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For the last two weeks, we revisited timeless tactics for selling cars, running fixed ops, and improving the F&I department.
(Highlighted a few newer tips, too.)
But this week we wondered: What’s different once a dealer owns the store?
And what’s most surprising?
Which brings us to this week’s edition.
Here are lessons on getting in the door, managing money, and prioritizing people over everything else.
Getting in the door costs far more than buyers expect.
Third-generation leader and CEO Ronnie Lowenfield runs Casa Auto Group, of El Paso, Texas, with his brothers.
Lowenfield said first-time buyers need to stay flexible, and consider OEMs and locations that may not be their first choice.
Build success, then become more choosy.
The Wu-Tang Clan covers a lesson Lowenfield learned early: Cash Rules Everything Around Me.
“Running a dealership, it's very, very, very capital intensive,” Lowenfield said. “I don't think that people understand how much until they get into it and realize, ‘Whoa, OK, this is pretty serious.’”
Ronnie Lowenfield
Casa Auto Group
To illustrate the gap, here's a simplified way to see his math:
Say the goodwill is $5 million and the land is $10 million.
Since most banks and manufacturers finance goodwill at roughly 50% loan-to-value, a buyer might assume $2.5 million in cash covers it.
But once a down payment on land (about $3 million), fixed assets (about $1 million), and required working capital (at least $2 million) get added in...
…And that $2.5 million suddenly looks a lot closer to $10 million.
Casa now has a vice president of accounting that gives daily cash reports, "and that was something that I never did," Lowenfield said.
What’s in the report:
Contracts in transit
Accounts receivable
Work-in-progress
Aged inventory, and floor plan balances
He's also more conservative now, keeping a larger cash buffer and investing idle capital into low-risk, liquid accounts, rather than letting it sit or over-committing it.
Jen Moylan, lead consultant at accounting firm Withum, told us dealers often struggle with understanding cash flow from departments they’re not as familiar with.
"So many new buyers, in particular, are coming up through the sales side,” Moylan said. “They know sales, they know F&I, but they really don't have that much involvement in the fixed ops side, and that's an enormous money maker for them.”
Jen Moylan
Withum
Tips from Moylan:
Hold monthly or quarterly meetings with department managers to review any and every expense: Still using it? Is it needed? Is there a cheaper way?
Track fixed absorption: service and parts income should ideally cover at least 80% of fixed overhead
Break down the daily gross profit target needed to cover expenses: for example, $500,000 in monthly expenses over 25 operating days means $20,000 a day in required gross profit
Audit and cut recurring tool/subscription charges
Old equipment can become a costly trap for buyers, she said. Evaluate how much monthly repairs could be.
"I just was looking at a dealership that was posting about $80,000 to $85,000 a month on average in repairs and maintenance expense," Moylan said. "Normally we want to see under $10,000 a month."
And make sure to scour a seller’s finances.
"It's going to cost you $20,000 to do a proper due diligence," Moylan said.
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Clarity and culture decide whether people work with you or around you.
Todd Edwards, president of his family’s Edwards Auto Group, shared a simple but important leadership lesson: Think before speaking.
"I don't think I fully grasped the consequences of speaking before clearly thinking through what I was going to say," Edwards said.
Todd Edwards
Edwards Auto Group
Now, he makes sure to consult and gather intel before, say, spouting off a new idea or process in a meeting.
Make sure to think through ideas from others, too. What may seem like a simple idea from your 20 group may not work for yours.
Take the suggestion to "just hire a photographer" to stay on top of used car photos, for instance.
Sounds simple, but without the right staffing and workflow behind it, he said, it can quickly become complicated and costly.
He suggests: Examining processes, and change what doesn’t work.
About two years ago, Edwards redesigned pay plans to be less commission-heavy with adjusted hours after noticing service advisors were quitting around the four-month mark.
Turnover dropped significantly.
Other tactics that worked for Edwards:
Establishing floating F&I managers who rotate between stores to cover gaps
Running a store yourself before plugging in a new GM or similar, to see how it’s working and get to know the people better.
And walking the lots regularly. Edwards said a disorganized lot could be a clue that that store’s processes need a check.
The key to unlocking success is prioritizing people over everything.
Lowenfield from Casa hires for values first.
"You have to have a baseline of qualifications and abilities to perform your job well, but that's not going to get you the job," Lowenfield said.
Casa Auto Group shares these five core values with every new hire up front:
Serving others
Doing what's right
Valuing people
Stewarding responsibly
And having fun.
For new hires, that usually means:
Every employee gets a one-on-one interview to gauge fit, often with a trusted general manager
Once aboard, employees get evaluated two main ways: Do they share the company's values, and are they getting results?
If someone’s values are a fit, then they can improve the results part, Lowenfield says.
Lowenfield also credits journaling for being a helpful tool to work out issues, and revisit as needed.
"Journaling is... an unbelievable gift," Lowenfield said. "It's wonderful to be able to look back and look at how I've changed and evolved."
He’s even been known to lend them out. (We appreciate this page!)
Michael Brown, CEO of Empire Automotive Group, worked for and learned from Roger Penske and John Staluppi before buying his first store in 2019.
He quickly grew to 17 rooftops by targeting struggling dealerships he could turn around fast.
His core mantra: Get the customer to return again for anything. Even wipers.
"You cannot always be conquesting customers," Brown said. "You got to keep your customer base, and then add to it."
Michael Brown
Empire Auto Group
Empire also enforces a call-back timeframe policy, (with wiggle room!)
"You don't have to call the customer back in 30 minutes if you are out sick, if you are on vacation, or you are dead,” Brown said.
And, he views complaints as opportunities.
"I'm thankful for the complaints," Brown said. "It's my chance to understand what the issue is... We have that customer's attention for better or worse, and now we can blow them away."
Because, he said, (and you may have heard this one before):
"I'm not in the car business," Brown said. "I'm in the people business. I just happen to sell cars, too. They could be grapefruits."
The bottom line: Every operator that succeeds in the car business knows it’s not always easy.
And those who do succeed, usually say the same thing: It’s not about the cars.
Cash and discipline get you in the door.
People keep you there.
