Spring has Sprung! This is our favorite time of year and not just because of the great April Fool’s pranks! It is our favorite because the weather changes, the return of baseball , The Masters tournament and it’s the unofficial start of our favorite season of all, Selling Season!
Auto, Powersports and RV dealers all get excited for this time of year as customers get their tax refunds and head to their local dealership to indulge in a new purchase. Although there was a somewhat flat start to the year, optimism continues to build as more and more consumers are acclimating to the new norms of vehicle prices, interest rates, etc.
Our markets have changed drastically over the last few years, and we are finding more and more dealers looking for ways to stay ahead of the curve, maintain COVID level profitability and maximize each transaction with as many products and profit as possible.
At ADS, we pride ourselves on providing holistic solutions for dealers. Whether it be a dealer looking to mitigate the impending negative equity monsoon (see info and video below), a dealer looking to maximize their marketing and customer data spend (https://clientcommand.com/), a dealer looking to right size their reinsurance position after seeing a spike in loss ratio or a dealer looking to provide their sales staff an extra boost with some training and development solutions (see below for course registration), we at ADS have you covered.
Of course, this in all in addition to our high-performance F&I training and development platform that we have been deploying and perfecting over the past 10-years.
If you are a dealer who wants ‘More in ‘24’, then reach out to us to see if we are potentially a fit for what you are looking for.
Another month flies by at a seemingly record pace! It is shocking that we are down to our last two months of 2023. The good news is we all have 60 days to make the most of this year and head into 2024 with momentum on our side.
November brings us the Thanksgiving holiday which makes it a great month to stop, take stock and appreciate all that we have to be thankful for.
At ADS we are all thankful for the successful year we are having, the dealers we get to work with, and the incredible additions we have added to our team. Please take a moment and meet our newest team members to learn a little about them as well as the role they will play here at ADS.
In terms of other industry matters, it is good to know the strike has been settled and manufacturing can resume at the affected plants. Additionally, there is a lot of news coming out about the BEV market and how oversold the hype for electric really seemed to be. It will be interesting to see where the consumers and the industry end up taking the BEV offerings the many manufactures chose to race to market with. There are a few recent articles below which provide some good insight into some of the shift in enthusiasm.
And poof, there goes the first half of the year! Not sure about anyone else, but we are amazed at how fast the calendar continues to turn.
There are so many different metrics to track in our industry (check out the comprehensive report from Colonnade Advisors below), both on the micro and macro levels, and certainly no shortage of prognosticators willing to opine on a wide variety of items.
In the last 3-years, we have heard about a ‘digital transformation’, industry ‘electrification’, and the thought of ‘brick and mortar’ dealerships going by the wayside. Having read countless blogs, watched numerous videos, and participated in several conversations about these topics, we can assure you of two things; our industry is evolving, and the more things change, the more they stay the same.
Yes, our industry is evolving, what industries aren’t? At the end of the day the retail transaction so many of us are fortunate to participate in remains largely unchanged. Sure, there is a digital component to it these days. ‘Fresh ups’ on the lot don’t happen as often as they once did, but the process of qualifying, selecting, demonstrating, negotiating, and delivering are largely still intact, and that makes us happy.
At ADS we have a saying, ‘the process is the shortcut’. Over the last several years, many in retail have forgotten to follow the process while presenting and selling a vehicle, offering protection products in the business office, or recommending maintenance in the service drive.
In collaboration with the Greater Cleveland Auto Dealers Association, we are putting on a Summer Tune-Up Series for F&I, Sales, and Service. A ‘back to the basics’ if you will. We hope to see many of you, as you look to sharpen your skills, as we head into prime selling season. Registration for the classes are below.
Ryan Nelson interviewed Colonnade Advisors CEO and Managing Director Gina Cocking on Advanced Principles Podcast. Colonnade Advisor’s provided a summary of the first episode together to hit the highlights of the conversation.
This interview highlights the important role that Colonnade Advisors plays for their clients when they embark on the process of selling their company, raising capital, or seeking to acquire another company.
Colonnade Advisors has deep experience in the automotive dealership services industry. They publish Quarterly Updates on the Auto F&I sector with information on dealer profitability and recent transactions.
In this most recent interview, Gina and Ryan cover the following questions:
What makes Colonnade unique as an Investment Bank/Advisor? (6:00)
How Colonnade Advisors brings specific value to the transaction process (13:00)
What is the difference between a Private Equity firm and an Investment Bank? (15:00)
How the pandemic created shifts in the auto industry and auto-related M&A (20:00)
What makes Colonnade unique as an Investment Bank/Advisor? (6:00)
Their focus is on industry dynamics, business models, valuation metrics, accounting issues, and participants. They maintain a dialogue within their extensive network of owners, investors, and buyers in their target sectors.
Gina:Our focus goes back over decades. In the early 2000s, we worked with Mepco on its sale to Independent Bank. Mepco had two lines of business: 1) insurance premium finance and 2) vehicle service contract (VSC) finance. We worked closely with Mepco on both lines of business to create a successful outcome for their owners and team.
We became experts in the insurance premium finance industry and the leading advisor on transactions in this space. We are the leading investment bank in the United States in insurance premium finance. We’ve done 28 transactions in the insurance premium finance industry.
Through our work with the team at Mepco, we also got to know the vehicle service contract (VSC) space. After a decade of working with our clients at Mepco and Independent Bank, we assisted with the sale of Mepco’spayment processing business to Seabury Capital Group.
We also work with finance companies in the automotive sector: subprime lenders, near-prime lenders. We closed a transaction last fall for OpenRoad Lending, a direct-to-consumer marketer of auto loan refinancing.
We’ve been doing a lot in auto finance. This has taken us into data analytics, especially on the direct-to-consumer side. Direct-to-consumer marketing is all about data and data analytics. We have now worked with a number of data analytics companies and marketing companies associated with the automotive space.
How Colonnade Advisors brings specific value to the transaction process (13:00)
Gina: We have pattern recognition, and we’re rarely surprised.
Every transaction’s different. There’s always something new. When things are new and different, we have the skill set to navigate the situation.
What differentiates us from our competitors in this space is the tenure, institutional knowledge, and experience of our senior bankers.
At other Investment Banks, team members float through the different groups. They don’t stay long enough to develop industry and institutional knowledge. Their junior teams turn over. More importantly, they don’t have anything but transactional experience.
What is the difference between a Private Equity firm and an Investment Bank? (15:00)
Gina: The Private Equity (PE) firms have a pool of capital to invest in one or more companies. Their goal is to become the owner of a company. They’ll negotiate and buy a company so that the company is then part of their portfolio, which they’ll eventually sell and hope to make two to three times their money.
Most private equity folks have gone through investment banking at some point in their careers. What’s different about what they do is that they’re managing other people’s money.
In investment banking, we are advisors on either the buy-side or the sell-side. Sometimes I’ve had people say, “Well, you’re kind of like a real estate agent.” My answer: “Not really.” There are business brokers that are more like real estate agents, however.
We are there to work with the (client) company side-by-side. If they’re selling, we help them prepare for the sale and go through the process. That includes getting to know the company so well that we can tell their story almost as well as they can. We help them to articulate their story: Where they have been, where they are today, and where they’re going.
We then prepare written documentation, called a Confidential Information Memorandum (CIM). We identify the potential buyer universe. We contact those buyers. We negotiate with buyers. We answer all their questions. We deal with thousands of documents in the data room.
We negotiate the terms of the transaction. We work closely with the attorneys on all the transaction documentation. We’ll provide our industry perspective and our business knowledge, but we’re not attorneys. We help get the deal to close. One of the important things is we keep the deal on task. It’s all about not letting people lose focus, keeping the deal going, and getting it to close.
In investment banking, we are paid a success fee upon the close of the transaction. Whereas a private equity firm is buying the company (and gets paid on the subsequent sale of the company after growing its value).
How the pandemic created shifts in the auto industry and auto-related M&A (20:00)
Gina: Everybody freaked out in the Spring of 2020. But we’ve worked with some visionary companies where we’ve been able to create some fantastic win-wins.
We had a deal that was supposed to close at the end of March 2020. The buyer put it on hold but worked with us to restructure the deal with an earnout. The transaction closed, the seller hit all their earnouts, and it was a fabulous deal for all.
Let’s talk specifically about the Auto F&I side: administrators and agencies. While everyone dipped in the spring of 2020, performance improved in the second half of the year, and then 2021 was a fantastic year. This was not as predicted, considering the supply chain issues. Fewer cars were being sold.
Why the fantastic year? The dealers are hyper-focused on making money when they can. The dealerships realized that F&I is uber important to the long-term profitability of the dealership. Dealers are selling more F&I products with every car. That has benefited the administrators.
Consumers have also had great experiences with these products. They’ve had claims paid out on their vehicle service contracts. They’re telling their family and neighbors, “It’s really a good product.” We have finally seen the maturity in the F&I industry that this is a peace of mind product. It’s not just a product that a dealership is trying to push onto a consumer; it’s a valuable product.
2022 has been a great year for Administrators. The dealerships are profitable, and they’re also getting better at selling products. We’ve started a new phase.
Colonnade Securities is a leading investment banking firm that has completed over $9 billion in M&A transactions for clients in the business and financial services industries.
Advanced Dealer Solutions is a full-service, dealer development agency focused on automotive, RV, and powersports dealers across the United States. Please contact 844-320-3722 or [email protected] for any inquiries.
The current supply issues are creating a unique ‘sellers’ environment for dealers of all types these days and it is unlike any market I have experienced in my 27 years in the retail industry. Whether you are currently selling cars, RVs, or powersports you are seeing customer demand potentially higher than you’ve ever seen and are rightfully enjoying the fruits of scarcity. We all know this is a cycle, and at some point, we will again see rebates, negotiating, and discounts. The fruits dealers are currently harvesting are well deserved after surviving nearly a decade of margin erosion and a continuous sprint to the bottom of the price chain.
I recently attended a couple of industry events and heard story after story about customers agreeing to purchase, and pay top dollar, for their third or even fourth choice of vehicle. On the surface, this seems like an ideal, highly successful model for dealers to live in. While it has been bountiful, I feel there are some adverse effects as well as some missed opportunities worthy of addressing.
There is an old adage, ‘when perceived value exceeds price, you have a sale.’ Right now, the perceived value is the raw availability to conduct a transaction instead of the traditional checklist of wants and needs. Simply having something to sell is all the value a customer needs to see in a retailer. The dealers I know and work with, want more; they want a customer to see value in the transaction, not just being able to conduct a transaction. Of course, dealers want to maximize on the current opportunity, but they also want to perform the balancing act of earning the well-deserved profit, as well as providing long-term value in doing business with their dealership but for years to come.
Assuming dealers are exceeding their customers experience expectations, then we’ll move on to the value of the vehicle. By value, I am not referring to the features and benefits the customer has spent hours online pouring over, but the additional value a dealer can provide by protecting some of the customers risk exposure. Customers often get caught up in the euphoria of the purchase and forget the reality of owning a car, RV or powersport toy. They forget cars get dirty. They forget RV’s get lived in and spills and accidents occur. They forget their side by side could catch the eye of a thief. The risks of these forgotten realities can be mitigated by dealers including protection products on an addendum.
An addendum allows a dealer to enhance the value of a transaction by pre-selecting one or more value-based consumer products and adding them to a ‘Why Buy Here’ of the dealership. These addendums create a unique presentation opportunity for the sales consultant and most likely leads the customer away from a decision based solely on availability, or worse price. Instead of talking about discounts to meet a competitor’s price, the sales consultant can direct the conversation to the benefit of having a vehicle location device with years of monitoring included, as well as the cash benefit to assist in the event of an unrecovered stolen vehicle. Customers will value peace-of-mind over price if they are educated on the benefits before being ‘sold’ the item or being asked to pay a higher price with no explanation of benefits.
There are a few addendums I have seen backfire on dealers. Pinstripes, although spectacular to some, generally don’t command a $1,495 increase to the cost of the vehicle. And believe it or not, there are some that don’t see $999 of value in a set of plastic mudflaps for their Honda Accord. Whereas customers do see value in knowing their vehicle is protected from everyday spills and stains, as well as having some coverage against the environmental effects to today’s modern painted exteriors. Who out there doesn’t relate to a soda, or ketchup packet spilling on their seats or floorboards at some point in their driving history?
The great part about an addendum is it helps clarify the customers value in the vehicle as well as reminding them of the unavoidable perils of owning a vehicle in today’s world. If the customer doesn’t see value, then the addendum can be removed, and you have a sold vehicle at or near MSRP. If the sales consultant properly conveys the value of each item on the addendum, then it is likely the customer will at least purchase one, if not everything the dealer includes on the addendum. Either way, the dealer and customer are in winning situations; value exceeds cost!
A few suggestions:
Make the addendum something of true value to your customers. Leave out frivolous outdated items nobody sees value in. Today’s buyer is too sophisticated and will see through the gimmicks of what is being attempted.
The success of an addendum is directly correlated in the confidence of the presentation by the sales consultant. If the dealership staff doesn’t believe in what is being offered, it will fail and most likely backfire on the dealer.
Disclose anything and everything. Don’t sneak anything in. Proudly display the addendum and additional cost on the vehicle. Give your team the tools to demonstrate the value of each product being offered. Value based protection products sell themselves when explained properly.
Live it. Like most rewarding actions in life, you cannot be passive. You must be active with your value-added items each and every day. Here are a couple ways to keep everyone focused on the value on in the addendum:
Walk around competitions for some additional Saturday spiff money.
Product knowledge quizzes focused on what makes this product so valuable.
Retain the customer. The addendum should have some form of tie back to the selling dealer. Don’t just sell a vehicle, win a lifelong customer. The real gains come from the harnessed lifetime value of a family in the dealership’s community. Believe it or not, people still like doing business with people they know and trust.
About the author: Ryan Nelson has over 25 years of experience in the retail industry and is a Partner at Advanced Dealer Solutions, a leading independent agency specializing in dealership development in the auto, RV and powersports industry.
To learn more about how the right addendum can benefit your dealership, please reach out to Advanced Dealer Solutions at 844-320-3722 or [email protected]
Later this month most Americans will take time to give thanks. For the ADS team, we are thankful each and everyday for the level of confidence and trust our dealer partners grant us, and for the best in class vendors we are fortunate enough to do business with.
In this edition, you will find a summary of our new product offering Brake Plus, the newest employee Eddie Rains, and what’s new on APP.
We welcome any feedback and will seek to continually improve with each issue. It is through this ongoing experiment that we look to gain more knowledge, insight, and ideas that we will pass along to our current and future dealers.
To read the full newsletter and subscribe follow the link below.
Fixed Ops. The last 18 months in automotive have put this often underappreciated channel under a magnifying glass. Instead of allowing Fixed Ops to run on autopilot quietly generating revenue, you may be one of the many dealers who are now shining a spotlight on your parts and service business.
If you have actively invested more time, strategy and resources in your fixed ops offerings, then kudos to you. If you have yet to shine a light on your dealership’s fixed ops, then I would ask that you consider doing so. This is a critical part of your business that can not only cover operating expenses for your dealership but also add to your bottom line if optimized for success.
In either scenario, there is a chance you are still setting self-imposed limits on just how successful your fixed ops business can be. Read on for 3 ways you may be setting the bar too low.
1. Limiting Yourself
Too often we limit ourselves to what’s most easily available. When it comes to service, we tend to look at the current customers in our database due for a maintenance milestone or customers who have said “yes” to ROs beyond the warranty or recall.
We know from the numbers that there is a wealth of opportunity out there with true customer pay work. It’s available with your recent service customers. It’s available with customers who have bought but never serviced with you. And it’s available with car owners who didn’t even buy their car from your dealership.
There are tools available to help you widen your net and reach real service customers who are actively doing repair work in your direct vicinity. Geotargeting allows you to deliver location-based content and relevant marketing to these service customers. At Client Command® we help our service marketing partners drive more revenue through their service lane with this solution and others.
2. Failing to Invest in Marketing
If you build it, they will come. But, will they really? Anyone who’s purchased a car from a new dealership likely knows there’s a service center. Hopefully, your top-notch sales people walk new buyers over to your service center and introduce them to the service manager or concierge as part of their purchase journey. But what’s being done once they drive off the lot? And what’s being done to attract net new service customers to your bays?
Marketing your service center, pricing and amenities drives two key things: awareness and approachability. Service technicians at dealerships are seen as highly-qualified – often even more qualified than the local service center around the corner. But, there is also a perception that service work at a franchise dealership costs more and takes longer to complete.
Building awareness through marketing and breaking down those consumer perceived barriers makes your service center more approachable, and therefore, a contender the next time a service customer needs to service their vehicle. Investing in marketing also works to build and increase the lifetime value of new and repeat customers further positioning your dealership for long-term success.
3. Increasing a Goal and Not Resourcing Against It
Okay, so now you’re shining a light on your fixed ops offerings through marketing. You’ve put dedicated media dollars behind it to drive awareness among car owners. It’s time to focus on resourcing this side of the business.
Imagine if your service marketing drove 100 more RO’s per month. Could sound like a stretch with your current tech and space capabilities. But that’s only about four additional RO’s per day, which is likely manageable in most service centers. Increasing the number of ROs drives revenue and profits that often result in incremental growth. Earmark a percentage of that growth to re-invest in your service techs and customer experience. A small investment can add hundreds of thousands more per year and make your dealership more attractive to service technicians. Everyone wants to be part of a growing team.
From there you can do a review of your online and physical experience and make sure it is user-friendly and clean. Envision the growth you want to see and begin taking the steps possible to make that a reality, just as you have done on your sales side of the business.
Wrapping It Up
Your fixed ops department is ready to be in the spotlight. Remove your self-imposed limits, set a goal and invest in location-based marketing to relevant prospects and drive more customer-pay ROs for your service center. Your bottom line will appreciate it.
If I asked you what sets your auto, motorcycle, or RV dealership apart from the rest what would be the answer? I can tell you the common answers are family owned, community driven, friendly staff, customer service, or worse yet the lowest price! It is the same old thing you hear with every other dealership. There is no curiosity or real awe factor for the consumer.
What if you could offer your customer a lifetime powertrain warranty at no cost and no catch? I can tell you no amount of marketing can compete with a complimentary lifetime powertrain warranty. The main reason is that it creates curiosity and gives value to your customer. Below is some of the marketing our auto, powersport, and RV customers have utilized. The amount of traffic an advertisement like that can bring to your store is unmatched.
What areas does Warranty Forever impact in your store? The simple answer is every department will see an increase in revenue. Warranty Forever helps your sales staff sell more cars because of the high value your dealership offers. Your F&I managers will have more opportunities from customers who see the benefit of being covered in the event their vehicle breaks down. It gives your dealership a chance to speak about the benefits of servicing there. Dealers have seen a 29% increase in unit sales, 31% increase in PVR, a 70% increase in customer pay repair order dollars, and many more benefits
In a world filled with monotonous digital ads, social displays, and emails add something to your dealership to help you stand out in the marketplace. To learn more about Warranty Forever visit our informational webpage. https://www.naenwan.com/ads_warrantyforever
Michael Sabol – Marketing/Business Development Coordinator – Advanced Dealer Solutions
In this month’s issue of The Advanced News, we highlight an organization that is combating Alzheimer’s disease, an exclusive program for your dealership, and the trick to cooking the perfect steak for Father’s Day.
Sales volume continues to be up, average prices are up, profits are up and we continue to celebrate our dealers’ successes with them each and every opportunity we can. We are all crossing our collective fingers for the manufactures to figure out the chip shortages so dealers can get much-needed shipments to their lots.
We welcome any feedback and will seek to continually improve with each issue. It is through this ongoing experiment that we look to gain more knowledge, insight, and ideas that we will pass along to our current and future clients.
To read the full newsletter and subscribe follow the link below.
