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The Five Key Ingredients to Improving F&I Gross Profits

The Five Key Ingredients to Improving F&I Gross Profits

There are five key components to maximizing F&I gross profits and product penetrations:

  1. Right Person / People
  2. Properly Trained
  3. Motivating Performance Based Compensation Plans
  4. System and Controls
  5. Dealer / Management Support

Let’s break these down with more specifics.

RIGHT PERSON / PEOPLE: Agents should be actively involved with the recruiting of their dealer’s F&I personnel. The keys to effective recruiting are to have a game plan, meaning a written interview process, which is designed to ask questions to gain knowledge of the applicant’s sales experience and skill sets. With that, the questions we ask should be sales specific related questions where we ask the applicant to provide us with the “situation”, “actions he / she took to resolve” and the “end result”. As an example, “tell me about a sales situation that you were involved with where you felt you gave it your all, but you were unable to make the sale, again please provide me the situation, actions you took, end result.” “In retrospect is there anything you could have done differently in that situation to change the end result and make the sale?”

The second key to effective recruiting (in no certain order), is to keep a “bull pen” of F&I managers you worked with in the past. We all know that good F&I managers are hard to find but keeping a log of contact information of the “performers” gives you a quick source of candidates to contact when your dealer is in need of a new person. I am certainly not suggesting you recruit quality people from your current accounts as that is not an ethical business practice. However as we all know, F&I managers often move from place to place and you can always reach out to them to see where they are currently and if they are happy there (again, only if they are now working at a non-client dealership). This strategy prevents you from having to recruit from a blank slate.

The third key component to effective recruiting is utilizing some type of third-party personality profile survey, i.e. D.I.S.C., Predictive Index etc. Many good sales people can really impress you in an interview and seem to “say all of the right things” but coupling a quality interview with a true picture of those individuals’ inherent personality traits, can assist us in making more accurate decisions. When it comes to selling F&I products, intangibles, there are certain personality traits that are more favorable, i.e. dominant and out-going versus introvert.

PROPERLY TRAINED: All F&I managers regardless of experience and past track records, when hired, should attend a formal F&I training course with one of our industries leading F&I training companies. Experienced or not, we all need a refresher periodically to re-tool as it is human nature to revert back to some old habits or maybe we just need to get back on track. I personally have never conducted an F&I training seminar where the veteran F&I folks will approach me at some point during the seminar and say “thanks dude, you know I used to use this stuff but I have gotten away from it” or “wow dude, I really like the way you handled that objection, I am definitely going to add that into my arsenal”.

When it comes to training and really running at market leader performance numbers, we should also have the sales managers cross trained on how to menu sell and how to overcome customer objections as they often have to fill in on the F&I managers day off or during their sick or vacation time… and I think we all know what typically occurs from a back-end profit standpoint, when a sales manager takes the deal… most often it’s a $0.00 profit deal or deals.

Lastly, we need to recognize and make sure our dealers and/or general managers recognize the role the sales person plays on the impact of the F&I profitability. Good sales people can make or break the deal and inexperienced, untrained sales people will almost always impact the outcome of the deal profit, negatively, not with any malicious intent, they just don’t know any better.

I will add one more point regarding the importance of the training, how many of our general managers know what “Customer Showroom Interview”, the “Menu Presentation”, and the various products “Customer Objection Handling Techniques” sound like? Might it be a good idea to role-play a presentation with them, or even better yet, have them attend a formal F&I course? We consistently have GMs and even dealer principals attending our F&I course and damn if that is not a show of Dealer support, I don’t know what is.

MOTIVATING PERFORMANCE BASED COMPENSATION PLAN: F&I compensation plans should be absolutely congruent with the dealer’s expectations of performance levels. Our compensation plans are our job descriptions. The F&I comp. plan should be based on a graduating scale of product penetrations and gross PVR (profit per vehicle retailed). The graduating scale method allows for the F&I manager to continue to “chase the carrot”.

Sales managers and sales people should also have a component to their comp. plans based on their F&I performance. This creates synergy and has everyone on the team striving for the same goals. Too many dealerships do not pay their sales people for F&I performance and therefore those that are totally money driven, simply don’t care.

SYSTEMS & CONTROLS: “We cannot manage what we cannot measure”, I’m sure all of you have heard this message in your careers and/or “we have to know where we have been, know where we are, to know where we are going”. Both very positive messages and absolutely spot on accurate. If I may, I am going to bullet point some of the measuring tools and reports that dealers should have in place in their dealerships and it is up to us as their trainers and consultants to get them to recognize how much impact the detailed tracking is to overall profitability. Not to mention, the more measurement tools the dealerships use, the easier it is for all of us as consultants to identify “profit leaks” and provide them effective solutions.

  • Daily F&I Production Reports (should illustrate): units sold-new, used and lease, percentage of deals financed both with and without leases. Individual products sold, including volume of each product, penetration of each product and profitability per contract sold. This report should be provided both for the store as a whole and also by each individual F&I manager production.
  • Individual Sales Person / Sales Manager F&I Production Report: This report should illustrate by sales person and / or sales manager the exact same information that the F&I Production Report illustrates. This allows us to pinpoint who supports F&I and conversely who is not supporting F&I. This provides us with additional training opportunities with individuals who need more help.
  • Cash Down Reports, “Cash is King”: We all know the more cash down we acquire on finance deals the more gross profit we make, both on the front end and the back end of the deal.
  • Desking Reports: We should track each and every deal and identify who the desk manager was and how the deal was structured, i.e. what was the initial term quoted (first, second pencil), was there any room in the payment to accommodate for credit challenged customers (rate guidelines), did we quote a $10 payment spread, etc.
  • Total Customer Yield Report: Illustrates the entire front end and back end by manager. When tied into the Desking Report by manager we can really highlight the strengths and weaknesses and again this represents training / consulting opportunity.
  • Contract In Transit Reports: Speaks for itself.
  • Charge Back Reports: Break down of reserve chargeback and product charge backs (by product).

DEALER / MANAGEMENT SUPPORT: This is really simple. Without the support of the dealer and his/her management team, we cannot move the numbers, and we will not be perceived by our clients as a valued partner and an extension of their management team.


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It’s Not an Event, It’s a Process

It’s Not an Event, It’s a Process

To the uninformed spectator it may look like professional football players have it easy. Play a game every week for a few months and make big bucks. But professional NFL Players are on the practice field 24/7. And when they’re not on the field they’re watching game film. These pros are the best of the best or they would not be where they are. Do they really need to practice and watch game film (training) when they have been running these same plays week after week for years?

Yes, for one simple reason: They play to win and it takes practice, practice, practice (training) to make sure they do. That’s what makes them better today than they were yesterday or even 20 years ago!

Given this proven concept, why do we, in our industry, either put training on the back burner or choose to not formally train our people at all – leaving the training to the untrained sales manager?

Because we are too busy – or maybe we are not busy enough. Or, perhaps we have sent our people to training in the past but we didn’t get the results that we had hoped for – the training was ineffective. But maybe it’s not the training that’s ineffective.

Training is not an event, a one-day activity that will change everything. It’s an ongoing process – day-to-day, week-to-week, month-to-month, and year-to-year. We practice every day, not just when we are in front of a customer on game day, but more importantly when we are not in front of a customer. We want to be practicing (training) when we are not in front of the “opponent.”

Why? It’s simple: We stand to lose if we have not practiced the execution of the play – through training.

With all of this in mind, let’s discuss the key elements of training and what makes training – or practice – most effective.

The Kickoff

First we need to establish the foundation. To use Vince Lombardi’s phrase when kicking off the first practice session of every season, “Gentlemen, this is a football.”

Before a training session takes place, you should have constructedyour process. In other words, you should have partnered with your training company and “white boarded” your process. By building your organization’s process with you (dealer principal) and your management team, you create “buy-in.” The process is yours, not some generic process. As a result, you and your management team take ownership of it.

Your process needs to be in writing. For example, if it’s a Road to the Sale process, you need to have it in writing and each and every individual has to have, using the NFL analogy, a copy of the “playbook”.

Once you have built your process, it’s time to have your trainer facilitate the training. Using TRAIN as an acronym, there are five key elements to effective training.

T – Train/Teach the Curriculum

One of the best methods of training is the guided discovery method, which is designed to create the “why” before teaching the students the steps to the sale and/or word tracks. If students, especially those who have experience, don’t understand the “why,” they will not buy into the new process.

Rather than have the trainer do all of the talking, encourage interaction from the participants. Before getting into the “steps to the sale” or “objection handling,” we need to allow the students to discuss, in an open floor environment, their “average customer” and the challenges and impediments to their performance. Once they are aware of and have discussed in a public arena their challenges, they want to know what the solutions are. The training course will provide those solutions. It’s called the “tell me more factor.”

There are a lot of great trainers out there who do all of the talking – the “stage show” approach – but there is little to no interaction with the audience. As an example, the trainer will role-play a given sales situation and impress the audience with his or her performance. However what the trainer or training program did not allow for, was for the student to learn, practice through role-playing and replicate the performance. This learning environment is not conducive to retaining the material. The training program should allow for the participants to role-play the presentations. As an added retention component, record each individual’s presentation and critique the video of it afterwards.

R – Repeat, Retain

Training should be conducted daily, weekly, monthly. No excuses.

Once the initial event (training session) has occurred, the most successful dealers have weekly training with videotape role-play and critique. When a dealer invests this time in his or her employee’s success, it has two very favorable results:

  1. The process is followed by all and the customer experience is positive.
  2. Employee turnover is minimized. Employees feel valued and morale is increased.

A – Accountability

If employees aren’t held accountable to follow your process, the training will be ineffective.

If you are going to invest in the training of your process and then not hold people accountable to follow your process to the letter, you have wasted your investment of time and money. It’s easy to let the “highest unit” sales person do it their way, versus doing it your way. Once this occurs it creates a domino effect. If you let your “big producers” break the rules, the end result is there are no rules.

I – Inspect What You Expect

If you don’t inspect your people’s presentation performance and instead base your evaluation solely on their sales numbers, you have again wasted your training investment. Have your people role-play any given sales situation “on the spot” to allow you and your managers to evaluate the sales persons’ or sales managers’ effectiveness.


Keep the process going. NFL Players are not just experienced, they are polished. It’s all about training. And more training.

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