February 2013, Auto Dealer Today - WebXclusive
In September, I had the honor of speaking at the 2012 Industry Summit in Las Vegas during “Examining the Hybrid Manager,” a panel discussion on the theory that hybrid managers can solve dealer financial woes by combining the jobs of two people into one. Traditionally, as an industry, we have implemented this theory by creating a combination of sales manager and finance manager, which is what I am. But many attendees were also interested in discussing another potential hybrid: the salesperson-finance manager. I hesitate to call this person a “hybrid,” as I think it is a rather vague term, and a good portion of our discussion at the Industry Summit was spent on definitions of titles alone. Let’s use the term “expanded function salesperson.” In essence, these people will have the primary responsibilities of salespeople, plus the traditional finance manager roles such as submitting applications and completing paperwork.
The resurgence of this idea as of late I attribute in part to the introduction of the mobile menu to the market. Of course, most every tablet-style menu provider will insist they do not endorse the hybrid system, but if we can replace the sales pitch of an F&I pro with a “cool” device, why would we pay for the expensive finance guy? And even if we aren’t 100 percent sold on the new menu concept, isn’t it more customer-friendly to have the one-touch experience, where the customer deals with the same person from A to Z? It’s the salesperson who has spent hours (and possibly days or months) working with this customer to get them to buy the car. Surely they can convince the customer to spend a few more dollars to “protect their investment.” On the surface, it sounds like a great solution. Margins are getting slimmer; we need our people to produce more with less. And if you can sell cars, you can sell F&I, right?
Even I will admit to being guilty of this flawed logic. When I was a green-pea salesperson, I thought finance was a piece of cake—sell a few products, print forms and show the customer where to sign. I didn’t know how much actually went into being an F&I professional, but I was sure that I could do it. Everyone thinks they can do F&I, and if you are talking about showing people where to sign a form, sure, that can be easily done. What everyone can’t do is run a tight ship that keeps a multi-million-dollar business legally compliant, ethical and profitable.
When you start hybridizing sales and finance, you start what I like to call “the balloon game.” You may remember it from a game show a few years back. It’s really simple on the surface, but many contestants failed. Take three balloons and keep them in the air for 60 seconds without letting them hit the floor. If each balloon represents a responsibility, your salesperson already has three balloons for things like follow-up, prospecting and product knowledge. I talk to a lot of dealers who have difficulty finding people who can just pull off that balancing act. Now let’s start adding in balloons for securing financing, compliance and paperwork. You just went from looking for a good salesperson to looking for Superman.
Let’s say Superman is on your staff already and he is your potential hybrid. So now there are six balloons up in the air, but these balloons aren’t all the same shape, size and weight. It’s been established that selling the tangible is different from selling the F&I intangibles like VSC and GAP. But typically your salesperson has the skills for selling metal, so they use the same approach for F&I. That’s like adding a sinker to the F&I product sales balloon. The profit in that department will hit the floor fastest, but since that’s a source of revenue it will be carefully watched. The front-end profit is always important as a salesperson, so you know that one will be handled no matter what. Where the issues start creeping in is the balloons that are small and are slowly falling down. Sure, follow-up is getting close to the ground, but we know it will be handled before long, and yes, that one application should be worked, but there was a new prospect on the lot, and I’ll fax that stip over to the bank tomorrow … By the end of a short period of time, you have one exhausted superhero with one or two balloons in the air, the rest having long since been forgotten. Let’s hope it's you (instead of an auditor) who notices that the compliance balloon has hit the floor.
It’s the small but important things that make F&I so vital to a dealership. Things that don’t appear on a financial statement are just as important. It’s easy to forget to run an OFAC check, look out for red flags or send out the adverse action letters. It’s tempting to break or stretch the rules on a deal with a huge front-end gross, especially when you are paid on it. I really foresee issues in the realm of special finance, where the customer may suggest a straw purchase or other illegal activity. Finance departments execute more contracts on a daily basis than most lawyers. What if your expanded-function salesperson doesn’t even know the laws? There is simply too much going on in that area to do it part-time.
So while the hybrid discussion has picked up as of late, let’s use it as an opportunity to learn and appreciate what each member of our team contributes to the dealership as a whole. If through good communication and some cross-training we learn our strengths and weaknesses, we can then capitalize on them. Maybe you do have a salesperson who could really shine in F&I. Give them a chance to learn, but don’t overload them by trying to convince them they can do the work of two people. You will only end up hurting profits and proving that expanded function sales hybrids aren’t a long-term viable option.