I had a really interesting call this morning, and I figured I'd unpack it here because I get this same call once or twice a week from dealers all over the country. So if you're feeling stuck, this one's for you.
The call came from a retail independent dealer out in the Northeast. Good friend of mine, I've known him 10 years, and he's also a client. He's been hovering right around 50 cars a month for a while now (45, 42, 48, 52), trying to break open to 60, 70, 80 and beyond. But he's plateaued. Treading water. Honestly, probably taking on a little water. And it's frustrating.
He called me this morning and said, "Justin, my sales manager just resigned. Can you help me find another one?" I said, "Let's stop for a minute." Because hiring another sales manager is exactly what he should not do. Let me show you why.
The Hardest Space in the Business: 40 to 70
I've said this a hundred times in my 20 groups, and if you're not in one, go look at ARC 20 groups. It's the highest ROI you'll ever get in this business. The hardest space to grow through is not 1 to 30. Getting started isn't the hardest. Going from 100 to 200 a month isn't even the hardest. The hardest space in the entire car business is going from about 40 sales up to 70.
Why? Because that's where you start having to actually define and articulate departments. F&I, sales management, who's managing who. You're bringing on leaders you hope will do what you'd do when you're not standing there watching. You're figuring out pay plans, coverage with a small staff, accountability, and your own changing role. And the big questions: What order do you hire people in? Do you hire a sales manager first, or an F&I manager first? Here's the truth. At 40 cars a month, you can't really afford either one of them full-time. It's a part-time job. So you've got to get creative.
Where This Dealer Is Stuck
So where's he at? He's an independent retail dealer doing about 45 cars a month. He has three salespeople, a full-time F&I manager, and a full-time sales manager who just resigned. (His BDC and all that jazz, I'm not even worried about it.) He wants to replace the sales manager.
Now look at his F&I manager. I'll call him Joe. Joe is running over $2,000 a copy, which is fantastic. A lot of dealers stuck at this same 45-car ceiling don't have that kind of firepower in F&I, so that's a real feather in his cap. But here's the thing: full-time for an F&I manager is about 75 spins a month. Joe's only doing 45 turns. He's a part-time guy on a full-time pay plan. He's got room.
Don't Hire a Sales Manager. You Already Have One
I told my friend: don't hire a sales manager. Sit Joe down and roll out some vision. Tell him, "Joe, you're doing a great job running $2,000 a car. But we've got to push through this 45 ceiling, and the next one is 60 to 65. To get there, I need you to wear two hats, our F&I manager and our sales manager."
Joe now has two roles, which means he gets two pay plans. As the F&I manager, his role is to protect the dealer, run his PVR on the back end, and sell ancillary product. On the sales management side, his new role is penciling deals, doing early TOs, and working with the salespeople on follow-up and lead generation to get traffic in the store.
A big part of that is what I call the "one thing" call. Joe picks up the phone: "Mr. Customer, I'm Joe, the manager. I know you were in yesterday and didn't buy. If there was one reason why, what would that one thing be?" Thirty seconds. People will be more honest with the manager than the salesperson, and a manager can make exceptions happen. The window on a deal closes fast, and that call brings folks back in while they're still ready to buy.
The Pay Plan: Two Roles, Two Hats
Here's how the money works, and if you follow my material you know I just can't deal with salaries on the variable side except in very special circumstances. Joe is currently on a $6,000 a month draw plus a percentage of the F&I product he sells, around 15%. And they do something I'd call advanced: they pay him on 85% of the back instead of 100%, and then they don't track chargebacks. A 15% chargeback rate is pretty normal, so paying on 85% means nobody's chasing chargebacks all month. Cool pay plan, and we recommend it in the right situations.
That F&I pay plan does not change. He stays on his $6,000 draw and his 13, 14, 15% on the back. What we add is the sales management piece: 5% of the front-end gross. Could be 4%, could be 6% depending on experience. There are a lot of hybrids, but for the mainstream I'll roll with 5%. No additional draw. No salary. There's no reason for either, because he's already covering his draw on his F&I work alone.
Think about what you just bought as the owner. Now you have somebody besides yourself losing sleep over holding gross. In an independent store, we pay salespeople on flats, say $300 a car, maybe $325 to $350 with tier bonuses and incentives, so they're motivated to sell another car. But now you've got a sales manager who's vested in the gross. The more gross he holds, the fatter his 5% is. And he should be docked for wholesale losses too, because that's his lane now: protecting the front. Joe's about to make a lot of extra money, and he's going to be excited about it.
Cast the Vision, Create the Momentum
Here's the pitfall, and it's where dealers who can't see down the road get burned. You have to prep Joe for what happens next. Tell him up front: "Joe, when we hit 65 or 70 cars, this 5% is going to go away." Because at 70 cars, doing both jobs is almost too much for one person. He'll feel the plane hit turbulence, and that's the signal it's time to hire a dedicated sales manager.
When that day comes, you sit Joe back down: "You told me you want to be the F&I manager, not the sales manager. So I'm taking that 5% back to fund the sales manager who's going to take work off your plate." Yes, it feels like a pay cut. But it's a huge reduction in responsibility, and now Joe's doing F&I on all 60 or 70 customers in a wide-open lane. He can push his PVR from $2,000 to maybe $2,500 because that's all he's focused on. And you keep casting the vision: "Joe, when we grow through 75 and on toward 100, we're going to need an F&I director to train the next person. Would you want that one day?" Now you've turned a pay change into an opportunity.
This is everything. When you roll out a plan and four months later it actually happens, you build momentum. The next time you cast a bigger vision, the team says, "It happened last time. I bet it happens again." That beats living in a stagnant pool of mediocrity where nothing grows and people quit because they don't see any opportunity. People can't get behind you if you're not leading the charge.
Do the Math on Your Salespeople
The management fix is only half of it. My friend has another problem: he only has three salespeople. "I've got three, with a fourth one coming," he told me, and that's been his line for a year. We all know the turnover in this business, especially when you're not growing, because a stagnant store is a revolving door.
So do the math. The average independent salesperson in America sells about 15 cars a month. Three salespeople times 15 is 45. What's he selling? 45. There's your ceiling, in black and white. He needs a fourth salesperson like tomorrow, because 4 times 15 is 60, and that's the capacity to hit the number. And it all has to happen in tandem: I'm getting Joe's buy-in on the management plan and hiring the fourth salesperson at the same time. You can't push one lever and ignore the others.
Free Up Your Frozen Capital
If you know my four pillars of growth, you know I always check the inventory. Historically this dealer has had an aging problem. Right now he's got 78 units frontline ready and 98 total counting wholesale and demos. Selling 45 a month, that's about six turns a year, roughly a 45-day supply on his frontline units and a 60-day supply once you count wholesale. And you have to count wholesale. Those units you pushed under the carpet three weeks ago, the ones with motor issues, transmission issues, waiting on a part down at the Dodge store, they're still costing you floor plan and holding cost. Ignore them and you're just fooling yourself.
Here's what a lot of dealers get wrong: he does not need to go buy more inventory to sell 60. The problem isn't too little inventory. It's holding a select number of units too long and freezing his cash while the younger units turn. He's got 8% sitting over 60 days. That's not terrible, but 20 units at $20,000 is $400,000, close to half a million dollars, that isn't turning. Get rid of the stale units, get that cash back, and re-inject it into the fresh inventory that's actually turning. Remember, as a dealer your inventory is your investment. Your job is to spin it and make money, so put that capital where it'll turn in 30 to 45 days. And be smart about it: know what's selling in your market, know your do-not-buy list, know what your shop can and can't handle.
Hit 75 and You Can Compete With the Franchise Stores
Here's the aha moment. When my friend gets to 70 or 75 units, it's a full-time F&I job and a full-time sales manager job, the same as a franchise store. The average new-car store sold about 104 cars a month last year. That's not some untouchable number. So once you have the turns they have, you can recruit any sales manager or F&I manager in the country and put them on the same pay plan the OEMs offer, because it's all funded by F&I gross. You can pull a great manager out of the rat race of the franchise world and into your growing independent. And honestly, you'd be surprised how many OEM stores are only running $1,200 a car and think they've got it figured out. They don't. There's no magic secret sauce.
The Bottom Line
This dealer's real problem wasn't inventory. 8% over 60 days isn't the issue today, even if it has been in the past. His problem is he's overstaffed at the management level and short a salesperson on the floor. So here's the play, and it all moves in tandem:
- Don't hire a sales manager you can't afford. Promote your part-time F&I manager into a two-hat role, two roles and two pay plans, and add about 5% of the front-end gross on top of his existing F&I plan.
- Cast the full vision now. Tell him the 5% goes away at 65 to 70 when you hire a dedicated sales manager, and frame the whole path, F&I lane and then F&I director, as opportunity.
- Hire the fourth salesperson immediately. Three reps at 15 cars each is 45; four is 60. That's your capacity.
- Free up your frozen capital. Move the stale units, get the cash back, and reinvest it where it turns in 30 to 45 days.
Do all of it together, and you break through 45 to 65, pick up net profit, and most importantly you build momentum and opportunity your team can rally behind. Get to 75 and you can recruit and pay like the franchise stores, because you'll have the turns they have. That's how you stop treading water and start growing on purpose.
-Justin Osburn
