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. All right. Well, hello. Good morning. Yeah, good morning. Happy Friday. Happy Friday. Our first day back in studio since the trip to Denver for NIADA. And got some news about that. Had a really successful visit up there. Was able to meet with some partners and even see a few dealers in the hallway. So it was good. It was a good trip. Yeah, it was mostly for us to connect with people that we already were collaborating with, as well as new vendor partners or other people to collaborate with. And that always is fun because when you come to one of those conferences, we love being able to see the dealers. And it was fun to feel that energy and all of that. But most of it was... was almost like this reunion of sorts with vendors that you don't see, but once a year and you're all in the same space. And so it's kind of a different club. Yeah, we had meetings before the conference started. We had our team come in for that and the team stayed around and we had some additional meetings because of some of our initiatives around technology in particular, right? So that was a big part of why we had everybody together. And so it was great. It was great to spend time with them in person. It was great to make some connections Had to go and do a tour of pastimes corporate office too. That was really, that was really cool. So cool to get directly from Chris has been with him. Well, and to have him say, okay, this was my marketing campaign. Then like the first ones, as he's going through all these pictures, it's like, i did that i did that and i'm like oh my gosh you're amazing these in words some of them so you know it's like it was really really cool it was amazing it was through that it was it was really it just reaffirmed to me why pastime is one of white hatway's founding sponsors yeah Just because they really are. They're really cool. They've been playing the game for a while and they're going to be playing the game for a long time. Part of those meetings, though, were just kind of bringing everyone, the founding sponsors and all that up to date with where we're at, what we're doing. And it was a really good opportunity. Really good opportunity. I have a little new segment, Michelle. I want to try it out today. A new segment? Yeah. yeah i didn't share this with you in advance i didn't prepare oh my gosh i don't like it when he does that well it's just i i feel like people in the buy here payer industry especially dealers have been through some tough stuff and i just think a little some words of encouragement i want a little word of encouragement my goodness yeah so here i got this all right so this is just food for thought words of encouragement pickles are literally just cucumbers that went through something and came out more valuable and more desirable So you've got this. You're just fermenting. Soon, you'll be a pickle. That's the part I wanted to share. Not in a pickle, but just a pickle. You'll be a pickle. Just hang in there, and you too, at some point, will be a pickle. So whatever you do, don't give up and just stay a cucumber. That's the risk. Yes, that's true. Unless you like being a cucumber. We'll see what kind of feedback we get on the new segment. and see if it's back next week. Yeah. Okay. Yeah, absolutely. I just, I, you know, I adore your humor and I'm always like, bring it and bring it. And listen, I need to tell our viewers, I had a really rough night of sleep last night. I never know why it's an ongoing thing, but I just want to let you know, if I drift off, Michelle will finish the show. And so you guys, it'll be a quick show. Go ahead. Yeah. No, we got some news. I want to share the thing about our dealer friend and a member of the B-A-T dealer group. Yeah, let me throw this up here. Is the National Quality Dealer of the Year. Congratulations to Cesar Stark. So we've known Cesar for some time. um you know the the to give a little bit about how that works the the dealers who are awarded their um the dealer what do they call it quality dealer in their state are automatically nominated to be considered for the national um dealer and and so caesar out of el paso was named the national quality dealer of the year edging out one of our other v-eight members out of tennessee uh john davachi so john is also and then we also had kristen acosta i believe was among in the running out of this particular um group and so kristen is a former v-eight member somebody we know and have a lot of regard for here's what i can tell you all of those people are going to go back to their dealerships and continue to do quality work and take really good care of their customers. So it's, it's, it's a Caesar was the one who was photographed on stage, but they're all, all doing good. And I, you know, I, I, uh, we talk an awful lot about white hat way and ethics and connection and trust and transparency and, And those are elements that I think really tie into quality dealer of the year. And so there are many out there that have been quality dealer of the year in the past or their state's quality dealer of the year. I mean, Jack Carter's one of those and, and others that just like, yeah, you do anything. There are really strong threads in what makes one of those with what we teach in White Hat Way. For sure. And I did ask, Cesar popped in on our group four meeting last night. And so I was able to ask him just to clarify because I wanted to be sure that bench pressing is not part of the competition because Cesar is a big stout dude. So I thought there could be some separation in the competition through actual. But he said no, it doesn't have anything to do with bench press. This is fun. So he's just a big strapping dude. So anyway. Should we get to the actual topic? I suppose. I can tell you guys. We have really not done friendly banter in quite a while. So this has been fun. Well, because you're not always friendly. But let's move on. Let's get on to the show. So our topic for today is around AI and in particular, deal structure. So this, as often happens, you know, with the inspiration for the topics comes out of actual conversations that we have with dealers and folks in the industry. And this one actually came out of last night. It was one of those meetings where we had a V-Ape meeting. I need a little backstory. Some weeks ago, when we've already done podcasts on this topic, people can look up the stuff about the White Hat Way Business Model Index that we created, right? The report card. Right. It's a report card. And so we have started rolling that out in a way to show dealers how they sort of stack up as a report card. Do we have an image of what that looks like? I don't think so. Okay, well... I think that we did, if you want to see what it is we're looking at, we're talking about, it's been in the last couple of episodes that we'll actually show. I think last, no, the week before last. Yeah. Yeah. So if you just, I think the title of the show was something like report cards. Yes. You can find that and you can see what our report card looks like. And it's, it's evolving. It's like I introduced version one point one to the group last night. We just kind of keep tweaking the lever on it. on how the waiting is kind of how the math works. But what came out of last night's meeting was really good because the other part of the back story I need to give is when I started sharing that at a couple of dealers in particular, asked me and this this one who's the subject of the conversation that we're going to have today the dealer asked me when they first saw the report card said jim when you look at that what is what would you tell me is the one thing i need to work on in the next ninety days and i said let me analyze it more carefully and i'll get back to you on that and then last night we had the the meeting and going into the meeting i was able to go to claude which we're doing a lot of this work in claude for the ai platform and i was able to ask claude for each of these members who will be in this meeting tonight what is the one thing they should work on right what is the one thing that should be a focal point of improvement in their business I, you know, when Jim told me, because we sat down and chatted after you were done with this meeting and you told me about this, I was like, oh my gosh, that is really strong. And here's why, before you get into the things, is that our Claude or our chat GPT, because we could probably use either, have a deep knowing. And a deep reach into all of our past content. All of the things that you have taught. Also, all of the products that we continue to develop to help dealers. And so it knows all of the things. And so that in itself is not your... personal clod it's because it's it's you know you can ask these kind of questions of any um of any ai yeah and um you're going to get an answer and it's not going to be incorrect but it won't be the full picture right and so that's one of the things with what we've been developing with the ai and with all of the things is a full picture of what those things look like Yeah. So this is the thing you're right. Claude and our AI has access to all of our history, which then it knows what I teach. It also has a pretty deep reach already into the data history, which we've got many months worth of data now in the eight. And so we're now using Claude to analyze that data that's there. Yes. So when the dealer asked me, um, What's the one thing? It came into deal structure. The one thing came back with this dealer in particular, who's the subject of this conversation. The dealer was, what should I work on? It's gross profit. You don't show as much gross profit as the other members. And so just so our listeners know, this was not the first dealer to ask this question about, based on what you see, what's the one thing? Yeah. That multiple had. This just happened to happen during... the VA during an actual meeting? Because I think some of those questions you were asked, it was like in an email. Well, this dealer had asked it last month when they first saw the report card. And then so in last night's meeting, I brought this for every member. Wonderful. So I showed it to the one member. And so the dealer, keep in mind, we got a room full of experienced dealers, right? So we got a virtual room full of dealers who've been to this for years. And there's another dealer there who's in a similar boat, have similar structure. And so, you know, they were able to also learn from the thing. But when the dealer asked me, should i mark up my cars more i was able to say that's what claude thinks right it takes it out of jim's opinion and yes and it also because from what i understood from the story is that that even the dealers and you had come to that conclusion yeah And this was an independent ask of based on the data and everything that you know, what would you say would be the one thing? And so you're both kind of coming at it from different angles, from experience and living in the trenches and all of that. And then from the raw data. Right. And so you're looking at the deal structure in particular. We're working with information that is basically taking the. So it sweeps. The weighting is kind of like this. It's about forty percent of the grade comes from profitability. Another forty percent comes from portfolio yield, which is kind of a function of cash flow and other other factors. I'm having technical difficulties. The light in her closet. Yeah, it's like, this is my closet. And I was, I'm sorry, I totally squirreled. But this, when we sat down, I was like, okay, I finally feel totally good about, you know, the lighting and that there's a contiguous, you know, that's contiguous. And then I didn't plug in my lights. And so they just ran out of battery at the same time. And it screwed up the look. So now we're back. I'm sorry. We're going into the data. Go for it. You look lovely in the lighting. So the idea here was that we got data that is coming in. It's raw information that is supplying the... It's a history of data, it's comparative, and it looks first at deal structure, or I'm sorry, it looks at portfolio yield and profitability. And then through that lens, it looks back at deal structure. So it's an effort for us to be able to show. It's that whole weighted piece. Yeah. So it's a move for us to be able to step more toward telling dealers, here's what's working best. Now, it's new, right? We're still working through it. It's already giving us some really rich information, but that's only going to build as we put more data in there. We get more history with the data. But this was able to say, you know, unequivocally, this is priority number one for this dealer. So we talked about it, and the other members chimed in. And this is what I'm doing. I'm asking the other dealers, let's ask your dealer, what do they think? Should you change your markup? And the answers from the other experienced dealers came in as yes. It looks like you should mark it up. It might not be immediately. Maybe you do it in stages. I confirmed, by the way, with the dealer by text this morning, are you, after sleeping on it, are you moving ahead with increasing pricing? And the answer is yes. So now we'll be able to support that. We'll be able to have some degree of accountability and tracking inside the ongoing VA report. We'll be able to support that dealer because they were a little bit uncomfortable about it. They've been doing business that way for a very long time, kind of a fixed model thing. So they were a little uncomfortable. So now we get to track that with them and see the outcome. of that i told them in the meeting i said we'll see a lot of this in six months time you'll be able to see whether it's working or whether it's causing any kind of adjustment but because this dealer is strong in other areas we said yes it makes sense to move the pricing and so it just gave a dealer independent validation including artificial intelligence to look in there and say yes it makes sense to change it and now we can change it we can turn a lever and we can look because you know as i keep saying to them we don't we need to we don't need to take the time to contribute data we don't need to take the time to come to a meeting and review these reports and everything else if we're not going to get better as a result of the time that we invest here right yes so we got to identify what is the thing so i think this is part of the focus and part of what we're settling into in v-aid is the you know there's always been a thing you know that i've talked about this where Figuring out the accountability factor in a small group is tricky, you know, because I don't think as a moderator, I should be the one in there with the stick saying, fix this, fix this. As a peer group, the way a peer group works best in my experience is that the dealers, in this case, learn from one another. Yes. And they support one another and they challenge one another. And so obviously that's part of what happened last night. I think AI just kind of gave us a solid recommendation that we could either confirm or reject. And so we're moving forward. Go ahead. I'm kind of thinking, too, that it's adding the AI and you. Mm-hmm. it's it's kind of a hybrid of just having a moderator but you've got a moderator coach yeah and so that coach is is like um it's it has a different a little bit of a different uh different feel it has yeah and i would say that it has a deeper look it it has got a lens into the data that is hard for me in my limited you know i i have a good picture of the stuff but for it to be able to go in there and sweep each dealer's history and stack it up like that's just something that um you know we we we're finding that ai can do that in a much a more thorough way and so it's it's useful and i think it's helpful for the dealers to see this is machine generated this is not there's no opinion here there's no this is just working through the mathematics and saying based on what we see in deal structure so that's why we chose the title about you know deal structure in this case was the thing that's on trial and it's basically saying this dealer's portfolio is working quite well their profitability is pretty good so that you know they don't have a problem their portfolio is working and so to adjust their pricing a little bit is some in this case um made sense to the other members to to claude and certainly to me so i was able to tell the dealer i confident and recommending that you move that pricing and we'll track it together and it'll be an excellent case study for other members and for folks as we learn kind of what the outcome is here. And not just a lot, I think is the right move. Yeah, I really appreciate, you know, as you've talked about how the scale was created And that the eighty percent is where kind of deal structure resides. And then there's the other twenty percent, which is like I think it's twenty. Is it sixty, twenty, twenty? It's actually twenty or sorry, forty and forty makes up eighty percent. OK. Which is in portfolio yield and profitability. Okay. And then the other is where should I sell more? Yeah. And how should I price them? And how should I price them? And so it's just, it's an interesting thing that, yeah, where it kind of landed on that. So, and that it's that pricing thing kind of throws in, it's a factor in the deal structure. It's like you change that. Yeah, and this helps us answer these questions that are tough. I mean, you know, I've said that dealers ask me these questions when we're working with people who are new to the business. Like, what's the right markup? What's the right, you know, APR? And one of the things that we, by the way, said in that meeting last night, and I wasn't the only one saying it. There were, you know, experienced members there adding the same thought, is that... just because it's right for dealer one doesn't mean it's right for dealer two i mean strategy can vary like and we talked about this in our meeting last night it's like i've said for years you've i've written articles about this thing about when you started to this business you you kind of either have a focus on cash flow like getting your capital back in a short time period or whatever or you have a focus on equity where you sell sell sell grow grow grow you defer your return on cash until a later date. And so the strategies vary. And, you know, this can vary a little bit by market, but it's really at the end of the day, it's the dealer's name potentially on the building. And so the model has got to serve them. Yeah. And we've seen already and just in the short time we've been doing these letter grades is they're there's more than one way to do this we've known that that there's more than one way and can work some might be stronger in some areas and and you know even with high repo rates we're seeing that the results flow through to say we we're still surviving even with high repo rates so this is part of the lesson and the value of what we're learning as it happens and i think now it lets us just tell a dealer very specifically you asked what is the one thing Claude spit it out. Fellow members confirmed it's time to act, right? And they're acting. And so now we get to track it and verify that that, in fact, was the right directive, so to speak, in terms of where we go. So this is part of what's happening. And so I think it's just... It's really kind of a celebration of AI from my perspective. I really value what AI is adding for me as an analyst. And through that allows me to bring information to the members that I think is really hard to come by. I've been doing this a long time and haven't been able to get to this kind of information. So I just think it becomes especially useful. I would say, too, that if there's anything that we can do to help any of our listeners out there, if you want some more information about some of the things that are tools that could be very, very helpful in your dealership, please call or text. You can also go to whitehatway.com. Right. And that kind of gives you a little bit more of a holistic view of the philosophy behind the products. And then there is a page for V-Eight. And you got my number now. So send me a note. If you were particularly inspired by the words of encouragement this morning, send me a note. Let me know how you feel about that word so we can make a judgment about whether to bring that segment back. Something tells me Michelle will have an opinion about that. Well, I'm kind of thinking that we all... I enjoy. just it it felt good okay the lightheartedness felt good on from me and so let us know you know it may be even more of an irritation or whatever so all right hey everybody thanks so much for joining and um we just really appreciate your support and uh you know i'm just really grateful and that we all together can change an industry for the positive yeah come back next friday we'll bring some more education absolutely have a great afternoon
