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. Happy Friday from Guymon, Oklahoma. Yeah, welcome. Happy to have you in the guest bedroom slash office slash whatever. we are we're getting ready to celebrate jim's mom's 40th work anniversary today so I just it's like who does that yeah that's that's pretty amazing and so I'm glad that that her she works the law office and they're throwing her a big shindig and yeah And we're happy to be here. My brother's coming in for the weekend. Spend a little time with them before we head back to Utah for next week. But, yeah, I just got a couple of quick updates. We had our first V8 meeting for the month of March last night. That was good. A couple of our dealers couldn't make it. We had six dealers there and a lot of great conversation. And then I'll just remind everybody, next Wednesday we have – the tribute to Rick Reeves, kind of a tip of the hat way to put it on your calendar. You're going to want to watch that. Yeah. We've got a lot of dealers from across the country chiming in to kind of say how Rick contributed to their success of many years. Many of them have been in business since the nineties. So it'll be a good, a good conversation on Wednesday. So. Absolutely. And then we have on the day after is the White Hat Way webinar. So if you haven't gotten tickets yet, you can use the coupon code morning show, no space, and it'll give you 75% off the ticket price. Right. Well, shall we jump into our topic? I think we shall. It's kind of a mishmash a little bit. Yeah, a little bit. I think we'll spend most of our time on this private money conversation because it was a theme in our V8 meeting last night. And, you know, we've talked about um private money before it's not surprising to me that private money continues to be you know a popular conversation because the cost of money is up and there are some some factors there that are driving those things and we you know it's I think we determined it's probably been a year and a half ago that we talked about private money yeah about use of private money and how to how to do that and that comes up with us because the nature of what we do as analysts, coaches, you know, we're working with dealers on cashflow modeling. And so it comes up a lot of times the conversation around private money comes in early because dealers aren't quite to the place where they can qualify for some of the lines of credit. So let's just first define private money is if you're going through a local bank or if you're going through someone who has money that you know that is willing to invest and put some money into your business. And so it's not the Spartans and the Primalens and those kind of money. But it's things that if you've got a relationship with a local bank or you've got a relationship with someone. And I think for a conversation today, I probably wouldn't even include local banks. Like that's a different thing. That's a different hoop to jump through. I'm really talking mostly today about private individuals. And so that can include some other private sources. But yeah, the Spartans and Primalins are kind of in the category that I would call specialty lenders like that. They're lenders or finance companies providing lines of credit for dealers, but obviously dealers have to be able to reach a certain level. And then the other big thread of conversation, not just in our group last night, but across social media, we see some threads around debt reduction you know with the cost of money being what it is people are kind of trying to figure out how do I ever get out from under this expensive money and um and so that's kind of where it comes into play we've been we've been working with a few dealers on on some math and it came up we actually decided to do a bonus meeting um in our v8 group just because we've got um it's such an important thread with some of them right now just trying to figure out what would it really take and you know the day of uh like the rick reeves days um from back in the 90s and the early 2000s I know you are honey um the the the ability for a dealer to step in to buy hair pay here without outside money um there's a lot more money that's needed up front and so It's it's a challenge that dealers that are newer to the business experience a lot more than those that are that are especially the early stage money. But it's you know, we we we it is absolutely possible to be able to do this without outside money. It's just takes a really, really long time. Yeah. And it takes more cash than it did, you know, pre-COVID if you want to. I mean, we can, we can talk about what it took to sell 30 cards a month back then. You know, some of our dealers we talked about in a prior episode last week about how our volume was up so much, you know, in the month of February compared to past years for a lot of our clients. And so what this starts, you know, some of the dealers were saying, man, but by the time I fund my increased volume, cost of cars, cost of replacing those cars at today's higher car cost. And, you know, the funding of the warranty and all the reinsurance for those who had reinsurance, like it just takes a lot of cash. You know, we're all trying to do volume, right? We're all trying to create business. And yet we get to this place where it takes a lot of, you know, capital to do it. And while you know the spartans and primalins and those folks have the appetite to do it they're they're willing to fund for those dealers who qualify then it just still is a thing where the price of money you know it obviously erodes the dealers um their own profits and and positive cash flow potentially and it also just delays the the time that they're going to be able to get free of that debt for those who have that strategy and you know personally I can just say I think I sure when we talked in the the podcast a year and a half ago or so on this subject is like I've I've been there like as a dealer myself I was a dealer for seven years we used some private money some of it went well some of it didn't go well learned a lot in that experience right about how to avoid that and you know any kind of problems of course and then the other piece of this is just looking at how to help dealers structure a deal that makes sense for both obviously the dealer and the investor. And I got to say it, Michelle, one of the things that I can say, having been around this business a good while, is that there's a percentage of dealers who don't manage their money very well. They're good at selling cars and they're good at finding cars and getting them reconditioned and turn around and all that stuff, but they just don't make enough desk time. So define managing money. Well, it's like planning how much capital is required and budgeting for the capital and cash that does come in, how to allocate those funds to debt reduction or managing the debt or anticipating cash flows and all those things are, it's hard to find enough desk time. That's part of why we talked about being able to work on the business and we're coming off a time of year when you know, dealers are very busy. They're just focused on trying to take, you know, the farm boy in me calls it hay making season. Like it's that time of year when it's, you know, it's seasonal, it's time to make hay. It's Black Friday for buyer payer. They're busy. And so it's a time that, you know, they're feeling concerned and frustrated about, you know, missed opportunities. Some of them missed sales opportunities because they couldn't recondition cars fast enough or some of that, which can be a function of money. And I think for today, I just wanted to have a chance to dig in a little deeper, especially coming off of that meeting last night. It's like, I just see that one of the problems, like if let's just, let's make it all sorts of private money. If you want to say a private investor, a rich uncle who is interested in participating in the business, right? If it's some family office that is going to place money in a larger operation, I think the things that we can talk about here, apply right up all the way to Wall Street. It's like if it's private money or it's non-institutional money, we'll say, then if it comes into our buy here, pay here segment, there are some things that need to be in place. There's some disciplines that have to be built in. And I will just throw in a word, like one of the things that Primeline and Spartan do and people are getting frustrated and wish they didn't have to pay as much for money. That's pretty much the market right now is higher cost of money. While it's frustrating and it can be difficult to manage for some dealers, the reality is those lenders have done this long enough. The reason they're still around in this subprime sector is because they have some built-in discipline. That's just a hard thing for people to think about. They require their dealers that are, that they, they exercise these same types of disciplines, that there's things that they have to have to be keeping track of and, and certain metrics that they, they need to be, they need to be within certain boundaries. And also just the way they handle actual assets, like tangible assets, contracts and, and how they fund the borrowing base, you know, and all these kinds of things or things that, you know, cause, dealers to have to be disciplined in managing. It's just like a forced level of discipline in the structure. And obviously if you're Spartan Primal and you're doing that largely to protect your own interests. And in doing that, you also keep the dealer from getting potentially out of bounds because again, dealers are busy being dealers and they're not often able to spend enough time at their desk. And I'm quite sure that this is something that, you know, if you're a Spartan and Primal in, as an example, it's something that you're aware of, like they've been around, you know, longer than I have many of them. And so they've seen the same thing. And the reality is they want to build a fund dealers, you know, and, and so we got to be able to try to find those solutions and then dealers want to be able to utilize capital and grow. We've talked in the past about dealers, you know, difference in different approaches to debt. Some have more aversion to debt than others. We had two dealers on the screen during our live event, our dealer roundup last month. And you could see that there are two dealers, both very successful, but different strategies around debt. We had it in our meeting last night. Different strategy outlook around debt. If you're a dealer who wants to reduce debt, if you want to get away from debt or could build a strategy to reduce debt or replace expensive money with less expensive money, then there's just some pieces that have to be in place. And that's really about just making some desk time. It's about, you know, finding some people to help, you know, do that pro forma, you know, do the projections that are necessary without, you know, stunting growth. I mean, we're obviously always trying to help clients create all the volume and business opportunity they can. And then in addition to that, they want to be able to, some of them want to be able to reduce the debt that they've got. So it's something that we've done, you know, you've seen me do it. It's like we, I come from a background of helping dealers do, analysis on this sort of thing and building strategies and projecting cash flows. And I just can see that one of the things, if I were personally loaning money to dealers, there would need to be some discipline built into the structure because it's just the nature of the business is like just having a way to make sure that dealers don't get themselves out of bounds in terms of their leverage. So when you talk about building in structure, what kind of things are you talking about? I'm really talking about, but typically what I would be recommending is a weekly settlement process, which is, is kind of, you know, there's a lot of administrative and, you know, with some of these lenders that we're talking about, it's more like a daily kind of thing. Like these dealers can actually draw on their lines of credit. more than once a week, in which case there's got to be an adjustment. There's got to be a quick accounting of all the assets and figure out what the dealer is eligible for. And I'm really saying at least a weekly process. As we know, we see through VA, dealers have a hard time getting to their desk often enough to submit stuff for us on a simple monthly composite, right? And so to be able to do a weekly thing is important. And I can just say that Michelle and I are not brokers. We don't broker money. We don't get paid as brokers. There are very specific rules around that, and that's really not where our interest is anyway. What we have done and can do is provide a solution where we're sort of a watchdog in between a private investor and a dealer so that we can fill a role of analysis and sort of confirmation that the assets are performing as expected, that the cash is being you know, managed and allocated in a way that's expected. And so this is kind of, you know, it's not exactly a borrowing base in our case, but it's similar in that you're, you're helping to introduce money privately in a way that can make sense. And I, you know, I can say that one of the other things that happens in our business, it's a pretty easy for a dealer when I say easy, there's an opportunity for dealers who wish to do it, to be able to sell a private investor. Who's not familiar. with our industry to sell them on how rosy the business is. Yeah, we've seen that happen. But it usually requires some level of... being able to communicate and educate whoever it is from the dealer. And, and so there've been times we've, we've seen dealers that are so great at that, that they have all of their, you know, they, they can string together data and they they've shown, you know, this is what it looks like. This is what I've done in the past. All of that, again, measure, measure, measure, measure, measure, because it's hard for someone who wants to, you know, that you're looking at to put money in. If you haven't been keeping really good track, and measuring and watching and being able to chart out what kind of, how money moves in and out of your business, that's a harder sell. But so we've seen some that just are really, were just incredibly articulate and had the data. And then we've had opportunities for those that are looking for money that we've been able to kind of help them communicate that with the people that they're stepping into business with, or being able to educate the dealer on here are the things that would be helpful for you to, to communicate with people that are not familiar with this industry because you're Spartans in prime lens, they know the industry inside and out, but there's a lot of other people that, that don't. And, but once you can kind of kind of talk to them about that, like you said, there's a really rosy picture and a rosy outlook. I think what happens is when dealers are newer to the business, they go through what is often called a honeymoon period. I'm sure you know what I mean by that. It's like the, the rosy parts early on. Are we still in the honeymoon period? Are you and I? Uh-huh. We can be. Okay. No, it's like, it's like the, the, the part that they talk about in the by your payer space is like early on, it all looks rosy. Like it all looks like there's, There's so much gross profit. We're not yet seeing all the charge-offs in the portfolio. We're not yet seeing the price of maybe not handling collections well. And so it looks good. It feels good. The margins are excellent. And it's like that cash element is something that I think is kind of intoxicating too. The profit side. The profit side. And so you see a lot of times... uh you know you it's the cash is coming in and it's like oh my gosh we've got all this cash and then it gets spent right on things that are not necessarily um growth strategies yeah I think you know the the kind of the white hat element to all of this is one of the things that people know you've seen it I think but I've certainly worked with dealers and dealers could confirm that when I've participated and I've been at these meetings where a potential bank is there with a dealer and might have multiple partners there whatever And people know when I'm there, I'm not sugarcoating. Like I'm just, I'm trying to make sure everybody at the table is prepared. Transparent, yeah. Yeah, just, you know, don't sugarcoat the thing. Don't oversell it because that just puts potentially us in a difficult place, which, you know, imagine I'm sitting there with a dealer, you're the dealer and I've got an investor lender there. Then, you know, when we oversell it and we get them excited and they come in, that could potentially end badly for both parties. And that's not a scenario I want to be a part of. So it's like we're trying to help dealers avoid that scenario. Don't create, don't sugarcoat it. Don't oversell it. Make sure that, and sometimes they don't know that they're overselling because they're new and they don't realize they're in the honeymoon period and all feels wonderful. And look at all the sales and gross profit we've created. And so we see that. We've seen some of that in social media, right? Where people are out there excited about their volume of business. And it's great to be excited. No, of course. You've got to create the sales in order to build the business. Yeah. It's just that. you know we can say it here like sales is not that sales is the easy part I mean that's just it really is and our our spartan and primal ends know that yeah it's not that's the easy part it's like but it's underwriting the deal properly managing the collections managing the cash flow I didn't say anything about profit Right. It's like, you know, it's managing the cash, managing the assets, being able to anticipate. But dealers, I got to tell you, you got to be able to get enough time at your desk. And that's that's a that's a major piece is, you know, we we did a thing that was about two years ago that. it was like September of 2022. Um, so go back into the history and, and I've actually was talking to, to Amanda Sanchez recently. And she's like, you should do that again. We did a Monday series on how to, um, how to free up space to work on your business instead of being in your business all the time. And so every week we had actionable steps and things that, that, um, That can help you to be able to step away, even if it is for maybe three hours a week or whatever, to be able to step away from working in the business and work on your business. Because I can just say that I... from what we've seen and from my own personal experience, um, as, as we've done, what we, what we do three hours, if it's really good quality, three hours a week, working on your business, you can do massive things. And, um, as long as you are undisturbed, uninterrupted, and you're not, you're not watching the, the, the auctions as you're doing your thing, you know, that you're you're really in your business and or you're on working on your business and and it's those kind of things that if you're looking for money it's it is very important that you that you spend some time that's an on your business thing yeah that's a very on your business yeah for sure and you know it doesn't mean it has to be the dealer crunching the numbers and running the tallies on the the you know these weekly things we're talking about it's just that Somebody's got to do it and we got to make sure the information is timely and that in order to protect this private investor, You've got to be able to manage the money and be able to be honest so that you don't find yourself in a difficult place where, you know, suddenly we had a difficult week and we took some extra charge offs and we owe this private investor, depending on the structure. There's all different ways to structure this. And I think, you know, you and I have talked about this. It's been a while since we said, I often tell dealers that are new to the business, there are two types of structure. that I think are really going to give you a much greater chance of success. One is going to be the structure of the loan to the consumer. How the loan is going to perform, the deal structure has a lot to do with that. We've got some margin for error in that one. The other type of structure is the structure of the capitalization of the company. So private money would be certainly no exception. And, you know, if we have a private investor, that's wonderful. It provides us more flexibility. And, you know, maybe some of these other types of finance companies or lenders might. And to me, the flexibility is a double edged sword. Having flexibility is beautiful. It's when we have too much flexibility that we can get ourselves in a pickle by not you know, making sure we stay on top of the assets and what, you know, what are the qualified earning assets? What's our method for making sure we stay in ratio? That's a big thing I always try to emphasize. We've seen it. You've been there whenever I've urged dealers to create structure that would create that kind of discipline in their model. And, and they sort of dismissed it. Like we, we got this, we know how to do this. And, and some of those didn't go very well. So it's like, when we don't create that structure, when we don't create that discipline in managing the cashflow, dedicating the cashflow to, to re resolving the debt and protecting the investor and making sure things stay in a favorable ratio. Again, I think you start to see this is where the Spartans and Primalins have their methodology and kind of in place where they verify assets and then you measure analytics and that sort of thing. And so this is part of what I would just say, and we, you know, we don't need to spend much more time here. I would say there's, we won't, this conversation will never end. Like it's, you know, we have to find a place to move on. But I would just say that the, uh, the thing that we've talked to some dealers lately who are approaching retirement and contemplating selling. And so now it's like, how do you, if you were to sell and you were to finance the sale of your business to another party, it's similar in this way of like, how do I make sure if I'm the dealer that I can, finance that and make sure that I can track how the business is performing. So this is the part that I would say, just know that one of the things we can provide is more watchdog we're happy to make connections. We're not trying to broker in a situation like that. What we would be interested in doing is providing that sort of watchdog layer between investors and would be dealers and investors, or in this case, buyers and sellers. Being able to step in there and play a watchdog role is important. Whether it's us or somebody else, it's a really important element. It's an important element. Create a third party scenario where you can make sure that we've got a way to track those things and know I always say that kind of when the wheel's starting to wobble, we've got to make sure we can identify that and catch it early and start to deal with it so we don't find ourselves in a really difficult spot. And I would encourage dealers, if you are thinking about doing some private money and, you know, like I like the idea of a watchdog, typically your local bookkeeper or CPA is not someone that is, unless they're very versed in buy here, pay here. Yeah. And even then they're really not equipped to do the parts that I'm talking about. We're talking about more like KPIs, analytics of the actual portfolio performance. So that's really not where most of your CPAs and accountants live. This is more, this is more, real time, certainly weekly kind of, you know, settlements and this sort of thing where there's a, and it ties back to the financial strategy that was created. So most, most accounting firms that I've dealt with don't really have a solution like that. And, you know, it's not something we do off. We have some clients we provide weekly performance reports for, but, and it's not necessarily in this context, but they benefit from that because they have lines of credit and, They're able to see their performance. We're able to, with one of our clients recently use private money, project their ratio, you know, at their current portfolio performance, we were able to say, okay, across the next 24 months at your current rate of portfolio performance and your current rate of debt reduction, your ratio looks to stay favorable, but that requires that discipline, right? To make sure that we, you know, actually follow through on whatever the plan is. So there's different ways to do it. I think we, you know, we don't need to go into too much depth, but I certainly over the years have adopted a method that I recommend to all of our clients and anybody else who's stepping into this situation between between investors and dealers, because it can be a really beautiful arrangement. Investors can make a nice return. And then we just, you have this thing to overcome. I mean, most of us, when we think about subprime, the word subprime, which is our sector, most investors are going to have a negative connotation around that word because so many of them got burned. We heard about, you know, retirement funds being, you know, wiped out back in the subprime crash of, of 2008 that one was around real estate but people still you know and I still use the word because I just kind of like to say look it is subprime that is the sector we're in I mean I just don't sugarcoat it that's that's where we are doesn't mean it can't work doesn't mean we can't mitigate risk and make it work for everybody but it's just important to uh you know, to not sugarcoat it. Say it like it is. We have a, if, if you've got questions about this and would like to be able to run some things past Jim or, or whatever, you can go to Jim at white hat way.com. I noticed that our, your phone number has been taken. Oh, wait, there's another one right here. I need help. Call or text us at 903-816-0216. And, you know, if you've got questions or something and that's something that you're looking at doing, it's an interesting thing as a observer. I'm married in to buy here, pay here. It's like Jim, been a dealer. loves analytics and loves the spreadsheets and loves all of that kind of stuff. And also really understands the space. So, um, yeah, if there's anything we can do to help you, please feel free to reach out, but, um, just, you know, make sure that, uh, like Jim said is, is you're taking some time every week and, and we're just off of a really big, um, a big, uh, black Friday kind of with all of our, um, with all of our tax return money coming in. And it's a good time for us as those things start leveling out a little bit, is finding ways to be able to create more time for you to work on your business instead of being in your business all the time. We work with dealers all of the time and some of them are like, they love the sales process. So it's like, we're not going to encourage them to take that away from themselves so they can spend some time on the floor or they really love the X, whatever process. And so it's not about you no longer working in your business, but it's about you carving time out to be able to work on your business so that you can take it forward, pay off debt, get new new capital, you know, all of those things that really help us strengthen our business. It's just about creating strategy. And we're so engaged in the sales department or any other department that we can't make enough desk time to create strategy and create, you know, the plan, a strategic plan. then we really just kind of end up on that hamster wheel that we're talking about. And we obviously like to help dealers avoid that. I don't like being on a hamster wheel. You just never get anywhere. You're just constantly, yeah. Good morning to San Antonio. Glad to have you here, Robert. Yeah, I agree. This is definitely a hot topic and it's something that we see a lot of opportunity, right? There's definitely an opportunity where private money can come into this space and and and do a lot of good have a lot of really positive impact um it just we know that there there has to be some discipline and structure built into that to make it really uh end well and you know we often talk about obviously our clients are dealers and then we talk about that we are also interested in the success of the consumer through our dealer clients and through the dealers that we uh you know speak to through the podcast and other channels but Now you can also add investors. We're interested in the investors having a good experience because when they can place money privately through these channels and have that go well, that can be such a great thing for them. And we've talked to folks who are doing it very well. And so we know that there's an opportunity in all that. But I think we also talked about, we were going to touch on some kind of repo policy. Why don't we save that until next week? Yeah. And we can dig into that a little more. Yeah. And we've just been, we, this, this topic came up to not just from your V8 groups, but we have seen an awful lot of conversation on social. And so we look forward to having a, another conversation soon about more of the hot topics and the things that are, that are, are making a difference. And, and as we're putting together our, our, our, Dealer Roundup in April, which is just right around the corner, we're keeping track of the things that matter right now to dealers. And so if there's actually, if there's a topic or something that you would really like us to talk about, and we've been talking about having the capital, that being another conversation, just specifically about capital for the Dealer Roundup in April. but if there's something else that you would really like to see, let us know. We do keep track quite a bit on what's, what the big conversations are on, on social media. So. And as like last time, there are a couple of topics that are coming into focus. We'll probably do three sessions again in the next month's deal roundup. So, so yeah, we're happy to hear from folks on what are their subjects, but yeah, we'll we'll, yeah and don't forget with with the events that we do the the webinars and the dealer roundups if you have a ticket that means that you get the recordings afterwards so if you're in and out and all of that it's you will have access to all of those so it's uh and so we know that life happens and sometimes you know you might have someone call in sick and so it's like I got doing this instead of doing this so we get that and that's why lord knows I've accepted the invitation a lot of webinars so we do we will be um for any of the events like the webinar that we have next week on um you know people don't quit jobs uh they how to how to keep your talents sticky the ones that are valuable Um, and so that's next week. And so anyone that has a ticket for that will be getting the recording so you can rewatch it. You can pick up on the things that you missed out on. You can even set your team around and put them in front of it and have them watch it because you have access to, to those recordings. And so again, for the event that's next week with the, um, the webinar, it's on the 21st of March. It's at 7 30 PM Eastern. It's going to run about 90 minutes. And right now, through the morning show, you can use morning show, no space, as a coupon code for 75% off your ticket. There you go. All right. So we should sign off from Western Oklahoma. I don't have anything else. I think that that is about it. Yeah, we'll be... probably in the denver area on monday to broadcast for our monday podcast there but I don't know there along the rockies so hey guys thanks so much for joining us we hope you have a great weekend and you know uh finish this tax season with a bang and uh and we will be seeing you all on monday
