Training » 5 Critical Success Factors » Efficient Business Systems

5 Critical Success Factors:

4. Efficient Business Systems

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The room was full of professionals and we sat, like school children, with two identical sheets of paper turned face down on the table before us. On each sheet the numbers “1” to “100” were randomly scattered across the page. At the instructed time, we flipped over one piece of paper and sought, within the 15 seconds allotted, to sequentially circle the numbers beginning with “1”. At the end of the time, we were instructed to stop and turn our pages again face down. I think I made it to the number “6”. Some did a little better, some did worse.

Without looking at it, we were instructed to fold and unfold the second sheet into quarters and place it again face down on the table. We were then informed the number “1” was in the top left section, the number “2” was in the top right, the number “3” in the bottom section and the number “4” in the bottom left. In the top left section again was the number “5” and so the system went. During the second 15 second period, I reached the number “36”, a 500% increase in productivity! Why the difference? I had a system that efficiently organized my tasks along with a process to know where my data was. I also had a paradigm shift in how to manage my life and work.

FranklinCovey has built a multi-million dollar company on these principles. Recently I introduced five critical factors for success in subprime auto sales. The fourth of those success factors is: Having efficient business systems. To enhance the success your dealership enjoys, I suggest you put in place the following:

A central log to track the dealership’s subprime traffic separate from your A and B traffic

Do you keep a log? A log acts as a tool to help you measure and manage your critical tasks. If sales is a numbers game, then your closing ratio is the solution to an equation. To increase sales, you must first increase your number of prospects. If you are proactively generating leads directly to your subprime staff, they are responsible to make initial contacts and set appointments. From shown appointments, you also must make lender submissions and get approvals. Your approvals will dictate your prospect’s vehicle selection which is tied to your inventory. Therefore, your closing ratio is directly related to your success at managing each of the components or critical tasks. Improve one and it is has a multiplying effect through the entire sales process.

We can only manage that which we can measure, so make sure your log allows you to measure your performance with each critical task. To improve at anything, you must first establish a baseline of current performance. A log will provide that baseline. Once your baseline is established, measure your trends with regard to the number of new prospects, initial call backs, appointments set, appointments kept, lender submissions, approvals and deliveries. Sales aren’t what you want them to be? Measure these tasks and the path to increasing sales will be very clear.

Logs are common place in many dealerships but does your log allow you to track your prime and subprime traffic separately? Here’s why I ask. Properly sold, your subprime business is handled completely backwards from your prime business. The critical path and tasks in the subprime sales process are different from prime sales and for that reason your logs should be kept separately. As we discuss subprime metrics below, it is important you look at these metrics specifically for your subprime business. A little bit of discipline in keeping up your log will provide a huge return to your bottom line.

Ability to capture and keep customers involved solely in a credit decision until you are ready to move them to a product decision.
When are your subprime prospects engaging in product decisions? Is it when you advertise? Possibly when they arrive at your lot? Maybe it’s during the initial interview process? Or is it after you and the lender have determined which vehicles are “finance appropriate” and you’ve provided a selection for them to choose from? The sooner your prospects enter into that product decision, the lower your chances of delivering a unit and maximizing gross. To excel in sub-prime sales you must work your prospects “backwards” through the sales cycle. Keeping control of the timing of product decisions is your responsibility and following are some steps you can take to improve control.

First, look at your advertising. Target subprime prospects with your advertising and drive them directly to your subprime staff. This allows the appropriate staff to control the sales process and achieve a greater success rate than “front end flips”. Consider using “blind” advertising as a significant component of your marketing plan. Blind ads engage customers in a “credit”, not a “product” decision. Advertising that identifies your dealership name and make has a place. Remember however, it does ask your prospect to first make product decision and may drive some prospects to a competitor.

Second, separate the process of initial customer interviews from the sales process. The use of toll free numbers is the most effective way I’m aware of to do this. Toll free numbers allow you to capture what is needed to begin to work: a credit application and permission to pull a credit bureau. This separation also provides an additional measure of control as you invite prospects to appointments where you manage the process. I’m a firm believer in using a service to answer those toll free numbers and believe “live operators” provide a better ROI than Interactive Voice Response systems.

Finally, create a “credit counseling” culture within your subprime finance and sales staff. Their responsibility is to help customers “re-establish credit” or “secure the credit necessary” to purchase a vehicle that meet the customer’s needs. “Mr. Customer, we need to first work through the credit process to allow lenders to provide guidelines for the payment and vehicle selections they will approve. After we discover those guidelines, we will help you select the vehicle you want.” Your staff needs to control the process. If your subprime prospects arrive on the lot and are allowed to go pick the vehicle of their choice before you evaluate credit, you are missing the mark.

100/50/25/10 rule – also referred to as subprime metrics - For every 100 workable leads, you should be presenting ~ 50% of them to your lenders. Of the 50% presented to lenders, you should be seeing an approval rate of ~ 50%. Of the net 25% approved, you should deliver between 40-60% resulting in a net 10-15% delivery ratio.

Think of these metrics as guard rails on the highway of success for subprime. Staying inside these boundaries will keep your subprime effort from going into a ditch. Tracking these metrics will also allow you to identify areas of improvement for your subprime sales effort. If you miss the net 25% approval ratio it points toward a need to improve either the quality of your lead flow, the depth of your lender mix or the aggressiveness of your staff in working your prospects. If you are achieving a net 25% approval ratio but are not closing the right percentage, it most often points to a problem with inventory, the process by which you’ve let the customer select a vehicle or your closing skills.

Some of these can be painful points to learn but not learning them is even more painful. Remember you can only manage that which you measure. In eight years of working with dealerships, I can’t remember a dealership that has been unsuccessful in their subprime effort that knew and followed these numbers. A little bit of discipline tracking these metrics will again provide a huge return to your bottom line.

Desking software - very helpful for structuring deals and maximizing profit.

You will never deliver a subprime prospect that is looking for credit without first securing an approval. Once an approval is secured, a number of factors come into play in when selecting the right vehicle. The deal structure for an “approved” payment call will be a function of the fees, rate and terms from your lender guidelines along cost, margin and book value of your inventory. You should search your available inventory to see which vehicles structure for your approval and allow you to maximize gross. Deal structuring software does this electronically in seconds and helps you do it right. Whether you seek to maximize gross profit or move aged units this software can be very helpful.

Prioritized systems and processes to work the customer: Initial Callbacks, Setting Appointments, Interviews, Stip Collection, Income Verification and more.

This is your work detail and there is a considerable amount to do. Establish a method to prioritize getting it done. I suggest rating your prospects A -Excellent, B -Good, C -Fair and D -Poor. Rate them based upon your perceived chance of making a sale. A number of factors define whether a customer is going to purchase or not including: their credit, job history, down payment and capacity to repay a loan (DTI ratio). Add to that your lender pool and inventory. Your prospect may have had a repo last month but with enough cash down, the right vehicle and the right lender you can deliver that customer as an equity approval. Once you have rated your prospects, you will have a method of prioritizing your workflow. Work your “A” prospects first, then your “B, C and D” in priority to maximize sales.

Establish systems and processes to complete your work detail and make sure your staff is familiar with them. Remember the illustration of finding the numbers told above? Just knowing where to look for information brings a phenomenal increase in productivity. Your systems and processes should be known and accessible by everyone that touches your subprime sales. For instance, if notes are taken regarding a particular customer, make sure they are accessible to all. Your work detail is dynamic so there is no question that an electronic solution will work best. Not quite sure where to start? E-mail me and I’ll be glad to provide you with some free ideas.

As the metrics above show, successful dealerships close between 10-15% of their subprime traffic. What about the other 85–90% of the prospects? Not all are deliverable but efficient business systems will help you find those that are and allow you to move beyond successful to phenomenal. These ideas are by no means exhaustive but do present a solid foundation from which you can build. Putting these ideas to work will help you secure, maintain or improve the success I believe you are looking for in your subprime department. If you would like to receive the 49.5 ways to SUPERCHARGE your SubPrime Sales & Profits, just email me tim.shea@greatdirect.com with the top three issues you are struggling with in your subprime sales. I will also send you a bonus of a Few Good Ideas from the 2007 NADA Meeting in Las Vegas!


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