% subprime anyway. Maybe nine. Maybe close to 95%. So we stayed with the, with the subprime. We've actually probably reduced some of the prime because the, the inventory. We've kind of had some issues in our recon center right now we're trying to fix. So I don't know if it's just difficult getting mechanics, but getting people trained, getting people motivated and, and keeping them in the shop has been a little task.

I think that's, that's Everybody. Everybody has that problem. Michael, could you go in a little deeper detail and what the problem was and, and the resolution you see coming forward?

So people don't like change, and sometimes people don't like other people. But we like to have a. A really good culture. And we had a couple little mishaps. We had somebody in that's doing really good. High performer, probably. I wouldn't say that he was low morals. I would say that, you know, there's a matrix where high performance and low, low morals is the person you probably want to cut because they cause more toxic relationships inside the business. And I'm not saying it was him specifically. There was probably multiple people involved. But we had a guy that was turning about 90 hours a week and high performer, but just couldn't keep his. Keep his words to himself, you know. So anyways, we kind of went down a path of trying to replace him and figure it out. And I think we've done that so far. We. We hired some new people, and that's been the last couple months, really. So these are no different struggles than you have. It's just another. Another. A different type struggle, I guess, because we don't usually have these issues. Yeah.

You know, I know what you mean by like that high performance. Sometimes bad habits come along with high performance. Sometimes.

Yeah.

Because there's not enough balance in. In. In the life. And you're so afraid to lose those high performers in your shop, especially your shop, that it takes too long to get rid of them. And sometimes that. That toxicity of those extra couple months that you didn't get rid of them can ruin your whole culture in your shop.

Right. Yeah. So actually it wasn't an issue for me. I don't have any issue getting rid of a high performer. That's not something I'm Looking for. I'm looking for people that can become high performers that have good, that have good morals and that are easy to work with, that are not toxic. So the second that this person actually reached out to me and was saying that he couldn't get along with some other people in the shop, but he was instigating all of it. And he even told me that he was instigating it and I basically told him that we don't tolerate that. And even though, that sometimes when people retaliate, they retaliate for a reason. Right. So I can't blame it on them, even though they had some fault in it for sure. But we just can't tolerate that. And he said, well, well, I'm done. I said, okay, no big deal. We'll just like somebody else. We'll find somebody that maybe they won't be as high performer but they'll come in and have a great attitude and we'll teach them how to do these things and they'll pass along our culture to other people instead of blocking it from them.

That's great. I love that attitude. I, I've been so afraid sometimes to cut that high performer because I knew what, what it would put on the rest of us. So I'm glad you were able to do that. Sure.

Yeah. Yeah. And did your, did your shop, you said it was an independent shop. Is it only do your recon? I imagine you're trying to get 100 something cars done a month. It was just internal.

Yes, it's all internal recon.

And it sounds like you're going to shut that down and move those recons to the on site sales location. So less of the hub and spoke and more of. And operating facilities.

Yes, for sure. So we'll have. And probably get into some retail at the same time. We're kind of, we have a little bit of restraint because of the size of the shop that we have right now. We're going to be able to grow it. We're going to be able to probably double our, double our workforce in our recon facility and hopefully double our sales with that.

Yeah, I'm, I'm about to lean heavy into retail. Retail service work too. I think there's a big gap that a lot of dealers are missing right now.

So I want to wrap my brain around a little bit more. Michael. You're gonna move that central recon facility and break it into two and put them at the sales locations like you're installing lifts. You're putting a full shop at each retail location somehow.

No no, no. So we're going to do recon out of one facility and then, and then we're going to relocate the cars over to the other car lots. Because you got to really think, guys, both of my dealerships that I currently have right now are extremely small. One of them is less than a third of an acre, and the other one's less than an acre. And the third acre, we sell about, about 40, 50 cars a month out of. And the, the one that's a little bit less than an acre, we sell about right at 90, 80, 90 to 100amonth out of.

Wow, that's, that's a lot of production.

High turn time.

Yeah.

Wow. We don't really have a lot of cars on the lot. They don't really last very long. And something that we do is probably different, a little bit different than everybody else. We sell a lot of things out of the shop, and then the customer, after the car gets ready, the customer comes and picks it up.

Yeah, I, I, I do that. And other people always criticize me for, for saying I do that. Jeff, you don't believe in that?

Well, if I was turning my cars that fast like Michael was, I would have to, right? But no, I got plenty of time to. If I've got 60 cars on in inventory and I'm only selling, you know, 30 or 40amonth, then yeah, I don't have to sell out of the shop. I don't want that headache.

But yeah, I agree it helps cash flow.

Yeah, absolutely. I agree that it is a headache because customers do get upset because something sometimes a lot of the time the parts get back ordered, things like that, they don't. Everything doesn't go as planned, you know, never. We use rapid recon to keep in, I mean, keep on top of everything, and it does a really good job. So. But you got to think that probably at any given time, I only have about 40 cars ready to sell. 40, maybe more. 40 to 60 cars now I have a ton of cars for sale. They're just not ready to sell at any given time. So we turn about one, I mean, of our cars ready to sell probably at least twice.

That's incredible. Yeah, that's incredible. Hey, Jeff, what you doing, buddy over there?

Hey, I'm just, I'm just seeing these guys that have done so much more in three years than I did in the last three years and just feeling a little sad. But one thing I did do over the last three years is I switched my reinsurance over to Buckeye, and I've been Using them to grow my reinsurance portfolio, which is a way to building wealth. I mean, I don't know if I'm going to be like Michael and pay in cash, cash for a franchise dealership anytime soon.

But I promise you, if you do reinsurance long enough and you, and you sell enough cars, you can long enough.

And if you sell enough cars. Thanks for those disclosures.

Yeah, you can buy a dealership from your reinsurance profit. I promise you that. So give Buckeye a call and get that thing set up. You still got a couple weeks to get this done before the end of the year. And I can't encourage you to do anything more important this year than that.

Yeah, and let me, let me tag this in there because it's timely. Right now I'm using it at this time of year to stock up on inventory. We all know this time of year we start buying more. We've got tax obligations, we've got Christmas bonuses. I'm trying to sock as much cash away into my reinsurance company for tax purposes. So that puts a cash strain on the business. So it's nice to have that reinsurance forced savings account for me to tap in right now. So that's another plug to get it set up so that next year at this time, you've got that little nest egg put away. You can tap into it around tax time. So call the guys at Buckeye.

Let's get, let's talk about banks and subprime. Every time Jeff and I are at a convention, what is the overall theme is for buy here, pay here? It's where can I get more capital at a, at a better rate? And for, you know, for retail dealers, it's how can I get more banks that can help me sell more cars? And with you doing 90% subprime, who is your biggest lenders? Have you had any pull out? You know, with this high interest rate environment and high charge off environment that we're leading into.

So actually we've had just, just the opposite now. We've had, had some. Now I'll go back and say what I said earlier is that they have tightened up now. We've had lenders, I think, that are still fighting for the deals. Right. But they're doing it with a scorecard that is, that is not as aggressive as it used to be. Right. So they still want the deals now. Some, some every month it's like a new bank picks up, like, hey, I want to fill up my portfolio this month or every 60 days, something like that. But we've Have a couple lenders that stay very steady. But with that being said, we actually had. I don't know if y' all familiar regional acceptance.

Yeah.

And I don't. They actually pulled out of the market probably two years ago from every single independent dealer, regardless if you had a franchise or not. They actually reached back out to me this past, I mean probably four months ago and we were one of the. One of. They only picked up four independent dealers in the United States and we were one of those four independent dealers that was the most profitable for them. So it was a. I felt good about that for sure.

They were, they were big for a long time. Regional was. And weren't they part of BBNT or BBNT bought them and I guess now it's Truist. Is that what happened?

That's true. So they were subsidiary of bbnt. They work hand in hand. They're sister companies really. But, but yes, that BBNT and SunTrust merged, become Truist and now there's. Now they're a subsidiary of truist.

Okay. And they're. But they're getting back into business.

Yeah, they're actually, I mean they've been in business the whole time. They were just with franchises only and they cut every single independent dealership off in the United States but they only picked up four independents in the United States and I was one of those four.

Well, that's, that's incredible. That's great.

Is your price point still about the same? Would you say you're still retailing like a fifteen to twenty five thousand dollar car? Is that kind of your sweet spot?

Yeah, yeah. I think our ACV come down a little bit because of the, because of. Actually our ACV would have went up since talking to y' all and then it would have came back down.

Yeah, yeah, yeah.

So that roller coaster of a ride.

Any Michael you ever CAC, are you doing any CAC deals?

Yeah, we probably do about 10, 15amonth, I would say.

Okay. You, you consider that a, a value to your portfolio, to your, to your business or, or you could do it without it?

Absolutely. Any, any company willing to lend money to our customer base on the cars that we buy is a value to us. Regardless. I think people view CAC very negatively. Like oh, they charge you these big fees. Well, I mean at the end of the day that's the risk of the business. It's no different than like for example, a customer comes and buy a car from a buy here, pay here. There is a margin in between what you sell it for and what you paid for it. Right. And that is the risk of the deal. It's the same thing for cac. I don't look, I don't look at it much as a fee as much as I do as a opportunity to sell another car to another individual.

But they're kind of your, I would say they're maybe what your second look or something. They're not like a.

Yeah.

And capital and everyone first, I imagine.

Yeah. I think that actually it wouldn't be as much as you think it would be. Right. Majority of our customer base is probably about an average of about a 5:40 to a 550 credit score. So that's not really ally and, and capital one. Yeah, they're kind of five. I think they probably get more of that 580 to 610 stuff from us. But a lot of our stuff is. And, and the cac. CAC is just a one off. I mean they score things completely different and we always try to look and see and we probably don't do a good job as we should be doing with CAC because you know, when it comes down to processes, whenever they're outside the process and I mean even though they're in dealer track. Right. There's, there's so many different ways that you can work a CAC deal to be profitable. So you can reduce the price by 3,000 and make $3,000 more. It's the silliest thing in the world. Right. Whenever you get that callback that you're not making as much money, you automatically lean towards the ones that you probably are going to make a little bit more money on. Even though my guys, my finance guys are trained to go look everywhere before we make a decision.

Yeah, Sometimes it's a lot of work if you get that first CAC callback to say oh I'm going to go in and tweak five different numbers to try to optimize it. They probably just say yeah, forget it. These guys gave us a better one. Let's just go over here. That's, that's. It sounds like you're pretty well balanced with your lenders though, right? You do you have one that's kind of taken the bulk of your loans or are you kind of keeping it pretty balanced?

No, we keep it very balanced. Right. There might be one that gets about 20% of them but, but the rest of them are between 5 and 5 and probably 15%. And then we have maybe some, some lenders that pick up one onesie twosies.

That's really surprising. I don't think you get that typically. And I don't know, I don't. You know, like I said, I don't do a lot of retail, but the retail I do typically goes to like one lender that my guys know they like. We get good callbacks, we get good rates, they're easy to deal with. So that's great that your. Your finance guys are or. Or are keeping everyone honest and shopping them around just to even keep the relationships.

Yeah, it's a requirement for me because I know that there's deals everywhere and we do more of creative finance, I guess you would call it, to where we're actually looking for the deal. Right. We want to make sure that our customer gets the best possible outcome for their financing as possible. Right. Because typically what happens is, is if the bank gives a better call, it's usually better for the dealership and the customer.

Most time better rate, more. More profit. Yeah, for sure.

That's right.

Yeah, that's. That's an interesting outlook. And I mean to train your F and I guys to, to work this process. Michael, is that something you did? Did you create the process or did you have hire an F and I manager from. From somewhere that already had had this process in place?

No, I had. My financing is actually centralized and I created that a while back because I found that I was going to try to. So Back to episode 198 when I'm talking about me buying, selling, doing everything myself. I was doing all the financing, all the selling, all the buying, things like that. And I had to get really good at finance, I mean at the creativity of the finance portion. And I know that most people call finance different than what I call it finance because I've never been in any. I mean, I guess a real dealership model is what the most. The most common dealership model is that the finance manager actually sometimes they submit the deal, sometimes they don't, or spend the deal. That's more or less the desk. Desk manager spends it and then finance sells product. Correct.

Yeah.

So what we do is we have a centralized finance that does not talk to customers, only the salespeople do. And the salespeople take it from cradle to grave.

Yeah.

Okay.

That's a pretty independent type view of it for sure. I think just lack of just having the manpower to put them in three different rooms and have them get, you know, which, which is really interesting because that does lead us into, you know, talking about this franchise that you picked up because I imagine when those two worlds collide, you Come in as an independent and then you've got franchise that totally does things in a very structured. Like this is the way everyone in the country does it. You need to have your salesman, you need to have a desk manager, you have a finance manager, and then you got to have a sales manager that comes in and. And hits them up again and writes, you know, like, it's very, like. I don't want to say gimmicky, but it's very like, you know, new car style.

Yeah.

How has that been blending those two worlds?

Is it.

Is it different? Do you feel like you're taking your independent mentality to the new car floor and building, or is that new car franchise coming to your independence and giving you a better structure and process?

There is no blending. I went into. To the franchise with my independent cleaned house 100. I didn't clean house. I had an expectation that we do it this way.

Wow.

And you have to.

Did you have to let go of the old dogs that had been there and wanted to do it their way? How's that growing?

It's. It's rare that I ever let anybody go. And even talking about the mechanic earlier, he had to make a decision for himself because I just don't. I typically don't budge if I know something's right. So. Not that I let them go. They basically gave up. It's an interesting story. I. We'll talk about it in a second. But it's really interesting, people's thought process on change.

Yeah. Oh, yeah. Especially when, if you're seen as an outsider or some. Some sort of a situation, I imagine that's got to be really hard. So. So maybe set that up. Give it.

I.

We know that there's been a lot of kind of franchise store transactions happening over the last, you know, couple years because of the valuations, because of cash outs, because of a lot of private equity going in and buying it up. But maybe set the table for us. How do you even get your hat in the rink for a franchise store? And which franchise store was it that you got? How did you. How did you get that introduction or even get an at bat at it?

So the franchise that I end up buying is a Chrysler Dodge Jeep Ram store. It's in Forest, Mississippi. It's about three hours away from Biloxi. So I had this. I've always had this epiphany because. Not epiphany, this. This past history of learning from everybody else's mistakes. In 2008, every single one of the banks went in and cut off all the independent dealers. Right. When the recession got bad. So I've had this fear because I've been so, I've had. I relied so heavily on lending that I knew that we're going to come into a recession here and things wouldn't be good for the independent dealer. Right. It's no different than when regional acceptance pulled out of the market. They didn't ask, they said, hey, this is what we're doing. They stayed with the franchises. Right. So the only way I'd be able to protect myself is to get a franchise. So.

I, look, I think that's something that every independent thinks about is, is exactly what you just said. I don't think you're unique, thinking, oh my gosh, I got to have that to protect myself.

Right? Yeah. So I, I told myself that I need this to protect myself. And I worked on it for probably four or five years. Heavy. You know, I actually reached out to, I actually reached out to Mitsubishi to begin with.

And yeah, that's so true.

I've done, I've done that as well.

Mitsubishi and Nissan.

So Mitsubishi wasn't so friendly. I will say that I actually probably, you know, I don't never meant to mean to disrespect anybody. And when I called them, you know, everybody's like, hey, Mike, that's where you need to start at. This is what you need to do. So I hand wrote them a letter and they reached out to me and the late, the, the lady was asking me, you know, why do you think Mitsubishi will be a good fit for you? Right. And, and I'm, I'm just very forthcoming. I don't like to hide anything I said. I, I think it'd be a great place for me to start out in the franchise world. And that was the wrong answer. So.

Right answer. The right answer is I have the customer base that fits your, your program. That's the right answer, Michael.

Yes, for sure. But anyway, no, she wasn't happy. And if I offended her, I apologize. If she's watching them, I'm sorry. But, but at the end of the day, that didn't work out. And I got to the point to where nobody would let me in the door. So I started calling all these dealerships that I knew were for sale, and every one of the owners would tell me, no, it's not for sale. Only to find out six months later that it sold. And I don't know why, they just wouldn't let me indoor. And I don't want to say that. Oh, they just didn't want me in, you know, I don't. I don't. I don't have that mentality. But something was definitely going on. So I offered a bounty for somebody that could get me a independent. I mean, a dealership. So I had hundreds of people reach out to me, hey, this dealership may be for sale, so on and so forth, and nothing. I mean, it was kind of fruitful, but nothing really came out of it. And I got sick and tired one day and I called my insurance agent and I was just. He's a. He's a good friend of mine. And I was just like, dude, do you know anybody's got a franchise for sale? And he goes, no, not really. And before he hung up, he said, hold a second. He said, this guy's been an absentee owner for a long time, and I know they're struggling really bad. Just get. Try to give him a call. And so that's what I did. And if you only get into it, I'll tell you how I did that.

Yes, please. That's. Everybody wants to hear this story.

So, literally, I got this guy's number. I must have called him a hundred times, never got in touch with him. I didn't call the dealership because I didn't want to shake anything up. You know, I didn't want anybody quitting because of it. I didn't. I don't think that's fair. I wouldn't think that's fair to the owner. So I found out he owned another business, and that's where he was spending all his time. He hadn't even been in this business. I mean, he didn't never come to the dealership for five years. Whoa. So he just. He had had enough. And I'll get into that story. So he owned another business, and it was in. It was a pharmacy. So I called the pharmacy several times to get in touch with him. Nobody would ever put me through to him. So I finally waited till about 5 o' clock one day, and I called like I was a sick old lady. And he. And they transferred me to him. And I said, it was just like this. I said, Mr. Owner, hey, this is Michael West. And I heard your dealership may be for sale. If you. If you'd like, I'd like to buy it. And he goes, hold on just a second. And I thought he was about to blow my hair back, right? And he. I heard him shut the door and goes, when do you want to come see it? So I said, when can you show it to me? It was the next day. So I came and met him, and he showed me around, and he took me in. I mean, the office next door. He brought me in. This is actually not even my office, but it's my general manager's office. But he took me next door and he looked around. He said, I blank hate this place. And I said, why is that? He goes, because I was always the one that had to handle all the problems.

I feel you, brother.

I feel you. Yeah. I said, man, that's just. Sometimes it gets overwhelming, man. But I welcome the problems. And, you know, if this thing's going to be a problem, I'd love to have it. Right? And we made a deal, and it. And it worked out.

The other thing you have to do this time of the year is get the money in the bank, and you got to take credit cards to make that happen a lot of times. So you need to have a good processor. And Blitzpay is our processor of choice.

Yeah, that's also for me. We switched over a year ago, and it's been great. Everyone is paying with credit cards. Everyone wants to be able to set up their own card. We're actually switching over to their cash network. Hopefully at the end of this month, we're going to be able to take no cash in the office. I just don't like the security issues. I don't like the. The office staff having to make deposits. I don't want to worry about theft. So we're going to switch over to only doing cash through their cash network. No more payments in the office. So we'll see how that goes.

Yeah. You know, I looked the other day to see how many Blitzpayers transactions we had last month, and it was over 80% of all of our payment transactions were done through Blitzpay. So super easy. Didn't really cost us that much to get all that done. Super easy for our collectors, too. And you don't have to deal with all that cash.

Wait, wait, wait, wait, wait. You can't just say we made a deal. Like, that's the. That's the most important part of this. Other than that's a really cool story of how you were persistent. I am not that persistent. I think about times I try to get in front of people and I give up after a phone call and mean secretary. But, okay, so we made a deal. Can what. What you can disclose. I'm super curious. How do you.

How does that work? Yeah. Yeah.

A franchise store that's losing, not performing well, neglectful owner who knows the market. How do you even get CDJR Stellantis to approve you. Like that's a. There's a lot in that.

Yeah.

Okay, so when I first come up here and he had a Ford store and a Chrysler Dodge Jeep Ram store. So whenever we done our asset purchase agreement and. And we agreed to terms on the property and on the blue sky and on the FF&E, if anybody don't know what FA, FF&E is, fixtures, furnitures and equipment, and we agreed upon parts, so on and so forth. We got all those agreements and what, I mean, what vehicles we're going to buy, what we're not going to buy, so on and so forth. So we came to those agreements, we put it on paper. We. We sent that over to the attorneys. Everybody agreed upon it. We signed the deal from that point. Everything was sent over immediately. The APA Asset Purchasing Agreement was sent over to the franchise franchisors, Ford and Stellantis. And from that point, they basically sent you a packet back and you had to fill it all out. And it's a. It's a pretty extensive packet. They want to know a lot. They want to know that the person coming in is going to be able to maintain the brand to their expectations, and I don't really blame them. So you got to have a certain. A certain working capital. So you had to. Had to be able to do that.

And do you have the Ford store now too, or.

No, no, no, I do not. So, yeah, they actually did not approve me. And that's okay. That's okay. So it worked out for the best for me because the store that we're in is a. Is a relatively small store. There's actually two. Two buildings. One of them's very small, which was the Chrysler Dodge Jeep Ram building. And one of them is. I can't say it's large, but with the shop and everything, it's about 16,000 square feet.

About.

It's about 6,000 square or about 4,000 square feet of sales in about 12,000 square feet of shop.

And it was the Ford store.

Yeah, well, they were operating both out of here.

Yeah, I've seen that. We have. I have a guy locally that does the same thing, and he's only now been getting pressure from Ford.

Yeah, Ford's not going to allow that.

From Atlantis, but he's gotten away with it for a while, so.

Yeah.

So Ford said no to you?

Yeah, they said no. And after, I mean, and, you know, they reached out to me and said, hey, we don't like the management. And I kept everybody I didn't need to change anybody. Right. Because I think my whole mentality on everything is as long as the people are willing to change, then everybody can change to meet the expectations. Because all it is is a different. A different perspective on how things are done. It's not. I mean, there's. It's not like it's extra work. I'm sure it's less stress making money versus not making money. Right. So I've never had the perspective to just go in and fire people. It's just to change their men, their. Change their perspective and do a paradigm shift on what they were currently doing. So Ford called me and said, hey, we're. We're actually not interested. If you can find us somebody that has Ford experience that we want to have, then we'll. We'll take a look at it again. So I said, you know what? I didn't want two masters anyway, so I just went the Stalinis route.

And what did the guy do with the Ford franchise? It was. The building's gone. You bought the building? Did he lose it?

Well, they. He sold it back.

Oh, okay.

Yeah, he got a check from Ford for that.

Yeah, for sure.

About four bucks.

Well, more than that.

Yeah, I think it was more than that, but. But I. I don't know. And I'm not going to say anything negative. I think they have a great program, you know, and I don't hold anything personally against them. I didn't meet their standards, and that's okay.

You may one day. I mean, you may one day that you want a Ford store, especially being in Mississippi, so.

That's exactly right.

How much can you tell us about the financing structure? You know, like, when you had to go in, I imagine that's very capital intensive. Were you able to find banks that would get behind you and do that? Or is that something. I mean, you just. You had a bunch of cash laying around. Like, what can you tell us about. How do you go from being an independent to actually affording a franchise store?

Well, my bank financed the property, and that was. That was pretty straightforward. Pretty simple, right? I paid cash for everything else.

Okay. The blue sky, the inventory, all that kind of stuff. Okay.

Yes.

And did you. I guess you went straight into the Stellantis floor plan or. No. Did you? Did you?

Yes, I actually have Stellantis. And, dude, I love doing business with Stellanis. It's a. It's been a brush of a breath of fresh air, for sure.

Interesting. I mean, because you were. I would assume you were using floor plan as an Independent dealer.

And.

And this floor plan's a lot better than that floor plan. Right.

You know, if I have to talk about as far as rates and things like that. Yes, true. Yeah. I. On the independent side, I work with a two companies. One's AFC and one of his first business banking. To be honest with you, everybody at both of those, I just can't say enough good things about them. They do everything that we need to do and they're just good people. I don't know if y' all know. Y' all wouldn't know our local AFC rep, but you probably know Jeff and John with First Business Bank.

I know First Business bank, but I don't know that. But I. I've had experience years ago with AFC and, And know some of the people they are. Those folks are good people, too, so. Yeah, well, yeah, they get it. They get a bad rap a lot, but I'm telling you, they do a good service for dealers, for sure.

Yeah. If you, if you don't. If you don't sell out of trust and you don't, you do what you're supposed to do. They're. They're a good partner to have, for sure.

So give us the playbook, Michael. When you go in there, day one into a failing franchise store, what do you do to make it profitable? It was losing money every single month. It wasn't. It wasn't doing well. Like how. How do you buy such a mess and have confidence you're going to turn it around?

So just kind of looking at the financials and trying to figure out how much, how much, how much, how many sales would I have to make at a certain margin in order to make up the loss, right? So I come in and they're selling 20 to 25 cars a month, right? So I said, well, if I can sell 50. Right. And hold this margin, then I will be basically break even. So that's what I did. It was pretty simple. It wasn't really anything incredible about it. Right.

Why weren't they doing it? Why. Why weren't they doing it before the market?

Absent.

Absentee owner, man. Absentee owners, first thing.

Yeah.

Management was just complacent.

Yes. A lot of good people. Now, absentee owner probably had a little bit to do with it. I think that everybody looks for direction from somebody, right? And if nobody's pointing in a certain direction, then everybody kind of goes which way they want to go. And even though people fight that, they actually like it a lot, Right. It's like having a kid that has no structure. At home and he lashes out to everybody. And then you give them structure and they change their mentality because they just didn't know what it looked like before. So. And I don't mean that anybody here was a kid. Right. It's just the. It's the psychology behind it for me. So I came in and they really had. Everybody had to buy in, man. We had a couple people quit. My sales manager, they only had two salespeople and both of them quit. Two of them, the sales manager and one of the sales people quit at the same time. And that was in the first 15 days. Yeah.

How do you have two salesmen and a sales manager doing 25amonth?

Well, you know as well as I do. What's that?

Fat commission plans.

Yes.

And it doesn't take much to live in a small town. Right, Michael? So, I mean, they were.

Yeah. So for sure. I'll tell you a story. One of the salespeople, when the. When the sales manager walked out, me and him kind of didn't really butt heads. I just like to be very upfront with people. When he said that all he needed was inventory. And I told him that if that's all you needed, the previous owner would have happily provided that. Provided that to you. You know, it's unfortunate that y' all lost $720,000 in a. In a period of time that he wasn't. He wasn't comfortable doing this anymore. Right. So. And he tried to posture and, you know, and people get defensive when you strike the ego. Right. So he basically was a ticking time bomb. And he was out of here. And one. I mean, he pumped up everybody else to go with him, and that's okay. So we started over. I brought a guy up from the coast and he's been a tremendous, tremendous help to me. And he's been working in that sales manager role, if you'll call it that. He's been more like an operations manager for me and making sure things go the right way. And we hired. So let me go back. We just. We went down to one salesperson and training more people. Correct. And the guy that was here that had made on average about $4,000 a month. He had been here for a little over about a year and probably four months. And he had averaged about $4,000 a month. His very first check was 90, $200 for the month, so. And he quit that day. What. Because it was just different. And this is what I was talking about, dude. That's right.

I thought you would get massive buy in at that point.

Nope, nope. Everybody was making more money. And dude, this. I'll tell you, we'll get into that. So our very first month and this Stellantis rep told me he. That he believes that we're the very first dealer, Stellantis dealer to ever buy a dealership, losing more than $50,000 a month. That made a profit the very first month. So we turned a profit the very first month, turned a profit the very second month, and then been turning profit ever since. Right. And it's been. It's been pretty good. So. But we've hired new people, we've trained new people. I brought another guy from the coast. It was one of my salesmen at my other dealership and he's been doing great and he reaped the rewards of all of us selling and him claiming it, you know, but. But he did an excellent job and we hired new people and everything's been going really, really well.

What would you say the biggest lessons are? Like, what's the big contrast between the independent and the nuke? The franchise? Like, what really stands out? Like having oversight from Stellantis being like, are they pushing new on you or is this just a really fancy used car dealership and you happen to sell a couple, you know, Wranglers and gladiators and whatever they sell these days?

The, the probably the second part is probably truer than. Than the first. So I had a conversation with them and to be honest with you, they were extremely grateful that we came in and saved the dealership. Right. And allowed them to continue to sell more new cars. We're probably not their star student by any stretch of the imagination. We're probably a C student.

Yeah.

And they know that. But I told them that if I'm going to come in here, the most important thing is the life of the business. And that's what I did is focused on increasing profitability. We have triple the shop profit or this TR the shop income. We tripled the. Over. We tripled the sales. We've. Well, I don't know if there's a number that you can say for the profit that we did, because going from a negative to a positive, it is.

Thousands of percentage better. Yeah.

Yeah. So we've been doing really, really well with it. With it. And hopefully if things keep going, we'll be able to pay back the. I mean, we'll be able to our return and invest and be 100 for what we pay for the property and the. The dealership all together in one. In one year.

And one more thing. You do have to do this time of year is get set up with Tax Max again, a great sponsor of the year this time of year. And every year for the last few, we have done our first fourth quarter Tax Max program. Just the other day, individual came in here to get a Pathfinder. They had a couple grand down. It was a good deal. But then we leveraged their upcoming tax return and we got two more grand committed from their upcoming tax return. So it took a good deal into a great deal. And all we have to do is follow up with them in January, get their W2s and do the filings. This fourth quarter program, we're getting everybody trained on it.

It's.

It's starting to pay off for us.

Yeah. And just think about the first of the year when you can actually do the taxes. You put the customer in the car, next thing you know, that check is coming into you in the afternoon. I know you. You told me a couple times last year, man, I got all this money in. And we know how excited you get about that.

So I love printing checks, man. You'll see it again this year. I'll post when I get that big cash drop. Come end of February, I'll print up those checks and it's a good, good day.

Yeah. And use podcast 2024 to get their VIP package that. It saves you 40% and it says sign and drive, essentially. So get it done.

Property and the, the dealership all together in one, in one year.

That's. Michael, that's incredible. I. I have a very important question because I like to think about things like this. You bought a plane to get back and forth, right?

Yes, sir. Of course.

You got to have that. So what kind of plane do we have here?

I have a 2021 Cirrus SR22.

Yes, sir. I love it. Okay.

Yeah, that's a nice one.

Yeah, that's what I want. Okay.

Yeah.

You pilot that yourself?

Oh, no, sir. I got a guy that, that pilots it for me.

So you're doing your split. You're how often. You said they're a couple hours away. How far are these?

Three hours.

Three hours?

30 minutes. 30 minutes in that series, baby.

It's about 40.

So. So is that a daily commute? I mean, are you up in the morning, back in the evening, or is this like. I go to the new car and I stay in a hotel or a condo for three days. I don't.

I come up here and I go back home. I fly up here in the morning, I come back in the afternoon. I mean, I come back at night.

I don't comprehend that. That's wild, man.

You got to do that. I mean, if you. Because you need to be there and I. If not, it was the same situation it was before. So I. I love it. I love it. Michael, you. You've done amazing things.

So.

Okay, we'll talk about that more when we stop recording because that. That blows my mind. But what would you have? What do you think the future holds for you? And give it kind of give us a wrap up of. Of what you've learned, what you would like other dealers to take from this and where you see this thing kind of going over the next three years until we interview you again.

So definitely buying more franchises. I've developed a different model. Right. I don't need the big. The big shiny ones. Right. I don't need the big. The big buildings and all that stuff to be profitable. I don't think it's important. I do need to learn more about the new car sales portion of it. And I think that's what we're learning right now is trying to figure out how to maximize that portion. And Solanus have been. Have shown a lot of grace on allowing us to do that. And it's appreciated. But if. If I had to give anybody any, Any advice and, and what it is that you want to do or get done is just. Just do it. I don't. I don't really know anything else to say other than, you know, whenever you do something, you get feedback, and if feedback's not good, you do it. I mean, you change what you're doing until the feedback, then you. Then you repeat it.

Yeah. You never had any doubt that you could turn that place around. Like when you stepped in there and saw a. Smaller buildings, maybe a smaller market, maybe, you know, bad sales and some bad apples in the crew. You never doubted that you could take on some. Some debt, buy a property, pitch a bunch of cash into this thing and, and get it going the right way.

To say that I had no doubts would probably be a lie. But if I had to do it myself, I just had to do it myself.

You do seem like you had a little more gray in the side there. Is that, Is that new?

Yeah, no, it's been there for a while. I just kind of covered it up last time. It was shorter than we thought. But I will say that some of those grays are a little grayer because of this. But yeah, dude, I'll be honest with you. We had 19 people when we started up here. It went down to 16. Really quick. 15. Actually, we got 29 people working up here now, and I couldn't imagine picking 20. I mean, 29 better people. 29 people to join my family better than the ones that I got. And that's a fact.

That's awesome.

It's awesome.

Yep. Kane, I'm glad. Go ahead.

No, that's the key, man. Just surrounding yourself with really good people and. And to your credit, Michael, being someone with people that are really good, want to be around. Right. Like you said, if you don't have a leader, if you don't have someone pointing the way, then it's not going to attract those types of folks. So. So kudos to you for being someone that can come in and paint that picture and get everyone rowing in the right direction, for sure.

Yeah. Well, I appreciate that. I don't. I try not to take very much credit for it, even though. Because everybody else does all the work. I'll be honest with you. And. But I think from my perspective is. Is giving people a clear. A clear vision, even though sometimes it doesn't seem very clear, but giving people a clear vision and the support. I think whatever I got to do to help you do it is what I will do. Because you don't have to be the smartest person. You just have to be the hardest working and learn from your mistakes.

Yeah. That's great advice. Thank you, Michael. We appreciate it.

Thanks, Michael. We'll see you around. And I hope to talk to you again in a couple years, huh?

All right, guys, thanks for having me. Thank you for listening. Please leave us a review. We'll catch you in the next episode.