Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of Joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here morning show. Take it away, you two. Hey, good morning. Hello, Buy Here, Pay Here people. Happy Friday. Happy Friday. Welcome to another live episode of the Buy Here, Pay Here morning show. I'm talking like, you know, like I'm doing a professional intro. You are just so professional at your intros. Thank you. That's what I was looking for. Yeah. Your confirmation. So welcome, friends. We've got a rich topic today. In fact, it's so rich that we made it two episodes. Yeah. And, um, you know, it's, it's interesting cause we use a lot of, um, V eight stuff, uh, on the morning show. And so, you know, some people may say it's like, it's a pitch for V eight, but it's like, this is the stuff Jim works on and this is the stuff that he really enjoys doing. And we just release it to V that's, you know, it's, it's not something that is, is, uh, is out yet into the wild and the general population and so this topic is around one of those things from something that jim worked on with the help of of ai and our um and it's so rich It's so good. It's so good. It's so, so good. Yeah. And I think it's important to give the backstory. I'm going to take folks inside the actual thing. Our subject today is report cards or this new business model index that we created under the White Hat Way brand name. And I'll just, can I make a comment about it? Is that when he took me through this, I was like, I love that it's like a report card. Report cards that every single person that went to public and I'm pretty sure private school K through twelve experienced something like this. And and so they you know, when you say you got. an A GPA or a C GPA, you know what that means, right? And so it's kind of like, so we were going through it and I said, okay, C, average. And everybody wants to be above average, but it's like you can still make good money and do all the things at a C. And so it's kind of fun. Just as I was looking at it, it was someone who's a lay person would be able to go, where does this, whatever it is that we're measuring... And, and so, you know, and it gives you yeah, it gives you some insight on like, here are the main things that are ranking kind of like in school when you've got spelling and arithmetic and, you know, all of those kinds of things. And, and I just, I look forward to the day when we add a white hat way layer on that. And that is like good citizenship, that kind of thing. Yeah. Yeah. Yeah, so I need to back up and give a little backstory on this. So again, we're talking about an index that we've created, which is really a letter grade, as Michelle said. It gives actually a grade. It's almost like the way I explained it, because we had our first V-A meeting of the month last night. And I was explaining to the dealers who were in attendance, because I introduced this thing to them with their own data. And I... said you know it's it's a little like i i like i like things to be transparent i like for them to be able to see individually so it gives them actually a letter grade we're going to show an example of one i blacked out the names of course for the dealers so their data is in their grades not revealed but um the the backstory is really this as i shared with them somebody who's This is bear with me because this is relevant. Okay. Started managing a buy here, pay your dealership in ninety seven. Became a consultant, started working with numbers in two thousand. So I'm twenty six years of data. And to this day, Michelle, if somebody wants to engage us as a coach and says, which business model is best? what cost of car should i carry what works best and i will be frank with them and i will tell them after all these years i wish i could answer that more succinctly so best i can do as a coach is to tell them you know here's a model that we recommend and here's why here's what we see and why okay And another coach would give you, here's what we would recommend and why. Okay. That's the best they can really do. So it's only now with all this, it's a couple of things that have happened that allow us to really do this now. Two plus years of V-Eight data strung together month over month, right? So you've got trending and history. That trending and history in our V-Eight data has a snapshot look at inventory levels. It has a look at sales volume. It has sales deal structure. It has lots of stuff. I'm going to take people on Sunday. Let me stop and mention on Sunday, we're going to do part two. I scheduled it for Sunday afternoon. It does some more stuff he wants to be able to talk about. Yeah, I'll take people deeper into the methodology. on sunday because i want people to kind of understand what's happening here because we'll be meeting with some partners around this stuff and i want everybody to kind of have a point of reference and and a little bit of a deep of enough peek under the hood to really understand the significance of what's happening here for today it was really to introduce the idea and kind of share the enthusiasm around what happened. So I, the first part of what I said was that V eight data, we needed that because in the past I've had to tell people the data is fragmented. We got a bucket over here. We got a bucket over here. I don't have enough information comparatively. One more point. So I can tell she's eagerly trying to get something to add. The other thing that's added now is that AI is on the scene. The ability to take AI inside that data and sweep all that, and then I spent a good chunk of my yesterday Answering the questions from AI to create a weighted scoring model on these different categories. Go ahead. Well, first off, so my comment is that we have two years of strung data from V-Eight. what is different about the data from V eight than others? I don't know. I mean, is that, is that we, we have, it's, it's, But DMSs and the way a dealer puts the numbers in completely can skew the data. Yeah, for sure. And so we've spent years making sure that people that are coming in, we are comparing apples to apples. Mm-hmm. And making sure that things like, you know, you gave the example this morning as we were talking about it, about a dealer that when they first started, when they'd have a repo, they would say this repo is worth... you know, X, a sign of value based on what they could sell it for and not what it was worth at the auction, which made it look like their losses were very different. Yeah. Right. Which skews everything. So it's things like that, that being involved in V eight, that you dive in and make sure that all of the pieces are aligning. I want to be careful about the way you're explaining that because you're suggesting that we require people to change their policies or their practices. And that's not really what she's suggesting. What we don't, we don't require anything. We just know in order for you, you to show up at a meeting and have your numbers be relevant and, you're going to want to be aware that most dealers are reporting their information. Well, and this dealer changed it. It's like, oh, so in order for me to get a real good view about what's happening in the whole ecosystem of repos, this is a better way to do it. So they did shift. They did shift. And so I think I can say today, we recognize there will always be some asterix a hard word to say but it's like a little asterix behind besides some of the numbers why because in our business there's always going to be some operational deviation one dealer does their repose a certain way the next dealer does it now in a v-eight environment we can we can filter that well right and so we're working on that part so and you've also seen in dms's that things are reported like In completely. Yeah. And so, you know, you've dug in and it's like, okay, this number, because the report that's coming from your DMS is spitting out this, but is, is, does your DMS really calculate it correctly? And so we're able to go in and like, and now it's, now it's apples to apples. So we can tell we have to coach dealers when they're signing up and coming into a VA. So, so let me back up to that part about what you said about, We are talking about stuff that V-Eight, and I would say V-Eight dealers are the beneficiaries of what it is that we're doing here and other projects that we've done. They can't first pick it. It seems like just about everything that we're... And they're the collaborate. Yeah. Because, you know, in my meeting last night, I introduced the thing and I said, so the reason we want to come back Sunday and talk about this in a little more depth is because I introduced to the dealers, and these will be the dealers that will be that will have my ear in terms of what needs to get adjusted in this formula. So for today, what I can say is the formula looks at, Those data points that I mentioned, inventory levels in both dollars and units, sales volume in dollars and units. It'll look at rate of turn of the comparison of those things. It will look at deal structure, the way that they structure financing to their customer, term of loan, cost of car, risk, et cetera. So it looks at deal structure. It looks at, I'm going to refer to my notes over there. then it goes into profitability just keeping it pretty general yeah it goes into profitability and it goes into um performance analysis and cash on cash return just so you all know that we have a working board with cameras and everything so when you're in v-eight you can go to the whiteboard and explain things yesterday was my first time to use it in a meeting so uh-huh uh so it's yeah so that's what i'm doing i'm referring to the whiteboard so Keep in mind, the other thing that's happened here is I just want to get to a place where I think we create a little banner that says, it's really about this thing that we talk about is I've been working for some time now and I challenge everybody that we work with to move beyond opinions. And this includes me as a coach. I'm holding myself to the same standard. Well, I push you on your opinions all the time. And you do. The end. So yeah, she does. She's very intelligent and sometimes she's right. But a lot of times it's like, I need to understand what it is you just said better so that I could, yeah, go ahead. I'm sorry. So the idea here is that we want to make sure that we're delinked. when it comes to business models okay so what do i mean by business model i mean all the pieces it's like you look at the cost of car that you choose to carry the rate at which you sell them how you finance them but most importantly in the gym formula is how well do you bank the money that you put in your portfolio? Isn't that really like or in your bank account? Yeah. Yes. And so isn't that really what this it's like most businesses? I mean, you can have what is it worth on paper? And what is it worth? Cash is king in this business. And so that is, you talk to any seasoned dealer and they're going to say cash is king. It's like, where is your cash flow? What do you have in the bank? That's the important part. Yeah, it's funny. Most dealers, when they're talking about cash is king, they're usually talking about down payment. But you're right. We're talking about cash flows. So I talked to the group last night about equity versus cash flow. We're getting kind of deep here. So we'll save most of that detail for Sunday. But I would just say that for today what no i just it's natural to kind of end up there so let me share something because this is this is i just could clip in there six dealers i did a little screenshot so here is a screenshot of the of the first iteration of the first iteration of um so this is a business model letter grade so when you see that dealer in the upper left there that has a c plus That's a combined score, a cumulative score. It's a little like the way I told my dealers. It's like, you know, if you if you have a history class and you make a B and you have a math class, you make an A and then you get your final report card and you have three point seven. So what I'm choosing to do is make it transparent, including the methodology, the formulas and the actual methodology. And the weighting is important here, because when I say, you know, this model is best. Based on what criteria? Right here. Click right here. It'll tell you exactly what criteria we're using to say that that one is a letter grade A and that one's a letter grade B. So this is what happens. And so the dealers last night heard me say that in my conversations with Claude yesterday and working through this data, Claude is asking me, where do we prioritize this and where do we prioritize that? It was asking me questions like, which do you favor in terms of inventory, higher cost or lower cost? I said, I'm not going to favor anything. I'm going to let you sweep the data And you come back and tell me what correlations you find as far as cost of car to the ultimate success based on what are these success metrics, right? So this is the part of what these kind of we're creating success tools here. But the idea here is if you look at this dealer, you can see. that we've already kind of touched on these inventory rate of turn of that inventory how fast do we turn it through the deal structure so it's going to give you some sort of grade on deal structure it's going to look at volume and that's going to look at profitability okay and um and then portfolio cash on cash return so you can see each one of those gets its own letter grade All right. And so now you have the letter grade and then it'll you dealers will ultimately be able to click on that and go in and see what are the metrics. So when you're doing this, you it's like from A to F, some they're not equally weighed. Or are they equally weighed? So sometimes the portfolio cash over cash has a heavier weight on it than turn rate. Yeah. So I actually use this phrasing in my conversations with Claude yesterday in saying that we're going to favor... The kind of the Ken Shilson mantra, which was it's not how many you sell, it's how many you keep sold. Okay. Okay. So that's a real simple way to think about you might sell a hundred. So two dealers sell a hundred. One charges off twenty in two years and the other charges off forty in two years. pretty easy to say which business model would we favor in that scenario. Okay. Right. So where, where would that, where would that, like that scenario, because the turn turn rate is, is a turn rate, like how, Michelle is very analytical. I really am. You're going to want to be here Sunday. So please make time to be here at one thirty central time, two thirty eastern on Sunday afternoon. So she's just got questions. I do. I do. And anyone who's seeing this today that has questions. like shoot them off and we'll make sure that we get them addressed uh on sunday too so yeah just understand we're gonna our v-eight members because this is where we can take care of them they've been early adopters with us they have hung in here through some pretty clumsy stretches. And so we're going to this is where we can reward them because they've now got many of them have twenty eight months of data inside our VH system. And so that helps us to help them. And so this is where they will be the first to shape the calculations here, the index and the index will be an ever evolving thing. I'm quite sure. And whatever it evolves to, it'll be transparent and what it now calculates. But I think what we want to be able to do is move past the subjectivity. So when, because now I want Claude to say, cause imagine how it feels for dealer here to sit next to I'm a C plus business model. I like my business model. This is what I've always done. Yeah. that's a whole nother can of worms. Yeah. Yeah. But, but back to the thing about being objective now, now it's not me as much as it is. It's my formula. Yeah. And I want you to help me shape the formula. And do you agree that the calculations that we have put in place are a pretty good indication of a success in a business model and buy your payer and lease your payer. Exactly. So, you know, those in V eight are going to have a lot of input and we would love to get input from outside as well. Eventually, our intentions are that this is something that is released in a scaled down version to the wild. So, you know, a dealer can enter their stuff or just, you know, look at where, you know, here's my basic stuff. Here's the aggregate. How do I measure compared to, to all of this? So, you know, for, especially for dealers that are, well, not especially, but for dealers that are newer and, You know, that's a really helpful thing for dealers that have been around for a long time. Here's like the kicker. If you know, if you've been around and you're married to how you do things and we've Jim and I've had lots of conversations around this concept recently because we're coming. You're just finished by your pair United coming into the national conference, Texas, you know, all these big, big conferences. And conferences, when you get everybody together live or you get everybody together virtually like we do with V-Eight, it is a really good idea to approach, and this is hard for a lot of people, and I've watched people just struggle with it, to approach the experience with confidence. an open mind and not married to, I have to convince you why you're wrong and why my business model is right, because this is numbers driven. And then there is some things that you, you know, you were, as you were looking at it as an analyst, the, the weighting of things. So I, I, like I said, this is a conversation we've been having recently is that as operators, I mean, Just the most independent business. There are as many business operators as there are business models out there. And so to be able to, even if you've been doing it for twenty years longer than someone has been doing it for five and they're doing it better. But what's the definition of better? Okay, based on this, in the aggregate, they are doing better in all of these inventory, rate turn, deal structure, all of these things. So I think what this lets me do, let me be the consultant for a minute. So I think one thing that would be fun on Sundays, have you just be the dealer and ask, I'll give you a list of questions that I often get from dealers in scenarios like this, working with new dealers. Okay. But one of the things I can see coming from this, and this is why, back up, you know, Jim's done data with all these years, but now AI helps me answer these questions in a way that we couldn't really answer them before. So it's sweeping a large amount of data in a short period of time. this thing by the way when i first uploaded the spreadsheet and asked it to run through the math and spit out the thing came back with a few questions and then once i answered those questions it probably took about four minutes to produce all these letters all these different things yeah it's great so it it was able to sweep um inside our subscription it was able to go in there and sweep based on the the the, the, the kind of the index that I was creating based on the waiting. So again, we'll get into the detail on Sunday. So by the way, that's only going to be on YouTube. So make sure I would urge people have subscribed to our YouTube channel. If you can have that on the screen, Michelle, I think we have that in our banners, but make sure people know where to find us on YouTube. Please subscribe over there. And that way you'll get a notification when we're going live, that that's coming up and you'll have a chance to catch that. And of course you can always catch it as a recording. If you can't be there when we go live, but yeah, Find that over there and make sure you join us because I'll take folks inside it. I think what it helps me to do. So back to your thing about what's better. Well, if you look at that and you say, so if I say to a dealer, well, Is it safe to say that when we say better, do you want to enjoy a pretty quick return on your cash? If you put a hundred grand at risk, do you want to see that money come back to you in cash at a faster rate? Is that what you would define as success? and I have had some fun conversations about what is success, right? So that's why you see me do the air quotes. He's like, what is success, right? So this lets us take a big step in that direction to say, if we can agree that success would look like this for you, you put cash at risk, You want to see it be recovered in a short amount of time. So what we see in our groups based on dealers with a lot of history is they're enjoying the best cash return on their investment across two years. Is that what you want to call success? Okay. Well, if that's what you want to call success, then let's look at what kind of cost of car they're carrying. Now I can better answer. How do they price their cars? Let's pick these people who are successful on this metric. And now we can go backwards to see what can we tell about the practices of those dealers that lets them land there instead of just guesswork, you know? I, you know, that's, that's, we have such great tools and I, and I see other people in the industry. It's like, uh, helping it's like pulling and we've been, we've been, um, crying from the, the hilltops. who owns your data and how are they using it to really help the industry to help all dealers instead of just their customers or just their whatever. It's like, how are they using that? Or are they, I, you know, it's like, it's how, who owns it and how is it being used? Because there is a lot of data out there that could just even be like you're talking aggregate of people in V eight. Like, yeah, there's a lot of data. The problem is it's going to need to be validated through some process and filtered because I can give you example after example, which we can talk about in more depth on Sunday. But look, it's not perfect. But what today is about is having the methodology established that can be tweaked and modified as we go. But what I've done is arrive at an index that says based on sweeping all dealers through the same process is going to give letter grades. And let me tell you, it's going to make for some really interesting conversations in our V eight meetings when dealers can see their own letter grade. And they're going to some of them are going to naturally want to defend their model. And so it'll give us a chance to. And I told these dealers last night, I feel the same with all of them. They know this. I would love to just be quiet as a moderator. Of course, I'll answer the questions about the calculation, but I want them to talk to one another about dealer X. How come your cost of car looks like this? And then, of course, they'll probably ask me, how come it's calculating that dealer X has a better return on this? And I'll take them inside the math. Here's what it's looking at. And here's why it says that it matters. So they'll be able to see more and more as we go. Yeah. And this is one of the really cool, powerful benefit of being involved in a group of some kind. Yeah. Whether it be a twenty group or a V eight group or some kind of a group where you can get together and. have conversations, like in-depth conversations with other dealers that you know and trust. And at a conference, you can do that, but you don't know them as well as you would in a group setting where it's like you're meeting with these people monthly or quarterly. And you get to see their numbers. And you really get to understand. Because why wouldn't we want everyone... that if if if all things were equal and you know everyone sold the same amount of cars but were able to really benefit so it's like um no your neighbor is not taking any business away from you none no no no business being taken away wouldn't i isn't isn't you'd want everyone to be like successful and and you know the best you and i can do is just make sure it's available to those who wish to access it yeah that there it's there's a path there for them to gain access and learn the same information so you know this all comes about because we've been having some really significant conversations with some members and some potential members about business model and what what you know, what works and what do we like about our model and why do we do things a certain way? And I think this gives us, this is a big step, right? This is a really big step into us being able to transparently show people here's, here's the math that I chose. Yeah. Okay. And AI did the work. and it's going to we'll be able to tweak it and turn some levers and adjust some things as we go but what it's really basically favoring at this stage is you know we may do lots of volume and we may turn our inventory really fast and we we may you know like the cost of car that we have but in reality what it's going to look at is how well do we do with banking the money? Like how much of it lands in the bank? Cause I don't know that anybody's out there moving paper for profit or just, you know, putting profit on the books and paying the IRS on income that they're never going to put in the bank. I don't think that's what people really are expecting to do and buy your beer. So I think what you're hearing in my formulas, which we'll, we'll take you into on Sunday is, you know, the approach that says, you know, what is let's, let's get to a place. And this number, this is better. I love it. Right. Yeah. And, and, uh, again, anyone who's listening, um, send whatever, whatever stream that you're watching this from, um, unless it's on our, one of the like Spotify or Apple, um, find us on YouTube, put in a note, what questions you might have thus far. And then we'll make sure that we are watching that and that we, we address some of those. And then Jim, like you said, Because I love to ask questions. I get to play the dealer. Thumbs up on the video that you like what we're doing. Right. I mean, that way we'll just keep showing up. Right. Exactly. All right. So happy Friday, everybody. We're happy that you're all here and hope that you have a great rest of your weekend. It's been kind of rainy cruddy here, but it's nice because it's a little bit of Sunday at two thirty. All right. Actually on YouTube. Find us on YouTube. All right, everybody have a great day and we will see you on the other side.
