Sept. 1, 2008 – Real-life, believable proof of the F&I?potential
September 1, 2008
Filed under Columns
Mike McBroom is my type of guy. He’s a cut-to-the-chase, no-nonsense type that absolutely tells it how it is.
He is also the “poster boy” for Zurich, an F&I provider for the powersports and auto industries. McBroom, the owner of two Missouri metric dealerships, is pictured in a Zurich advertisement that you’ve seen in Powersports Business.
McBroom, to prove my description, agreed to be pictured in the advertisement but would not agree to place his dealership’s exact F&I per unit sold data in the ad. And his reluctance to do so had nothing to do with any type of competitive concern.
“I said, ‘No I can’t do that because people are going to think I’m lying,’” he said.
And he’s dead serious. McBroom probably would have had grave doubts himself if he would have opened up Powersports Business and seen a smiling face peering out at him that had a F&I revenue number alongside of it. A number that, in his mind, was just downright absurd.
Like this one: $800 per unit sold for F&I revenue.
That, by the way, is the actual per unit sold number for McBroom’s Neosho, Mo., dealership. The very number that McBroom would not allow to be placed in the ad. The very number that actually has been eclipsed in recent weeks by his F&I staff.
McBroom, in fact, should not just be a poster boy for one company but for the entire U.S. network of dealer principals. This industry is filled with the Mike McBrooms of the world, hard-working, down-to-earth types that have a definitive opinion of what their F&I efforts can — or better said, cannot — achieve. That unbending mindset is a dangerous one in these tougher times when back-end profit becomes a likely difference between making a profit or losing money.
To McBroom’s credit, he was willing to try something different with his F&I department even when he thought the idea of doubling his previous per unit sold number — $350 — was about as likely as winning the Show Me 5 Paydown, one of Missouri’s state lotteries.
Before going further, it should be noted that McBroom is unlike the majority of dealer principals in the United States in that he belongs to a 20 group, a network of dealers from around the nation that meet regularly to try to improve their business.
He does, however, fit many other typical characteristics of dealer principals. He’s a powersports enthusiast that has worked along with his wife, Leslie, and his son, Josh, in a dealership in a small community of some 10,000. His values mirror that of the Middle American lifestyle. He has a straight-to-business approach — “Well what do you need to know?” he asks after immediately finding out who’s calling — but has a sly sense of humor that emerges when he discusses his state of semi-retirement and how that affects his son, the president of the two dealerships. “I’m just hanging around to pester him,” he says.
Really, he’s the perfect poster boy for what needs to change in the industry, and more to the point, in the business operations of dealerships. Higher back-end profits need to become a priority for dealer principals and general managers. A recent national dealership survey that was conducted for Powersports Business by our market-researching partner Irwin Broh & Associates proves this. The survey of 500 dealerships showed that dealers who made less revenue in 2007 compared to the previous year were more apt to spend less money on F&I. In fact, it wasn’t even close. Dealers who made less in 2007 than the previous year were twice as likely to have decreased their spending in F&I.
Now was that the only reason why some dealers sold less in 2007 than in 2006? No, as you’ll see in the survey that will be shown in its entirety in our soon-to-be-published 2008 Market Data Book. But we know from another national survey taken the year before that more than 50 percent of dealers’ revenues are tied to new unit sales. Those sales are obviously down this year — roughly 8 percent in the first half — and it’s hard to imagine them suddenly rebounding in any dramatic fashion.
The other 50 percent of the dealer’s revenue, including F&I, will have to perform at higher levels than in years past. And we’ve seen that’s not out of the question. Several on-road aftermarket companies reported at Tucker Rocky’s recent national sales meeting of seeing historically high sales volume. Plus there’s the F&I potential, as McBroom could testify.
And he’s not alone. Fellow dealer principal David Roosevelt, a Ducati-Genuine Scooter dealer in Seattle, also has experienced that. His F&I revenue has tripled this year.
The connection between the two: Each discarded the “tried-and-true method” and took a bit of risk in attempt to increase their F&I revenue. Roosevelt hired a full-time F&I salesperson for the first time and McBroom worked with Zurich to install new processes and new staff.
“It comes to pass,” McBroom said of his store’s F&I per unit sales increase. “I can stand behind these numbers.”
That alone ought to speak volumes. psb
Neil Pascale is editor-in-chief of Powersports Business. He can be reached at firstname.lastname@example.org.