By James A. Ziegler, CSP, HSG,"The Alpha Dawg"
Welcome home from your trip to the
Land of Oz. For the last few years, we’ve been on this magical journey through
a mythical time and place where consumers gladly paid $10,000 over MSRP, and you
could sell every car in stock every month.
Well, slap a little water in your face
Dorothy, we’re all back in Kansas, and the gray skies, the black and white of
reality, have set in. Inventory is coming in, and manufacturers are resorting
to rebates, subsidized interest rates, trunk money, and huge discounts. Some people say we’re on the brink of a
recession, and others say we’ve been in one since the last election.
Interest rates are climbing, and banks are withdrawing, cutting back, or leaving the auto sector altogether. Several top banks have just announced they will no longer do indirect lending through independent dealerships, and they are cutting back on franchised dealers' loans, limiting them to the top tier credit tiers. It's not uncommon as almost every bank, finance company, and even the credit unions are limiting auto lending criteria.
Zero percent financing for 84 months
with 140% carryback, I think we’ll all agree those days are long gone. Month
after month, dealerships gave themselves trophies for setting records as
if they’d done something worthy of recognition. Those same dealerships are ill-prepared for the 'Back to the Grind' competitive sales environment that is rapidly returning.
So, speaking to 'underperforming
dealerships' or dealerships that will soon fall into that category … or worse
yet, dealerships that are 'underperforming' but won’t admit it, this article is
for you. Most underperforming dealerships are living in an ocean of excuses,
denial, and blame-shifting.
Most dealers and general managers of
underperforming dealerships never admit it or face the facts until they run out
of excuses. When your competitors in the market are outperforming you month
after month, that might be a clue. The manufacturer might be unrealistic, but if
the pressure is more than usual, that might also be a clue. Once you’re out
of excuses, the grow or die mentality kicks in. You become either defeated or determined. When you reach
that level, remember this article.
Commitment & Profitability
In April, I performed a private seminar
in Atlanta for the Ben Keating Automotive group. In 2023, Automotive News just
recognized the Keating Automotive group as number 15 in sales volume, one of
the most rapidly growing companies in the business.
Keating flew 60 of his top managers to
Atlanta for the two-day event, paid for their hotel stay, rented the Marriott
ballroom, training materials, all the AV equipment, meals, and a banquet at a
top restaurant, and also paid me. The expense and commitment here is unimaginable for most dealerships and actually for most dealership groups too. You see, although they were rated at number 15 amongst some big dealer groups, I
suspect they may have been as high as number 10 in real profitability.
Ben Keating and I have been doing
business for at least 25 years. His organization is process-driven and
A Performance-Driven Work Environment
The first thing I tell an
underperforming dealership is to create a culture of unswerving focus and
determination. To do that, you must invest in quality management training and hold everyone
accountable for performance.
It all begins with staffing your
dealerships. Not only having the correct number of people but having people
with the right attitudes, abilities, and specialties.
For 35 years of consulting
dealerships, every class I teach starts with the quality of the people you put
in front of the public. I
have always required a performance-driven work environment. Pay plans, hiring,
firing, advancement, and demotion are performance-based (unless you're
related to the dealer). We do not award 'Participation Trophies' in my world.
In my world, non-performers, bad attitudes, chronic complainers, miscreants, disruptive behavior, poor attendance, late problems, those people cannot stay here.
If your dealership is one of those underperforming stores, ask yourself: Do we have people working here that should get terminated? Reread the previous paragraph and ask yourself if anyone in your business fits within those categories. It's a business, not a rescue mission. Stop trying to save people that won't be saved. I'd rather have no people greeting our customers than bad people.
Look Like Success
Every day my team shows up with that black stuff smeared under their eyes, well-groomed, well-dressed, looking like success, and ready to do business. Upgrade the quality of what you're putting in front of the public. Look, dress, and act professionally.
Every day of my life, as a top-performing salesman and later as a manager and still later as a trainer and consultant, as I put my tie on and looked at myself in the mirror, I’d say out loud, “Somebody’s Gonna Pay for This!”
when several of my managers said, “But I’d rather dress casual,” I replied, "In our business, casual people earn casual money."
F&I Director, before I was a sales manager, I always dressed in a
business suit, even though the sales department wore Polo shirts and slacks.
Subsequently, as a GSM, I required my management team, especially my ‘Financial
Consultants,’ to wear business dress every day. The reasoning is
that bankers do not wear Polo shirts. Managers establish an executive presence through their appearance and air of authority. Everything about you, from how you dress to how your office looks, your countenance, and more, all contribute to your power posture. Managers look and act like managers.
Act Like It's Already Happening
the years, I’ve always had a reputation for growing dealerships to big numbers. So how do you do that? My philosophy for growing dealerships
to their ultimate potential is to act like you're already doing it.
Do this, and you’ll grow to incredible numbers. It doesn’t take months
or years to reach your potential. You can be there overnight, like immediately.
The problem many have is they believe you have to gradually grow.
You envision that you’ll introduce new concepts and processes slowly into the
dealership. That is so wrong.
Through the years, whenever we grew a dealership, say from 500 units a month to 1,000, or 200 to 300, 440 to 800, whatever the number, we reached the maximum potential of that dealership within three or four months of when we began.
Know What's Realistically Possible
The first thing you need to do is make a
realistic and educated estimate of what that dealership is capable of selling
if everything was perfect. Maybe hire a credentialed consultant to give you an
idea of what is realistically possible. Once you have realistic numbers then
you act like it’s already happening.
You hire the right number of
salespeople, BDC, F&I, and sales managers immediately. If you realistically believe
it’s a 1,000-unit dealership, you hire and train enough staff to sell 1,000
units. You stock enough inventory for a 1,000-unit rate of travel. That’s right; You put enough cars and trucks on the ground to sell 1,000 units a month, day
one. You market and advertise as if you
were already selling 1,000 units. If you want to sell 1,000 units a month, and the
number is a realistic expectation, act like a 1,000-unit dealership in
every way immediately.
Now, maybe you're reading this and saying to yourself, wait a minute
here, Ziegler... we can’t get enough units right now. Well, that’s where the word "realistically" comes into play.
If your manufacturer won’t provide enough units then it’s unrealistic to expect 1,000 units a month in sales if you’re only receiving enough units to sell 600. A tried-and-true growth plan is to plan for the dealership to grow to its
realistic potential immediately. You don’t have to sneak up on the numbers.
If sales is a war and your competition
is winning, either your troops are inadequate or your weapons are obsolete.
However, underperformance is a curable disease.
We can replace employees and train
those that are trainable, but what weaponry and equipment are we working with?
I’m talking about your processes and your technology. Since the COVID pandemic, the
state-of-the-art technology in our industry has turned over several times. How old are the systems you're using? What about your DMS, website, and CRM? Are your systems and tools old and beyond repair?
Replace an outdated system with a new, modernized version. Some technology
vendors don’t want to lose their foothold so they continue to patch up and put
band-aids on obsolete technology.
Know your options because there may be newer all-inclusive technologies available. So many
dealerships use three or four vendors to do what one modern vendor can do
all in one application. Not only is consolidating more efficient, but eliminating vendors that have redundant services is also a significant cost saving.
So, it's time to go shopping. Ask your
employees; they know the latest and the greatest tools that streamline
processes and create sales. AND dealers and GMs, you need to attend
conventions and conferences with your employees, like Digital Dealer, to see firsthand the newest and best sales and service tools (weaponry in the
There are advancements in AI that
will replace a lot of redundant employee busywork and increase productivity 10X
in some common labor-intensive areas such as follow-up and scheduling, freeing
up your employees to work with in-market buyers. But be careful, everyone says they
have AI, but very few have genuine productive AI.
Don’t be afraid to ditch old vendors
that can’t justify their ROI.
I just got off the phone with a good
friend and long-term client, Brett Sutherlin, one of the fastest-growing and
forward-thinking dealers in the country, who just ditched all third-party vendors. I told him I was mentioning him and Jaime in this article.
With the help of Jaime Drabczak, VP of
Vendor Relations at Sutherlin Automotive Group, they saved more than $2.5 million without losing sales. They took marketing in-house and shifted the
budget to where it works. I recently did an interview broadcast with Brett and Jaime, where Jaime statistically justified moving away from third-party spend.
Not saying your dealership should
indiscriminately fire all of your third-party vendors, but it’s time
to make everyone justify true ROI, not the Voodoo math and bogus 'attribution'
some vendors are serving with a side of smoke and mirrors.
All too many underperforming
dealerships are hanging onto old obsolete solutions out of a misguided sense of
loyalty when there are better, newer options.
F&I as a Dominant Profit Center
And the last piece of the puzzle is
your F&I department. I just read that all of the big public companies are
benchmarking around $2,400 per retail unit in their F&I departments.
Now that the party’s over and vehicles are once again selling at highly
competitive prices, even at or below invoice on new cars and trucks. Most
dealers can’t give EVs away. All of a sudden, the worm appears to be turning
back to pre-pandemic sales prices. Not all of the brands, but Nissan, for
instance, is selling below invoice on many of their models. I am beginning to
think the 'Stair-Step' programs are coming back soon.
This indicates to me that
F&I will once again become the dominant profit center in the dealership and
will require more quality training and support.
So, once again, it’s time to shop
F&I vendors and see what deals are out there. Especially reinsurance and
private label service contracts and maintenance agreements. You have to be
asleep at the switch to be selling third-party service contracts and
maintenance and allowing the vendors, even the manufacturer, to keep all of that
With the federal government and state
agencies ramping up legal compliance, a highly trained F&I department is
the dealership’s best insurance against liability and violations.
Main Points, for Now
There’s a lot more to do and changes
to make for a dealership that’s underperforming their market, but these are the main points as I see it. For most dealers, the changes I’ve suggested are as
much as most people can absorb all at once.
James A. Ziegler, CSP, HSG, of Ziegler SuperSystems, Inc., for 45
years, has been a recognized industry leader, writer, magazine columnist,
professional speaker, and super performer following a record-setting sales
career as F&I manager/director, and GSM with some of the top automobile
dealerships in the country. Jim has worked with more than 15,000 dealerships
nationwide, and over 125,000 dealers, managers, and factory executives have
attended his automobile dealer management trainings.