Jaqueline Jase is an amazing and talented skin care specialist who also offers world class therapeutic massages.  She has a newly opened Spa in Worcester Massachusetts, Jaqueline Jase Face and Body Center, that offers Microderabrasion, Chemical Peels, Facials, Massage, Eyelash Extensions. 

Check out her article on How to Get the Most from a Massage:

A professional massage may seem like a waste of time to many people, but this theory is washed away once you have had your first massage.  Massage not only is a relaxation technique, but massage provides many health benefits — physical, mental and emotional health benefits.  The experience of getting a massage can be spiritually lifting, and you may find a deeper inner peace through the process of massage.

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Dealer Floor Plan Financing Program

On September 27, 2010, President Obama signed into law the Small Business Jobs Act which, among other things, established the SBA’s Dealer Floor Plan (DFP) Pilot Program. The DFP Pilot gives SBA the ability to issue 7(a) loan guaranties to revolving lines of credit made by qualified participating lenders that are provided to retail dealers of titleable inventory.

Key Features of the DFP Pilot:

• DFP is structured to encourage SBA lenders to extend lines of credit to eligible dealers of new and used automobiles, motorcycles, boats (including boat trailers), recreational vehicles and manufactured housing (mobile homes).
• Size Standards: The applicant can qualify for a DFP line of credit using either the traditional, industry-based size standards (set forth in 13 CFR 121.201) or the alternative size standard. Under the alternative size standard, SBA will classify a business as small if it, and its affiliates, have both a tangible net worth that does not exceed $15 million and an average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years that does not exceed $5 million.
• Minimum Loan Size of $500,000 and Maximum Loan Size of $5,000,000
• Guarantee: SBA will guarantee 75% on floor plan lines of credit when the lender advances no more than 100% of the cost (invoiced) for new inventory and 100% of the cost or industry based wholesale book value, whichever is less, for used inventory.
• Use of Proceeds: Loan proceeds may be used for the acquisition of titleable inventory for retail sales, to refinance existing floor plan lines of credit with another lender, or to refinance/replace existing floor plan lines of credit with the participating lender. Proceeds may also be used to pay the SBA guaranty fee.
• Delegated Authority: A floor plan lender with at least $1 billion of floor plan lines of credit in its current portfolio may qualify for delegated authority under the DFP Pilot, which will expedite the loan approval process for small business owners and allows more autonomy for lenders.
• Documentation: Delegated floor plan lenders will make use of SBA Express forms and therefore, be able to utilize to the maximum extent practicable their own policies, procedures, internal controls and documentation. Non-delegated lenders will follow standard 7(a) procedures, including the documentation requirements.
• Guaranty Purchase: Lenders will be able to request purchase of the guaranty on a DFP line of credit in the event of a breach of a financial covenant, a sold out of trust (SOT) situation, or an unremedied adverse change.
• Liquidation of the titleable inventory securing the DFP line of credit will be required prior to making demand on SBA but the lender will not be required to liquidate all additional business personal property securing the line prior to making demand.
• Time Frame: The DFP Pilot will be implemented on or before February 7, 2011.

The Federal Trade Commission enacted new rules, effective January 1, 2011, that require creditors who use credit reports to deliver a Risk Based Pricing Notice to consumers to whom the creditor (dealer) will extend credit but on “material terms that are materially less favorable than most favorable terms available to a substantial portion available to consumers from or through that person.”

I have attached a copy of the Act and requirements for your review.  Please note that these requirements are intended to improve the accuracy of credit reporting by alerting consumers who are negatively impacted by a derogatory score.  They are meant to compliment the Adverse Acton Notices which are already required as part of the Fair Credit Reporting Act.

What this means to dealers:

• If you offer “non-prime” financing options to consumers and use a credit report to help you make decisions on the credit worthiness of your customer, you are required to provide a Risk Based Pricing Notice.  This requirement includes BHPH dealers, secondary finance dealers and even dealers who offer “near prime” financing options.
• This does NOT include dealers who offer leasing options; this does not include commercial lending.
• If you use a credit report to determine financing options for any customer who has a credit history other than “A-Tier,” and you have agreements with lenders who can finance them, you are required to provide a notice.
• If you do NOT use a credit report and only offer one-tier of financing, you are skirting the issue and are “technically” not required to deliver a notice.  However, I strongly urge you to take the little time required and comply with the new requirements.

If you have questions, please email me.  For more information, click on the links below.

Risk Based Pricing Notice Requirements

Summary of the Risk Based Pricing Notice Requirements

Last month Experian launched a new program called “RentBureau” whereby they can now report a consumer’s rental payment history. This was an inevitable expectation during the information age and regardless what people think about it, rental payment histories will be a highly valuable tool for creditors and collectors.

If you are a sub-prime creditor you most definitely should consider incorporating this data into your underwriting, credit and collections procedures. You should also expect for TransUnion and Equifax to follow with similar products. However, this is only additional data. It is your ability to interpret this data that will determine if you can gain a competitive advantage in the market today.

Consumer Rental Payment Data

Experian Launches Rental Payment Data for Credit Reports CLICK HERE TO REVIEW THE PROGRAM

Ten Questions Top Sales Managers Can Answer

By Tom Herald

For Auto Dealer Monthly, Volume 6, Issue 4

Every high-performing sales organization is led by a manager who has the answers to 10 common performance questions that separate the strong from the weak. Your answers to these questions will be your compass for action and execution. They are your roadmap for improving sales.

1. Which lead source generates the most gross profit?
Every sales organization uses leads to generate sales. Whether it’s door-to-door knocking, sitting at your desk waiting for the next up bus or launching a large, multimedia ad campaign, salespeople need prospective customers to sell their product or service to.

Top-performing sales managers know which lead source is generating the most leads. They know what their cost per lead (CPL) is for every source, but more importantly, they know what their cost per sale (CPS) is. CPS matters most because it is this cost that represents your true investment. Top managers maximize their ROI instead of dickering over the CPL. If you want the good leads, they’re going to cost more. It’s up to you to decide if they are worth the investment.

2. How well does your Web site convert unique visitors into actual sales leads? The Internet is replacing the yellow pages and newspaper for today’s consumer. To remain competitive, you need a strong presence on the Web, and prospective customers need to be able to find you among the clutter. However, that can be very costly, especially if you’re just learning about SEO. What’s even costlier is driving traffic to your site that does not convert to leads. You have to know what your conversion rate is to continue improving your sales process. You can have the fanciest site in the world, but its sole purpose is to generate sales leads.

3. Are you eliminating good lead sources because you lack the tools to convert them? Just like visitors to your Web site, at the end of the day the only thing that matters is your ability to convert these visitors into leads and the leads into sales. If you don’t have the right balance between process and product, your sales conversion is going to be low, or if you lack the ability to effectively capture prospects’ attention and inspire them to buy, you’ve just wasted a lot of time and money.

Top-performing sales managers know the importance of converting prospects into leads and leads into sales. They also know what tools they need to make the sale once the customer arrives at the store. Does your inventory match what your customers can afford to finance? Is it what they want? Are you partnered with the top finance companies in your market that will finance those customers sitting in front of you?

4. What process is your best salesperson using?
Every sales team has top performers. They also have wannabes who probably won’t make it in sales. Top-performing managers know the secret sauce their aces are using and set the bar for performance based on their results. These managers inspire the rest of the team to pay attention to and mimic the work ethic and processes of top-performing salespeople. Most importantly, they understand the processes that work and train their team on best practices from which the rest of the team can benefit.

5. When they are away from the dealership, do your salespeople have the ability to respond to prospective customers?
We live in the information age where virtually everyone has a cell phone with the capability of e-mail and text messaging. Every good salesperson knows the importance of constant customer contact and uses the latest technology to achieve top-of-mind awareness. Have you seen Facebook and MySpace lately? These social networking sites are loaded with prospecting sales teams and businesses promoting their livelihood.

6. Where is your sales team stalling in the sales process? Is there a common theme to address?
Total quality management is built on the principles of Kaizen – continuous improvement – and the strongest business leaders are constantly looking to reinforce the weakest link in their sales chain.

7. Is every lead being followed up on in a timely manner?
It costs money to generate and purchase sales leads, and it absolutely kills me to see dealerships have 40 or 50 percent of their investment fall through the cracks due to a lack of process or accountability. Top-performing sales teams treat every lead like a potential sale and understand that other dealers can beat them to the punch. They manage every lead with 100-percent accountability.

8. Does your sales team have immediate access to up-to-date brochures, product information and competitive data?
Point-of-sale material and testimonials are critical keys for success in sales because they give the less impulsive prospects something to read and think about outside of the sales environment. They turn shoppers into “be-backs.” Top-performing sales teams are proud and want to tell people why they should buy from them. They also want to share success stories and understand testimonials are great tools to help build trust.

9. Which competitors are you losing business to and why?
Top-performing managers and their teams know the score in the game. They know what down it is and they know what they have to do to win. They don’t assume anything or ever chalk up a competitor’s success to factors that are beyond their control.

10. How do you know when to hire more salespeople?
Top-performing sales managers are business leaders. They know when their team is underperforming and when they’re overstressed. They live by the one-third rule—they let the top third run with the ball, focus training on the shortfalls of the middle third, and are constantly looking to replace the bottom third.

Vol. 6, Issue 4

The Future of Special Finance

Has Anything Been Learned From the Past?

By Tom Herald

For Auto Dealer Monthly 2009 - Volume 6, Issue 9

In order to gain a more clear vision of the future, we must first have a solid understanding of our past. During the mid-1950s, a car loan was only available to qualified applicants with near-perfect credit, and even then, the maximum term was only 30 months with one-third down. If a consumer lacked the ability to obtain financing, they only had three choices: walk, save up enough cash to buy the car or search around for a used car dealer willing to tote the note.

By the early 1970s, buy here pay here dealers found they were competing with large, regional finance companies that were willing to take a chance on people without credit. Mercury Finance, Jayhawk, Credit Acceptance, Household and several others stormed onto the scene; carving out the distinctive niche we now call subprime, or special finance. Ironically, in those days, the term “subprime” was actually used for customers with strong credit histories. It meant they were worthy of a below-prime interest rate.

As the industry continued to evolve and the ability to distinguish a consumer’s creditworthiness improved, special financing became more and more lucrative, and the need for it increased. Even some of the largest banks were lured into the mix due to the high-yielding interest rates and huge discount fees being generated. Large and small finance companies alike began providing indirect finance options for people with bad credit. Creative financing was making it possible for people without credit to buy a more expensive vehicle and these consumers suddenly had more options than ever before.

Over the next several years, the price of automobiles inflated much faster than the average wage across the country, mainly because of the demands from Washington for improved safety, efficiency and pollution standards. As the price of vehicles increased and competition intensified, the only remaining variable that could make more expensive loans possible to finance was increasing the term. Terms for automobile loans quickly advanced from 36 months to 42, to 48, to 60, and so on until 72- and 84-month terms were offered, even to non-prime borrowers.

Competition among finance companies was fierce, and for several years dealers reaped the rewards. I remember several of us joking at one of my first 20-group meetings, we didn’t want too many members to join our group for fear that the secret of special finance profitability would leak out. To us, it was like shooting fish in a barrel and we didn’t want to share. If you weren’t averaging over $3,000 per deal on non-prime financed used cars, you were at the bottom of the class.

However, the secret did leak out, and dealers throughout the country jumped onboard and started offering their version of guaranteed financing. The special finance segment quickly became the fastest growing in the industry, but there were definitely some cracks in its foundation.

Underwriting guidelines became too lax. Several underwriting exceptions were made by companies in order to compete for originations. Some of the largest would even waive income proof requirements just to get the loan. There was also an element of fraud by a few dealers who knew how to work the system.

Repossessions and credit defaults were no longer as significant to the approval process. Even with a fresh repo, a buyer could get into a new car with as little as $500 down. Dealers were able to sell more vehicles by absorbing the negative equity in customers’ trades and/or put a customer into a vehicle that was more expensive than they could actually afford. Sales volume increased, as did the size of the loans, but gross per vehicle retailed decreased.

Prudent non-prime lenders earned huge profits, but the earnings for those companies that took chances and were willing to overlook key underwriting elements were even larger, initially. The focus was more on short-term profits than on originating collectable loans because cash from asset-backed securities was plentiful. Just like in the mortgage industry, this was the ultimate version of OPM (other people’s money).

So, where does that leave us today? Although automotive special finance had its own version of a credit bubble, it is still a major segment of the industry that will continue to expand as consumer credit scoring and technology improves. However, instead of just being a secret profit center for knowledgeable car dealers, it has become a necessity to survive for many.

The future is still unwritten, but it’s waiting for entrepreneurs with a vision of what people want and need. It belongs to dealers and finance companies that understand the history and can improve upon best practices, but more importantly, learn from the mistakes made by others throughout the years. As George Santayana, American philosopher, said, “Those who cannot learn from history are doomed to repeat it.”

Vol. 6, Issue 9

The Massachusetts Independent Automobile Dealers Association has just launched their new website.  It is designed to promote dealers and vendors in a unique forum that allows the exchange of information and ideas while providing the latest industry information.

Please check it out!  www.miada.com

By Tom Herald

My eyes have recently been opened to a whole new world of social media, and the importance it plays in commerce and information today.  Just last week the world’s only real source for news about the uprising in Iran came through the internet portals of YouTube, FaceBook, and Twitter.  Every major news network was tuned in to the web for their updates. 

Whether it’s the latest news, updates, consumer reports or if you want to research the origin of sliced bread, we have an entire world of information available at our fingertips.  We can literally reach and connect to tens of thousands of people in a matter of seconds which has completely changed the way we get and send information.  As a result, the natural laws of advertising have changed as well.

Talk with any advertising agency or marketing firm.  Or, take a close look at the results from your own ads over the past couple of years.  Traditional advertising methods are much less effective today.    Invasive campaigns like noisy TV/radio commercials, direct mail, eMail blasts, and even outbound telemarketing, turn people off.  We don’t want to be interrupted!  When we want information, we want it on our terms and when we’re ready.

People don’t need marketing today!  They don’t even want it.  TiVo, Sirius satellite radio, call screening telephones, and “pop-up” blockers are all highly successful businesses because they help us, as consumers, avoid unsolicited ads.  Initiatives like the Can-SPAM Act of 2003 and “Do Not Call” lists now have much stricter provisions and are as important for car dealers to monitor as the OFAC list of terrorists.  The rules for advertising have forever changed.

To understand why, take some notes from the two Stanford geeks who revolutionized the world without spending a dime on advertising.  Sergy Binn and Larry Page launched Google from their dorm rooms about ten years ago and today, “Googling” is a household term.  These two visionaries own the most valuable domain on the planet because they understand what people want when it comes to information.  They believe that the most effective form of advertising is simply helping people find the most relevant version of what they’re looking for, fast.  That’s why you won’t find any distracting ads when you visit google.com. 

Today, outbound marketing is out.  The impact it has on prospective consumers has been diluted by a more “permission based”  style of “inbound” marketing such as social media sites, blogging, RSS, viral videos, free web based tools, and Search Engine Optimization (SEO). 

To help simplify the exponential evolution and complexities of internet advertising, I have put together a brief overview on Search Engine Optimization that I call SEO 101.  Because no matter how fancy your website is, if people can’t find it or even worse, they don’t respond to it, you’ve just wasted a load of money and lost a lot of ground to your competition.   The good news, it’s not rocket science.  Instead, if you understand the terms, mechanisms, purposes and intent of Google, SEO is relatively simple and inexpensive to do yourself.

SEO 101

• SEO is a process of “optimizing” techniques that help your website rank higher in the organic/natural results for specific search phrases with search engines like Google
• The cornerstone of all searches is Keywords – Words or phrases people use whenever conducting a search.
• Millions of people use Google every day looking for a product, service or information and there are two ways for you to reach them when they search keywords.  
  1. Paid advertising where you pay to be listed in the sponsored section of the search results.  But, think about where you look when you do a search.  For most of us, it’s not necessarily the sponsored section.
     • Keyword phrases are auctioned to the highest bidder and once the money runs out for the month, so does your presence on the list
  2. “Organic” Searches.  The natural rank of your search based on keyword phrases.   The most important difference is that the organic list is free.  Paid placement, otherwise known as pay-per-click, however is not.  
     • Google estimates of how relevant and credible your website is and that process determines your placement on the results page.  This “optimization” of your website’s relevance is what is called SEO. 

Websites are written in HTML (Hypertext Mark-up Language) which is scripting code that describes the structure of text based information by labeling the text as links, headings, paragraphs, lists and content, called “tags” and is completely blind to cool graphics and pictures.   Search engines quickly read, prioritize, and rank the HTML text on the web and display it in “Search Results.”

“Search Volume” is how many people search specific keywords and is the overall size of the list of results.  Google only really knows the exact numbers; it’s a sort of secret sauce for how their engine works.  But, you can get a good idea whenever you search by looking at the results section.  Or, you can go to Google/Adwords and get an even better idea for free.

There are two main factors that determine your place on the list of organic searches:

1. Relevance – The measure of how your website (or more accurately one of your web pages) matches the keywords the user has entered.  Measuring relevance is a relatively sophisticated process, but it boils down to some fundamentals like the title of the page, words on the page and how frequently these words occur on the page.   A good metric to track and review is your conversion ratio – the number of visitors to your site that respond to your site based on specific keyword searches.

Google figures out what your page is “about” by looking at its title and content, and by looking at other sites with similar content.  It then uses this to figure out how relevant you are for that particular search phrase.   Your relevance is based solely on your content and, content is King.  For an example, if you google “BHPH Sales Training” you will see our firm at the top of the list.  But, we would have absolutely no relevance at all for a search on “copper plumbing.”

1. Page Rank - PageRank on the other hand is much more important than Relevance.  It is an independent measure of Google’s perception of the quality/authority/credibility of a single web page and does not depend on any particular search phrase.  For all of us, Google conveniently reports this as a number on a logarithmic scale from 0-10, and is primarily determined by how many other web pages are linking into you.  Google considers an inbound link as a vote of confidence or more like an endorsement.  So web pages with more credibility (i.e. a higher page rank) that link to you have more “value” to your PageRank than those with less credibility.
   • 0-3:  Newer sites with very minimal links
     4-5:  Popular sites with a fair amount of inbound links
     6:  Very popular sites with hundreds of quality links
     7-10:  Usually media brands (CNN.com), global companies or the top blogging sites.

**(If you want to measure the PageRank of your site the Google Tool Bar has a setting that will display the ranking of whatever site you are viewing.)

Search Engine Optimization is like getting tens of thousands of dollars worth of free advertising in the most relevant newspapers or television in your market if done correctly.  To rank high you should do two things:  First, make sure your site has the right relevant content for the types of searches your prospective customers are conducting.  Second, try to get the highest PageRank possible.  To do this, you need to get as many inbound links from as many high PageRank web pages as possible.  Social media sites like FaceBook, LinkedIn, Twitter and AutoDealerPeople can help you tremendously with this.

Download a copy of this article here

By Tom Herald

Have you ever noticed the differences between really good companies that stand out among the competition and those others that just seem out of step?  How about sports teams?  Why did the Bruins dominate the Canadians during the first round of the Stanley Cup?  Why do Roger Penske and Rick Hendrick routinely field championship racing teams?  And, why is Richard Branson so successful?  The one common difference that all successful businesses, sports teams or organizations share is rooted in their ability to outperform their competitors as a team.

I was just visiting an exceptional Chevrolet dealer in the Midwest, the number one volume dealer in Indiana who just completed an outstanding first quarter.  And as soon as you walk onto their lot you immediately recognize the essence and importance of teamwork.   There is absolutely no evidence of a recession or that their manufacturer is on the brink of bankruptcy.  Instead, the entire team, from porters to managers, is focused on serving customers and selling cars.

I also just finished a training event at the Mohegan Sun Casino and Resort, another exceptional organization.  Let me tell you, everything from the valet to check-in to event coordination was performed with meticulous attention to detail and uncommon enthusiasm, the way Las Vegas casinos used to.   Every guest is pampered and every customer is fully accommodated with world class service.  And, the employees are quick to point out that as a team, they “take pride in their service.”  Their reward was a sold out hotel with $800 per night room rates.

Then there are companies like US Airways, who just raised their bag check fee another $5 per bag and, they charge you for peanuts.  You remember, these were the add-on fees some of the airlines implemented to offset the spike in fuel costs last summer.   Well the cost of fuel has come down but these “annoyance fees” have gone up.  And US Air’s generally unfriendly, non-smiling staff are quick to tell you with their “too bad, not my problem” attitude, that they’ve just taken more wage cuts and are more worried about being laid off than about serving customers.

Well I flew these guys a couple of weeks ago after vowing never again and quickly saw the deteriorating fruits of their labor.   I needed to change to an earlier flight so I could catch my daughter’s softball game.  The ticket change fee was $150, even for a frequent flyer.  So I asked, was the earlier flight full?  No.  It was two-thirds empty, as was the one from which I wanted to change.  Still, there was no negotiation.  For that moment they had me, as they squeezed another $150 out of my wallet.  My only other option would have been to pay the $800 one-way fare for the earlier flight.  I was annoyed with every moment of the experience and puzzled by their inability to see the big picture.

In complete contrast I flew on Virgin America for the first time last week.  This company has taken air travel to a whole new level of service, and it was refreshing to see a friendly, professional, enthusiastic and happy team at work.  Everything about my trip with Virgin was a positive experience, from the $250 fare to their smooth ability to make the passengers of a sold out flight feel comfortable.  Again, I needed to change my flight, however their approach made much more sense.  This airline has a “no fee” policy, as long as space is available.  And, they don’t charge for peanuts.  Now which airline do you think posted a first quarter profit while the other had a multi-million dollar loss?

As consumers, we are all critics and fans of retail businesses to varying degrees.  And as business owners/operators, analyzing the hundreds of examples around us on a daily basis is a great way to learn something new about running a company.  It is easy to see who to emulate and who to ignore.  But at the very least, these good and bad examples remind us of how customers react to service, both with their spending and their comments.  Since reading Mark Sanborn’s book The Fred Factor, I am always looking for examples of successful companies that get it right.   In every one of these success stories you will find energetic people who operate as a team. 

The Essence of a TEAM:

Talent – Every successful team is comprised of talented individuals who have the aptitude, drive and character to do their assigned job exceptionally well.  Each position on the team is well defined and interdependent and each team member fully understands how their contributions affect the overall success of the team.

One essential talent that is vital to the success of any team is leadership, and a team needs it all levels.  Leadership is one’s ability to influence and inspire others.  It is the driving force that gets any team through adversity and turns a group of talented people into a team of champions.  And just like every football needs a good quarterback.  Every team needs a talented leader.

Enthusiasm – Enthusiasm requires a positive mental attitude and is highly contagious.  So is a bad or pessimistic attitude.  One negative person can bring down the spirit of an entire team.  But another who has heart and shows courage with an enthusiastic approach to the job can bring everyone around them up, including customers.  Enthusiasm makes people feel good.  It brings excitement to the team and costs nothing to implement.  But the rewards are immeasurable.

Accountability – Every member of a team has responsibilities to the team and, these team mates hold each other mutually accountable for the performance of the entire team.  Accountability is a fundamental discipline for any competitive team because it ensures all the tasks necessary for success are accomplished and raises the standards of excellence.  It puts the elements of success in the hands of each individual on the team.  Without it, there is no synergy and the most talented and enthusiastic groups of individuals will never realize their full potential. 

Mission “Oriented” – All teams need something to win.  They need their success to be defined.  They need a clearly defined mission to accomplish that becomes the goal on which every team member can focus their efforts.  They also need to taste victory, because winning becomes an addictive habit that is essential for champion performers. 

Start small and work on achieving little victories first, as a team.  Then work toward your BHAG (Big Hair Audacious Goal).  The important point is to have a goal for the team to accomplish together; something meaningful on which they can focus their combined efforts.  Once you have the goal, devise the plan, measure your progress, and the rest is about execution.

Download a copy of this article here.

By Tom Herald and  Ben Donnarumma

Special Finance is continuing to evolve at a rapid pace.  The demand for financing is growing as consumer credit shifts lower on the spectrum and several national non-prime lenders scramble for cash during the credit crisis.  This combination of events has created a very challenging dilemma for many car dealers – How to finance customers in the “no man’s land” of credit?

This tier I am calling the “no man’s land” is for customers with credit scores below a 550, and there is no shortage.  However, the supply of cash is tight everywhere so dealers have to look for viable alternatives or, continue watching lost deals walk out the door.  Many dealers use companies like Drive Financial, Credit Acceptance Corporation, Westlake Financial, and Western Funding for this tier.  Several others are moving to take matters into their own hands and start their own financing arm, Buy Here Pay Here.   This can be a highly profitable venture if done correctly and the timing could not be more perfect than it is now.  But, if done incorrectly, BHPH can be the most expensive business lesson you could ever receive.

If you are contemplating the notion of taking on the financing of “high risk” customers yourself, I highly recommend you get all the training and advice you can before ever putting one dime out on the street.  And with a lot of hard work and persistence, your success will be grounded in these Ten Fundamentals of BHPH:

1.       Commitment – The number one difference between Special Finance and BHPH is whose money you are using.  And when it’s your own money, the first fundamental is practically a commandment.  You must be fully committed to the business with your heart, soul, mind and resources and keep your focus on the long-term benefits instead of the short-term profits.

2.       Capitalization – BHPH is a long-term business venture that requires capital investment.  You need enough cash to consistently fund your financing for the first two years of operations.  Otherwise, you have to start small and grow your portfolio one deal at a time.  You’ll still get there.  It will just take you longer. The point is you have got to think about how to fund your portfolio whether it’s one deal per month or 100.

3.       Collections – Selling cars BHPH is the easy part.  Collecting the payments after the sale is a whole different story.  This part of the business is not rocket science.  It is however a little four letter word called “work” that is the fundamental element of your entire BHPH business.  Your ability to collect on the loans will make or break your success and is the one fundamental around which the entire program is built.

4.       Compliance – As a BHPH dealer you are a lender, a collector and a keeper of hoards of personal privacy information regarding your customer base.  The compliance requirements you are used to as a dealer only compound with these responsibilities and there is little room for error.

5.       Investigative Selling – Before you loan money to someone you really need to know a few things about them first.  Investigative selling is an important step to setting up each individual deal for success.  During the interview process you can learn volumes about the spending and living habits of your prospective customer that will come in helpful when and if you have to go find your collateral.  Their answers to routine questions will give you a valuable insight in helping to determine whether or not the deal makes sense for your business. 

6.       Inventory – The vehicles you sell must be desirable and affordable for your customer.  They must also be able to last the term of the contracts.  And although your inventory values may not be tied directly to a valuation guide, one of the worst things you can do is stretch your ACVs too far above the market value.  Your portfolio will quickly become unrealistically inflated.

7.       Metrics – Every day you must be able to accurately review the books of the business and hold the team accountable for performance.  BHPH is a daily business so you have to manage it by the day so you need accurate metrics to help you make the most informed decisions possible.

8.       Deal Structure – The structure of the deal determines the elements of risk.  It determines how much cash you are willing to put on the street.  It also determines your margin of profit, above an allocated “discount” that covers your standard losses.  Without enough margin built into each deal of your portfolio, you losses will consume any profits.

9.       Consistency – BHPH requires patience, persistence and consistency.  It is about doing right processes and procedures over and over for the long run and keeping your eye on the long-term goal.

10.   Underwriting – Your underwriting guidelines are your roadmap to building a successful portfolio. You would be doing yourself a favor if you follow the lead of some crafty veterans like Credit Acceptance and Drive Financial and verify every aspect and stipulation of each and every deal before you fund it.  These guidelines are in place to help you manage the risk of your portfolio and there is absolutely no room for shortcuts. 

BHPH can be a very viable and profitable alternative for financing customers in the “no man’s land” of credit.   It affords you the opportunity to take your business in your own hands and decrease your dependency on outside financing sources and at the same time, build a portfolio of wealth.  If you master each of the 10 Fundamentals of BHPH you will be well on your way to enjoying the benefits of one of the best business decisions that can be made in the automotive industry, especially today. 

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