Launching Special Finance: Part One
The DealerStrong team heads to Champion Motors to help launch a world-class special finance department.
September 2015, Auto Dealer Today - WebXclusive
Welcome to Part One of a six-part series of articles about the launch of a startup special finance operation at an already successful independent dealership on the fringe of a major U.S. metro market.
Although the names of the principals and, indeed, the dealership itself, have been changed to protect the company’s privacy, you will get an inside look at the plan, the strategies, the successes and the challenges encountered over a six-month period. Our end goal for the new department is to reach a monthly sales volume of 70 deals at over $230,000 total gross by the end of that period.
New clients always mean new challenges, some more exciting than others. It was certainly more exciting when “Aaron Matthews” and “Clay Rodgers,” partners at “Champion Motors,” an independent dealership already retailing more than 100 pre-owned vehicles per month reached out. They wanted me and my team to help them build an SF department from scratch. They were experts at marketing (digitally) and selling to prime credit customers, but like anyone selling used vehicles, they realized many of their customers had blemished credit and wanted to better serve them.
Matthews and Rodgers realized they had neither the requisite background nor experience in subprime, so rather than try to pay the tuition of developing that channel through trial and error, they turned to the experts to speed that timeline up. Since it had been many years since I personally had the opportunity to build a solely SF department from a clean sheet of paper, I jumped at the chance. (Typically, our SF efforts are combined with developing the entire operations of a dealership.)
This article will focus on the planning and 30-day “make-ready” period prior to launching the business. This is a tough phase. The clients see the potential and want to go from zero to wide open overnight. It isn’t going to happen, and if it did, they would not be able to sustain it. To me, this is the most important phase as it involves building the foundation for the “machine.” Once it’s built, we’ll add fuel to make it go, continuing to increase the fuel until the machine maxes out and needs to be grown again.
In this situation, to reach our end goal, we will divide our plan into three phases of growth. The first needs to be accomplished in the first 30 days, and it includes five key areas: personnel, customer demographics and finance companies, inventory, BDC and technology and, last but not least, facilities. Let’s take a closer look at each one.
You can’t dive into SF without a skilled manager with sound integrity. For Champion Motors, we will also start with at least two salespeople. Finally, within the first month of operation, we will launch a business development center that will initially focus on SF. The BDC will be staffed with three business development representatives (BDRs).
To expedite the hiring we placed ads on Indeed.com, the DealerStrong website and our social media sites as well as several others. Additionally, we used LinkedIn to make our network aware of the openings. Finally, we reached out to key industry partners who have ties to the city to try to find managers with the skillsets and character needed.
The résumés quickly began to pour in. We use a generic and compliant employee application, which we forwarded to the respondents with résumés that were worthy. Once the applications are returned, the screening process begins. Employment tests were provided to determine if skillsets and claimed skills are equal. From there, interviews were scheduled and eventually reduced to a handful to be interviewed by Rodgers and Matthews. It is a scripted process that eliminates the riff-raff from the hirable few. A staff will be ready for the onboarding and job training on Day One.
2. Customer Demographics and Finance Companies
In the pre-engagement homework, Rodgers and Matthews quickly and thoroughly reviewed the credit bureau pulls from the prior 30 days, breaking them first into prime and subprime tiers. This is when they discovered that 52% of the credit pulls were for customers with subprime credit. Additionally, a significant percentage fell into the category of zero to 510 credit score.
Our goal is to match the customers with subprime credit to a portfolio of finance companies or banks that will cover the entire credit spectrum. Fortunately, Champion already had signed relationships with Ally Financial, Capital One Auto Finance, Chase Bank and Wells Fargo. That is a good base. To that we created a list of 15 additional auto finance companies and credit unions needed to cover the entire spectrum of credit, with instructions to Matthews and Rodgers to get them signed by the end of the 30-day period.
Certainly, anyone that has ever read my writings knows how integral I believe inventory is to success in SF. It must not only be behind book on the lot, ready to go, but it also must fit the banks and finance companies’ parameters that will be used for each particular customer.
Our goal is simple: Inventory a supply on the ground equal to a one-month supply of forecasted SF sales, and do it so that the unit count is essentially divided among the credit tiers in relationship to the makeup of the customer’s credit demographics.
The great thing in Champion’s case is that we are essentially starting from a blank sheet of paper. They currently stock about 150–170 units for their prime business. A quick analysis of their inventory indicated that about 10% of their inventory would work well for SF customers. That meant there was no dire need to rush out and buy a lot of inventory but rather work our way into a perfect supply.
Shawn Foster, DealerStrong’s inventory specialist, was involved in the planning phase, as we worked with Matthews and his buyers to set out parameters to buy from. Additionally, we established reconditioning standards for their service department to work from. The immediate expectation was that beginning with mid-month of the planning phase to the middle of the following month 15 units would have to be acquired and made ready for sale.
4. BDC and Technology
At the outset, the sales staff, which numbered only five, answered all the incoming calls and made all the outbound calls for the 700 total opportunities to do business the dealership currently had. Recognizing the team had no subprime experience and no additional capacity to handle more leads, we knew they would not be utilized. Additionally, being in a major metro market, once marketing was added to the mix, the lead count each month could literally reach the into the thousands. As a result, the decision was made to build a BDC immediately and, by the middle of the first active month, have it fielding incoming calls as well as making all outbound SF calls.
Additionally, the CRM system being used by Champion really wasn’t well-suited for a BDC and subprime, nor to their service department. The decision was made to install ProMax Unlimited and move the entire operation over to it, including prime, subprime and service. Additionally, with the dealership poised to have over 200 used vehicles in inventory, ranging all the way from a nearly new Audi R8 Quattro to deep subprime vehicles, the outstanding desking features in ProMax will allow the subprime team to be able to glean opportunities out of higher-end inventory that would normally not be expected to work well.
With ProMax poised to handle call and lead management, we added Bidzpin to help the buyers identify and bid the inventory to match the finance companies. Technology will help us keep us ahead of the game with inventory from sourcing to structuring.
As stated before, we began the BDC with three BDRs: Wendy Reeves, DealerStrong’s resident BDC expert and trainer, set to the task of essentially taking a newbie crew and turning them into a strong foundation. Not only did Wendy work through the processes and the call guides, with ProMax on board, she was able to install our entire template contact and follow-up system (email and text), which has proved so important in increasing the contact-to-lead ratios and the shows-to-appointment ratios. She anticipated a mid-first month timeline for the BDC to be ready to go live and expects them quickly to hit benchmark productivity.
Next was getting the facilities ready for the new sales and BDC teams. Champion is the site of a former second-tier franchise store. It has been very tastefully reappointed to handle the upscale prime business, but it didn’t have sufficient space to add the additional SF personnel. Rodgers and Matthews quickly went to work to convert a nice-sized storage area adjacent to the showroom to house the customer waiting area for both sales and service. This allowed the former customer waiting area to be converted into office and cubicle space for the new SF team.
Additionally, it was decided that a small office building immediately adjacent to the dealership, also owned by Champion, would be converted to handle the BDC. It is large enough to accommodate up to eight BDRs, along with a manager, so it should work well. The one-month lead time gave us the opportunity to get it outfitted and wired to handle a VOIP phone system.
And so went the first month of planning and preparation. It certainly was an active time, but it provided the ability to build a solid foundation. Next month we will discuss the results as we go live. Without a doubt, as in any organization, there will be hiccups and obstacles that are encountered that will have to be worked through. That said, we feel extremely optimistic and have nothing less that absolute expectations that our initial goals will be met — and it should be a ton of fun.
Stay tuned to watch it grow, and if you have any questions as to why or what we are doing, drop me a message at [email protected]. Better yet, join us September 8–10, 2015, at the Industry Summit in Las Vegas and ask us in person — and meet Matthews and Rodgers as well!
Until next month, great selling!
Greg Goebel is the CEO of DealerStrong and the industry’s leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker, author and consultant.