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Dog and Pony Show

November 17, 2016

For Sale: One Dog and Pony Show

 

One of my favorite lines from an old Michael J. Fox/ James Wood movie called The Hard Way goes something like “We can do this the hard way or the easy way. You choose. And I would suggest that you make the right choice.” I love that line because it sums up so many things that we are constantly confronted with in the car business. We are bombarded with choices everyday. Many of these decisions appear to have two distinctly different paths to the same end- a hard way and an easy way. Sometimes it’s not always clear which route is best. Sometimes the hard way is simple. But simple is not always easy. Sometimes the easy way is, well, too easy to be taken seriously.

 

While all of this philosophy is very interesting, what does it have to do with life in a car store?

 

Plenty.

 

Recently, I was stood up for a lunch meeting I had scheduled with a dealer friend of mine. In all fairness, he called and postponed. He said that he was finishing up a project and wanted to reschedule for the following week. I gladly obliged. When we finally got together, I asked about the project that had been consuming much of his time. He said that he had spent the better part of the prior week working with a company to dissect his F&I department. He said that they analyzed every F&I manager, sales manager and sales person. The observed deliveries, sales turnovers and customer interactions. The company then promised to provide a complete report of its findings at a later date. He said that they turned the department inside out to gather data. “It was a heck of a Dog and Pony show.”

 

Curious.

 

I told him that it was always my impression that his F&I managers did a pretty good job maximizing profit opportunities. He indicated that they still did, but that he wanted to be sure. He explained that he had been interested for some time in enhancing the profitability of his F&I department and finally got around to doing something about it. I told him that I would be interested to hear how the follow-up report turned out. He promised to keep me posted.

 

A couple of weeks went by before I heard from him again. He invited me to his store to review the “proposal” he had received back from the company. When I looked it over I must admit I was impressed. The document consisted of no fewer than 30 pages, complete with charts, graphs and pictures. The last few pages, the recommendations, were what I was really most interested in though. The company indicated that they had found deficiencies in the sales process, the F&I delivery system and not surprisingly, the products being sold by the F&I managers. They recommended a retraining process, a retooling of the sales process and a change in F&I products. In essence, a complete overhaul. “In conclusion” they wrote “by incorporating these changes into your dealership we are confident that your average Income per Retail Unit will increase by between $50-100 per vehicle.”

 

Seemed to me like a lot of hard work for an uncertain return. I expressed this thought to my friend and asked if he would be willing to try what might turn out to be an easier way to drop profits into the F&I department. He agreed.

 

Over the next couple of weeks, we analyzed each and every agreement he had with his F&I vendors. We looked at commission and fee schedules. Our results were impressive indeed. We discovered that he had been overpaying for one product for almost 2 years! Additionally, we were able to renegotiate a more favorable fee schedule with another provider given that the original agreement was over 10 years old. We found a more lucrative product to replace an outdated version that he had been selling (much to the delight of his F&I managers) that afforded a higher profit margin to the dealership. All in all, he estimated that we were able to “add” roughly $85 per unit to his F&I bottom line- all without the heavy lifting involved with tipping the entire dealership upside down.

 

 

The merits of hard work cannot be denied. However, work for the work’s sake sometimes may not make much sense. As the old saying goes “Work smarter rather than harder.” Don’t get me wrong. I’m still a fan of a good Dog and Pony show, just so long as it’s at a circus.

 

 

 

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