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Tag Archive: Business Success

Joe Basil

What are you hiring for: personality or failure?

What are you hiring for?

I can’t even count the number of times I’ve listened to hiring complaints from dealers, managers and business owners. Finding and retaining the right people is a huge concern for any business, but the auto industry pays a particularly heavy toll with an average turnover rate of 66%.

Leaders like you want to know the best way to hire and keep high-performing staff, but the answer may not be what you expect.

Hire the person and the talent, not the skillset

Take a minute to think about a job opening you have. Chances are, you have a specific list of activities and experiences needed to fill that role. Now, consider the last person who worked in the job—did you let them go because they didn’t match up with this list or did they simply not “work out”? Did a different person show up for work than the one you interviewed?

I’d hazard to guess it’s because they “didn’t work out.” But what does it mean, exactly, to “not work out.” It means that the person didn’t behave in the way you wanted. Maybe he or she wasn’t outgoing enough to really make sales. Maybe she simply wasn’t very organized and couldn’t keep track of incoming BDC leads. Those problems are related to personality, not skill.

Understand the personality needed for success

Let’s agree that personality and talent should influence your hiring decision. The next question is: What’s the right personality? How do I know their talents? This is where things can get tricky. Let me give an example.

If you ask around the dealership what are the best traits for a sales rep, you’re going to get many different answers:

Dealer:  Energetic self-starter with good people skills who sets goals and achieves them —a good closer, good grosser and they have to be a team player!

Manager #1: Someone who is organized, punctual, follows procedure and covers all the details.

Manager #2: Someone who is persuasive, outgoing and can build a book of business.

Manager #3: Someone who is friendly with customers, always takes care of their needs, never has customer complaints and can create strong customer satisfaction.

Who should you hire? One manager would hire a “neat nick,” the next manger would hire a “slammer” and the last one would hire a “consumer advocate”—and no one would hire the dealer’s sales person!

To figure out the best personality fit for a position, don’t ask the managers what they want—in fact, don’t even ask yourself that! Instead, look at who’s been successful.

Consider your top performers: What are the character traits that help them succeed? Then study your worst performers in the role: What about their personalities led to their failure? After some thought, clear patterns should emerge about each job, and you can use those insights to find the right personality for your open positions.

Balance out performance and personality

Not that you should only hire on personality! You need to balance a candidate’s skills and personality, and select people who are a great fit in both criteria. During the interview, gauge the candidate’s ability and natural talents. But remember: while you can always train someone, you can never change their personality.  Even if you like a candidate, he’s not going to perform well if your dealership requires him to act against his nature.

Ready to learn more about hiring and retaining the best talent? Join the NCM Institute for its courses on Finding Top Talentand Sales and Management Compensation. Working with experts such as Joe Basil and Mark Shackelford, you’ll develop a comprehensive hiring and compensation strategy to bring the best talent onboard and to keep them.

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Tom Hopkins

Success Begins in Your Mind


Most people who fail in business fail because they don’t know how to keep their attitudes positive on a daily basis. They start their careers learning and practicing the basics, applying those ideas and end up making some money. Then, they go into a slump. They will stay in their slump until they go back to the fundamentals. Until then, they return to doing what they get paid for and accept failure and rejection without letting it stop them.

The key to success is in how you handle failure. Handling failure does not come naturally to most people. It is an acquired skill.

Some of your emotions tell you to sulk and avoid any situations in the future that are likely to put you in line to feel the pain of rejection again. Other emotions tell you to get more out of life for yourself and your loved ones. Concentrate on what you have to gain, and learn how to change your attitude toward rejection.

I am going to present five sayings that have helped me move forward in all areas of my life. Memorize them and recall them when you’re rejected or have failed to achieve what you wanted.

I never see failure as failure, but only as a learning experience.

Every sale that doesn’t go through is a learning experience; every challenge you have is a learning experience. Learn from your failures. Thomas Edison, who conducted more than ten thousand experiments on filaments before he produced a practical light bulb, was once asked, “How did you keep going after you failed more than ten thousand times?” Edison replied, “I did not fail ten thousand times; I learned ten thousand ways that didn’t work.” Like Edison, try to look at failure and rejection in a different light as a learning experience.

I never see failure as failure, but only as the negative feedback I need to change course in my direction.

Outside a restaurant with a lively bar, I once saw a gentleman who had too much to drink to try to unlock his car with the wrong key. No matter how many times he tried, the wrong key still didn’t work. After I’d talked to him into taking a taxi home, it occurred to me that sometimes we all keep using techniques that don’t work in our selling endeavors. We keep applying the wrong solution to the problem long after we’ve tried it and failed.

I never see failure as failure, but only as the opportunity to develop my sense of humor.

Have you ever had a traumatic experience involving a sales presentation? Three weeks later, you finally tell someone about it and suddenly that same event is hilarious. The longer you wait to laugh, the more that failure will hold you back. Make a determined effort to laugh sooner, and learn the trick of telling a good story on yourself.

I never see failure as failure, but only as an opportunity to practice my techniques and perfect my performance.

Every time you present your service to others and they don’t buy, at least they gave you a chance to practice. Many people don’t realize the importance of this. Learn to appreciate the opportunity to improve.

I never see failure as failure, but only as the game I must play to win.

Selling is a game. Life is a game. Both have their rules. Over the years, I’ve discovered that a single rule dominates every situation: Those who risk failure by working with more people earn more money. Those who risk less failure earn less. If you risk failure, sometimes you will fail. But every time you fail, you’re that much closer to success. Success demands its percentage of failure.

Work with these five attitudes toward rejection. What counts isn’t how many transactions fall out, how many doors slam, how many things don’t work out, how many people go back on their word. What counts is how many times you pick yourself up, shrug off failure, and keep on trying to make things come together.


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Robin Cunningham

There Is Good Failure and There Is Bad Failure

failure and success

I think we have all heard that we can’t even fail unless we try. In every class we conduct at the NCM Institute, we begin by focusing on accountability, management, and leadership. Right after that, we take a very deep dive into the students’ numbers, either departmentally or in the case of General Managers, the entire dealership’s profitability picture.

Some of them are year-over-year comparisons of new and used vehicle volume per vehicle retail gross profit and total departmental gross profit. We look at personnel productivity in those variable departments like unit sales and gross profit per sales person and unit sales and gross profit per manager. The discussion of F&I is huge because, in many dealerships, the F&I gross profit per vehicle retail is larger than the front-end gross profit per vehicle retail. Of course, we look at expenses in many ways like year-over-year comparisons in personnel expense, advertising expense, floor plan expense, and other selling expenses. We look at inventory aging, especially used vehicle inventory. We look at dollar and unit day’s supply and the all-important inventory turn rate. We begin to track the price-to-sale gap (difference between the advertised internet price and the actual selling price of each used vehicle).

In the Fixed Operations, we look at year-over-year comparisons in mechanical customer pay labor gross, mechanical customer labor gross as a percentage of sales, effective labor rate, the number of customer labor hours, the number of customer repair orders, hours per repair order, parts department gross, and parts gross profit as a percentage of sales. In the Fixed Operation Personnel Productivity, we look at the number of mechanical technicians, labor gross and hours per technician, the number of service advisors, how many technicians per advisor, how much labor gross per advisor, and how much parts gross profit is generated by each one.

We remind our students that in 20 Group meetings, two of the most important metrics that the dealers look at are where the dealership and departments are in relationship to being at 30% net-to-gross and total dealership and departmental gross profit per employee.

What does this have to do with good failure and bad failure?

All we are doing in our deep dive of the numbers is identifying opportunity. And, we usually find a lot of upside opportunity in each dealership we work with. The bad failure I am referring to is not the missed opportunities that we uncover. Bad failure is not really doing anything substantive about it. Or, in many cases with our client-students, it is that they have never been taught or shown the best practice solution to turn the situation around. Bad failure would be learning the best practice way to do their job, and then not successfully holding themselves or their associates accountable to the new and better way of doing things.

For example, a General Manager, General Sales Manager, or Used Vehicle Manager comes to us and they are unprofitable in their used vehicle department, which invariably includes having a huge aging issue. We spend a lot of time examining the root causes of aging (price/valuation, reconditioning, planning). We go through the 30 Used Vehicle World Class Check List to determine a plan of action. The primary takeaway will be to begin conducting the Daily Trade Walk/Stock Walk Process. These help to ideally onboard each used vehicle into the system and manage the aging of each vehicle as it ages, not when it ages. Bad failure is coming back to the dealership and taking all this new information as a quaint suggestion and not doing it. Bad failure is synonymous with the definition of insanity (doing the same things over and over and expecting a better outcome). Good failure is gathering the buy-in necessary to get the team on board (this is not an easy undertaking) by explaining why we are going to do this, and what’s in it for everyone. Good failure is sticking through all the trial and error to ensure the eventual outcome. Good failure is celebrating the little wins along the way. Good failure is doing positive coaching when the slightest amount of process evaporation begins to creep in.

You get the point. Real, substantive change is hard! Good failure is creating the safe place where real change and growth can take place. Having a clearly defined and communicated daily routine where everyone understands the WHY is your starting point.

Good failing to you!

UV Training


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Dan Schneider

Successor Development and Talent Management: What Makes It So Hard?

Image converted using ifftoanyCompanies like to say that people are their greatest asset. If that’s really true, why are so many organizations unprepared for facing the challenges associated with recruiting, selecting, and retaining the right people in the right seats?

According to one COO I interviewed recently, “Talent management puts you under strain because it stops you from doing what you are rewarded for.” This COO’s sentiment, one that I find many executives agree with, is one of the major obstacles to developing talent, family or otherwise: people simply don’t believe that’s what they’re paid to do.

Whether your business is privately held or publicly held, talent management and successor development in your organization probably share a common financial thread. In both cases, development is expensed rather than capitalized. Now you might be asking, “What difference does that make?” Keep reading.

If talent management and successor development are expensed, then when revenues and profits go down, so does the effort put into people development. When you stop developing your people, you dull your competitive edge. That usually occurs when you can least afford to have that happen. But the lure of a “quick fix” on the expense side of the financials is very seductive.

If talent management and successor development aren’t part of your strategic and succession plans, prepare to wander in the desert. During one session with a group of CEOs, one asked me “Why are really talented people so hard to find?” My answer is that there just aren’t that many to start with. As a result, there is a real global “talent war”.

Check your organization on the following questions and see how you fare:

Question: True False Unsure

  1. Senior managers spend quality time on talent management.
  2. The company encourages constructive collaboration and
    sharing of resources.
  3. Line managers are committed to developing direct reports.
  4. Line managers differentiate performance among their people.
  5. The Senior team is involved in shaping talent management strategies.
  6. Talent management is aligned with business strategy.
  7. Underperformance is addressed as it occurs.

Now, go back and look at your answers. Were you really honest or did you just want to feel good today? If you answered all seven as “True”, and if you were honest in answering, then you and your management team have learned how to manage talent and will be in a better spot when it comes time to identify successor candidates. If some of your answers were either “False” or “Unsure”, then you might want to consider why finding and keeping the right people is harder than you would like it to be.

Note from the NCM Institute:  NCMi® now offers Mastery Level classes for Used Vehicle, Service and General Sales Managers, which include focused discussion on employee development and talent management. To learn more, click on the “Master Your Destiny” link below. 



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Jeremy Anwyl

What Drives Great Success?

surefire-pathway-to-increased-profitsI have been doing lots of flying recently. The travelling is rarely fun, but the meetings I have been having with dealers usually are. You’d think that dealers would be pretty happy these days, and that generally is the case. Sales are looking good and the dealer count is down — seems a surefire pathway to increased profits.

Despite this, there are some conversations that take a different turn. Sometimes, a dealer is focused on increased regulation, competitive discounting, bullying from manufacturers, (think stair-steps and facility mandates), employee turnover — the list can be lengthy. Meeting with these dealers can leave me drained. But then I run across a dealer who is completely different. These meetings can run all day, but feel like they lasted an hour. The dealers tend to be optimistic and thoughtful. Most interestingly, these dealers have what I call an “itch.”

They acknowledge the competitive pressures all dealers face. Despite all these, they are successful, but still not satisfied. Their “itch” drives them to try new things, push different boundaries; not in the simple pursuit of profit, but to find a way of doing business that is dramatically better.

I have been thinking along these lines for the better part of my career as well—so we have lots to talk about. What anchors these talks is the opportunity articulated in my last post where I noted there are a few dealers around the country whose performance is head and shoulders above what we would normally consider successful. These stores draw from very larger geographic areas. They are stable. And perhaps the biggest twist is that their gross profits are higher than average. (Proving that really high volume doesn’t have to mean low—or no—profit.)

Very simply, the opportunity is for more “typical” stores to achieve this heightened level of success. And with the opportunity being so huge, the wonder is that every dealer is not working to achieve it — especially when we realize that what these stores are doing is actually not that hard to figure out.

It is really only three things:

First, the dealers have identified the things that a large number of consumers really, really value when buying a vehicle. We covered some of these in my first post; things like efficiency and respect for their time. A feeling of confidence that the dealership’s pricing is fair. A dealership point of contact who has the customer’s “back.” (Someone the customer feels they can trust.)

Second, the dealers have developed processes that consistently deliver on these features. Consistency is the key; meaning that these experiences are delivered every day, to every customer.

Thirdly, the dealership efficiently communicates to the marketplace to build demand and expectations around the aforementioned experience.

A big part of what I am describing is really the building of a brand — at least in the way I think about brands. Valuable brands are built from a set of expectations, or promises about a product. They are also trusted or credible, meaning there is little doubt the expectation will be met. While brands can be influenced through advertising, by far the best way to build a brand is through word of mouth.

These three steps to success are easy enough for me to write about, but I have to also acknowledge they are devilishly tricky to implement. They start out easily enough — understanding what consumers value is no mystery. (Dealers can simply ask their customers, or look at the decades of research in this area.) And it is not that hard to design an experience that responds to these needs. It is the consistency part where things start to get tricky. Sticking to a process is not something most dealerships are good at. Salespeople like to do business in their own way. Turnover also undermines consistency. Perhaps the biggest obstacle is the pressure to hit a number that encourages managers to stretch for a deal that really should have been passed on.

Think about that one for a minute — passing on a deal is really, really hard. But sometimes it is the right thing to do; first, because of the need to deliver the same experience to every customer, with no exceptions. Second, if the dealership did its homework when designing their consumer experience, it will be highly valued by many consumers, but probably not work for some others. You’ve heard the expression “You can’t be all things to all people.” As it relates to branding, you shouldn’t even try. For example, let’s say you have designed a sales experience around fair prices and an expedited sales process. This might be valued by 80% of the market, but the 15%-20% of the market who obsess only about the “deal” will not be impressed. Instead of undermining your credibility with the 80%, why not leave the deal-obsessed to your competition?

Today’s super-successful stores developed their versions of this road map long ago and have followed them for years. When the market was tough, it was not viewed as cause to change. The big payoff for this commitment would have been an ever increasing rate of referral business. Prospects became customers, who shared the experience with their friends, who in turn became prospects then customers and the cycle continued. Referrals are the underpinning of a profitable store and the only real way to build a business, but they build out over decades.

Who has that kind of patience?

This is probably the single biggest barrier that blocks dealers who want to see dramatic performance gains: The cycle time. The stores I have been referring to that are already at this level have been at it for decades and they have achieved referral levels that can exceed 80%. (Think about that for a moment. It is a huge number.)

But before you dismiss super levels of success as practically unobtainable, let me offer up a ray of hope…

I just covered an example of how referrals used to play out; one customer sharing with one or two friends where perhaps one of those friends would remember and visit the store at some point in the future. Until just recently, this was the norm. We all had fairly well defined peer groups. Today the Internet — especially social media — has blown those traditional boundaries apart. Communications are no longer one-to-one, but one-to-many. This raises the possibility that the cycle time that dealers had to endure in the past can today be radically shorter.

This could be a big deal — and we will look into it more in my next post.


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Dave Anderson

Building a High Performance Culture (Part One)

Culture Words that Work: Earn and Deserve

business-cultureAccording to class attendees, one of the most helpful parts of my Up Your Business 2.0 Super Leadership Workshop is when I have attendees create two columns on a page and write “Strong Cultural Words to Weave In” on one side of the page and “Weak Cultural Words to Weed Out” on the other side. Over the course of the two days I add to the list to create a blueprint of the mindsets, values, attitudes and behaviors you must embed in a great culture, as well as the destructive mindsets, values, attitudes and behaviors you must remove. Over a series of blog posts I’ll share words from each column to help you do the same:

Strong Cultural Words to Weave in: Earn and Deserve.

A. Earn: to acquire through merit.

B. Deserve: to be worthy of, to qualify for.

An “earn and deserve culture” repels entitlement. It sends the message that all team members will receive rewards, opportunities, promotions and discretion in accordance to what they’ve acquired through merit, what they’re worthy of, and what they’ve qualified for.

“Boss, why didn’t I get an end-of-the-year-raise?”

“Because you didn’t acquire it through merit. In our culture we reward results not requests, stepping up versus showing up. Let’s sit down and redefine expectations so you’ll more clearly understand how to qualify for, and be worthy of, additional compensation.”


“Boss, I’d like the next shot at management, after all I’ve been here the longest.”

“I sincerely appreciate your interest in advancing in our organization. However, in our culture we reward results over tenure; the person we promote will be he or she that is most qualified for, and worthy of, and additional responsibilities. I’m happy to lay out for you exactly what you can do to earn a shot at future promotions.” 

This is the first of a series of articles Dave Anderson is contributing to the Up To Speed blog on Building a High Performance Culture in your automotive dealershp. Be sure to watch for future articles in the series about every six weeks.  In the meantime, you can learn more about Dave from his bio, below, or visit


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Jeff Faulkner

Business Structuring and Family Harmony

passingthetorchBusiness Structuring is a critical component of succession planning that can have a huge impact on family harmony.

Throughout the course of this article, I’m going to describe three different family business situations that I’m currently involved with where Business Structuring is causing havoc.

Situation 1: Active and Inactive Shareholders

The first story is a highly complex third Generation Family-Owned business which consists of a real estate and a separate investment business with four family shareholders.  Two shareholders, father and son, are active in the operating businesses and two shareholders, sister and a sister-in-law, are not active but are financially dependent upon the business. The ownership of the separate entities add even further complexity to the situation in that, the operating businesses own a piece of the real estate,  numerous trusts own a piece of the real estate and investment businesses, and the operating businesses have multiple owners consisting of other entities that the family shareholders control. I have done my best to explain this situation as simple as possible, but due to the bizarre nature of ownership, I have likely confused you.

When we got involved, none of the family members, or any of the family’s advisors for that matter, completely understood the structure.  And for a simple family, it didn’t make sense and was causing relationship stress. The two inactive family shareholders were growing increasingly frustrated because they could not predict their income stream with any reasonable accuracy and consequently, could not plan their lives accordingly. The son was growing increasingly concerned about his fiduciary liability with his siblings.

This structure has worked under the father’s leadership because the daughter and daughter-in-law have believed that things are being done in their best interest. However, nothing could be further from the truth. To create dependence in any human being is never in their best interest. If these issues are not worked out with a new, simpler structure, the likelihood of the next generation living under these conditions is highly speculative at best, and more likely pointing toward volcanic explosiveness.

Fortunately, all family members have come to understand the issues and are cooperatively working toward a straightforward structure that is easy to understand and that creates predictable and meaningful sources of income. The initiation of the process towards an uncomplicated structure, in and of itself, has created a more harmonious family environment. The inactive family members’ frustration levels have subsided, and the son’s fiduciary liabilities have been reduced, as they all see movement and growth toward independence.

Situation 2: Blended Family Business

The next situation involves a blended family business that has two children from each side.  Two of the four children are actively involved in the business, one from the dad’s side and one from the mom’s side. Both active kids want to be able to run the business at some point, but the entire family has strongly suggested, if not warned, against the two active kids working together.

Here’s the problem, the business is made up of five different franchises underneath one corporate umbrella. That’s right; all five businesses are inside the same corporation.  And, the bulk of the family’s net worth is the operating business. What’s a family to do?

Well, you could start by forcing the kids to grow up and learn to cooperate with each other, so they could work together. On the other hand, if the family is right in that there is absolutely no way to make this happen, we’d then be setting them up for failure and family disharmony. So, why not build in some flexibility? An IRS Section 355 divisive re-organization, or tax-free spin-off, of the separate businesses is in order.

While this will most certainly be a costly initiative that is dependent on IRS approval, it will create the flexibility for the active kids to remain in business together if they show that they can mature beyond their sibling rivalry issues. In the event they cannot, well, we then have the flexibility to divide the businesses up and allocate one or more to one child and one or more to the other child.

Further, we will also segregate the real estate that each business is sitting on into separate entities to provide additional planning flexibility, not to mention, much needed additional liability protection. While this environment is not perfect by any stretch of the imagination, it most assuredly creates an environment that is more conducive to the maintenance of family harmony in the long run.

Situation 3: Good tax planning but not necessarily good succession goals.

The tax-driven planning accomplished in this case is particular to the client’s state of residence. Similar to the situation in situation number two, this one involves an operating family business and business related real estate, with two children active in the business and one not. The typical structure is to have a lease agreement between the operating business and the entity that owns the real estate, thereby generating a long term and reasonably dependable source of income for the owners of the real estate. Many business owners establish such a structure to provide them with retirement income once they decide to leave the business. Others, as in this case, use this type of structure as a way to create equality between their children, with those active in the operating business paying rent to those not active in the business, and giving the actives the option to buy the real estate. Not perfect, but it works in a lot of cases.

In this particular case, however, the owner did not set up a lease agreement between the two entities; rather, he established a joint venture between the operating business and the underlying real estate to avoid paying sales tax on the rent transaction. The way this works is that the real estate and the operating business share the net profit of the business. Makes sense, huh?  Except that in this most recent economic downturn, the operating business lost money a couple of years in a row, thereby generating no profit to share with the real estate. Rather, the operating business, which thankfully was well capitalized, loaned money to the real estate to pay its share of the income taxes. Now, the real estate (inactive child) owes money to the operating business, with no other source of income to pay the loan. The actives could buy the real estate, but then it would be a reduced figure due to the loan that would be due them.

Obviously, this is not a great deal for the inactive child. Unwinding the joint venture is not going to be an easy thing to undo. But for the sake of family harmony in the long run, that’s what this family has chosen to do.

In sum, when structuring your business and your acquisitions of other businesses, real estate, etc. that you make along the way, please keep in mind that someday you will likely be in a position of leaving it all to your kids. Always ask yourself, “What impact will the decisions I’m making now have on the long term continuity of the ‘golden goose’ and the maintenance of family harmony?” You owe it to yourself and your family to make these decisions as wisely and with as much foresight as possible. It impacts more than just today.

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Jeremy Anwyl

Is Your Auto Dealership’s Sales Process Customer-Approved?

Today, we’re introducing a new Guest Expert to the Up To Speed blog. Jeremy Anwyl, Vice Chairman of will be contributing a series of articles on consumer-centric and cost-efficient marketing strategies for automotive dealerships.

customer-approvedEvery few months or so we have groups of dealers visit the Edmunds office in Santa Monica. The idea is to get “street level” market feedback and stay current on any issues dealers might be wrestling with.Along these lines, we also get together with consumers regularly to develop insights and understanding on their views on the vehicle buying process.

Some time ago we had a group of dealers in and decided to try to bridge the two exercises; basically, to get dealers thinking like consumers.To make this work, we asked to dealers to participate in the following exercise:“Imagine you have been asked to deliver the keynote at a fictional prestigious automotive conference. (Think TED for autos.)

Your selection was based on how you have reshaped the retail sales process, removed customer pain points and achieved a remarkable level of business success. In your speech, you share your secrets.”We split the dealers into two groups and give each 40 minutes to outline their speech. I found the result interesting.

Here’s the combined work from the two groups: First, the dealers identified the pain points; the things that consumers valued, but also found frustrating.

Pain point #1.  It just takes too long. The dealer nailed this one; it is a recurring theme from consumers as well. The interesting thing in talking with customers is that it is not the entire process that takes too long.  Some aspects of buying a new vehicle consumers actually enjoy. Things like checking out options or touring/viewing vehicles in inventory. Some dealers are trying out an extended delivery at the consumer’s home that consumers really like, as well. The parts of the process that take too long and the customers don’t enjoy, are getting in and out of F & I, and the back and forth of negotiations.To address these areas, the dealers talked about how they launched digital contracts, where most of the consumer and deal information could be entered online. They also proposed integrating the tools that consumers use across the Internet so the same information doesn’t have to be entered over and over again. The dealers didn’t focus on this, but it would also seem to emphasize that customers set appointments before coming into the store so the personnel can be ready and waiting.

Pain point #2.  The customer worries about paying too much. (Ripped off, using the dealers’ words.) The dealers proposed transparent pricing as the solution.

“Transparency” is a catch all term these days. Sometimes it means access to info on what other consumers paid for the same vehicle. In this context, the dealers were referring to pricing info that is freely available, with no or limited negotiation.

This worried the dealers a bit as they made the leap that if/when this kind of transparency arrives it is going to drive down margins. There is a tension they expressed as “new world pricing with old world expenses.” The dealers correctly see being more efficient as being essential to survival in the future. But also feel they are being pulled in the opposite direction by manufacturer demands for facility upgrades, etc.

The risk that margin pressure will increase is real, but there is also a chance we might be surprised in how this plays out. So far, transparency has been about a single price; specifically, a new vehicle price. But we all know that a deal involves many elements. The new vehicle price is just one.

Testing a theory, I asked our analysts to run some data. They ranked a set of new vehicle transactions, in order, based on the new vehicle gross. This ranked list was divided into four groups.

My suspicion was that for deals with a lower new vehicle margin, dealers work harder to make up for the “loss” by pushing for higher margins in other areas.   (Think of the old four square.) Charging a bit more for the loan, or offering a bit less for the trade. This might not work in all cases, but across a broad enough number of deals a pattern should emerge.

The group with the highest new vehicle margin was a bit of a surprise in that the interest rate paid was also higher and the appraised value lower than the other groups. Apparently there is a group of consumers—even today—that makes a mess of buying a vehicle. They pay way over the norms in all areas. (They averaged paying over $2,000 more overall!) Let’s forget this group for a moment.

There is also a small subset of the deal with the lowest margins. These buyers are very savvy shoppers who are willing to put enormous time into getting the absolutely lowest price, often have no trade and don’t use dealer financing.  Let’s ignore this group as well.

Looking at the remaining transactions—roughly 60% of the market— there is a pattern where the new vehicle gross and the margin on other deal elements are inversely correlated.

Seems to me that this accounts for much of the frustration that consumers associate with vehicle purchases. The greater the focus on the new vehicle price, the greater the level frustration with the overall negotiation.

The dealers see a future with more transparent pricing around all the elements of a deal. What is preventing dealers moving in this direction today is the fear that offering this level of transparency will just make it easier for consumers to take the new vehicle price and shop another dealership; a dealership where it is simple enough for a salesperson to offer a lower price and work to make it up on the trade, etc.

The irony is that consumer behavior is the impediment to consumers getting the simplicity and straightforwardness they crave. The dealers didn’t have a solution for this, but it is clearly a puzzle we need to figure out.

The final pain point: Confidence in making a purchase.  I put this pain point in my own words as the dealers were focused on the customer feedback that is scattered around the Internet. I rephrased this because what we see consumers looking for when they look at customer feedback is the assurance that the vehicle and/or dealership will perform as promised. One way to ease this concern is to look at the experience of other customers.

As the dealers pointed out, currently this feedback is a bit of a mess; some is useful, much is not. There also is no single source—either for the consumers to rely upon or the dealers to stay on top of.

As I think about this area, it is clear that if we focus on the pain point for the consumer, there are ways to deliver confidence that don’t involve customer reviews. Referrals, for example, are a source of business for dealerships where the store has great credibility. (A customer is hardly going to refer a store to a friend if they had a bad experience.)

I am not sure that customer feedback on the Internet is going to prove to be the best way for customers to feel confident about a decision. The source data is just so unreliable. But in identifying this pain point, the dealers again tied closely to what we have been hearing from consumers.

In fact, that is what struck me the most about this exercise with the dealers.  They get it. What consumers are looking for in the sales process is not a mystery. (We are hearing the same things from consumers as well.) What may be a mystery is figuring out how to remove these pain points in a way that supports a profitable business.

I have some thoughts on this that I will start to explore in the next article.


Jeremy Anwyl began his auto industry career in 1979 working with auto dealers who were looking for more consumer-centric and cost efficient ways of marketing. In 1991 he began working with manufacturers—again on projects that focused on retailing and marketing efficiency. Anwyl joined Edmunds in late 1999 where his years of experience working with dealers and the manufacturers on retail opportunities have been a key part of Edmunds’ success. To reach Jeremy, tweet @JeremyAnwyl, call 310.309.6393 or email

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Loyd Rawls

What’s in Succession Planning for Me?

Today’s article is contributed by Loyd Rawls, founder and CEO of The Rawls Group.  Nationally recognized, The Rawls Group specializes in business succession planning, addressing the issues that impact the continued success of a business legacy.  By partnering with their clients and their clients’ other advisors, they work to develop a plan that will perpetuate the leadership, culture, performance, and relationships that are key to business success.  
h--rek-pictures-blogs-loyd rawlsSome things are more obvious than others. However, occasionally I am asked “why should I do succession planning?” My response is that succession is not a natural progression of an enterprise. You have a right not to care but if you don’t care, your employees, bank, strategic partners, and community who love you are going to resent you.

More often the WIIFM question comes from individuals who have recently spent a small fortune updating their wills and buying an insurance policy. This question is legitimate to them because although the business and the family may be coming apart at the seams, there is overwhelming conviction that he/she has for the near term spent all the time and money they are going to on the welfare of the next generation. The more appropriate question is: How can I make more money to pay my bills including that cursed insurance premium?

And, in other circumstances, the question may also be legitimate because the individual does not have any successors. The apparent reasonable (but incorrect) conclusion is that succession planning is not applicable to me because I am planning to sell. Why should I waste my time and money on succession planning if I am planning to pass this baby on to the highest bidder?

The answer I want to drive home is based in the definition of succession. If you look at the root word independent of all the business continuity implications, you should recognize that “Succession is the Continuation of Success.”

The bottom line answer to “why should I do succession planning” is because SUCCESSION PLANNING BUILDS BUSINESS VALUE. Prospective buyers, banks, Wall Street and estate tax auditors all recognize that business value is dependent upon the predictability that the earnings will continue after a transfer of ownership occurs, whether by sale, gift or estate bequest. These same parties also understand that value is not all about today’s earnings.

Contrary to popular belief, succession planning is not just adopting a new will and/or buying an insurance policy to pay estate taxes. Succession planning is a pro-active initiative to address the interdependent planning issues that impact the continuation of success. And the continuation of success drives business value. Sure estate planning is involved but it is just one of the components of the Succession Matrix which also includes: personal financial planning; owner motivation and perspective; successor development; family harmony; key manager motivation and retention; strategic planning; business performance and structuring; team synergy; leadership and management development and business governance. In fact, estate planning is not even a major component of the Matrix, it is a subcomponent of personal financial planning along with building independent wealth, exit strategy and credit continuity. Another potential surprise is that business performance (profitability), although very important, is only a single factor because value is not based exclusively upon what happens today. Value is based upon the forecast of profitability into the future.

So, to prove that no one should ever accuse me of promoting rocket science, let’s cut to the chase. Irrespective of whether you have a vibrant business, kids still in little league or you are just waiting for someone to liberate you with a wad of cash, succession planning is a worthwhile, virtuous endeavor. Any improvement you can make in the critical factors of the Succession Matrix will build value in your business. The value created by succession planning will give you the peace of mind that your heirs will not trip and fall after the transfer of control that your partners can make good on the installment note to purchase your stock or put more cash in your pocket when you sell the business.

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