Dependencies in Your Dealership

Y’all may or may not know I travel the country working with dealers one way or another.

I did have someone ask me recently: What do you do?

The short answer is Audit operations, consult with owners and train employees on their tasks or software. Some consulting involves service departments, more involves collections. I have been a Fractional COO of an operation in Chicago where I gave input and made decisions concerning all aspects of operations and inventory to the finance company. I was the Fraction Portfolio Manager of another operation where I coached the Account Managers (Collectors) as I make operational changes to their tasks and created training procedures. I also go onsite with Auto Master Systems to help dealership teams understand the new Dealer Management System (DMS) as we convert their data into AMS and help everyone learn how to do their job with the new “tool” and help management understand how to monitor the metrics. Many of you know me as Jilcat Proline (CVT Supplement) as well. That is the “side hustle” (I run that small company) because of the results the product provides and my connection to so many potential users.

All of that interaction combined with my own 30 years of operating experience gives me some insight into ways the results could improve or at least be more efficient and successful. After countless visits to different operations I find that almost every way of operating can work to achieve profits. I have seen very organized operations with monitored metrics, managers that stay directly on top of each task and trends to be sure there is a response to any fluctuation. I have seen operations where almost nothing is monitored beyond cash coming in and what is paid for vehicles (on the operations level). There have been plenty of dealers that fall somewhere in between.

I have talked with owners and managers that say sales is first and foremost. Let’s roll those vehicles to anyone wanting to buy, having the down we need and will sign today. There are others with sophisticated AI underwriting with complete stipulations required along with an interview to be approved. The question comes down to what the owner sees as important in an operation and how his team must deal with the constraints to be successful and is there a way to be better?

This is where dependencies come in. I have been involved with an operation (as a consultant) that was approaching $150M dollars in the portfolio. I was brought in to try and help collections get back into covenants with lenders. It did not take long to determine this was an impossible task under the existing business plan. The entire focus was selling. The operation was owned by new car franchise people. The sales departments were all managed by the same. If you worked in a Used Car Department of a franchise dealership the number one challenge is getting approvals, generally. If those same people had control of the “bank” what do you think was happening? Yep, I see a picture of the monkey cage at the zoo and a load of bananas gets dropped into the cage, peels flying, screaming and jumping around, basically chaos. Imagine…the underwriters were bonused for approvals.

When the collections department opens on Monday when I started, it is like a dump truck backs up to the door and a load of deals pour out into a pile. I go into the Collection Managers (VP of the Finance Company) office to begin the consulting process and behind me is a person rolling a two-wheel dolly stacked with boxes. Each box stuffed with deal files. He asks where to put the stack and that’s when I realize the office has those box stacks sitting all around the room. The VP starts to cry. In these boxes are the first payment defaults from the previous week that the GPS failed. In the collection room where that day there were 32 collectors, supposed to be 35 but 3 no shows and in the group are 10 new hires. This group operated in Oklahoma and Texas, so many of the customers were not English speaking, or barely at best. Most of the collectors we not bi-lingual. Needless to say, further discussion on this operation is in past tense.

This operation was a shining example of what not to do. If someone in sales says “We sell them and collections collects” needs to be fired. I am willing to bet many of you would say that is obvious but there are more examples than you might realize where the operation is disjointed so collections constantly fail or are daily struggling when it is not necessary.

Your entire operation, everyone, should understand their role in collections and be thinking about how they help. From the inventory buyer through the shop, the GPS installer and the entire “sales” staff all need to have procedures that are designed to help collections succeed. BHPH is not about selling cars, we are about collecting payments. We need to collect all the payments we can. Once sales completes a deal they are on to the next, and should be. It is about their process that can help the customer understand what is expected, what was offered and how to get help as the ownership experience unfolds. If sales just takes the money, cursory reviews any requirements from the management, does not test the GPS or complete the verification process (job, POI, references, insurance) then follows that with a 5 finger signing*, there will be constant issues trying to collect.

Managers and owners will be pushing on the collections department, there will be turnover and finger pointing between departments about what is wrong. The answer will be everything is wrong. The vehicles need to be bought with longevity in mind but excitement is important. The shop should have a recon process that addresses maintenance issues and truly makes the repairs so the vehicle rolls out in shape to last best as possible. The GPS needs to be installed properly (you would be surprised how many fail because of shotty work) and tested multiple times in the store’s procedures including by the sales team when the deal is closing. Is the check stub or POI real? Do you look at more than gross pay to determine a payment? Do you actually have good information for collections to use coming with the deal from sales? Once the delivery takes place is the shop setup with priorities so that new sales get immediate attention if an issue arises?

In the creation of a sales model do you take into consideration the car having mechanical issues? Not just “I hope they don’t” adding in “the customer bought it and they will need to find a shop”. Yes, in BHPH our customers complain. I see many dealers cause their own headaches with car condition and after sale help with problems. The customers we deal with today have been “screwed” in their mind by another dealer(s) and the junk being sold. Many of our customers have a short fuse with car problems because it always happens to them. What do you do that is different to help the customer’s ownership experience which in turn helps collections? Do you even think about the ownership experience or is it only the sales experience you are concerned about?

*5 finger signing: spread the documents out so only the signature lines show and tell the customer to sign where you point.