Part IV of A Business Model That’s Just Plain Bad For Business.

Do you want people who are going to tell you “What You Need To Hear” or do you want people who are going to tell you want you “What You Want to Hear?” If you are the later than you might as well stop right here because I am not here to stroke your ego, I’m here to make you money and make you proud of your business and of what your accomplishing.

Have you heard the expression that you need to “Spend Money to Make Money?” Have you heard the expression that you need to “Save Money to Make Money?” Let’s Get Real!

Bottom Line Growth is not sustainable only Top Line Growth is and only Top Line Growth will get you the results that will take you where you want to go with the rewards and pride that come with it. (Tell your bean counting consultants to put that in their pipe and smoke it.)

So how can you think or where did you get the idea that you will get the best Marketing, Sales, Service or Parts minds on the cheap? These people who are on the front lines day after day “Are you Business” and are the one who are going to make or break it.

Saving Money is all well and good but Making Money means that you are doing the right things to be successful and to be successful you need to have the kind of people that can get the results and this means you need to “Pay for Performance.”  If you want to save money save it on office supplies, Press your vendors for discounts, change your electric company but don’t think that a gift certificate for dinner or a pat on the back is going to recruit or retain the talent you need to be successful.

Let me ask you a question.  Were you born a business owner or did you have to pay your dues and earn what you have today? Did you seek out the companies that thought people with your experience and talent were a dime a dozen and didn’t want to pay what you were worth? I think not.

I stayed at the last Dealership I worked at because they knew the value of people from Management to salespeople to every worker there and paid accordingly. I and my co-workers made more money than we could at any other place and the Dealership made even more and were consistently in the top tier of highest average front and back end grosses- A business that PROVES this all out. How can this be? It is a direct result of sharing and respecting the people who make it happen for you. It means making an investment that unlike the stock market is guaranteed to pay off. There is no complex formula here to figure out.

 Do you want to attract Independent thinking people who can create value for your business? Then you need symbiotic relationships.  Or do you want parasitic people who are going to attach themselves to you on the cheap because they have few or no other options?

If you are the former, send me an e-mail at billcosgrove@dealernetservicesonline.biz and I will send you a commission plan that will attract and retain the talented people you need and should want if you want to be successful and stand above the rest.

By Bill Cosgrove
Pesident
DealerNet Services

In my last post “Bad Management It’s Also Just Plain bad for Business“ At Dealerelite.net, David Ruggles brought up a good point when responding to a comment made by Steve Richards.

Steve stated that "The retail culture incubates mediocrity and as gross profits continue their downward spiral good luck attracting quality sales personnel. Can you name another product that sells for $30K and pays a $100 commission?”

David replied that “Gross profits continue their downward spiral because the previous asymmetry in information has become more balanced, creating a more efficient market. While that might sound good to consumers, an efficient market leads to disintermediation.  For those not familiar with this term of economics, it means cutting out the middle man while the product becomes a commodity.  Can you name us another product that sells for $30K, where consumers expect to know our base costs, and 10% is considered to be an obscene profit by industry outsiders and many "insiders?”

My mission to get Dealers to improve their business model goes back to 2010 when I started discussing what I saw as a growing movement, which was a perfect time to execute due the pain caused by the recession,  in the Industry to commoditize the Automobile Industry and that is that I saw the Giants in this Industry buying up the vertical and convincing Dealers that they need to sell for one price and buy for another and our way of marketing is the right way. That is that in order to compete and move product you need to turn more product at a lower price to survive in today’s Marketplace. This plays right into the hands of the Mega Dealers who’s Business model is based on churning out more and more numbers at low marigins.

To do this they need more and more territory to churn those higher numbers to make their business model work. Where is that territory coming from? I think you know the answer to that.

Automobile Manufactures mandate Dealers to selling numbers which is the most basic contradiction in the Franchise model for the Dealer. The Manufacturer doesn’t really care where those numbers come from as long as they are met. After all the Manufacturers profit is built in and booked as soon as it leaves the factory to its destination.

You saw what happened to True Cars when they tried to reach into the pockets of the Manufacturer but who is looking out for the Independent Dealer? No One.

Between the Manufacturers and the Giants of the Industry owning or controlling the vertical from Inventory to marketing whose mission is churning higher and higher numbers you wonder if commoditization it is inevitable.

And believe me. If this takes place the Independent Dealer is not the only one that will be affected. All of us from Marketing firms to Consultants to any Vendor in the Industry will be fighting for less and less dollars as our customer base will shrink

Where do you think the Industry is headed? Right now Franchise Laws as David stated "By law, franchise laws in every state, a new vehicle can only be purchased from a franchised dealer.” Is this being circumvented by the creation of Mega Dealers? Will Franchises as they exist today become non-exisitent in the future?

Is the only way for the Independent to fight back to start running their businesses more effectively and efficiently. This is a topic that needs to be discussed because all of this it is already happening whether you want to open your eyes to it or not.

By Bill Cosgrove

http://dealernetservicesonline.biz
 

When you take a trip back into the history of the automotive world, there’s a lot of strange and wonderful things to look at. Like, the height of the worlds lowest street-legal car, or, how much a hood ornament on a Rolls-Royce costs, or even a couple flame-throwing BMW‘s. All weird and wonderful things to behold.

Take a look at these 50 quirky car facts that the folks over at Carloan4U put together:






 

Do you have an uncontrollable desire to yell, “KABAMA-LAMA!!!” more frequently than you already do? Then you definitely need to create Facebook posts that get more shares. Because when Facebook page admins discover one of their posts has ‘gone viral’, they can’t control themselves. They yell out strange phrases. They fist bump, give themselves a high five, and show off their really bad dance moves. Hopefully they have someone in the office to share this with. Otherwise the accounting department sees it and starts looking for irregularities in the social media side of the ledger.

In this ebook, created by Marketo and social media expert Brian Carter, we’re going to teach you how to create posts that more people will want to share. The ebook includes:

• Facebook post best practices
• Real Facebook case studies
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• Information about the marketing ecosystem on Facebook
• Discussion of the concept of virality and whether it's truly possible on Facebook
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• Information on what mistakes make posts unshareable

And for the geeks out there we go into excruciating detail about the research we conducted. Download this eBook now and learn everything you need to know to create highly shareable posts for Facebook
http://dealernetservicesonline.biz


 

This is another subject for discussion from my posting " A Business Model That's Just Plain Bad For Business"

Bad management runs rampant in organizations. For my discussion I will focus on Automotive Sales and Finance Management. I say this because this is epidemic in many Industries and I don’t want to appear to be singling out Automotive Dealerships.

All emotions stem from insecurity and must be controlled because it has no place in a work Setting. It is a disease that will eat away at and hold back any organization.

A bad manager will not hold on to good people and staff does not want to go to upper management for fear of retribution. This has devastating effects on performance of the department. Always be suspect when a manager says “What goes on here stays here” or “It’s my way or the highway”.

I cannot stress enough the need for companies to have a consultant come in once a year to audit the operations and make recommendations on improvements that could be made to improve profitability. Even if operationally things are functioning well, someone on the outside looking in can always see things that the entrenched management cannot that could mean a significant improvement.

There are many different factors that define a bad manager. One kind of manager is the one who is inconsistent saying one thing and doing another without explaining his actions and who is arrogant in believing they are always right and makes sure everyone knows it. This type of manager is often egocentric and makes every issue about them, doesn’t listen to advice offered but ignores it before even considering it. This inhibits the staff from even mentioning any ideas they may have and leaves them feeling helpless and feeling that nothing will ever be done to improve on a bad situation.

 These managers are also often self-centered and do not support, encourage or look out for their team. The worst are mean and abusive and make people feel bad for no reason.

Then there are managers who micro-manage and Refuse to delegate anything, despite what they say. This isolates them so they often don’t involve others in decisions and rarely look for ways to support or encourage the work of their team. This is often is caused by incompetence the lack of basic communication, intellectual, or emotional skills needed to for their role.

 

Then you have the complacent manager who is content with the way things are and is not open to change. They like things the way they are because they have become lazy or are thinking about other things. I once had a GSM that spent more time outside the dealership hobnobbing with hockey players from the Boston Bruins who were spokesman for the dealership.

I have also be part of organizations where a manager spent valuable company time in generating options as solutions to problem but the problem was created by this same manager. Incompetent managers create more problems than they solve and then waste time to solve the same problems they created in the first place.

Posted By Bill Cosgrove
http://dealernetservicesonline.biz
 

The traditional business model of the Automotive Dealership works against itself practically at every     
turn and is just plain bad for business and it is time to think about change.

With all the advances in technology over the years from Marketing to DMS, CRM and diagnostics for repairs  the changes have been exponential. But yet the business model which has been flaw from the beginning has been overlooked and ignanother discussion)

2. Managements commission structure at most Dealership is based on the monthly numbers which is a big mistake but a necessary one at least for the new car Department. This propagates the undesired effect of pushes at the end of the month by management to put even more into trades and often sell vehicles way below their value and often times at losses to hit those numbers. Additionally, often times deals are back dated for days into the following month in order to hit those benchmarks set by the Dealership for the payment of bonuses.ored.

There are two main points that I will touch on for this discussion but there are many other areas of concern which are fodder for other discussions to come.

1. Every department in a Dealership is a business upon itself with a budget and income expectations. This in itself causes a great deal of friction within the Dealership and most notably between the Pre-owned Department, the Service Department, the New Car Department and the BDC Departments.

A. At most Small and Medium size Dealerships any properly managed Pre-owned Department is  the Service Department´s largest customer.  

B. The Pre-owned Department pays close to the same labor rates as the average customer who has their vehicle serviced at the Dealership.

This causes constant in-fighting over costs of repairs, turnaround times and repairs that are not necessary. Also, repairs that were needed that were not performed before they were passed on to reconditioning and end up on the lot in disrepair.

C. The New Car management is constantly putting higher than called for numbers into trades (a subject for another discussion) to hit the benchmarks set by the Manufacturer to get that back end money and hit their bonus. (And yes I understand why this is done)

D. Then it is the responsibility of the pre-owned manager to sell at a loss or a small profit or eventually take it to auction to sell at a loss. This is the cause of being mandated by the Manufacturer to move vehicles by the numbers which is where this contradiction surfaces. (Inventory control - subject for another discussion).

E. The BDC department in a lot of cases thinks of the sales Department as a bunch of narrow minded Neanderthals and in turn the sales department thinks of the BDC staff as a bunch of Computer geeks that should not be engaging the leads.

 All of these points in a lot of cases may be true caused, not by the lack of training, but by the lack of structure and proper management. Bottom line all of these things affect income potential resulting in loss of substantial amounts of profit. (a subject for

A. You can see where this can lead to management looking out more for themselves to hit their bonuses than for the Dealership they are working for. You can also see where here again is another potential loss of profit for the Dealership.

There is a better way to structure the business model easily without having to reinvent the wheel. Dealerships simply need to take the profit from all Departments and combine them and the entire management team at the Dealership is compensated with their respective percentage.

 But Dealerships also need to base the amount of managements  bonuses on the combined CSI of all Departments which will hold all accountable. This will foster more cooperation and force management to pay more attention to customer service at all levels and customer follow up.

This just covers the basic structure of the business model. There are other areas within this overall model that can be done to improve efficiencies and foster more cooperation and accountability. (Which is another subject for discussion)

Author Bill Cosgrove
DealerNet Services