First in a six part series of articles.

While the names and locations are being changed to protect the company’s privacy, this is the first of six articles that document the process being used to develop a startup Special Finance operation inside an already successful independent dealer, located on the fringe of one of the major metro markets in the United States. It will detail the plan, the strategies, the successes and the challenges encountered over a six month period, with the end goal of the new department to reach a monthly sales volume of 70 deals at over $230,000 total gross by the end of that period.

The Starting Line

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 an averaging 100+ pre-owned vehicles per month reached out. They wanted my team and I at DealerStrong to help them build a Special Finance department. 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 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. (Usually our SF efforts are combined with developing the entire operations of a dealership.)

This article will focus on the planning and make ready period, the thirty day period prior to launching the business. It is a tough phase as the Matthews and Rodgers see the potential and want to go from zero to wide open overnight. It isn’t going to happen – not and be able to sustain it. To me, this is the most important phase as it involves building the foundation for the “machine.” I believe in building the machine, adding 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 get to the end goal there will likely be three phases of growth.

Timeline: To be accomplished in the first 30 days

With no existing department, DealerStrong must help Champion Motors accomplish a number of tasks in the first thirty days prior to launch. They cover:

1) Personnel
2) Customer demographics and finance companies.
3) Inventory
4) BDC and Technology
5) Facilities

Personnel

To commence SF you need a skilled manager with sound integrity. Additionally, we will launch the department with a minimum of two sales people. Finally, within the first month of operation we will launch a BDC that will initially focus on SF. The BDC will be staffed with three BDRs.

To expedite the hiring we placed ads on Indeed.com, used our own DealerStrong web site 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 that have ties to the city to try to find managers with the skill sets and character needed.

Quickly resumes came in. We use a generic and compliant employee application, which we forwarded to the respondents with resumes that were worthy. Once the applications are returned the screening process begins. Employment tests were provided to determine if skills sets 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-raft from the hirable few. A staff will be ready for the on-boarding and job training on Day 1.

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 score to a 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 Finance, 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.

Inventory

Certainly, anyone that has ever read my writings knows how integral I believe inventory is to the success in SF. It must not only be behind book on the lot, ready to go, but it also must fit the banks/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’s 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, who is responsible for inventory, 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.

BDC and Technology

At onset, 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 “thousands.” As a result the decision was made to build a BDC immediately and by the middle of the first active month have it both 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, or their service department. The decision was made to install ProMax Unlimited and move the entire operation to it – 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 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, the DealerStrong BDC expert and trainer worked with the BDRs to essentially take a newbie crew and turn them into a strong foundation. Not only did Reeves work through the processes and the call guides, with ProMax on board, 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 time-line for the BDC to be ready to go live, and expects them quickly to hit benchmark productivity.

Facilities

Next was getting the facilities ready for the new team and BDC. The dealership is a former second tier franchise store. It has been very tastefully reappointed to handle the upscale prime business. What it didn’t have was sufficient space ready 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 month lead time gave us the ability to get it outfitted and wired to handle a VOIP phone system.

And so went the first month of planning and make ready. It certainly was an active time, but it certainly 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 should be a ton of fun.

Until next month,

Great selling!