DESIGN VBC PAY PLANS AROUND KPIS THAT LEAD TO BETTER ACQUISITIONS.
The automotive industry knows better than almost anyone that compensation drives performance, and that’s just as true on the buying side as it is on the sales side. But compensating your VBC team isn’t the same as your salespeople.
For instance, you likely commission your salespeople on every sale no matter what. If you did that for your Buying Agents, you’d end up with a lot of lemons and losing a lot of money.
In this VINCUE Accelerate, Danny Zaslavsky, VINCUE Managing Partner and Dealer Principal at Country Hill Motors, shares a few different strategies for compensating your VBC team that will lead to better acquisitions – not just more acquisitions.
Good afternoon friends. This is Danny with VINCUE and Country Hill Motors. And thanks for joining me today for VINCUE accelerate live, VBC pay plans and KPIs, both whether you have a startup vehicle buying center and you’re just getting warmed up and… Excuse me, starting to scale the vehicle buying center efforts and trying to figure out how do I incentivize those people, how do I pay them and how do I pay them in a way that allows me to scale so that you don’t have to change pay plans along the way and accidentally either underpay somebody and they’re poached or overpaid somebody and have to have those tough conversations. So again, thank you very much for joining. Please do me a favor and put your name and dealership that you’re with in the comments just so I know who’s with us and if you have any questions, please ask in the comments and I will answer them now.
At any point, you can email us email@example.com if you need or want any of the things that you see in today’s presentation, because we do have the pay plans and the KPIs all documented and we can email them to you. You can always get ahold of your performance manager, but this is meant for those that are serious about growing your private party acquisition efforts. So today will be pretty concise and impactful. I hope we’re going to be talking about two things. So number one, a startup vehicle buying center, how do I incentivize, how do I pay your first vehicle buying center agent and manager? Okay? You may be just starting with an agent and the manager is going to be at the desk, an existing one or you may already have a team in place as a startup but we’re going to be talking about that. So let’s go ahead and get rolling. So the very first thing I want to share is a VBC agent job description. So I’m going to pull this up. Let’s move my face away so you guys can see this.
All right. So if you need this again, I can email this to you. Just email me, Danny@dealerq.com or firstname.lastname@example.org. We’ll get this over to you. So let’s reverse engineer this. The first thing we want to talk about is your customer acquisition cost. So customer acquisition cost should be between 200 and $250 per customer. Now, if you think about that on average dealers at the moment are paying about $1,000 for acquisition. So by the time you pay auction fees, post-sale inspection fees, transportation and that’s not to mention an increased cost in reconditioning, there’s about $1,000 just to get a car on the lot before packed dock reconditioning, all the things that you have to do to the vehicle. So customer acquisition cost should be around between 200 and $250 per acquisition. Now I’ll explain how we’re doing that math.
So if we start with the end in mind and reverse engineer, when you look at a profit and loss statement specifically for a vehicle buying center, if you have three coordinators and a manager in there or four coordinators in the manager, your payroll and expenses should be between 20 and $30,000 a month. Each coordinator is responsible to purchase between 20 and 30 acquisitions per month. Okay? You do have those rare vehicle bikes that are coordinators that can buy more than that, that can buy up to 40 cars a month, but the average will buy between 20 and 30. 20 to 30 acquisitions a month, when you do the math with payroll at $25,000 divided by 100 cars purchase, that’s $250 per acquisition. And that’s believe it or not, even on the high end of what you should… You guys should be paying. A customer acquisition costs between 200 and 250, that should be your total expenses for payroll, advertising, technology as you’re scaling.
And that goes… So when you’re looking at hiring somebody, what I suggest always is first start with hiring a person that can be promoted into a vehicle buying center manager’s position, but first start them out as a vehicle buying center coordinator. So here’s an example, a vehicle buying center, we can give you all of their job duties but then when you get into pay specifically, let’s play with this math here. We’ll scroll down. So base pay is an hourly rate. So let’s actually keep it simple. Let’s go base pay is a salary of $32,000 a year, okay? At $32,000 a year, it’s about $2,800 a month working five days a week, Monday through Friday, commissioned to be set at $100 per car purchased approved. Okay? And if you notice per vehicle approved by the director. Now the director could be at the desk or the director could be as the manager.
And commission to be paid on, now commissions work just like sales commissions do where you get paid on whatever you buy between the first and the 15th and then whatever is purchased between the 15th and the 31st. And so we pay at my store every Friday, they get base pay and then they get their commission checks every two weeks on top of that. So that way we can keep track of what’s getting paid. Now, if there’s any questions, please put them in the comments section. We can send you this position overview and pay plan. This is for a VBC agent, but again, from an owner or dealer principles standpoint, what we should be looking at is what’s the total customer acquisition cost per acquisition and it should be between 200 and $250, when you take your total expenses in your vehicle buying center divided by the number of units being acquired.
And that’s before obviously we talk about any real return on investment or ROI. So in a established VBC. So once you get out of that startup phase and you get into more the established side where you now have crossed over 30 or 40 acquisitions a month, because that’s really when you start hitting your pace, a lot of guys get plateaued at around 30 acquisitions a month first for a number of reasons. One of the things that we really want to start paying closer attention to is what vehicles are being purchased and VINCUE will absolutely guide and help with understanding what vehicles churn faster, what vehicles bring faster gross including things like seasonality, including things like vehicle acquisition channels, maybe it’s Facebook, maybe it’s Craigslist, maybe it’s Autotrader, maybe it’s CarGurus, different markets have different successes with which marketplace we’re pulling cars in from.
And as you’re working those keep in mind, consumers are learning that you guys are buying center and so at the same time, inbounds will start increasing too, as long as you’re doing good customer testimonials. So I’m going to pause here for a second, because I want you to see, this is a video that I took this morning at my dealership and you can… I’m going to play this so you guys can see it. So this is Darren, our vehicle buying center manager and this is Sydney who is working those opportunities. So right now they’re doing paperwork. You can see they got, VINCUE open on the screen. Darren’s going over some paperwork on a vehicle that we just purchased this morning. And then I’ll walk back and follow Kaitlin into our vehicle buying center. So you can see back here, Drai’s in the corner working, they have VINCUE open and having conversations and setting appointments, looking at vehicle history and getting consumers in.
Now their goals as a vehicle buying center agent is to have what we call high value connections. All right? So high value connections are when we can not just say, “Hey, is this car available? Would you be willing to bring it out?” But it is high value connections that overcome the primary objection with the consumer, which often is money. Like, what are they trying to get out of the car? And we can… Because it’s private property, we can see a place one more time for folks that are just getting in the room. We can see what somebody is asking for the vehicle and sometimes there might be missing information like a VIN number or mileage or something we need in order to really get that value or maybe it’s a couple of pictures of the car. So that is the job of the vehicle buying center agent is to get as close to it as possible and [tio 00:09:31] with the manager to figure out, “Hey, is it worth it? Should we bring this car in?”
This morning, we bought several cars. One of which was an oddball. I’ll share it with you now. It was a 2001 Isuzu rodeo with, get this, 60,000 miles. A hard car to bid but it’s an inexpensive car that with a good motor, good transmission will sell very quickly. And we were able to acquire that car for only $2,000. Great vehicle, excited to have it. Will go through service and obviously get resold. So I’m going to pause here for a second. If we have any questions, please ask. Sean, thanks for being with us. But if you guys have any questions, so we were going over a VBC agent job description. Now I want to look at what a VBC manager’s job description looks like. So VBC manager should be promoted from within. Somebody who has worked as an agent, understands what it takes to work in inbound opportunity or an outbound opportunity, knows what it means to tio and or work values with the consumer and is able to do it at scale, right?
So the manager’s pay plan looks something like this. Let’s zoom in here. So let’s say they get a base salary and we can keep it, let’s say it’s $30,000 a year. And then instead of getting $100 per car acquired, now they’re going to be going down to $25 per unit purchase for the department. So by either department, which is a big deal, right? So now not only are they getting a base salary, they’re getting a smaller amount per vehicle purchase, not by just what they’re buying, but why their whole department’s buying and then you also give them a percentage of front end gross per month on VBC sold inventory. So at my store, we do 1% upfront gross on VBC sold inventory. So for example, if this person sold… If the department sold 40 cars retail that were once purchased by the vehicle buying center and those 40 cars average, let’s call it $3,000 a copy times 40 that’s 120,000 times 1%. So they would get $1,200, right?
[inaudible 00:12:15] Wouldn’t they pay? So, and then 30,000 divided by 12 is 2,500 plus 25. So it’d be… Their pay for the month would be 5,000 plus 1,200 so they would make $6,200 as the manager for the month. This can be adjusted obviously based on your dealership. You can lower or raise the gross. You can lower or raise the per unit purchased by the department or the… Excuse me, or the front end gross number, obviously depending on the market. New York versus Kansas city versus Omaha, we’re going to pay people differently. But this is how you begin to incentivize your manager in the vehicle buying center to pay attention to vehicles that should be acquired for the purposes of increasing gross and increasing churn. And this is often in alignment with what your tower, your sales managers are doing as well.
So I’m going to pause here for a second. If you guys have any questions, what we’ve covered this morning so far is pay plans for a startup VBC. Please ask any questions if I miss something, what a VBC agent should be getting paid. We also talked a little bit about what a VBC managers should be paid. I’m going to go back to the idea of when you’re looking at your vehicle buying center as a department and running just a profit and loss on the department than the… Let me get my little photo booth up here so you guys can see me.
So the vehicle bike center department, the customer acquisition cost should be $250 on the high end. Really it should be between 200 and 250. So when you take payroll into the equation, when you take software expenses, when you take any advertising that you’re doing, because advertising we’ve talked about this in other accelerates, a lot of it can be coming from existing advertising channels that you already have, whether you’re working with a digital marketing agency to include acquisition in that conversation, whether you are doing email marketing campaigns, social media campaigns, service drive, hang tags with QR codes, all of those are coming into the vehicle buying center. Okay? Now the only thing we didn’t talk about so far today is the incentivizing salespeople. Now at my store, we do incentivize salespeople to buy cars from the public but it is a by-product of their efforts to sell cars not a primary goal, because we don’t want to take away from their attention. Okay?
And the way it works is they get $100 per car required. However, they’re only capable… I mean, they’re only allowed to look at the opportunities coming out of their own CRM and their own pipeline. So any consumers coming in selling their vehicles that we’ve generated through the vehicle buying centers, advertising or efforts does not go to a sales person that goes to the vehicle buying center. But if a salesperson uses their own CRM to get in front of customers, whether it be their friends, their neighbors, people they’ve sold cars to then absolutely we encourage those types of deals.
So I’m going to pause here just for a second before we go back to a little bit more on the KPI side. I want to share two slides here that have a little more to do with process. And if anybody has any questions, please ask. You can email me, Danny@dealerq.com. You can also message email@example.com at any point, we can send you these pay plans. We can send you these job descriptions. So I showed earlier and I’m going to bring it up one more time for those of you that may have missed it and we’ll just play it over here on the side.
So these folks over here are our vehicle buying center agents. And so here’s what it looks like as an agent. Once they come in the consumer does an intake form. The intake form asks questions like, how many keys do you have? How many fobs do you have? Anything we should know about the car from a mechanical or cosmetic standpoint? They’re filling that out while we’re test driving the vehicle. Keep in mind, we’ve already pre-negotiated the deal upfront so we know within maybe $1,000 what the vehicle… What the customer wants for the vehicle. That’s really important. Especially as we start thinking about digital acquisition and moving forward to… We have some dealers that go out to consumers’ houses. So, I mean, that takes a lot of time. So if we think about it as ourselves, we don’t want to go to somebody’s house if we don’t feel like, “Hey, we’re close to making a deal.”
So you want to get close on those numbers and use technology to your advantage to get pictures, to get any information you need. Then we do what we call the final vehicle appraisal. So about 50% of the time, we’re taking the vehicle down the service, service is taking a look at the vehicle. The manager is sometimes getting in front of the consumer and showing them the data to say, “Hey, this is where we can buy the car from the auction, this is what it’s worth retail, this is what we’re going to pay for it. This is what the vehicle needs in order to… In order for us to be able to resell it. And then once that’s done, it goes back to the agent and the agent does all the paperwork with the consumer, if there’s a payoff, takes care of that and obviously gets them a check if we can write a check on the spot.
And then the very last thing right here is this customer interview and testimonial. If you haven’t seen those, go to YouTube, SellToCountryHill.com you’ll see those there. So the last thing I want to touch on today is how to measure some of that success. Now I’ll give you… For those of you with us today, this is exciting stuff. You get a sneak preview and some reporting that’s coming out. So let me open that. Okay. So the first thing to notice here, this is going to be on your VINCUE screen coming soon. So you will be able to set acquisition goals. Now the acquisition goals we know aren’t just for your street purchases, but you had goals, right?
For your auction purchases and those hopefully are changing because you can see the additional gross and turn and trades that come out of private party acquisition, but you can still set your auction goals. You can set your customer trade goals. You can set your dealer trade goals if you’re doing either inner dealer training within your own group or if you’re using the dealer network to buy cars, whether it be demo or lease, anything else, service drive, sign and scenes if you’re going out or if you’re doing web purchasing and then obviously street purchases.
As those goals change over time, what we will… What you will see that we’re tracking is where those vehicles are coming from, how many you’re buying at each acquisition source, what your average cost is within those sources, those channels and then once they’re selling, what’s your average profit, and what’s your average churn. All of this is going to be in VINCUE here very soon, which is one of the reasons it’s so important that you’re clicking that acquired button when you’re making acquisitions because you can see here, you’ve got sources, you have auctions trades, dealer trades, street purchases and that equates to a whole lot of money monthly.
We also can talk about productivity month over month. So you’ll be able to see not just what you are doing but how are you doing measuring to the goal, right? When we do one-on-ones with VBC agents or salespeople, they may be buying 20 cars a month and they say, “Well, my goal is 30 and our responses, that’s great. How are we going to do it?” Other than a hope and a dream, right? It takes some strategy. It takes some real time and attention to it. So by having the data here, not just to see current month but to see previous month, because there are some factors that play into this, whether it be seasonality or the market, we want to be able to make sure that we can keep track of that.
And then the last thing is the sold report and this is what I think is the sexiest report of all, because this shows the full picture over time. So you can see a rolling three months and you can see where you’re making your purchases, how many you sold, what your cost, your front, your back over time, which we think is really great. So in the VBC, how are you measuring success? And this is what I was just pointing out to you that’s coming to your screen soon. In your VBC, we’re measuring opportunities. So how many opportunities did you get inbound, outbound, third-party service drive, right? How many do we engage? And that’s what I was talking about those high value connections. I don’t care if you’re making 80 phone calls a day, that is not the way a vehicle buying center will succeed, that is a BDC mentality, that’s not a VBC mentality.
What we’re after here is high value connections from those high value connections. So usually it should be a lower number is I guess what I’m saying. How many appointments did you make and how many of those appointments turn into the acquisition. Appointments on VBC’s show at a high rate, because remember these folks are coming to you to get a check, they’re not coming to you to write a check, big difference. And then how many acquisitions and then what’s that closing ratio, depending on if it’s inbound, outbound and then by agent. So this is what we’re going to be living and dying by within the vehicle buying center in order to drive that customer acquisition cost down and obviously buy as many cars as possible and at the best possible churn and gross.
So that’s everything I have for you today. That’s a high-impact 30 minutes working together with you guys today. I’m really happy that you were able to join me. Hopefully that was impactful. Again, if you guys have questions, you can email me, Danny@dealerq.com. You can email support, firstname.lastname@example.org. Our performance managers are excited to work with you and help you scale at any time. So please reach out. So again, thank you very much for joining me today.