Keys to Operating Multiple BHPH Dealerships: Mike Carlson Motor Company

September 2006, Auto Dealer Today - WebXclusive

by Greg Goebel - Also by this author

Owning and operating multiple dealerships bumps up the potential for headache as well as profit. Dealer Roy Carlson, president of Mike Carlson Motor Co., has a successful prescription for avoiding the migraine and maximizing the dollars. Owner with two other family members of the largest family-owned independent car dealership in Texas, Carlson and his management team run six successful and highly profitable Buy Here Pay Here (BHPH) used car dealerships in suburban Dallas.

How does the 49-year-old Carlson keep tabs on his far-flung enterprise while maintaining his sanity?

In Carlson's view, the key is two-fold: Finding and keeping good employees and then devising and implementing tight checks and balances.
Carlson's turnover rate among his 75 employees is well below the industry average of 50 percent during employees' first year. Among his employees, 73 percent have worked for Mike Carlson Motor Co. more than one year. (Among the 20 who have been with him less than a year, four are in newly created jobs.) Recently, his independent dealer 20 Group looked at employee retention percentages and Carlson's was among the highest.

Even more crucial, among Carlson's 22-person management team, average employment duration is eight years. Some have been at the dealership much longer. Controller Sandra Pfeiffer, for instance, is a 16-year veteran. But how do you ferret out and retain these key people?

"You network," Carlson said. "You attract bears to honey if you have plenty of honey. Word-of-mouth in this industry works the best. We've created a work environment where people come to work happily and where they are driven by purpose. Over time, people want to stay in a place where they're fulfilled and where the goals are clear."

But how can a dealer, especially one with multiple dealerships, build purpose into his or her operation? Carlson does this by valuing everyone for what they contribute, from the lot wash-boy and General Manager Mark Jones to Pfeiffer and Carlson himself. And he also provides ample opportunity for training and continuing education.

Internal controls are also critical. Over the years, Carlson and his management team have established numerous systems of checks and balances to maximize profit and minimize theft. These include standardized employment policies and procedures, a centralized computer and software system and daily cash drawer counts. The most the company ever lost was $7,000 when someone skimmed off the top of the cash drawer; Carlson tightened up operations once the loss was discovered.

Interestingly, when Carlson's father started the business 33 years ago, no benchmarks or other industry guidance existed to help a dealer set up shop.

"The industry was extremely fragmented—a mom-and-pop type of deal. A dealer like my dad did business through trial-and-error,” Carlson said. “Today, industry tools and consultants are much more accessible to help a dealer get started and make a profit."

Each dealership has a manager, plus several sales associates and various support people. A year ago, Carlson and his partners, brother-in-law Michael Thomasson and Mike Carlson Jr., hired an energetic general manager who oversees operations. GM Mark Jones receives a percentage of the bottom line to sweeten the pot. He travels from lot to lot each week, training and motivating employees. This leaves Carlson free to focus on larger issues, such as the company's direction. Before Jones joined the dealership from a stint as a new-car salesman, Carlson wore two hats: operations manager as well as president.

After Carlson's father died 12 years ago, his heirs centralized first collections, then BHPH loan approvals a few years later into a sole department. "If I had it to do it over again, I'd centralize these functions much sooner," Carlson said. "Otherwise, managers at each of the dealerships are in a tough position-wanting to sell the car to the customer but also needing to make sure that his credit application is in order. Doing these two jobs makes each job harder. It's imperative that these functions be separate."

His nine-person credit and collections department works the credit application side and then goes after delinquent accounts on a regular basis.

Economies of scale exist for Carlson's company, especially with advertising. Each week, he buys the entire front page of the Thrifty Nickel car-shopping brochure and then advertises regularly on radio and TV under the Mike Carlson Motor Company brand name and the dealership's tagline, "Reliable Transportation People."

The best single decision that Carlson said he ever made as a dealer was five years ago, when he joined a newly formed independent dealer 20 Group. "We would have grown more and faster had I been in a 20 Group sooner," he said. The friendships among and between 20 Group members mean a lot to him, as does the front-line intelligence about the business he gathers during each meeting, held three times a year at various locations around the country.

Combined, the six Mike Carlson Motor Co. lots sell about 325 units a month, with about 4,000 active BHPH loans on the books. When Mike Carlson Sr. started his business in 1969, he began with one store and three cars on the lot. Now, the six Carlson stores stock a total of 600. Growth has been steady the last five years with the company's management team focused on building sales volume at its existing stores rather than opening new locations.

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