Article

Realizing Dreams - Growing and BHPH Operations

September 2006, Auto Dealer Today - WebXclusive

by John Carroll - Also by this author

In January of 2003, Todd Smith decided his third location just wasn’t measuring up. He never had the kind of “sales coach” he needed to make the numbers work as planned. The lot hadn’t come close to duplicating the success of his other two locations in Dothan, Ala.
 
“We kept struggling and struggling,” Smith said. “So we just shut the lot down.” Once he had made the decision, it took three days to lock it up.
Looking back now, Smith knows it was the right thing to do. By dropping the third location and focusing his energy on his other two outlets, Dothan Motor Company (DMC) would go on to wrap up 2003 with record sales. And now, two years later, the CEO is struggling with a new issue: Which of his two assistant sales coaches (Smith doesn’t use the title, sales manager) will go back to that empty lot in April or May and make it a success in 2005.
 
Ever since he jumped off the corporate ladder at the communications giant Alltel and went back to run the family BHPH operation in 1994, Smith wanted to grow the business. But he wanted to do it the right way; taking a mom-and-pop shop run by his father and uncle and expanding into multiple locations, with a repo company, a finance company and a service center. He’s branded the old Dothan Motor Company into the regionally recognized DMC, complete with an advertising jingle that’s instantly recognizable to anyone in the marketing area and a reputation for honest dealing that keeps his repeat business running high.
But he didn’t do it alone. Smith always knew that if he was going to make the transformation, he would need the kind of manager/coaches that would make it possible to expand sensibly. He compares his management strategy to the old carnival routine where performers race around spinning plates on a stick.
 
“One person can only spin so many plates,” he said. “But if you teach more people, you get more plates spinning. We were running back and forth, keeping the plates spinning. Now we have people trained to do that. It wasn’t easy. It’s a hard transition to teach people what you do instinctively.”
 
Developing management talent was one of the most important expansion tactics Smith adopted early on. But there were others as well. He persuaded his local banker to increase his credit line so he could improve the inventory on his lot. Cars went from a low-end collection of older model, high mileage vehicles to a more stylish lineup of vehicles that tops out at $10,000 retail and runs the gamut down to $3,000 while working on building a regional reputation for a company that has been a Dothan fixture since 1946.
 
It’s been a successful formula. Car sales have grown from an average of 40 a month to 75. And, more importantly, he’s grown DMC’s BHPH loan portfolio from $1.4 million to about $5 million.
 
Local demographics have helped. Dothan is nestled into the southeastern pocket of the state, an economic hub for about 250,000 people who live in the tri-state region connecting Alabama, Florida and Georgia and rely on the town’s hospitals and other services. A military base – Fort Rucker – is nearby. But that doesn’t translate into the boon the dealership relied on after it was founded 59 years ago. The old days when a used car dealer could call up a soldier’s commanding officer and make sure he made good on a note payment are long gone. Even repossessions are harder to work, with a trip to the M.P.’s office as first stop.
 
He’s also had to grow the business against the grain of American social trends, watching the threat of litigation swell as he got to be a bigger target for local attorneys and seeing others try to duplicate his success with new lots of their own.
 
“If it’s not customers, it’s the employees,” says Smith. “It’s the nature of the society we created: What can I get out of it? That’s the way everyone handles things.”
 
But Smith lives and manages his business on a contrary mission statement. By focusing on what’s right for his customers and his employees, he also protects himself against the quickie deals or solutions that will only create trouble in the long run.
 
“Our objective is to put the right person in the right car with the right situation,” Smith said.
 
That’s not altruistic. It’s just good business. Training his sales people to properly size up a customer and get him into the kind of vehicle that he can pay for – rather than the quick buck that comes from selling too much car to someone destined to lose it in foreclosure – improves the quality of loans, builds repeat business and improves his reputation. And that all translates into more support for another goal of his: helping his coaches realize their dreams.
 
The in-between
 
Any BHPH business is as much a finance company as it is a car sales operation, and Smith has devoted a lot of time and effort to the books.
 
He’s sold paper just once, in a deal packaged with TranSouth Financial that netted 80 cents on the dollar. “It was good paper,” said Smith. But Smith was after more than an injection of cash. He wanted to demonstrate to his wary local bankers that there were some serious money men in the world who would value his loans near the top of the industry’s range.
 
The bank responded by increasing his credit line and the availability of funds. And that helped Smith grow the business along the lines he wanted.
 
Now he’s working with Leedom & Associates to line up more credit, with terms better suited to the Buy Here Pay Here business. Longer credit terms and more capital will help him further expand the business without having to constantly worry about a sudden change of heart by his local bankers who could drop out of their year-by-year arrangement and leave Smith without a financial bridge to essential credit.
 
Smith says he’s close to a new deal with a Texas credit union. But it’s no easy task. “They either want $10 million and up or three (million) and down,” he said. “That in-between is tough for us.”
 
To keep focused on the big goals, Smith has joined not just one but two 20 Groups. The meetings themselves are great ways to generate new ideas for growing the business.
 
“That’s a lot of what broadened my perspective,” said the dealer. “Like they say, if you want to be a millionaire, hang around millionaires.” So Smith hung out with bigger dealers operating with bigger portfolios. It wasn’t long, he adds, before he realized he could “get out there and do this.”
 
There was also something else he realized: Don’t stop doing things right.
 
“I’ll get to sharing with others in the group and say, 'we don’t do that anymore and there’s no reason why,'” said Smith. “That’s been extremely valuable.”
 
Case in point: he saw that repeat business had dropped from about 60 percent of his sales to 40 percent to 45 percent – and he’s resolved to get the number back up in 2005.
 
It’s amazing how easy it is to stop doing the things you need to do to stay successful, said Smith. His sales team had stopped doing little things like sending out follow-up letters to customers and working to stay in touch – everything that helps to build relationships and keep repeat sales high.
 
Now the cards and letters are headed back out to customers, and Smith plans to keep up special offers to prior customers, like offering them a car at $99 plus tax and title during slow months. With a good ad campaign and regular outreach, Smith knows just how important good customer relations are to the business.
 
“My most successful sales person, her customers stop by to say ‘hi,’ long after the sale is done. A lot of what we do has to do with relationships."
 
Realizing your employees’ goals
 
Smith also uses the 20 Group trips to set aside some quiet time to get away and think about what he wants to do with the business. That kind of reflection helped him to focus on starting a repo business. One of his management team had worked with a repo operation before and he gave her a minority stake in the new business. They set up business with two drivers. The new operation has helped him handle a 40 percent repo rate – not unusual in the BHPH business – while picking up new business from GMAC, Ford Credit and the local banks.
 
Smith said: “In order to get into it and do it right, ensure ourselves and isolate liability, we started looking around. We
saw there was a need and a gap. One of the things I try to accomplish is to realize my coaches’ dreams. One of my coaches’ dreams was to have a repo company. I gave her a minority ownership. She had a lot of contacts from being in the business prior. Now we’ve been in business a year. We’re at breakeven; that was our objective. (The lenders) want us to go bigger, into Birmingham, which is four hours away, that however would require another office. As I’ve learned before, you control your growth, so you have your people.”
 
To help his sales coaches better realize their dreams, Smith invests in training from Jim Jackson, a trainer based in Las Vegas. By bringing in outside trainers he gets challenged on how he coaches the coaches, and they get support on problem solving and communicating with others.
 
None of that, though, substitutes for the daily work that goes into training.
 
In addition to building team skills, Smith is always looking to make employees better at their jobs and that calls for some unique skills in the BHPH business. If sales people are better detectives, they’ll find out how to really evaluate a customer. In one recent case, he said, a customer turned out to be a long-time volunteer firefighter. He may not have been on his job for a long period, said Smith, but that one tidbit of information in the customer file tells him where he can find him if necessary. It also tells Smith that he’s the kind of reliable individual he wants on the books.
 
“We do a lot of training in small groups,” says Smith. "There are five people in the group and that group will meet once a week and read a book. Different members facilitate conversations.”
 
That kind of interaction has helped build his team. And through it all, DMC has remained a family business. His father is still busy, heading up the car-buying side of the operation. “He doesn’t like to sit around much at all,” said Smith. And his uncle still sits on the board.
 
It’s a tightly knit group of family and coaches, with a common purpose. Together, they keep the business growing.
 
Smith’s willing to bet his future success on it.
 
Volume 2, Issue 1

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

On-the-Point

Jim Ziegler
Objects in the Rearview Mirror

By Jim Ziegler
The past is right behind us and the future is coming fast. The Alpha Dawg plots a course for your store’s success and shares advice for Elon Musk, Johan de Nysschen, and pre-owned managers.

The Big Talent Drain

By Jim Ziegler
The Alpha Dawg tackles the shortage of talent in the managerial ranks and reflects on Amazon’s rumored foray into vehicle sales, the imminent used-car correction, Hyundai’s plan for the Genesis brand, and the untimely passing of Tammie LeBleu.

A Faster Horse

By Jim Ziegler

Strangers in the Mall

By Jim Ziegler

Opening Observations

Over the Curb