Finding out what dealers want
I was visiting with a friend and fellow PDR tech, James the other day. He started dents the same time I did and went on his own around 1997. He was able to pick up an anchor dealer right away, giving him a good base of income to build his business around. This dealer would give him enough work to live on and he serviced them for the last eight years.
I know it’s a good account because I had it at one time and then they hired and trained an in-house guy. They kept him for about three years until he moved away. After he left, James went in and got the account by offering fixed pricing. This is a popular method among used dealers where a blanket price per car is charged, regardless of damage. The audio CD accompanying this letter talks more about it.
Recently, James hired a guy to train and grow his business. Unfortunately, he chose the transmission guy from his anchor dealer. After the trainee got some confidence in PDR, he quit James and became the new in-house dent guy and James lost the account.
You’ve seen the books about “How to swim with the Sharks”? When you are working for a dealer, it’s a bit more like chumming the water with dead, bloody fish, smearing your skin with it and jumping in. It’s not a question of if you’ll get eaten, it’s how long will you last?
Used car managers and dealer owners are not bad, no more than sharks are a mistake of creation. You just have to learn to deal with them on their level. They are meat eaters with sharp teeth who see you as dinner. Only jump in if you are protected.
The best protection starts with knowing the predator. Knowing their motivations and the weapons they use.
Why do dealers love in-house reconditioning?
From your point of view an outside vendor is more motivated, more dependable, more skilled, doesn’t cost payroll taxes and extra accounting, and doesn’t get benefits, like an employee. And you’re right.
Still they keep trying it. A touch up guy called me the other day and said he was losing accounts left and right to in-house set up.
Look at it from their point of view. Selling cars is a high dollar per transaction business. It’s also a small margin business. Meaning less than 10 percent profit.
Thanks to the internet, most car buyers today are so hip to the deal and know the invoice and bottom line that many cars are sold “skinny”. This is the term dealers use when they cut the price to the bone and sell at or close to what they paid for the car or, invoice.
Every dealer has a built in profit from what’s known as “holdback”. This is around 3 percent of invoice and is paid out by the manufacturer on a monthly basis. This money comes no matter what price they sell the car for.
If you’re a dealer and you sell 1 million dollars worth of cars or about 40 units, your gross profit is at least $30,000 and as much as $100,000. That ain’t awful but there’s a lot of overhead there. Sales commissions, advertising, and of course, you as a reconditioning vendor of Paintless Dent Repair.
The in-house vendor craze started the day a smart dealer said, “1 Million Dollars a month are rolling through my accounts, what can I do to keep a little more of that?”
Even at low profit margins a sum that large qualifies as “high finance”. The smart dealer knows the “Time value” of money.
For example, listen to what a dealer did to the local Wurth guy.
Wurth invented the glue puller for dents. They were the first to market it. What you may not know is they’ve been a supplier of nuts, bolts, and chemicals for many years. They supply mechanic’s and body shops worldwide.
Stuart, the Wurth salesman here, started his route with a credit line of $250,000. This meant he could sell that much on account but couldn’t sell more until he collected on what had already been sold. This is a good way to get your sales staff to be careful with your product.
When Stuart first started, he landed a big fish (shark) who wanted a large order of brake cleaner. This car dealer has 1000 new units on the ground. Stuart was excited.
“What’s the largest amount of brake cleaner you can sell me?” asked the shark. “We use a lot.”
Figuring he’d leave some room in his credit account, Stuart sold them $150,000 of brake cleaner and left thinking about his commission.
He sold it “Net 30” so he figured he’d collect it at most 45 days later. Wrong.
On the 91st day, because his collection efforts had proved fruitless, he drove 2 hours to the sharks’ headquarters to collect. He had gone from salesman to stalker and was ready to make some noise.
He finally gets into the top Shark’s office, who is not surprised to see him. Nor is he affected by the anger and excitement in Stuart’s voice. He actually smirked when he heard about Stuart’s credit account limit.
Finally, the Shark reaches for a stack of checks on his desk and starts rifling through them.
“Here it is. We never pay these until the 90th day,” he said as he signed the check.
Remember, Time Value of Money. Even a little time can mean a little more money.
In fact the term “in-house” comes not from vendors, rather, it was coined by the smart dealer who said, “how can I keep more dollars in-house?”
Why are they so motivated to keep money in their accounts? So they can put it to work over the weekend. I got an inside glimpse into this high finance stuff when I talked to a guy at a medium sized dealer. He told me there is an accountant on staff whose only job is to calculate all the monies in all the liquid accounts. He then deposits it over the weekend into a 72 hour Certificate of Deposit where it earns interest short term. They call it a “Sweep”. This medium sized dealer reaped an extra 100,000 in profit per year from this move.
Now you see why Stuart got strung along for ninety days. The Shark knew he could get away with it at least once, so why not?
Like a shark scientist knows all the behaviors of it’s subject, you can do the same with your business.
The lessons are that dealer’s will always have a compelling reason to find a way to get services rendered by an employee instead of a vendor. They pay less and keep the money longer. They have control over an employee to a degree. Whereas you might go work for any other dealer and may or may not come back.
Run your business to survive
You might find a few dealer’s who will give you a check each week, but the large ones will have you on the Purchase Order system. You will turn in an invoice when you’re done with the car and be given a P.O. number. At the end of the month you’ll issue a statement with all your invoice numbers and P.O. numbers to match and (hopefully) get a check by the end of the following month.
Knowing how dealer’s work, you can see it’s best not to let them get too deep. You ever heard the old quip, “If you owe the banker 100,000 he owns you. If you owe the banker a million or more, you own him?”
The upper hand goes to the guy who owes the most. If you owe a small amount, you’d better pay it back. If you owe a large amount, why, now the banker better be sure he does everything he can to help you pay it back.
For this reason, when there is a hail storm, my monthly billing switches to weekly. If they get too deep, they might just be tempted to turn 30 into 90. Meanwhile I’m left bleeding in the water.
Know the Predator part 3
Above I mentioned the “one pricing” method that seems to be gaining ground among dealers. It appeals to the used car manager for one reason: speed.
The used car business is now driven by the auctions. (I know. You’d think it’s the other way around)
One day each week, the manager has to show up, look at, size up and put a price on a car that he is willing to pay for it. Much faster to see a dent and know what it costs up front. Too much time wasted if he has to count panels. So “one price” appeals to them for this reason. If you can make it work and earn your bucks, do it. Now you know how to sell it.
James’ story also has a lesson in it for hiring folks. No doubt, James got to know this guy over the many years of working at the same dealer. Probably sized him up over time and concluded he was a good guy who would never leave. When you make a decision to hire someone, how can you keep your emotions out of it?
First, have someone else interview your prospective employee. Preferably someone in a non-related, non-competitive business. This uninterested outside party will make a judgment based only on face value. They won’t be subject to the emotions you have for this prospective trainee.
Second, never, ever train someone without money up front. Break this rule and you’ll hate yourself in the morning, even if morning don’t come for a couple years.
Doesn’t matter why or how they go. They go. It is perhaps the biggest problem in an all labor business. If you don’t charge them for training, in your mind will forever a remain a debt unpaid. No strings attached is difficult to apply when you help a person double or triple their income.
Still, I love teaching and I am proud of what they have accomplished. As I am proud of you and all that you will achieve.
Third, try to balance your accounts. If you lose a big one will you survive? Avoid being “owned” by a large account. You’ll make better decisions if they are replaceable.
Marketing guru Jay Abraham says each account is like a pillar in your business. With just 3 or 4, removing one can be disastrous. Instead, think of building your business like the Parthenon, where a single column collapse can be absorbed by others.
Also, even if you are busy as you can stand, never stop selling. Always be on the lookout for new business. Think of your market as infinite and unexploited.
Fourth, think of yourself not as a dent technician. You are really a marketer of Paintless Dent Repair. I speak a lot about the technical doing of the “thing” we are in, and I love to improve and get better at it.
PDR has tremendous upside potential. Hail storms and busy seasons can be great slack adjusters. But all the financial growth comes from improving your marketing skills.
Think of your business as a funnel, wide at the top, narrow at the bottom. You will have many customers call or want to ask questions about your services. Only a few will shake all the way to the bottom of your funnel. These will give you money. Your job is to keep pouring them in the top by means of your ads, your card distribution and encouraging your customers to refer.
Did I forget to mention?
You have way more knowledge in the Paintless Mentor System than I had when starting out. Still, there’s always room for improvement. For this reason, I give you a recording of a phone interview with longtime PM student Richard Parizeault. He is a man of wisdom and had me taking notes.
See if you can catch what he says about pushes. What scale is used? What rule does he impose on himself when working dents? Finally, how does he get business?
Till next time,
Tim Olson