Dealer Tech Tuesdays
S01E03 - Dealership Buy Sell - Recovering From Disasters - How Microsoft Teams Has Changed Business
Dealer Tech Tuesday is a podcast and Clubhouse room on the Automotive Innovations Club. It airs at 2pm EST every Tuesday. It is a discussion and QA for anyone in the automotive space. VTech Dealer IT hosts the show, bringing in experts in their respective field.
This week's guest is Paul Jensen of Qvale Auto Group. In this episode we discuss Buy/Sells, overcoming disasters, and how Microsoft Teams has improved their day to day operations.
Song: For Today by Jaialai
Visit us at: https://www.vtechdealerit.com/247-it-support/
Dealer Tech Tuesday is a podcast and Clubhouse room on the Automotive Innovations Club. It airs at 2pm EST every Tuesday. It is a discussion and QA for anyone in the automotive space. VTech Dealer IT hosts the show, bringing in experts in their respective field.
This week's guest is Paul Jensen of Qvale Auto Group. In this episode we discuss Buy/Sells, overcoming disasters, and how Microsoft Teams has improved their day to day operations.
Song: For Today by Jaialai
Visit us at: https://www.vtechdealerit.com/247-it-support/
All right, welcome everybody to Dealer Tech Tuesdays. Today I have one of my favorite people in the world in the automotive space Coming from the Cavalli Auto Group, mr Paul Jensen. He is in charge of operations of many, many, many sorts at the dealership, has done a lot of mergers and acquisitions, or otherwise known in the dealership world as buy-sells projects, major construction builds, legal. As many people know him in the Cavalli Auto Group ecosystem as the guy right IT for kind of my main point of contact for all IT needs at the Cavalli Auto Group that we provide for them Um and just kind of general um man of many hats and um has had an awesome and long history in the automotive space.
Speaker 1:So, paul, welcome to the podcast, thank you. Thank you, john. Paul and I talk daily, daily on a regular basis, and it's usually full with um Daily, daily on a regular basis, and it's usually full with awesome jokes and really good time. And in many cases Paul to me is a mentor and, as Brad Paschal would say, my car dad, the guy that really taught me the ropes of the business, so kind of with your experience in the IT world and then in operations, fixed everything that you've done in the car business. You've been a great resource for me and we've got today that I think we're going to go through some stories of the trenches and fun stuff that we've done together. Well, thank you.
Speaker 2:I just hope my head can get through the door when I leave.
Speaker 1:No, I mean, you know, I think that you know, going through this process of kind of the, you know the jack in the boxes, I would say buy. So hey, like hey pop goes the weasel. We're buying a new dealership or we're selling, we're selling we're buying, we've got a deal.
Speaker 2:Yeah, we've got a deal. Um yeah or um yeah, we got served a lawsuit today, or yeah, what are we doing? Yeah, that kind of stuff, what? Yeah, all that just kind of crosses my desk jeez man.
Speaker 1:So how I kind of want to start a little bit with your background and like what kind of got you to this place? And you know you, I know you've told me a lot of times, you know we've had this conversation many times, but for the audience for the audience For the audience.
Speaker 2:Well, I graduated from college. I taught high school, I taught college level for a year, got into the automotive business, worked for Ford Motor Company for several years as a parts and service rep, and then I kind of jumped ship and I went to a major soda manufacturer as a fleet rep Pepsi the best first job and then I kind of got back. I got out of that because of for some personal reasons and I got back into the automotive business, service management and back-end kind of stuff. Started out as a technician early. Really.
Speaker 1:Yeah.
Speaker 2:Irenches, for I was a when I went to college. By the time I went to college, I was a master uh certified chrysler tech really yeah well, it was easy back then, yeah right, they had things like egr valves and and uh electronic ignition oh wow, it was like kind of coming into the market, yeah I used to do to do points, and you know tune-ups with you, know you had to put them on a scope and look at all the patterns and all that kind of stuff.
Speaker 1:Oh wow, so it goes way back.
Speaker 2:Jeez, yeah, oh, wow. So then I worked my way through. I ended up working for a guy in West Palm Beach for about 14 years as an IT guy, because I had no.
Speaker 1:I kind of gravitated toward the computer side of things. Yeah and um, can you define the IT guy?
Speaker 2:because I think it's a really interesting story, the definition of the yeah, so as I was in in the fixed ops in the service business um, I had a PC at home and was early.
Speaker 2:You know dual floppy drives and 5k 12 and no modem no mouse kind of you know early, and as that progressed, I ended up getting involved in the DMS systems, the dealership management systems, doing the backups, and then I learned how to run cable and and to you know when we would want to add something and um. So when I, uh, I moved to florida back in 89 and, um, the job that I got with the guy that I was with, um, they said, well, we don't really have a position for a parts and service guy, but we're looking for somebody to take care of the computers.
Speaker 2:they had just spent an enormous amount of money with cdk oh wow, back when they had the mainframes were in the building and they're a size of washing machines.
Speaker 1:No, they were the size of filing cap oh wow, yeah, geez like had the you know, yeah the the tapes and yeah you can kind of picture that yeah. Like war games, you know, like the movie War Games.
Speaker 2:yeah, so I got hired there. And then they found out I knew about the car business so they would have me run special projects. Oh, we've got a warranty receivable issue Go fix that. Oh, wow, we have a body shop receivable issue Go fix that. Hire somebody and get that done. And I just ended up working. It was just whatever you needed done.
Speaker 1:They came to me and I got that done and was it mainly because you knew how the systems in the back end worked and how they were supposed to? Like the chart of accounts supposed to work?
Speaker 2:yeah, well, I knew how to read a financial statement and so.
Speaker 2:So you know, you get that kind of stuff, the um, what I, you know, I know a little bit about a lot of things. That's kind of the deal and you, given a task, go master it right and then find somebody to do that task on a regular basis, keep track of it and move on to a different task. So I was very good at doing that, hiring people and putting them in place and then having someone come and say, hey, we've got another issue, we're spending too much money on this, figure it out. We're, we got a CSI problem, figure it out. You know, it's just special where you just become focused on something and then, as you keep doing that, you just get more and more responsibility. And I ended up when that dealer sold all his stores. I ended up staying with him for two years just in an office building, just kind of cleaning up stuff with him.
Speaker 1:Oh, wow so.
Speaker 2:I had done a bunch of buy-sells his six stores and then I ended up going in the furniture business for a little bit of time yeah and as a chief operating officer for a national furniture company. And that was another learning experience, because at the time I knew that I was sitting in a chair, the thing in front of me was a desk, thing behind me might be a credenza and uh, so you, uh, that business ended up in the downturn going south yeah that's 2008.
Speaker 2:Yeah, 2008. And I was basically out of work for two years and ended up working in a speed shop in West Palm Beach. Oh, wow, so running a dyno and having guys trick up cars and stuff, making money any way we could Fast and the Furious it was.
Speaker 1:We used to have the little Fast and Furious meets. Oh really. All the kids in their little Japanese cars would come around Like the tuner meets All the tuner guys down in a warehouse district and the police would fly the helicopter over. Are you serious? Yeah, wow Got Vin Diesel with a cut-off shirt and a big old gold chain. Had a DJ.
Speaker 2:So, then, a guy came to me and said hey, I got a guy buying a store down in Coral Springs needs some help on a buy-sell. And I went down and was doing fixed assets and was sitting in a little office on a Saturday afternoon and jeans and a t-shirt and a guy sits down across from me and says who are you? What are you doing? I'm here helping out on the buy-sell and I go I'm Paul Jensen. I go who are you? He goes I'm the guy buying the store. Oh geez, yeah, must have done something right. And that's how I met my boss and never left.
Speaker 1:Yeah.
Speaker 2:Ended up. I started out as a service manager for the Coral Springs store until we could hire somebody and turned over the parts department and got that straightened out, Went over and then set up the Lighthouse Point. Audi Point was a new point for us. Yeah, Got that going Um and then just took off and we had a bunch of stores in California and, um, he grabbed me one day and we went out there and here's what I need you to do and just started pointing I need you to fix that. I need you to that.
Speaker 2:I want to know about that and off we went yeah, and we've bought stores, we've sold stores. We're actually at the lowest point of stores that we've had ever since I've been with the company. We just sold five the first of this month, but the four that we have are real strong and doing well, so we're looking to buy right now.
Speaker 1:That's yeah that's always good.
Speaker 2:Right.
Speaker 1:Yeah, and that's the kind of thing that I've that. I've, you know, noticed is that I, you know, we service a lot of dealerships, right, and I know what a good buy sell is and I know what a not great or a less smooth buy, sell, looks like.
Speaker 1:So do we, and so, um, yeah, we'll just, yeah, wait for it for now. Um, so, um, you know the, you know, we know what, what a good bicell is and what a difficult bicell looks like and and kind of everything in between and every single flavor in between those two things, and and I, what, I, I do, what, what, what's like this is a paul jensen buy cell and this is a not paul jensen buy, so kind of kind of my well, you've been on.
Speaker 2:You've been on several of them.
Speaker 1:Yes yes we've done a lot of them.
Speaker 1:Yeah, we've done.
Speaker 1:Um, that's kind of where some of our you know kind of value add comes from is how many buy cells we've done and how familiar and comfortable we are with buy cells and how fast we can we can spin them up.
Speaker 1:But the, the, the biggest thing is like the, the, the point for me, a buy cell is something that you know in in a normal dealer operation you don't see that often right, like you don't see somebody that has one or two points doing a lot of buy cells and it might be something that they do once or twice in their career and if they're very successful they'll do many times right. So it's kind of like this for me. From my perspective, it's like this kind of group that has a certain set of skills, okay, and you know, like I've, I don't it's almost something that comes to become easy through experience and doing it a lot and there's not really a roadmap, because you can have massive legal issues, you can have massive logistical issues, you can have operation issues, you can have inventory issues, you can have issues with the manufacturer that you have to figure out and go through, and I've seen you guys, from the, the IT perspective, navigate those things really well and I've seen other people not navigate those.
Speaker 2:Well, it's all about the due diligence that you do and how you set that up. The more difficult side of it is buying. In my opinion, it's harder to buy, it's easy to sell, it's easy to say we have a deal, the owners cut a deal and we're going to sell. And they ask us questions.
Speaker 1:And you're just like. Here's the information.
Speaker 2:Here's the information. Here's what we're doing. What contracts do we have that you want? What contracts don't you want? We need to work out assignment agreements. I need to be shutting down stuff that you don't want. I gotta notify everybody and close it down. On the buying side, you have to evaluate what you're buying and where you want it to go so like you're buying the potential of well both.
Speaker 2:Both store, but the, the stores that we've bought we always see potential. Obviously you're not going to buy it. If you're doing that In looking at buy-sells we've looked. You know. My boss basically says look, we'll look at 10, we'll do one.
Speaker 2:Yeah, that makes a lot of sense. So we looked at things. So we looked at a big store out of state was doing, was doing 2500 new a month. Big store, wow, they wanted big money for it and we we were capable of doing it. But we figured that it's a machine, you have to be a machine, you have to be a machine. You gotta be a be a machine. You've got to be a machine. What were we going to bring to the table? The only thing we could do is screw it up.
Speaker 1:Yeah, that makes sense. Yeah, don't break it. If it ain't broken, it's not fixed, right.
Speaker 2:Because you're paying all the money for the multiple anyway, right?
Speaker 1:Yeah, exactly.
Speaker 2:So then you look at a store like the store we bought in Texas, right Underperforming no certified financials, and we saw what the market was and what we thought we could do?
Speaker 2:We went in we did a good job with it. I mean, the store made money and likewise the store that we just bought in Tampa was performing poorly. We saw the market, saw the brand and said, yeah, that's going to be, we can make that go and paid probably more in a multiple than what the brand typically brings. But we've done. You know we're doing just that now.
Speaker 1:Yeah, that makes sense.
Speaker 2:But on that side also you have to be prepared to have the people and the processes in place to make those changes. And you were involved in that. Where you know, it was a Reynolds and Reynolds store. We converted it to CDK. It was a heavy lift, yeah, yeah, we converted the CRM.
Speaker 2:We converted the MPI process in the back we converted. We took out all the old computers that were there and put all new computers in. We put all new wi-fi in, we put all new, put a server in, we put new switches in everything, so that there was no excuse from a technology standpoint, of I can't get it done ipads, ipad touches with the text and of I can't get it done iPads.
Speaker 1:iPad touches with the text and very quickly we did that in two days.
Speaker 2:Yeah, in two days, exactly Right. Yeah, we spun it up in two days. Spun the place up in two days, yeah.
Speaker 1:And it was a full, full overhouse Servers, Wi-Fi, everything.
Speaker 2:All the software that they used, yeah.
Speaker 1:Completely. My curiosity leads me to how long does it take for that initial cold bath of water for the staff to kind of subside? It's like how long in your I mean you've done that several times.
Speaker 2:It depends upon the buy-in. It depends upon the buy-in. So if you get people that are set in their ways and unwilling to change, it can take a long time and you may have to turn some of that staff over. We're not ones to go in and just flip the place on its head. Yeah, yeah, yeah, yeah. We continue to do business with the same people the same way. We just had to teach them new software.
Speaker 1:Basically, we continued to do business with the same people the same way. We just had to teach them new software. Basically, yeah, and it seems like the majority of the transition is like failure to adapt to the new way of doing it, rather than we're just, you know, kind of eliminating positions. Because you're part of the old regime, you guys come in with kind of like a… or here's your new pay plan.
Speaker 2:Yeah, exactly, yeah, yeah, a lot of times that'll kill um. What happens post-sale is that they want to come in and do that. We don't do that. We go in, yeah, um, and we, we calculate what. Basically, what we did on the last one was we just said what have you been making? And we're going to guarantee you that through um, through the next 90 days, oh okay, yeah, mean you don't want to make the hole deeper, right?
Speaker 1:It's like it seems like in some of these cases, people that come in and say here's your new pay plan just makes the hole three or four feet deeper, right, it can.
Speaker 2:I don't really want to say this. It gives you an opportunity to judge the people, coach them, look for issues, coach them out of and get them into the process and they're either going to make it or not. And in 90 days you pretty much know and that's what we. You know no harm, no foul. Yeah, we're going to.
Speaker 1:Do you guys factor that into the kind of the buying price that's like over? The next 90 days you're going to. No, it's operational at that point.
Speaker 2:Okay, so your ability to turn the statement black is your primary goal.
Speaker 1:Yeah, right.
Speaker 2:So the first month probably not going to happen.
Speaker 1:Probably not going to happen, probably not going to happen, probably not going to happen.
Speaker 2:But the goal is, you know, increase your revenue, control your expenses and do as much volume as you can, whether it's in new car sales, used car sales, fixed ops.
Speaker 1:When you guys get into a dealer right that you've just recently purchased, is it a slow trickle into kind of the investment in new avenues of marketing and fixed and variable.
Speaker 2:That all depends. We do no paper advertising yeah, that makes sense. We do no TV. We do very little radio some very minuscule amounts. But we're data-driven, so we're a moneyball kind of company. So we have all the social media and the places that the ads go. And then we have companies that do attribution for us to show us where you're hitting it. 50% of your advertising supposedly doesn't work. You just don't know which half it is.
Speaker 1:Yeah, right, Jeez, yeah. And that's when I was at the Mitsu store. It was like $80,000 worth of advertising and 50,000 of it was mailers. I was like let's stop all the mailers and see what happens. You're selling 40 cars. Let's see what happens. You're selling 40 cars, let's see what happens. It can't get any worse. Did you sell 40 cars we sold?
Speaker 1:40 cars, right, I mean come to find out we sold 40 cars. Yeah, it's like the theory was like if we couldn't find out exactly where that car was getting sold from, we're not going to do it right.
Speaker 2:Well, it's money ball yeah, it's money. It's money, it's really looking on base, yeah it's getting on base and then internally it's you know it's process. Gotta have good process, you gotta have people that follow the process and you gotta pay plans that reinforce that yeah and so we've rewritten. Uh, you know we, we just changed corporately our process in service in the last year with going to Update Promise.
Speaker 1:Yeah, yeah, yeah, yeah, that's huge.
Speaker 2:So change because we found that that program offered us a complete circle of from BDC to car coming in and right up to getting an MPI to communicating with the customer to follow up that kind of stuff. So our pay plans for the service advisors now incorporate they get paid on gross for the internal warranty and customer pay and then they get paid for CSI. There's a CSI bonus which is substantial, and then there's a utilization bonus and that is we have measures within update promise of how many MPIs did you send? How many car film videos did you send with them? How many times did you present a menu? We have a menu. Oh, wow, right, so if they don't hit the number then they don't get the bonus they don't hit the bonus they don't hit the bonus and it's substantial.
Speaker 2:It's a substantial, it's not like a a five hundred dollar boot.
Speaker 1:Yeah, yeah, yeah.
Speaker 2:They'll be like I'm gonna make that up and no, it gives them an extra 1% on their gross.
Speaker 1:Oh, wow.
Speaker 2:So it's tied to how much, the more volume you do and the more you do. That then it ties.
Speaker 1:It adds percentage points to what their overall earnings are and, magically, if you incentivize the points in the process that produce the results, the results happen naturally right.
Speaker 2:Well, you can see, yeah, you'll find that people that buy into the process do the best yeah and that, and that's what we try and show everybody um, where you've got a, um, we hire a service advisor that comes in with um a. He is an ex-service manager and he's kind of retiring and he wants to, and and then you hire a kid that's never been in the business.
Speaker 1:Chick-fil-A yeah.
Speaker 2:And now the kid that's never been in the business is knocking it out of the park and the old guy that's the old service manager, still wants to do it his way and he's not. And then he's kind of like why is the kid showing me up? So, who moved my cheese? Yeah, who moved my cheese? Yeah, who moved my cheese?
Speaker 1:And it is a who moved my cheese.
Speaker 2:But it comes down to more. Of you got to believe in the process.
Speaker 1:Yeah.
Speaker 2:And as a whatever it is. And if you don't believe in the process, what do you think is wrong? Let's talk about it, because we're not hard and fast on what we're doing unless we know it works or unless you can show me that there's a better way. And yeah, absolutely. And and that was, you know, kind of our onus a year ago in moving, um, our uh service product into doing that was, um, we were forced into doing it because of a software limitation on the company we were using. Used flash went out of business. Yeah, and, and so we were. But when you start looking around, you go, wow, that's a great idea and wow, that's pretty cost effective. And uh, here you go. And then, yeah, and you know, like we just had a, we've actually just created a new position within the company of a technology person.
Speaker 1:Like a technologist.
Speaker 2:It's true, yeah, that the processes are working and that the software works, that the hardware works, that if there's glitches, let's get it fixed, to move that on.
Speaker 1:Like a utilization manager almost Pretty much, trying to maintain everything at high penetration levels.
Speaker 2:His job is to make sure everybody makes their bonus.
Speaker 1:Yeah, exactly that makes sense. And then magically you know everything's in the black.
Speaker 2:And then the business grows, yeah imagine that.
Speaker 1:So, um, I kind of want to. Um, you know we digress, change gears, I hear a little bit and you know I remember being on um saturday morning, right I'm, I'm sitting at the house and I get a call from Paul Jensen, which never happens. Rarely, rarely, very rarely, unless something's catastrophically wrong. And come to find out something was catastrophically wrong Half of the dealership in Midland had burned down, mainly service and parts.
Speaker 2:Started in the service.
Speaker 1:Started in the service.
Speaker 2:Yeah, didn't get into the shop.
Speaker 1:Didn't get into the shop, luckily, yeah, right.
Speaker 2:Burned the service department out and smoked the showroom totally. Golly.
Speaker 1:Black.
Speaker 2:Oh yeah, I mean John was there, Our producer John Navarro, was there and helped respond to that. Well, you were there by either Saturday afternoon or Sunday.
Speaker 1:Yeah to that. Well, you were there by by either saturday afternoon or sunday yeah yeah, yeah and getting kind of getting you guys back up and running from kind of this emergency right um catastrophic emergency to a place where you guys could sell cars again so, so yeah, so they'd cut the power to the building and the um the uh parts department had gotten smoked out.
Speaker 2:And all the service computers were down. The server room was actually in the same building but didn't get fried. Yeah, but all the cables did.
Speaker 1:Yep.
Speaker 2:So you guys went down there, we put trailers on the ground, we had a new, we brought in a double wide for service and a tent and brought in one for accounting because the accounting office got burned out and between Saturday and Tuesday or Wednesday we had sold like 20 cars on handshakes, on Texas handshakes.
Speaker 1:On.
Speaker 2:Texas handshakes right and then we got that's so cool. Brought everything back up online by Wednesday and went back and contracted everybody and then all the handwritten ROs that they had done got put in and nobody missed a paycheck, yeah that's incredible. And then, 18 months later, we had the place rebuilt.
Speaker 1:Yeah, I mean that was a pretty substantial rebuild because it had kind of the complications of the fire rebuild because it had kind of the complications of the fire, had the complications of the trailer moves that had to be, you know, kind of set up in a in a very kind of, uh, quick, emergency response manner and then kind of playing the dominoes of the, you know like not the dominoes but playing the whack-a-mole game of we're going to remodel the service and uh parts area while still still doing business in the showroom and then moving the showroom to, like, how do you guys manage that movement and that orchestration of all those things in our unit?
Speaker 2:Very carefully. It's basically we move things around, we morph things as we needed to. If we had to move and do something, it was getting the insurance company involved, getting a contractor to get in and start getting things cleaned up. Fortunately, there was another showroom. There was another building that had a showroom in it that we moved to actually two of them, because we had a used car building too that we moved to um and uh and then getting the contractors in and then getting plans approved and by the city and we had ada issues that had to be updated and caused a bunch of heartache and stuff.
Speaker 1:But you know, it got done and I think that the benefit comes from. You know, like this is kind of what I've seen is that there's some, you know some, dealer groups right that have somebody that's in charge of, in charge of the projects right, soup to nuts, that's the person that's in charge of it, the champion it's going to drive these things home, take it, update everybody, coordinate everybody in that in in in the case of the cavalier group, that's you and I think everybody else says give it to him.
Speaker 1:Yeah, exactly, but the ownership of it. There's a lot of power in that right. It's like I've seen others, that it's like the CFO doing it or the GM doing it, or, you know, the dealer principal doing it but not really doing it.
Speaker 2:Well, fortunately, I have a very good relationship with the owner and if things need to get done, I can pick up the phone and call him and say what do you want to do? And pretty rapidly and he's a pretty down-to-earth guy, he doesn't lose his mind and we make a decision. Or he'll say, let me think about it and I'll call you back, which he does or those are the big decisions like that. Most of the time. We have a pretty good management staff and we're not overly staffed at a management level by any means, and so we'll talk as a group and say here's what I think we should do, here's what it's going to cost, here's going to be the time frame, here's what we you know how do we want to approach that as a group? We'll put that together and then at that point I just I go to the boss and say, hey, here's what we've decided we want to do. What do you think?
Speaker 1:and you know, 99 times out of 100 it's yeah, go yeah, no, I mean that that's because it's not necessarily you know, somebody's responsible for it and somebody's carrying that flag, or the champion of whatever it is, and and, and they get implemented. You know, come hell or high water, right.
Speaker 2:Or he'll come to me and he'll go make this happen.
Speaker 1:Exactly, exactly.
Speaker 1:But I've seen, like you know, these, these responsibilities getting delegated or not taking, not necessarily not taken seriously, and I think it's a huge misstep that deal auto groups have, that have, you know, the GM slash project manager or dealer principal slash project manager and don't necessarily have the skill set, the muscle memory right, doesn't have kind of the full holistic operational view of the organization, in many cases fail, and this goes from an implementation of a new BDC all the way to a buy-sell to.
Speaker 1:They all have the kind of same mechanics and one thing that I've seen in common is that when you put somebody in charge of it on a regular basis, that's always in charge of it. They have this momentum and kind of like muscle memory for things and it's like what happens when a buy cell happens, what happens when a major project happens, what happens when a major implementation. They all have the same thing in common, which is you're on the phone, coordinating all the people having conversations, meeting milestones, reporting to the boss and keeping everybody orchestrating the whole circus, and I don't think he was realizing how important that is.
Speaker 2:Well, now, getting back, let's talk about when we did the buy-sell on the Tampa VW store. So early on, when we started this, we said, okay, we need a list of what needs to get done. I got to get licenses, I got to get permits, I got to get dealer packages together. We've got due diligence. We want to look at this, we want to know about that, all of that. So I took on the role of tracking. Yeah, so we'd say, okay, you're going to go do this and you're going to go do that, and then we're going to meet once a week and I'm going to circulate a document that has all of the things that we need to do. And we'll keep adding on at the end if we need to, and when it's done we'll highlight it so we know that project's done and everybody can see that it's done and it's not forgotten about. And we did that right up until the closing.
Speaker 1:Yeah, yeah, absolutely and you would coordinate with me on the IT side and you'd coordinate with, you know, the accounting team on the financial side, and everybody started getting on the same page of what that was.
Speaker 2:Right, we had somebody that was working on the dealer packages and so a lot of times when you're doing a buy, you know you have to get approved by the manufacturer. Yeah, you have to have your level of your letter of approval to get your dealer license. You can't do that until you own. You know that all has to happen. So a lot of times that'll require information that the individual doing filling out the forms doesn't have.
Speaker 1:Yeah, that's 90% of the problem, right.
Speaker 2:Right. So a lot of it she did have, but a lot of it she didn't have. So, as we, she would send emails out hey, I need, I need, I need. We would put that on the list and then we would assign that to somebody and then by the following week did you get that information. And so you're constantly having to keep yourself on track to meet a closing date. Yeah and um, you know, on the last, uh, we just closed a five-store deal in on the first of the month and, um, that was a. We were selling at that point and we were hustling to get everything together and they hustled us up on a closing date by two weeks, yeah and then they couldn't meet it and then it bounced it back a week and then.
Speaker 2:So everybody's just kind of, you know, you're flip-flopping like a fish in the bottom of the boat yeah, and tensions are already high.
Speaker 1:right, I mean tensions are high and there's a massive negotiating and posturing on both sides and like it's getting.
Speaker 2:Because the deal's not done until the money's in the bank.
Speaker 1:Yeah, exactly. Yeah, I mean the deal's not done until it's at the Until the papers are signed and the money's in the bank and the wires are done yeah, and the deal is, you know, getting baked all the way to that and to unwind all of that stuff is a massive headache.
Speaker 2:Well, you have to coordinate your, your parts inventory the things that are fluid are parts inventory and vehicle inventory. Right they're moving targets. Right up until the closing table.
Speaker 1:Yeah, until the last part is closed for that day that the parts inventory gets updated and you know like a true-up.
Speaker 2:Well, you bring an inventory company and now in this case, we brought the inventory crew in two weeks earlier than we got closed, earlier than we got closed and then you have to do a sold by sheet to track that, so that you know what the true inventory is at the end. And uh, and then what's work in process, what cars are in the shop, what parts are on those and how much labor have you got out? You have to true all that up. And then there's the used car side of it, where you got a hundred used cars. What are you buying? Because you negotiate that at the end, yeah, and they want to you know we did this one.
Speaker 2:We did on a closed bid. Give me a number and we're going to tell you yes or no. Oh wow, right and we're not, we're not, we know what we want for the car, but we were in a unique situation with the used car market as it is today. We were willing to take every car. I think there was 150 cars on the five stores. Yeah, that makes sense. We were. We were willing to take all the cars to florida so yeah, right I mean, and in the end we didn't take anything.
Speaker 2:Really, yeah, and they, they stepped up they because they knew they needed the cars. But you know, they always want to try on and and uh, you know it's negotiating right down till till the papers are signed man, yeah, and that's the like, the, the.
Speaker 1:The problem is that you don't necessarily want to add to. You know, whip the inventory problem, the inventory change right, or the the parts inventory either, and the smoother that you make the process, the smoother this whole thing goes absolutely.
Speaker 2:And not adding necessarily problem, unnecessary problems, because this organization to the fire right again, it's more on the buy side yeah I would think that they had way more to do after the closing than we did yeah, yeah, that makes sense, yeah, yeah.
Speaker 1:I mean also, there's like probably a couple weeks after you're working on WIP, right or not, or not? Yeah.
Speaker 2:We just yeah, you bought what you bought, we write the rest off that just goes you know you got to zero everything out.
Speaker 2:Like you know, it generates a lot of capital back because you get. You know, you've released your new car inventory back to the bank, right, so that goes. You've sold your used car inventory, so that turns into cash. Okay, here's the titles your parts inventory now belongs to them, so that's gone. So you have to zero all that out. You have to. We still have warranty claims that we have to process after the fact and get paid.
Speaker 2:You have, you know. Then you got and then you have the. Well, this bill was yours and this bill was mine, and there's proration going on. That's kind of mopping. That's what you have to do in the mop-up after the fact, that's what we're doing all the way back with Swickard on some stuff.
Speaker 1:I still have stuff that crawls out from underneath them from a year ago, yeah, but that's also why the relationship between the buyer and the seller should be still good, because there's still some open ends that you want to tie up on both sides.
Speaker 2:Hopefully that's, true.
Speaker 1:Yeah, hopefully that's true.
Speaker 1:Yeah hopefully that's true. Yeah, I mean because you don't want to. You know, on the IT side we're always, you know, if we have, if we do a buy-sell right and the organization that is buying the dealer has an internal IT team. We want to be the nicest guys possible because you never know. You know, I used to have a sales manager that used to tell me he's like be careful of the toes that you step on today, because they might be connected to the asset you're kissing tomorrow. I like that, I'm going to use that, but I'm always like hey, man, whatever you need, we're here to help, because this is a small world. This dealership world is minuscule, right?
Speaker 2:Well, it is a very small world, yeah, and it is ankle deep in talent, so it's hard to replace people.
Speaker 1:It's hard to replace people.
Speaker 2:It's hard to replace people, so you have to be careful. You know technicians are at a premium Service advisors. It's a hit and miss with us of people that come in and they're rock stars and once you know where they, where they were, and they think they're going to hit a big home run because they're coming from a maybe a domestic into a highline car that we have and and um, they, but they've been allowed to shoot from the hip before, yeah, and now they have to follow a process, so that's where you know you got. We have to be very clear with people about how we're doing that.
Speaker 1:Yeah, and you know, on a lot of these clubhouse rooms we talk about experience. It's like remember, experience is the good and the bad. Like you bring on the whole trailer. You're not just grabbing the, you know the good fruit, you know the ripe fruit out of it, you're getting the rotten stuff too.
Speaker 2:So out of it you're getting the rotten stuff too. So, you know, be be careful of somebody that's got a, you know, 20 year career, 10 years of experience.
Speaker 1:It's all the good and all the bad, you know well, that's what you have to control, geez. So I mean just talking about, um, you know, going. Going back to the buy sell question, is that, what are you? What are some best practices that you've seen from making sure things are set up for a smooth transition, buy-sell wise, and what are some things that you want to avoid at all costs?
Speaker 2:Well, it all starts with the paperwork when you're putting the deal together, because typically it's two dealers. Typically they have egos, Typically one thinks it's worth a lot and the other one wants not to pay a lot. So it starts with your letter of intent and how you structure that so that there's a foundation for a deal. And then it's the purchase and sale agreement, the asset. You know if you're talking about an asset sale agreement where they're not buying the company.
Speaker 1:Okay, you know the difference between the stock sale and it, yeah, yeah, absolutely.
Speaker 2:Yeah, so we always do asset deals. We're not. I've done a stock deal in my day, but that's real easy, you go here's the key.
Speaker 1:Here's the key. Take all assets and liabilities. There you go. The dealership falls in two pieces after you drive it. A lot of people, both of them, yeah Right.
Speaker 2:Yeah, and then in the APA, the asset purchase agreement, you really want to have a sharp lawyer that has APA experience, that knows the pitfalls, and then our APAs could go back and forth for a month.
Speaker 1:Oh, wow.
Speaker 2:We have an APA or we have an LOI and we're going to APA. Yes, we have an LOI and we're going to APA, but there's a lot of little items that you can get screwed on as a seller or a buyer and the language is pretty specific.
Speaker 2:It gets right down to how you're going to do things and you know, like on a real estate deal, you want two appraisals and if they're too far apart you've got to hire a third to get in the middle and do that. And who's going to pay for that? And who's going to pay for the parts inventory and who's responsible? How are you going to negotiate deals on used cars when you get to that point at the table? What's the process? What are you going to buy on work in process or not? Wow, on the last deal we just did, in the APA it says if the repair order is over 10 days old, we don't have to buy it.
Speaker 1:Really.
Speaker 2:Unless it has parts on it. If it's over 30 days old, we don't have to buy it at all. Okay, so I got a car. I'm waiting on an engine from Germany and I got five or six grand in parts in it already and there's no ETA on the engine. What do you do?
Speaker 1:Yeah, because there's chip shortage or whatever. Whatever it is.
Speaker 2:Whatever it was. But you know all that got worked out in the end, wow, as part of the used car deal, all closing. But that's a key You've got to have good paperwork going into it.
Speaker 1:Yeah.
Speaker 2:Once you and then once that's executed on both sides, don't dawdle. Start doing if you're on the buy side. Start getting your due diligence. Start looking at what you have, because you have a typically a you know, a get out of jail free card for 30 or 45 days. You get a look, okay. You get a look at the books. You get a look to.
Speaker 1:Yeah, your due diligence. You can say we're out for X, y, z reason.
Speaker 2:Any reason. Yeah, we can get out Now once that goes hard. Now it's harder to get out in that first period of time. So you got to do your environmentals. So you got to do your environmentals. So you bring an environmental company and does a phase one which is just a history lesson. Here's what the property's done and here's what we see. And if they find something that they think is what's called a recognized environmental concern, a REC, r-e-c, then they'll recommend what do we do from here? Do we do borings in the ground? Do we do underground radar? Is that tank really there? What's it filled with?
Speaker 1:Yeah.
Speaker 2:And you know that can cause a lot of consternation and extensions on time until you get it, because on the environmental side, once you occupy the property you're responsible for yeah, it's yours it's yours and so even if it was a gas station or plutonium, you know there's got to be.
Speaker 2:You need a line in the sand, yeah, you know we had a storm in, uh, west palm beach that was on a corner with two gas stations that both had leaky tanks and we had in-ground tanks. And whose fault is it? It's a Superfund site, seriously a Superfund site. We had to pull the tanks, remediate the ground right. They hold the bad dirt out and put it in an oven and then bring it back and put it back in the ground and then pave it over Like kind of thing. Wow, put monitoring wells in.
Speaker 1:And you can't really tell who's.
Speaker 2:And you can't sell the store. So you know you've got who's going to take on that liability until you've gotten a clear bill of health.
Speaker 1:Yikes.
Speaker 2:That took five years.
Speaker 1:Five years, took five years, yeah, oh man. But, fortunately he wasn't in a selling mode during those five years, Jeez.
Speaker 2:Yeah, that can be a and I had another situation like that where we were buying. We bought a piece of property in Fort Lauderdale, the 13th Street property that was an old recon center for King Automotive.
Speaker 2:So it was their truck center and a recon center. They had a big dealership down where infinity is now on sunrise, and they'd had a diesel tank that leaked in the ground and they knew it. They remediated it and they put the monitoring wells in and they got everything done and we were like great, closed on the property, went to do a refinance on some stuff and the bank wouldn't buy it because there was a missing document called a no further action letter by the state and I had to go back and do the whole process again. I had to open up the wells, have the same company come in, do the testing everything was good file the thing and get an NFA the no further action letter and then, once that was done, the property's clean.
Speaker 1:And so the NFA. It's like nothing's valid until you have that NFA that says you no longer have to. It's certifying that you no longer have to do anything to it.
Speaker 2:Correct. So once you're reported to the EPA on a site like that, you have to go through all the remediation, do all those things and if it's been noted and it's got a case number on it, yeah, you have to get an nfa from the in florida. You have to get an nfa from the state oh man, that's frustrating boss goes what yeah, that's that jack-in-the-box, that didn't what do you mean?
Speaker 2:yeah, exactly what do you mean? What are you talking about? How long does that take? Oh man, how much is that gonna cost? Jeez, yeah, I'll get back to you.
Speaker 1:Yeah, exactly, I mean, but that that's how you become the guy right that you've gone, you've had all these experiences dealing with one thing or another and and I think that, um, you know, kind of your strength comes from the ability to figure shit out right. It's like we're gonna one. There's one of the guys on clubhouse that says, uh, fitfo, let's figure it the fuck out right. I like I can heavily rely on my ability to fitfo, you know, yeah well, you watch it happen, make it happen, or wonder what the fuck happened.
Speaker 1:Yeah, I mean really, I mean that's, that's a, that's that's a powerful thing to to have in your and wonder what the fuck happened. Yeah, I mean really. I mean that's a powerful thing to have in your toolbox. It's like I've seen a lot, you know I could probably figure out something.
Speaker 2:Or I know somebody, or I know somebody. Or I know who to call yeah, or I know who to call. That's a big part of it is you can't think that you know it all, but you need to know who to call. Or you need to know who to call, or you need to know who to call. That's going to know who to call, or get you put in touch with the expert in that field and then figure out what it's going to take to get your problem solved.
Speaker 1:Man.
Speaker 2:Yeah, I, just for me it's like that position is so important in the organization. You see it right, some new computer worm or thing, comes up and you've got to figure out how do we combat that and not let that be a problem.
Speaker 1:Yeah, and I've learned that a lot is to collect people in some capacities, like the guy. It's like oh, I've got a firewall guy and a cybersecurity guy, and then I got a systems guy and I got a networking guy and any of these things. We can figure it out one way or another, depending on what the pain looks like.
Speaker 2:Or together.
Speaker 1:Or together, yeah, exactly. Or get everybody on a call and get a Tiger team together and say this is what's happening. You know kind of orchestrate that thing, and I learned a lot of that from you. Really, to be honest. It's like how do you do that? And then, like, another big lesson was auto nation. Auto nation we did a buy sell for a nissan store and they had this project manager that was just a bulldog and just kind of ground on that excel spreadsheet and I was like you haven't done this and it just went through that list. You have a very, a lot, you know, a more honey way of doing it, but yeah, but that's what you got to be.
Speaker 1:Yeah, you got to be the pinger. I'm like the ping ping, ping ping. Yeah, when I was in the Air Force we had production expediters. So imagine, you know there's a flight line and there's jets and they're broken, right, there's one jet's broken for one thing and another jet's broken for another thing. And it would be this, and he usually was like a senior enlisted guy and he was a pro-super is what we'd call him, and they would go around pinging you about what was going on, like where's that jet, why is it greened up? And it's like coordinating all the things, and sometimes they would have to get those.
Speaker 1:We do that on a daily basis, Like that's a pro-super, like a pro-super of the dealership group.
Speaker 2:Why is this contract not cashed? Yeah, you know, contracts in transit. Uh, what are we doing?
Speaker 1:you had an open ro?
Speaker 2:um you know more than you know, and and and what we have found are the key, a lot of that. The key is, uh, being a having a central place of information okay and the ability to leave notes right. Get. Get the monkey off your back.
Speaker 1:Yeah.
Speaker 2:So why is this repair order open for more than 30 days? Well, we have a nationally back-ordered part, Right? So it's off until the parts guy comes out and puts a note on and says parts are in.
Speaker 1:Yeah.
Speaker 2:And then you look at it and you go why isn't it back in the shop and fixed yet? Whoa.
Speaker 1:We're moving for space here. We're busy It'll be in tomorrow. So you probably know where I'm going to go with this next question. It's like what do you guys use for internal communication for the organization?
Speaker 2:Teams, okay, microsoft Teams. What did you guys do before that? Well, nothing. I used an iPhone. Our organization has changed over the last couple of years. At one point we had a 25-person BDC doing sales and we realized that there was no attribution. That comes back. Yeah, that goes down to attribution, you know that comes back that. Yeah, that goes out to attribution, oh, yeah, we're doing great, we're selling a lot of cars, but the financial statement didn't show any more gross or any more units, so yeah, we dissolved that.
Speaker 1:You just said robbing from peter to pay paul right, so so that went away.
Speaker 2:But we also had um, the owner, his assistant, a lawyer, a chief financial person, an assistant chief financial person, me, a retail guy, mergers and acquisition guy, a marketing guy, a used car guy right, so we're down now to about four people at a corporate level that we're running the company, and early on you know you and I had had conversations and you know we've since closed our office, right. Yeah yeah, and we're, you know, we're basically so that you know huge savings for the company just not having you know it was crazy, but we had a conversation about being data-driven.
Speaker 2:This was early on and you were like, hey, I got somebody we can look at data and we can do that.
Speaker 1:Yeah, and that was a flying back from Midland conversation. Yeah.
Speaker 2:And we were sitting and talking. That's exactly where I was.
Speaker 1:You'd be surprised what can happen when you get four guys looking at each other on a plane, talking for three and a half hours yeah, with nobody else around With nobody else around With nobody else around, just sitting around talking to each other and figuring stuff out.
Speaker 2:Yeah, so yeah, so we started down that and that was to his credit, gino, he's our guy on the retail side, but he's just a data guru and he's just relentless on knowing the numbers and what's going on and what are we doing with this and what are we doing with that for everything? So, and then when COVID hit, we had and you had said, oh, you guys got to get on teams and we were like, what is the new system now?
Speaker 1:Oh, I don't see how that works.
Speaker 2:And you know, just pre-COVID, like two or three weeks pre the world shutting down, we had an opportunity to get out of our lease in our corporate office and the boss said hey, what do you think about working from home?
Speaker 1:And we were all like, yeah, that's great. Yeah, I don't have to drive in every day. Great, Exactly Super, that's great. I don't have to drive in every day Great.
Speaker 2:Exactly Super and we started with Teams and started getting the stores on it and you know part of that involved adding a lot of Office 365s to the network. Before that we only really allowed people on Office if they needed Word and Excel. You know that kind of stuff and if you were just, you know, a grunt in the store, you didn't need that stuff. You get your email not a big deal Online and whatnot. Yeah.
Speaker 2:So with Teams, now we have we're actually closer I feel way closer to the stores than we've ever been to management. Yeah, that's what I kind of suspected is that the ratio of interaction per employee is probably through the roof, more so from we hold meetings most every day of the week of one kind or another. Mondays are service. We have GMs and the service people in Anybody really involved parts managers, service managers and going over what do you got going on how many open RROs, what's your gross look like, what's your pace, look like, what's the dirty math. We take what's in WIP and part of that goes into how much you got and that's we call that dirty math. Yeah, and how you doing, where's your CSI and what's your utilization and how are you looking and how many of this do you got? This person looks weak. And look at your ELR and your hours per RO. This person's weak and we need to get those. You know you need to concentrate on that. Then no more than 15 or 20 minutes per store.
Speaker 1:Oh, that's great. Short, yeah, Short short short, short, sweet and to the point. Short, sweet and to the point.
Speaker 2:Yeah, and we have the management in the store drive the meeting, so they have to share their screens. They have to because we we want them. We don't want to be showing them the numbers. We want them to show us the numbers because then we know, they know how to find them. Yeah, because if we're showing them the numbers all the time, then they go, oh yeah I suck, yeah, yeah, and they wash their hands of it.
Speaker 1:There's no ownership. There's no ownership, right, yeah, so that that that their hands of it. There's no ownership of it.
Speaker 2:There's no ownership right, so that's part of it. Tuesdays is more of a sales and F&I meeting.
Speaker 1:Okay.
Speaker 2:But the service people attend because we want them to understand what the front end of the business is doing, absolutely Because it's all tied. Yeah, you know, the service managers love the front end because they pay retail Full pop, no discounts ever. Wow, so they're our number one cut Full pop retail.
Speaker 2:And it took a while for our sales management corporate guys to get it. But you need to do that because you need to put the gross into the store, not on the front end gross side, because salespeople sell from cost up, of course, and everybody goes oh no, we sell for market value. Yeah, everybody does. Everybody in jail is innocent. Yeah, everybody does. Yeah, everybody in jail is innocent. Yeah, exactly so. Yeah, so we charge. You know it's full pop and every new car comes in, gets wheel locks and nitro. And you know we don't sell a nitro program from Nitrofil but we sell a nitrogen for life program that says if you ever need to have your car regassed, just bring it down, we'll do it for you. But you've got to have this piece of paper.
Speaker 1:Yeah, that makes sense.
Speaker 2:And you buy that it's an F&I product, yeah, and so, and we're all big on prepaid maintenance because that brings the car back, the car's back, and you have to become a tire and brake center and you have to have good MPI process to highlight that, and you have to be competitive in doing those things. So, anyway, so on Tuesdays we do that. So this morning we had our meetings with the stores, and then Wednesday's kind of open Thursday is another sales-related call, short and sweet, and then Friday we do another service call. Again, they're only 10 to 15 minutes each and that's. It's less now because I have five less stores as of the first of the month, but it's the same format that we've been doing.
Speaker 1:Wow, yeah, and one thing that I have noticed about you guys is that you're more of a service-driven organization, like fixed-driven organization Got to be Than variable Got to be Well no, I wouldn't say more than I would say you just got to be.
Speaker 2:Yeah, you got to sell cars, yeah, you got to make. You know, in today's world, you got to make gross on the front.
Speaker 1:But the muscle memory that you have from fixed is a completely different lens to look at the organization than from a variable side. I think the incentives are set up incorrectly. That's kind of my 30-foot thousand view.
Speaker 2:What incentives are set up there?
Speaker 1:So, like on the variable side, like if you have somebody that has a very, very strong variable past, right, they're looking at the 30th day of the month, right, and that's every time. They're looking at this sprint race right From day zero to day 30 or 31.
Speaker 2:See, I don't think we look at it like that.
Speaker 1:No, you don't.
Speaker 1:But there's organizations that do oh yeah, yeah, we don't look at it like that, but I think that comes from a deep understanding of fixed, that you not only I mean it's day to day, but that Bruce comes from that background. Yes, it's like how does an organization like I was kind of posing this question to the group is like to the clubhouse group is like what is better? A GM that comes from like who has more tools in their tool chest? It's like a GM or an owner that's come from a variable side, or a GM or an owner that's come from a fixed side.
Speaker 2:I'll tell you it's fixed.
Speaker 1:Yeah that's what I think.
Speaker 2:Yeah, I agree with you, because the fixed is a day-to-day process, exactly.
Speaker 1:It's every day, Every day, Every day, and process and long are driven. You know, if you're not maintaining your alignment machine, you know your service manager says go fix the alignment machine because that makes us money. You know what I mean. Like whatever that looks like. It's kind of a different way of looking at things.
Speaker 2:Yeah, you have to make sure that everything's like that, but every day new people drive in. Every day you write new repair orders. Every day you close repair orders and you do volume. It's not. A customer comes in on the up bus.
Speaker 2:Yeah, the up bus, exactly, yeah, bus and yeah, I'm the up bus, exactly yeah, and and wants to buy a car and you, you spend four hours in the showroom with him and you get a deal and then off and and he drives off in a new car and and you go okay I got over that, yeah, yeah one yeah exactly, and I think invariably in fix you guys see it more as like a lifetime cycle of a it's an everyday thing, yeah, and you got to keep going and you can't.
Speaker 2:Not only do you have to have good write-up, but you got to have good process in the shop and you got to be able to have good salespeople working with your customers. Then you got to get the tickets paid and closed.
Speaker 2:Yeah, and that's just that's very process driven and yeah, and that's just as hard. Um, and then most dealerships. You look at how many open rows you have. You got a busy service department. You might have I don't know 100 right, maybe 150. Look at it at the end of the month, there's like 30. So why couldn't you do that every day of the month? Why did it take you to every day of the month? Why did it take you to the end of the month to close the tickets, to put the money on the book? We, if we see that it's bad management, right, that's, that's a um, um. Do you know the Brown M and M story?
Speaker 1:No, oh, is that the tell?
Speaker 2:it please.
Speaker 2:I can't think of who the artist was Is he Ozzy Osbourne, no Van Halen or somebody like that I can't think of who the artist was, but they had very complicated and extensive contracts on their concerts and one of the things that was in their concerts was we want a big bowl of M&M's. No brown M&M's in the bowl, jeez. So when they would get and everybody would go insane why do these guys want no brown M&M's? And then when they would get there, if they found brown M&M's in the bowl, they knew that they hadn't read the contract or didn't know what it was, and they would start scrutinizing everything.
Speaker 1:Oh, wow, yeah, it's attention to detail.
Speaker 2:It's attention to detail.
Speaker 1:And it's a canary in the coal mine.
Speaker 2:It's a canary in the coal mine. So we see high open ROs mid-month and low open ROs at month end. That's a brown M&M. You've got a process problem and that's what you have to look for the brown M&Ms in everything. And that's what you have to look for, the brown M&Ms in everything. What's wrong with this picture? And then, how do we address that in a way that is effective and gets the people to buy into it? Because that's the big thing. It's all buy-in, because you can't. If you beat people over the head, that's abuse as management, but you can't beat them over the head. You got to lead them to the way to getting it done and really make them think it was their idea. That's ultimately, if I can make you think it's your idea and you got it done.
Speaker 2:You're brilliant, you're brilliant, you're brilliant. Yeah and yeah. And you know we had a um, we had a partner manager in in a series of our stores at one point that was extremely he'd trip over a, he'd trip over a dollar to pick up a penny and wouldn't invest any money into the business and just was like no, I'm not.
Speaker 2:And um was abusive to the people and when they'd quit he'd just pay him more money to stay and uh it just it's a really expensive way to do things, yeah well, he thought he was doing great, yeah, and that that's kind of what you got to look at is is you got to have the ability to look at what's going on around you and and look for the brown m&ms and fix them?
Speaker 1:yeah, yeah, and that's kind of like from from my perspective, is to see like there's two ends of the buy sell. You're either getting all the money for it and you're leaving because that's you're getting all the money, right, you got a great offer, or you've cut, cut, cut, cut, cut, cut all your way to a, to a, to a sell side of a buy sell and you haven't adapted to the new time. And then you, you're suddenly like where's my cheese? I'm sitting on this $25 million or $16 million, I'm just going to sell it and I'm going to get out of the business. Those almost seem like the two spectrums. Well, you have, you know, like the two ends of the spectrum.
Speaker 2:Two ends of the spectrum. So buying you know the big groups are always looking to buy and they always pay all the money. And you know they've got a process.
Speaker 1:They're playing a different game.
Speaker 2:Well, no, it's actually the same game.
Speaker 1:At a different scale. At a different scale, yeah.
Speaker 2:But we'll look at 10 stores before we buy one and we'll look at 10 stores before we buy one, and when we're looking at them we just want to know the best things we buy are things that are broken, where we can look at a financial statement or a series of them and know that it's broken. Look at what's going on and where are you in the market and what's your market penetration and where's the brand going. Sometimes brands are not good, you know. I mean we had, um a couple of hyundai stores out in california at one point in time that it was just a very difficult brand to make money with, especially in a california market yeah um.
Speaker 2:So you know, those got sold, those got sold and somebody bought them and somebody's still there and somebody's still making money and that's okay. Yeah, um, but it didn't, didn't fit with us. Yeah, um, you gotta watch where you're at. I'm glad we're out of California.
Speaker 1:Oh yeah, that man, california is tough.
Speaker 2:California is tough.
Speaker 1:Yeah, california is tough Now. We're Florida based and and that and now we're looking. You know what's available for us in in the southeast, yeah yeah, that makes sense basically within a plane ride, just draw a, you know a 600 mile radius draw a line to atlanta, yeah exactly, yeah, really, geez, man, that's so. How have um like, do you think that? Um, you know, taking leveraging data and the data points that you guys have started to discover and leveraging those against brown m&ms, how has that impacted your, the, the organization?
Speaker 2:makes. It just makes the organization work better. I mean you, if you set the level of expectation of what everybody's looking for from a management standpoint, then they, the people, aren't surprised when either you're doing it or you're not doing it. Or you know, we were on a call today with the front end and we were going over F&I and we were looking at individual product penetrations and PVRs and very easily and plus we have a very robust reporting system Exessa that we use so it was real easy to just go back and click the previous month and the previous month and the previous month and we knew that this certain individual had been performing very well and now he's not. He's not or it's not that you would look at it and you go well, those numbers aren't bad. Well, his numbers aren't bad, but they're horrible compared to what he was doing. So if you can't track that kind of stuff, then you begin to accept mediocre performance.
Speaker 1:Yeah.
Speaker 2:And you can't do that. You constantly have to be asking for the best out of your people and you know it's not the last breath you take. That's important, it's the next one. Yeah, yeah, yeah.
Speaker 1:That's. Ain't that the truth, Jeez?
Speaker 2:Yeah, so you know, and we used to joke about it. You know the boss would go. What have you done for me lately?
Speaker 1:Yeah, yeah, yeah, yeah yeah.
Speaker 2:You did a great job last month. What?
Speaker 1:are you doing now? Yeah, what are you doing now?
Speaker 2:well, you know you don't want to be rude about it but you need to be able to say, okay, here's, here's the performance of what's going on and things change. Covid was a huge change in the business a year ago yeah right. So we went from a company of 600 to a company of about 200 250, yeah, in about 30 days. Yeah, yeah, um and um, and then, as as business comes back, you're putting people back in, but it also teaches you that you probably can do more with less yeah, yeah.
Speaker 1:Yeah it's a great reset. It's a huge reset.
Speaker 2:It's a once-in-a-lifetime reset yeah, once-in-a-lifetime reset From the business. Now, business was horrible, we continued to do business, but when you reduce your number one expense, which is people, and you continue to do the business that you can and you keep the productive people, you know your tech, you know I don't need to lay off technicians if I've got work, yeah, and as the work comes back and people continue to drive and they continue, that's where fixed really is fixed.
Speaker 1:Yeah, it's really fixed.
Speaker 2:It's really fixed yeah yeah, yeah, it's really fixed. Yeah, yeah, yeah. And then it just becomes important that you maintain the level of service and you grow the level of service as your UIO goes up and you have to be careful about outside shops eating your lunch.
Speaker 1:Yeah.
Speaker 2:And so the way you do that is you have to stay somewhat competitive in pricing, which means you can't blow your labor rates out, but you can't pay your techs too much money, because then your grosses go down.
Speaker 1:Yeah.
Speaker 2:And you've got to have good CSI. The people that are coming in on a regular basis are telling you that you're doing a good job and, by and large, you know like our south florida stores um are typically one and two in the region, if not the nation. Yeah, in csi, month after month, after month process, it's all process, process, it's all process.
Speaker 2:Yeah um, and you know, the, the new store struggled in CSI because we had legacy people that you know Stuck in their ways. Stuck in their ways, you know. He comes out, he's got a little patch on his thing, says Bob, he's got a cigarette in his mouth and he says Not that we could do for you. You got to get away from that.
Speaker 1:Yeah, you got to get away from that yeah, you got to get away from that. Yeah, yeah, I'm paul. Can you talk a little bit about how this is? This is always a really interesting and I think for the listeners is an interesting process is how you calculate hours and and service.
Speaker 2:Right so shop technicians yeah, so we have, um, this is, uh, we put this together together about a year ago. I've always looked at it one way or another and there's a lot of differences. But we look at what we call efficiency and productivity and some people say they're synonymous. Some people get them reversed. I have my own opinion and I'll give it to you as what you have. So we look at productivity as the amount of time that you have a technician standing in a stall and he's punched onto a job.
Speaker 1:Okay.
Speaker 2:Right. So productivity could never be more than 100%, right. We look for productivity to be about 90%. That gives you 10% of the time he is between jobs. He's punched off of this job and he's not punched onto the next ticket. Then their efficiency is as they're working on that job. How many flat rate hours are they produced for the actual time that they were punched onto? The?
Speaker 1:Right.
Speaker 2:That's how efficient he is. So if he's getting, if the job pays 10 hours and he gets it done in 10 hours, he's a hundred percent efficient. If he gets it done in five hours, he's 200% efficient.
Speaker 1:Yeah.
Speaker 2:Right. So, um, cdk, our DMS has a report that runs it both ways. So you can do efficiency and you can do productivity. And we look at that on a. The service managers look at it on a daily or almost daily basis. I look at it on a monthly basis. So we take those two percentage numbers. So let's say it's 90% and your efficiency is 110. So you take 90 times 100 times 110 and and you multiply just those two raw numbers together and that gives you a score. That's what we call. It is the score, and the score there is 9,900. So if you just do the math, it's arithmetic.
Speaker 2:In theory, you're getting an hour for an hour for every, for the amount of time the techs are in the stall. Yeah, and that's what we look for. If you're running 10 000 or better and you've got a wait time of more than a day or two getting cars into the shop because your scheduler is maxed out, you need another tech. If you're less than that, don't come to me looking for a tech. Get your efficiency and productivity up. You know. Get to where you've got that and you know some of that. The productivity side of it is a function of how well you're dispatching, how well your technicians are clocking and how many cars you have coming in what I call bumpers. How many bumpers are you getting in every day? How many? How many cars are showing up that you can put into the shop to do that? Efficiency is is is totally up to the technician okay how fat.
Speaker 2:What wrench do I have in what hand and what? What gets it done? And how do I beat the clock? You know so. A technician, that's, you know a break job takes, you know a break job, pays two hours and actually should do it in an hour yeah um, chasing the wind noise?
Speaker 2:uh, doesn't pay squat. Yeah, exactly, you know, um, and, and that's where you have to have. I am of the opinion that in a shop that has more than about six or seven techs, you need a full-time foreman. Okay, now the foreman gets paid. He should be a technical guy, should have come from the shop, should be as smart or smarter than anybody else that's in the shop and should be being paid on the number of hours that are coming out of the shop. Okay, total productive, total production and efficiency and productivity.
Speaker 2:So his bonus is based on making sure that the efficiency and productivity numbers are up that 10 000 number is right so if you've got us, so if you have a low, real low, productivity number when you run it, if you're running 40%, 50%, you have a clocking issue. Somebody's not clocking out and the computer will run you for 24 hours. Yeah, and I'll tell you, those technicians are definitely not productive on the hours where the store is closed. Yeah, right, right, so you got to. Or if your efficiency is real high, you get a good score. Your efficiency is extremely high and your productivity is very low. You have a clocking issue. They're clocking on and off of the ticket, like they're clocking on and off just as they're doing the job. So he gets the car, he fixes the car, he fixes the car, he punches on, writes his little story, punches off and gets paid three hours. But he only worked. But the ticket so is. He wasn't.
Speaker 2:He had a lot of time where he wasn't yeah, it wasn't on the clock right so the risk there is is that in a warranty audit, if you're not clocking consistently between warranty and customer pay and internal, if you're just not clocking consistently across the board, they'll look for chargebacks. They'll look for straight time work, where you're chasing that water leak or a wind noise, where you punched on and you worked on the car for five hours and punched off and you want to get paid those five hours. Yeah well, if you're not clocking consistently on everything and the factory picks up on that, they can. They can go in and then they'll start charging you back like you'll be like an outlier of the right, or if you're too efficient, um.
Speaker 2:So you know um. I know a guy that um can do an engine job on a particular car. I think I know who you're talking about. That pays about 20 hours, and if you give him the car first thing in the morning, when he gets there, he'll road test it before he drives home. Wow, right Now. So the factory frowns upon the fact that he only worked on the car for eight, but I'm paying him 20.
Speaker 1:Yeah.
Speaker 2:Something's wrong. Yeah, Now when you look at the car, the car's perfect. Everything went out, there's no issues, it's fixed, it's fixed, everything got done, wow Jeez. But there are some tricks that and technicians they all have them on how to kink the system. But you have to be consistent with your clocking.
Speaker 1:Yeah, or you're going to get in trouble.
Speaker 2:Oh wow, so you have to be careful about that stuff.
Speaker 1:And so, on average, are you looking at some, you know, are they humming along Like, do they find synergy in some shops where they're, you know, humming along at 11,000, you know at, you know the?
Speaker 2:11,000.
Speaker 1:And then some guys are you know at, you know 10 and a half and like you're tweaking that efficiency on a regular basis.
Speaker 2:Well, we look at it all the time.
Speaker 1:Yeah.
Speaker 2:We look at it all the time. Yeah, we look at it at our two northern stores. I get a report every day of what it is. Wow, you know our fixed person. We have one fixed person between two stores. She texts, she puts an email together every morning. Here's where we're at, here's the dirty math, here's our CSI, here's our efficiency and productivity and here's our utilization report. And she just pulls the. It takes her five minutes, puts it together and sends an email out. And that's what we look at every day so we can see where. Here's how many open ROs I got. You know my totals are down a little bit, but I got a lot of open ROs. We got to concentrate on getting them done.
Speaker 2:We got to, you know, doing that kind of stuff. And when it comes back again, when it comes around to what we talked about earlier about the front end paying full freight, you know, regardless of the brand, every car gets a 30-day inspection.
Speaker 1:Yeah.
Speaker 2:Right Now, a lot of places don't do that, even though with some manufacturers it's a requirement-day inspection. Yeah, right Now, a lot of places don't do that, even though with some manufacturers it's a requirement. With Audi it's a requirement. You have to do 30 days and you have to. There's a form that has to be filled out and it needs to be in the service file, and they check that when they do their super. We're going to look up where the sun doesn't shine and to get the trunk money, like you know, you have to pass your inspections to get, uh, to be certified, and so, um, you know, I've, I've told you this story. What are the four rings of of audi?
Speaker 1:stand for the four hoops you have to jump through. Yeah, they're all the hoops.
Speaker 2:They're all the hoops you got to jump through for the factory to to make sure that you're uh that you're, that you're making all the money. So every car gets a 30-day, which means the car technician's got to. We have to write a repair order. Technician's got to get the car. They've got to start it, drive it, bring it in, run a battery test, drive it around the block and park it. Make sure that everything's working, keep the brakes from rusting Jeez.
Speaker 1:Yeah, I mean I think that that you know kind of to to some and we put that cost back against the car yeah, and I mean that that's your kind of almost natural holistic pack to it that you're gonna, you're gonna keep the money inside the dealership rather than giving it uh, you know, at the variable um, you know judgment of the sales guy to to give away or not at the vehicle, if you're going to be losing it anyways.
Speaker 2:We do that and the front end still makes money.
Speaker 1:Yeah, exactly yeah.
Speaker 2:Once the sales manager gets over the fact that they still make money.
Speaker 1:They still make money. Yeah, exactly, that makes sense. Yeah, and I think that kind of to sum this whole thing up is that you guys over the past you know kind of we've been working together for a long time I've seen the evolution of the organization transfer to like a very as technology has kind of increased is to a hugely data-driven operation, and I think that you guys mainly make decisions not from gut but from facts like data, right, it comes back to the money ball thing.
Speaker 2:So you've got to manage by data, you've got to understand and you've got to take that out. Now, some of that also means that you have to invest in the technology. Right, you have to find the best software package. Yeah, you have to find the best software package. Cdk is not the end-all, be-all of everything, because it's got all these little bolt-ons that you need, or you've got another program that runs better than that. So you have to find what works and the people have to take ownership of whatever it is you're putting the processes in place, otherwise it becomes closetware.
Speaker 1:You've got hardware software vaporware and closet wear.
Speaker 2:Closet wear is where you know all that technology ends up in a closet. Nobody looks at it. Yeah, and you're still paying for it. And you're still paying for it. You're still paying for it.
Speaker 1:And not only you paid for it, you paid for the selling of it, the training of it. No-transcript. It's like the IT room is the graveyard of great ideas. It's like full of it sometimes that great ideas.
Speaker 2:It's like full of it sometimes that Well, and then again you also have to be prepared to doing what needs to be done to meet your goal. Now, when we took over that group out in California, they were still doing licky, sticky, daily time and job tickets on repair orders. They would go to the computer, They'd open a repair order, print out a work order, but when the technician went to log on he hit a time clock with a you know, and then Like an analog input.
Speaker 2:Yeah, Well, you'd snap it on, snap it off, and then you'd take the'd, tear the little tag off and lick it, stick it on the back of the ro and and that's how you calculated how much time you had in it.
Speaker 2:So integrating, and you know the systems are so robust, there's no reason you wouldn't do that so so you integrate all of that stuff and then you and then you know, at that location there were five Netgear Wi-Fi networks yeah, I remember them and we had to take all them out and we had to redo all you know. You put in a robust Wi-Fi system and then, when we decided we were going to put iPods in the hands of all the technicians, to do their videos.
Speaker 1:That was huge.
Speaker 2:Huge.
Speaker 1:Huge yeah.
Speaker 2:And then the iPads in service advisors for doing write-up. We found that the Wi-Fi system wasn't robust enough because we hadn't put enough access points outside or in the shop and we were running into problems. So you have to say, hey, here's what it's going to take, roll it up, get it done. And we did. And from my aspect I don't want to hear that I can't get it done because of a technology thing.
Speaker 1:Removing excuses, yeah.
Speaker 2:Take the excuses away and if it's a software problem, get it fixed or find out or move away from the product. Yeah, if it's too glitchy, move, move away from the product. Yeah, if it's too glitchy, move it away from the product.
Speaker 1:Yeah, and that's the biggest thing is that I think that when somebody owns it, owns the process, they can do away with those excuses. It's like when somebody's, when the responsibility falls on kind of everybody, it falls on nobody, and I think that that's kind of one of the key components of it.
Speaker 2:Ownership.
Speaker 1:Is really ownership of the process and that's from your side and from Geno's side, on whatever that looks like. It's going to own that process and going to implement it fully and give it a full shot, rather than give it this kind of half shot that doesn't necessarily.
Speaker 2:Or you install a product and walk away.
Speaker 1:Yeah.
Speaker 2:Nobody looks at it. Oh, it's great, greatest thing since sliced bread. You come back a month later, nobody's using it. Nobody's using it, exactly Right.
Speaker 1:Yeah, I think that that's and then you reinstall it again.
Speaker 1:Yeah, yeah, then you relaunch it again. It's like, oh, nobody's using this. I mean, it would have been in the same place as everything else is, exactly, and that's the weapons. Don't make the warrior you know what I mean Like that's like such a, I think, core concept to this is that I think that's one of the main key component you know, differentiators between you and like the Cavalli Auto Group and other groups is like how well you manage projects and how well you implement those projects. Regardless if it's a rock or a Remington 700 or a bazooka, whatever that is, it has some. It's given its proper breadth to be implemented properly, measured, held accountable consistently over a long period of time, and if it works, it works. If it doesn't, it doesn't.
Speaker 2:And when you do a financial review and you go okay, where did that cost come from? And you go oh, we're not using that.
Speaker 1:Kill it, shoot it in the head. Yeah, yeah, yeah, absolutely.
Speaker 2:Yeah, 100% yeah yeah, that's huge. And you know it's the same thing with people. We talked about how we reset, you know, due to COVID. People have to bring value, no matter what you are. You have to bring value to the company, whether you have to be the, the gold or the sand bag if you're going to carry one down the road.
Speaker 1:Yeah, one gets heavy. You're going to set the sandbag down. You got to keep the gold.
Speaker 2:Yeah, yeah, yeah. So so you really have to take that mentality with everybody. Are you bringing value to the business? And again, it comes down to what are your pay plans in line with that? You know, one of our GMs was very famous for saying you know, if you got an A player, you got to give him an A pay plan. You got a B player, you give him a B pay plan. And if you got a C player, you give him a C pay plan. And if you're out of line in those, it doesn't work. You can't be a B player and get an A pay plan, and if you get a C player, you give them a C pay plan and if you're out, of line in those.
Speaker 2:It doesn't work. I can't, you can't be a B player and get an A pay plan. That doesn't work for us.
Speaker 1:And if you're an A player and you've got a B or a C?
Speaker 2:pay plan. You're not going to stay. Yeah, you're not going to stay. So you got. You have to realize the value that people have and do things that are appropriate, and and also you have to grow. So you have to grow people from within. Yeah, find out what they're good at and find out how to utilize that skill and are they in the best position, and also be prepared for the Peter Principle, where everybody reaches their own level of incompetence.
Speaker 1:Yeah, yeah, yeah, yeah. Be careful how you promote, because they might reach the lowest level of incompetence. Man, that's a hard principle to learn.
Speaker 2:And it's difficult, but you just have to be aware of it and you have to watch. And then I'm always of the opinion that if you're managing people properly, even if they're in over their head, give them an opportunity to go. Look, I know it's a hard thing to say you want to go back to your old job, but are you really happy with what you're doing? You're seeing a lot of pressure. I see the sweat beads on your, on your upper lip, every time we talk, um, and and what are we going to do here? Because typically what will end up happening is they push the self-eject button.
Speaker 1:Yeah, yeah, now, sometimes, sometimes that's good and sometimes you don't want to see that yeah, no, I mean, I've seen that in practice in your organization and it's worked out and it speaks volumes of the character of the organization. It's to say, hey, man, you're a valuable asset, or lady you're a valuable asset. If this doesn't work, let's move you to a position that does. And then you keep the, you retain all the experience and training that you put into that person, how they understand the ecosystem of the organization and they, you know, if they have the stomach to lose face or that ego hit that they get, then they can be successful.
Speaker 2:Or you move them to a different store, yeah, or if you've got that ability, that you've got multiple locations, that they can find something else, or ask them what they would prefer to do.
Speaker 1:I mean, there's a lot of that, it's huge, yeah, yeah, I think that's's a lot of that. It's huge, yeah, yeah. I think that's a great place to wrap it up. You know speaking of how you guys take care of the people that work with your organization, and I think that speaks volume for your guys' management style and kind of the culture of the company, so I want to say thank you. It's an honor working with you. It always has been.
Speaker 2:It's an honor working with you. It always has been. It's fun. This is the first time I've done something like this. It's a lot of fun.
Speaker 1:I mean it's a lot of fun to do this and you know I think that you know more and more people should listen to this because you know there's a lot of really good, interesting nuggets in here that can help our industry be better.
Speaker 2:you know, get a better reputation out there because you know the dealership industry for many years has had that.
Speaker 1:What kind of discount are you going to give me Exactly? But like there's true organizations that are professional, looking forward, that have great cultures, and I think Cavalier Group is one of those and really leading the pack nationally, you know.
Speaker 2:Just one more thing that just crossed my mind. So even on the sales side with customers, you know we're very transparent.
Speaker 1:Yeah.
Speaker 2:We're very. Show you the numbers. Here's what it is. Here's the deal. We're not. It's not. It's not a one price, single point of contact. But it's best price. Yeah, and you're not going to. You know, we don't put you into the box and whack you. You know, here's what we think. Other people that buy cars. In your thing you got kids and dogs. You probably should get seat protection.
Speaker 1:Yeah, you know, yeah, that kind of thing.
Speaker 2:Have you ever had a flat tire? You know you can't patch them, you only buy new ones. So you might want to buy a tire and wheel program or that kind of stuff. Or you live in a high crime neighborhood. Maybe you need a low jack.
Speaker 1:Yeah, that kind of stuff. Yeah, you're not ripping people's faces off. Yeah, I mean especially in this market.
Speaker 2:It builds value. It builds value. It's all about value.
Speaker 1:It's all about value and I think that you guys have that in spades and you know it's been awesome to really learn from you guys and thank you for doing this and I really appreciate that Thank you.
Speaker 2:Thanks for having me All right.
Speaker 1:Thanks everybody. We'll see everybody next week.