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10 Steps to Special Finance

The special finance market is booming and the good times are expected to continue for at least the next 12 months. Special finance guru offers a 10-step guide to getting in the game.

by Greg Goebel
November 12, 2013
10 Steps to Special Finance
5 min to read


With the special finance market booming and the good times expected to continue for at least the next 12 months, our phones and inboxes are blowing up with dealers and executive managers who want to get back in the game. The inquiries are multiplying as we get closer to tax refund season. They usually go something like this: “Yeah, I want to fire up the SF department we had four or five years ago, and I need to know which finance companies we need and what advertising is working best right now.”

If only it were that easy. Then again, I guess it is that easy to get into the business. Enjoying any success is a different animal. But you can’t know it will work if you don’t get started now, so here is a 10-step guide to building or growing your SF department:

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Step 1: Define the Process
Decide whether you will create a blended floor, which is the usual choice for the highest volume SF stores, or a separate department. Will you be refining some existing subprime business or starting from scratch? Resolve any pay plan conflicts that exist between employees.

Step 2: Set Goals
You need achievable and measurable goals to succeed. A very realistic (average) goal in most any non-highline store is 25 percent of your total volume. Let’s say you are doing 100 units with zero SF business — of course, most stores will have at least a few, even if it’s purely by accident — then 130 total units, including 30 SF units, in 90 to 120 days would certainly be realistic. Additionally, knowing that the benchmark for total deal gross profits in a franchised store is $3,291, shoot for an initial goal of $2,500 per unit sold.

Step 3: Assess Resource Needs
Review your existing credit demographics, sales, finance companies and inventory. What percentage of your traffic falls into the various subprime credit tiers and niches? What sales are you deriving from each? Will new opportunities be the result of a need for different finance companies, inventory to match the finance companies or both?

Step 4: Add Resources
Find finance sources to cover all of the credit tiers and niches, then add necessary inventory — in that order. You need the finance companies to match your credit tiers and niches and you need inventory to match the finance companies. Base your proportions on the number of prospects in each segment.

Step 5: Assess Personnel
Do you have an employee who can read a credit statement and know which finance company will buy it and why? If not, where can you find one? An average person working SF can handle 75 new leads per month. Do you have sufficient personnel to handle additional opportunities?

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Step 6: Set Budgets
Set your budget for people and marketing using benchmarks. To grow your business by 30 deals per month, at benchmark delivery rate, you would need at least 90 additional prospects. Attaining benchmark results right out of the gate is not likely, so you will need even more prospects.

If you use the franchise benchmark of $436 per sale for the cost of advertising, then your budget for marketing should be limited to no more than $13,080. Using a target of $2,500 per unit sold (well below benchmark) for average total gross profit, and $350 per car sold as sales compensation, and $350 per car sold as SF management compensation, we know your special finance manager should earn about $10,000 per month if he or she hits our target.

Step 7: Calculate Lead Needs
You already have a certain percentage of unsold SF prospects walking through the door. We know that if we can just identify them, we won’t have to attract as many new showroom visitors; therefore, you can reduce your marketing budget. While credit score alone doesn’t determine whether a prospect is prime or subprime, it is the easiest way to measure.

Run a credit bureau analysis and, using an appropriate and arbitrary credit score, see how many of your credit pulls were below the prime threshold. Assume any prospects you did not pull credit bureaus on would fall into the same SF category. Subtract those existing prospects from the total of 100 showroom visits you need, and recalculate the number of new leads/opportunities you will need.

Step 8: Add Personnel
By now you know how many additional people you need to have, as well as how many may need to be replaced. I suggest you look outside the industry rather than trying to reframe someone else’s retreads. In any case, once hired, this is not a one- or two-day training process. For example, if you are hiring a salesperson and you have a BDC, I would insist that each salesperson spend at least one week working the phones before training for the floor after orientation.

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Your salespeople will need to spend a significant amount of time role-playing in addition to solid process training. I also suggest a mentoring program if you are not starting from scratch. Finally, you should be measuring the team’s sales activities daily and coaching them as well. Every salesperson, even the best, needs coaching. The time invested in training and coaching will pay long-term dividends in conversion rates and employee retention.

Step 9: Add Fuel
Create a team that is able to maximize the conversion of the customers already walking in the door before trying to attract more opportunities. To add fuel to your program, hire the people and get them trained before you push the “go” button in marketing. The money you will spend to hire and train additional employees in advance will be far outweighed by money wasted attracting more people than you can service.

Step 10: Adjust as Necessary
As you add finance companies, people and marketing, inevitably, something will not work as expected. The only way you can know for sure is to track your sales activities meticulously, compare the data against trends and against our industry’s performance guides. Taking those steps will make it much easier to determine what really is working and what isn’t. From there, as in all businesses, adjust as necessary — and keep tracking!

In the end, these 10 steps, along with my 10 Critical Components for Success, should help you create an SF department or store that operates at or above benchmark. It takes a plan, discipline, and a watchful eye. As always, if I can help, I am always available, so drop me a line.
Until next month, great selling!

Topics:Dealer Ops
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