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. I'm already laughing. And Jim is already shaking his head. Oh gosh. Cause I like, I, we know that intro music and the words and the time I know the timing. And so I'm like saying it with them. Yeah. Take it away. You too. Okay. I'm a goofball. Yep. So that's why we do so. Happy Friday. I, um, I like for some reason completely forgot that it was a podcast morning, even though we talked about it during coffee time, it was up getting my brother up and, and doing all the stuff. And we were just gyms downstairs in the bathroom. You can hear conversation upstairs and he goes, Oh, He goes, hey, you realize we got a podcast in twenty minutes? And I'm like, oh, I forgot. Scramble, scramble. So I, yeah, run, run, run, run, run. Go grab the stuff. I told Michelle's brother, she's getting kind of forgetful. We may have to talk about putting her in a home. And if we find one that's comfortable enough, I'll go with you. If they got one of those shuffleboard, those grass shuffleboard things. I'll come with you. Right. That would be, that would be fun. So, um, yeah, uh, just been, it's been a really busy week and, and, uh, it's a happy Friday. So, you know, some announcements. Okay. We got, uh, the, Big event with Mid-Atlantic, Tommy Brandes, Executive Director of Marriotta, we'll still call it. And so that comes up on the fifteenth, the week from Sunday. Starts on Sunday, I believe. And then we've got LHPH Capitals event in San Diego on October two through four. So if you're in lease here, pay here, or thinking about doing lease here, pay here, or adding lease here, pay here, that's a really good event to go to and kind of just be able to talk to people that are actually in it to, and the education is specifically around leasing. Yeah. I'm going to have a conversation with somebody today around lease here, pay here, or lease to own software. Yeah. So people are interested. There's still, you know, some high interest. It just, you know, it depends on what your goals are and the tax structure of your state and, you know, a lot of things like that, too. Yeah, for sure. Yeah, we've got. So any other announcements before we move into our big thing? The Super Forum's coming. Is it Super Forum is what they call it still? Oh, no, they just call it Dealer Forum. Dealer Forum, which is going to be in St. Louis. No, I think it's New Orleans. New Orleans. Yeah. New Orleans. I don't know the dates on that. That's in November. So we're just, those of you who, oh, and, and the policy conference too. There's so many things coming up. Policy conference starts this month too. And that's a big one for meeting, you know, your senators and, and congressmen and all of that from your state. And, and you actually get a first row seat in, in the work that niada is doing in your behalf so and then I want to make sure and get the word out to uh our uh dealer listeners that if you want to get in a v-eight group and have a chance to see how other dealers are doing business please reach out right away because we've actually got our our our Target date for data for this month is next week, the tenth. I just threw up your cell phone number. If you need help, too. But, nine-oh-three, eight-one-six, oh-two-one-six. Just send Jim a text, and it's like, hey. Oh, and George, FIADA. It's coming up on October fifth. You think that conference season is wrapped up. I kind of think that the down season for conference season is like, December, January, February, and then maybe March because it's like, it feels like it starts in April and just runs until November. Go to Florida for that event and kind of check out some of those retirement villages with the golf courses. Yeah. We did go see the dad of a client in the villages. An amazing retirement community. There are golf carts. I don't know if any of you have ever been to the villages in Florida. It's by Orlando. Kind of. It's just like people have tricked out golf carts that I'm like, okay, so this is where golf carts go to live their best life. Because it's not about golfing. It's about this is my personality. I want to go down to the restaurant. And instead of car parking, it's like cart parking. Right. It's fun. Okay. So I digress. All right. Good morning, Karen. Yeah. So it looks, sounds like Karen's going to be at FIADA. So Karen, you're going to enjoy today's conversation. This is, this is kind of an ongoing, and by the way, one other announcement, it looks like Ben Clifford will be available to join next week. So just quickly, Ben and I recorded a year ago, like a session to bring to the, we prerecorded. And we just, we weren't real satisfied with it. So we put it aside and then I got busy and I just, you know, it's one of those things. There's other people that we've done that with and we should probably reach out to them and try to redo that. So this morning, just a blanket apology to all the people that are on our list of folks we're supposed to talk to. Yeah, yeah. So it's like, I hope you don't, you know, if we owe an apology, you're getting it. And yeah, so. Do blanket apologies. No, it's like we got, so we'll have Ben next Friday and we're going to dig into this thing. And I didn't think to get loaded up. Maybe I can find it while we talk. But the image that he shared on social media, I borrowed it and shared it. Oh, yeah. You didn't load it? I think it was shared on the poll that you did on what's most important to you. It was interest income, cash flow. I forget what the third one is. You did take a screenshot of it this morning. You said there's a fourth option that one person voted for, but I think that it was a mistake because it just says on. I'll show the poll. I can show this image. So it kind of ties into our theme. So what brought this about is I met yesterday with a dealer for the first time on cash flow modeling. So, you know, we do these virtual sessions and we run on cash flow scenarios. Was this the one that you're like, honey, honey, honey? listen to this voicemail oh yeah yeah because he's got a great texan accent yeah and so jim's like you got to come and listen to this it's just like this just it's music to jim's ears because he's like I love texas accents so yeah I was living there yeah so yeah anyway we just uh we had this uh great conversation and it's when somebody's new and they bring a whole fresh perspective and this person is an entrepreneur they have other businesses and so now they're looking at this industry for the first time and they're grasping the numbers that we're loading on the screen and And it was really a good meeting. And I think, but as I meet those kinds of people and they ask their questions and I'm able to kind of see how they think about and what kind of the missing pieces are for them as they're trying to grasp, you know, the demands of this business. It's a good idea for me to step into. Yeah. Well, it's just, I'm all the time working to try and I really, listen, people can tell. I love the work that I do and I'm all the time looking for ways to, present information in a new way, maybe a more thorough way. Well, and part of that is, is, um, which I, I am so grateful for. And so it may sound like, you know, they're talking about the same thing, but we're at different times. Like we've might've talked about something like this in a way a year ago or whatever, but, um, I've recognized as, as we were kind of discussing this morning's topic, I said, honey, have we done like an, uh, a podcast on what is cashflow? Because it's, you know, for everyone in the industry, it's kind of one of those things that everyone knows what it is. And have we done like what it is and what interests, you know, and like really break it down. So that's something that we're going to maybe do in the future, but But I recognize because, you know, my past career experience is I it's like this learning how to translate something that everyone I dealt with engineers every single day. And I would go to the engineering meetings about the new software stuff, the new updates, the new things that they were creating for this product that this company sold. And I was the one that was responsible for translating into everyday common, I'm a salesperson speak, or I'm a customer success speak, or I'm support speak, people that understand that to use their language. And so sometimes I think that we come across terms that people that have been in the business for a decade understand it. Yeah. But this podcast is also directed at people that are new. Yeah, for sure. We always try to be mindful of that listener. And I think especially because we hear from a lot of them, right? We hear from people that are brand new. The conversation I have with a lease your pay your person later today is somebody I've not interacted with on social or anything. So we we recognize that folks are tuning in in that way. And so I think for today, what I wanted to be able to do is present a conversation around cash flow and it ties back months ago we did an episode on amount writing you remember that conversation so it's just it's math it's just it's just weird maybe but this has kind of taken amount writing and and I I set into this project um and it'll be kind of an ongoing conversation throughout september because You know, when we have been here next week, we'll talk about the kind of the same stuff in different ways and the ways dealers think about it. And for today, what I want to do is I started in this project. I'm kind of thinking about amount writing because amount writing in its simplest form is like where a dealer takes their cash and deal and they apply money that they're collecting on their portfolio and they apply that so it's sort of like you know dealer can look up and say I now have this much actual cash they're in in their way of thinking they have this much actual cash tied up in their portfolio and I said in that podcast before I said I think that's dangerous I think that's problematic I get why dealers might like to see the number but I think it's we got to be careful about drawing any meaning from that number. There is. And, and, and yeah, there's, there's so many ways to look at the numbers and buy here, pay here. And because of the nature of the business, it's, it's really, I, it makes me wonder, is it better to look at this business as how would a bank look at this? Right. yeah seriously I mean how would a bank look at that because you are a finance company um a bank would look at this quickly and uh and send us on our way no it's a joke but I mean okay but I mean it's like how would they look at the numbers coming in and going out and and all of that because it's different than just a regular business where you have a product you sell the product and people go on their merry way well this is like you have collateral for a loan or for a you know piece of paper so the collateral is the car and so it is it's and that's that's part of when we talk to dealers that are people that want to get into the business or people that are currently in the car business and want to get into buy here pay here that's part of that paradigm shift is it's like it's money does not it needs you need to look at money differently and how it's moving differently than you've looked at it before And this boils down to the simple thing like Ben's image. And let me just go ahead and share that. See that there? Where? Oh, there it is. Okay. I'm adding it to the stage. So this is actually from the post that I put out. And this was Ben used it as a... in his reply to that poll, which I'll show the poll in just a minute. Yeah, so for those of you who are listening via the audio podcast, always, if there's stuff that we're showing and we're talking about things we're showing on the screen, please go to YouTube and like and subscribe our channel. But there's a guy sitting behind a table. It looks like he's at a park, and he's got a cup of coffee, and he's got this little smirk on his face, and there's a sign on his table that says... Monthly payments, cash in deal on new loans minus overhead equals true profit. So monthly payments minus cash in deal on the new loan minus overhead is a true profit. And at the very bottom of it says, change my mind. And so it's like, this is the way a lot of dealers look at this business. Yeah, it is. Well, we'd like to see more dealers think about this business this way when they're new. And we talk a lot about the paradigm shift when dealers are coming out of independent retail and franchise into this space. And they sometimes bring a retail mentality and they're kind of still focused on gross profit. And you've heard me have those conversations with dealers. It's intoxicating when they're like, oh my goodness, I now have a million dollars in my portfolio. And it's like, hmm. Well, yeah, that's kind of the whole thing. But yeah, there's so many layers to this that we can go on tangent after tangent. But I think what we have to do is think in terms of, you know, Ben's approach here and he's been in the business for a while. Yeah. And he's always expressed to me that he's grateful that I spend a lot more time talking about cash flow. than profit and even receivables. I mean, it's all in there. In the modeling I was doing yesterday with this dealer, we didn't even look at profit. We calculate net profit because we have to, from a cash perspective, that's a cash item. We have to pay the IRS for our income tax. And so it's a cash line item. So we calculate it. It's just that we don't talk about it. That's not really the the emphasis. And so I think in order, let's go to the poll first. Let me find the poll and share that. I've got it right here, I think. Yes, right here. So again, there's so many layers to this and think about when I put this poll out there, can you read it, Michelle? I can. Let me open this up. So this was, we did this on August thirtieth. So it's been out there for a couple, for a week or so. Dealer only poll. Okay. Sorry, I've got stuff about that too. Dealer only poll. Regarding your profits slash income, how do you view the split between gross profit and interest income? Write in your answers if necessary. It says, look for this to be a topic on the pod, blah, blah, blah, blah, you know, all that. So there were three things that you put down and then one just accidentally, I think, put on, which is the bottom one. So it was three things that it says, I favor interest earnings because... And then please explain in the comments. Two, I favor gross profit because... Explain in the comments. And then the third was I favor cash flow, so it doesn't matter to me. So let's stop there. We can tell people the results, but the idea here is that we finance a customer, and obviously we have an interest associated with that, and we have a gross profit on the contract. You know, the gross profit technically would be part of the principle that we collect. And so I was really in thinking about all these kind of numbers that we work with all the time. I posed the question. You can see the results came back at eighty seven percent of the respondents said I favor cash flow. So it doesn't matter how many people. No, I might be able to find it over here in just a moment. But no, but it was a decent, decent sized poll. I want to say the numbers who said they favor cash flow was in the thirties or something, you know, it was a pretty good sample. But I think the reality here is that if, if we think in that way, then it starts to, if dealers truly don't care, about how much of what they collect is interest earnings and how much is gross profit on the markup, right? So we had a whole conversation around markup before and we continue to have those conversations. But I think what I'm getting to here is that If it's just cash, and then you jump to Ben's scenario where he says, what his poster said there was equals true profit. Well, technically, our accountants listening would say that's not really profit by the IRS or the GAAP accounting definition, but it's positive cash flow, which is... spendable money. Whereas the, the others it's in our receivables and our profit and our, you know, it's not spendable always. So, so Ben's point is he, and he also talked about, I look forward to having him on next Friday so we can talk about this part further because he basically said he manages from his balance sheet. Okay. So that just means he's, he's looking at changes in receivables and changes in inventory and changes in bank balances month over month or week over week or whatever he chooses to do there. So I think it starts to help dealers see the difference, especially dealers that are contemplating this business, start to see the difference between, you know, this business that we're in versus, you know, conventional car sales. Right. It's just very, very different. Well, and, Again, huge. Those of you who are listening that are thinking about getting into the business, and if you need to talk to someone to help you understand why it's so important for you to understand that this is different than the regular car business, give us a holler. Because we can walk you through why, but it's so important that the way you look at it gets shifted into... This is not selling cars. This is becoming a bank. Yeah. So let me take dealers inside the numbers that, you know, I kind of promised today. So I prepared a couple of, before you show the graph. Sorry, Hugo. The IRS is listening. Oh, yeah. Good. Good. We like that. We do. We have stories. So, no, it's fun. But I think the thing that I want to kind of back up. So here's what I did. I just kind of took the cash flow modeling tool that I use all the time. And I loaded a scenario. using our actual group averages from the what I call mainstream dealers so those dealers that are one hundred five hundred yeah yeah so I grabbed those averages from those groups and I said okay if I have this selling price and I have this down payment I can show that part on the screen Well, and just so y'all know, that's probably the majority of dealers out there fall in that category. The majority of dealers do. So these are kind of the assumptions that I loaded in there. And you can see in that one column, it says this is from V-A July. These are three-month rolling averages. So those dealers in the three-month period ending July averaged fourteen sales per month. Okay. Not a big volume. A lot of dealers get in this business. Why is the number the same all the way across? Because it's running one through five years. So my cash flow modeling is built to run five years. So what you're seeing is that first column is year one. Okay. So I keep all the numbers the same when I'm working with a new dealer, especially. So it's because it's the exact same thing. Right. Do your one, your two, your three. So you're going to go further. Okay. Yeah. So just all I'm doing is just showing that these are the numbers. So APR is twenty three point nine, which is kind of an average. Average payment. So these are averages for the people that we have access to data and our tracking. So average average. Units sold, fourteen. Average selling price per sale, thirteen-two. The add-ons, I think I've still got six percent sales tax loaded in there by default. That's sales tax and all of that. What's the other add-on, the eight-seventy-seven? Is that your... Eight-seventy-seven, that's the cost of the add-ons. So all that's really different. And we don't need to get too tangled up in these numbers. But I would just say that... The ten eighty two is the price of the add ons and then the eight eighty seven is the cost of the add ons because of the dealer dock fee, which I probably have one hundred ninety five dollar dock fee. So it's just the difference is the profit there. So the eight eighty seven is direct cash. And then the unit cost on average is around seventy five. You see there's a separate line item for recon. OK, so we zeroed that out. So it was including recon. Cash down. And this is something that it's just like there's some people that that that this is one of those things that dealers are all over the spectrum about that. But this is an average. Average is sixteen hundred dollars cash down. apr and then the payment on average is right around five hundred right now which is so weird because just a couple of years ago that was like four hundred it's it's that that's a considerable jump and the dealer that I was talking to yesterday you know he kind of built his own modeling at three fifty you know and I'm like well you know most of your customers can handle more than that so so it's like we so the key here is that I just use the default numbers. The other thing I can show, and I'll try to show my screen. Which one do you want to do? Am I connected so you can show my screen, or do I have to show it for myself? No. So which one of these graphs do you want to show? It's not a graph. It's I'm going to show the actual screen. Oh, okay. So let me get the screen shared up here so I can get that document on there. So there's one more piece I want people to have confidence in here. But if I do this, wait a minute. Do-do-do-do-do. How come you can't share my screen from over there? Because I'm not on your computer. But it's showing in the stream over here. I'm having a little trouble with the view, folks. But let me just tell you what it is, and we'll move on. So the portfolio drivers are big here. You have to be able to... The best method, the most reliable method that I've come up with for projecting cash flows in a buy here, pay here portfolio is to sort of build out or like a roll forward on a portfolio using the drivers that some would call liquidation rates. I call them conversion rates. It's the rate at which we collect principal. It's the rate at which we recover repo values. It's the rate at which we collect interest. And we apply those ratios. So I can tell you here verbally that What I use, and these are low numbers, really. Some dealers do quite a bit better than this. But I use for principal, my driver was two point nine percent. For charge offs, I'm at two point four percent. Then for interest income, one point eight and repo recovery, one point one. That'll mean almost nothing. It means absolutely nothing to me. Yeah. So it's just basically those are drivers. Those are drivers that you use to build the forecast. This is the rate at which we would collect on the portfolio. And a whole as a whole. On a month. So that's a monthly conversion. So that's basically each month you have a starting balance. All those numbers are percentages of the starting balance. you calculate the new starting balance, you apply these ratios, and that tells you about how much principal you would collect, how much interest you would collect, et cetera. So that's how this portfolio is built. So when I show you these next slides, I think it's important to understand these are the pieces that are in there kind of driving this whole thing. And then for overhead, I used I rounded it to eighteen hundred at the number that I didn't make time to go find. But I remember in our conversation with Brent Carmichael when he came and we did the overhead conversation, we looked at first quarter with his NCM numbers and it came out to about eighteen hundred dollars per car sold was the total overhead for buy here, pay here, small, small group dealers. Like over the lifetime of the loan is eighteen hundred. No, it's eighteen hundred per month per car sold. Okay. Okay. So, okay. So, so again, that's so. So it's like if you're selling forty cars, then you're timesing forty times eighteen hundred. And that's kind of where the industry average is for what what your overhead. So in this case, we got fourteen sales is our model. And so the number comes out to twenty five thousand two hundred dollars per month is the overhead at fourteen sales per month. Okay. So that math. All right. And then overhead is marketing costs. Everything. It's everything that you pay out that you don't get returned. Yeah. Okay. So, but before we move on, I just, I wanted to just acknowledge Fahad's comment. And this is actually something that I was thinking about writing down when I read it, because I think it's a conversation that I don't want to squirrel. Please don't. It says our monthly payments haven't gone up nearly as much as our insurance has. As insurance has. So that's a great comment. And that's a topic that I think we can tackle another day. And that's not... It's not really pertinent to what we're talking about here. This is what the customer is paying us. You're right, though, Fahad. That is definitely something that we are mindful of. And dealers are missing business everywhere because the customer can afford the down payment. But by the time they cover insurance, there's not enough left to really make the deal make sense. So that's a problem. So, but again, my focus here today was, and listen, this is just, so you saw the assumptions that I loaded in there. And so I ran a cashflow model. And what I set out to do here is break down where does the cash, how much cash is required? So let's look first at, let me go to the one that is incoming cash. Oh no, let's actually, no, let's do outgoing. So on outgoing cash, this is a pie chart for those who can't see the screen. This is a split of outgoing cash upon reaching operational positive cash flow. So in this case, without taking you into every line of every row of the whole projection, this calculated out to eighteen months, which is what I've been telling everybody. You know, it used to be that I could say that most models that I ran were going to turn positive in October. ten to fifteen months. Now with cost of car being what it is, a lot of them are coming out more like eighteen months, which is exactly where this one landed. Operationally, I did not include income tax in this particular model. It gets a little messy with RFCs, etc., but So I just did operational cash and you know, it treats it like the, do you have like, you, you don't have an RFC, you know, like you're just basically owning these contracts yourself. Okay. So it would take months to get cash positive operationally. So what I mean by that is you can see the items that I have on the screen for operational cashflow. So the red bar is overhead. So, so let me, the whole pie represents all the money that we would, have outgoing from our bank accounts in the first eighteen months. So if you added everything up that went through your bank account, this is a representation of everything. So you can see that the red bar is seventeen percent. the tag and tax money that you would write to the dmv again our direct cost in this I realize texas you guys have an advantage over there but for the dealers who are just writing a check to the dmv um then you know if you this is kind of the method that I used here so that represented nine percent okay And then the initial inventory, which I included because that's also cash coming out of our bank accounts at the beginning, is one of four. But that only came to about four percent. You know, we kept to pony up that money in the beginning. But then the green, which you can see is by far the largest bar by far, seventy percent. From my perspective, as we've walked dealers through this cash modeling or perspective dealers, that's the piece, this cost of replacing inventory, that's shocking to them. It's because I've got enough to be able to do this and I've been thinking that I can sell one and get the down payment and buy it. It's like, Just so you know, to keep your machine moving to get to your goals, it's going to cost a lot more to get to where you want to go on inventory costs. I'm just saying from my perspective of listening to dealers, that number is the part that's most shocking to them. Yeah. And I would say when I look at that green bar, I would say it's actually somewhat comforting to me if I'm a dealer to see that because I've seen some models where that red bar would be much higher and that would be more frightening. Well, and we have had dealers that have come and they've said, we want to be able to, when we get started, we want to make one hundred and fifty thousand dollars for our family and we want to be able to support the this and the that. And so by the time you're done, it's like that red bar is a quarter of what's being spent. And it's just like. And you probably won't be positive in eighteen months. It'll take you a lot longer. Potentially. Yeah, it depends. There's so many variables in this thing. There's so many levers, as some people call it, like there's so many different things you can change. But I've showed you the variables that we're using. and and it's just an example it's just but it's it's representative of a typical dealer like if you're a typical dealer middle america what I call the mainstream dealers if they started a dealership using this exact you know structure this is calculating the the cash now we're all speculating as to how the portfolio is going to perform if it's a brand new dealer right so I'm working off of numbers that are typical and now you know obviously portfolio performance would really move this needle quite a bit it would change these these donut graphs quite a bit but again just for those listening the the inventory replacement comes out to seventy percent so that but why that's comforting to me is that's earning assets that's money that's going into because I'm only spending that money if I'm replacing cars that I've sold which means I've got earning assets on the road from last month yes right and so now I've got that cash is I think if I'm working with a bank and I will be later today, I'll be talking to a couple of banks on behalf of a client. And I think this is the stuff that, you know, these are earning assets. And while they may not perform, you know, they may have higher loss rates. They still as ratios of, you know, what we invest relative to the earnings. And the yield off the portfolio, it's, it's, it's, it's pretty healthy ratios. Go ahead. Okay. I'm sorry. I just like, I, I have such a hard time staying focused. You really do. And, and I read Vic because, love Vic. You're, hi Vic. Vic is actually one of our V-Eight dealers. And so he's like, can we get a copy of this graph? And I'm like, I'm sure you're going to see it in a meeting. So I can email. Yeah, absolutely. And then he's like, Jim is king of graphs. It's like, Jim is king of graphs. He just, and it's, it's cause you know, I'm a former dealer. He's a former dealer. And you also, Jim understands that there's a lot of people out there that are visual learners. And so it's like, how can we make this instead of just a spreadsheet that you're looking at a whole bunch of numbers? It's like, Oh, I can wrap my head around the concept of an aggregate like this. So we're working. Thank you, Vic. You caused me to chuckle. Vic, you're going to see more and more graphs out of us. We're working with some people who can make that all happen. That's true. That's true. I think everyone is going to see more graphs from us. So again, there's your breakdown of all the outgoing cash. We talked about those numbers. We don't need to share them on the screen, but I can share with folks what those numbers were. Let me just give you the grand total. I've got to find the right sheet in my workbook. So the grand total for cash out, two point five million. OK, and now let's look at the incoming cash. So that's the other one. OK, so we're moving to this one. And this one is split of incoming cash upon reaching operational positive cash flow. So that's like after the eighteen months. This is kind of what it looks like. Right. so let's talk about this so now what you have then is the the I've got three different shades of green there move us out of this because it's you're we're in the middle of the thing so yeah covering one of the labels okay so for those just listening in what we've got is down payments represent fifteen percent of the total incoming cash now this is problematic I'll explain but that's again one of those things that so many dealers have different this is based on that average of like fourteen was it fourteen hundred dollars sixteen hundred dollars Of what? Oh, sixteen. Sixteen hundred dollars to average down payment. So that's based on this average down payment. But when I say it's fourteen percent or fifteen percent, it's of all money that had to go into the business because I'll jump ahead. The blue bar over there on the left is the cash from the dealer. Why? Because the dealership shows to be about one point one million dollars short. It brings in about, you know, I said it's two point five going out overhead, buying cars, paying. So it's like we're looking at all out and all in. But some of the end is more money coming from the dealer to somewhere. Yeah. Or I mean, it could be come from the dealer or it's like whatever capital provider the dealer is using or whatever. And that actually, if you're using a capital provider, there's a couple more little pieces in there that would be outgoing, but you know, expense side. I work with Brent's numbers. I can't recall if he had finance charges, but anyway, that's a tangent. We digress. Yeah. So I think in general, what you're trying to show here is that You've got two point five million again using these exact assumptions and the typical mainstream dealer, two point five million going out and you would bring in about one point six. So the difference between those, somebody's got to make that up. So whether dealers using a line of credit or coins out of the cushion of their sofa or wherever the money's coming from. We got two point five going out. We got one point six coming in in the first eighteen months and now we're positive. OK, so what I'm saying is if I'm the dealer here, if I stepped into this exact model with this overhead, this cost of car, this average down payment, I would need to come up with about one point one million in order to cover the part that is required to get me to cash positive. And then I can quit putting money in. Okay, so what happens, because that one point four, or one, oh, four, seven, whatever, million. One point one million. That's not something, that's, okay, so I'm having a hard time wrapping my head around this. Let's go slow, because I want to make sure our listeners are not having the same problem. Yeah, I'm having a hard time wrapping my head around this, because... So let me take you through the individual items. You can see that the cash that we're going to collect in the first eighteen months is for down payments. It's going to be right at four hundred grand, right? OK, four or eight. Then the payments that we collect from customers on the contracts, she's got it, but let's help the listeners. So the payments that we're going to collect from customers is going to be about nine seventy six. So obviously those are growing. Right. As we add new contracts and each month there's a little more payments and they're growing. But we're going to by the time we get to eighteen months, we will have across eighteen months collected nine hundred seventy six in payment. OK. we will have recovered in repos. We will have sold some repos that we've recovered, and that would have brought into us another . Okay. And so what you're really showing is, is that when we look at the other one about all the money that's needed to go in, what you're really looking at with this is really all the money that the dealer has to come up with is one point one out of the the two million because all of these other things, all these other levers are starting to work. to bring in extra. Okay. So I get, I get you. So after this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, Correct. OK, gotcha. Now, there's still one more element. Again, I said it early on. I'll say it again. This doesn't have income tax. It doesn't have sales tax addressed in there, but doesn't have income tax. And that's different depending on your your structure. That's different depending on, I mean, you know, income, state income tax. Yeah. When I do the modeling, we'll just pick up a thirty five percent tax bracket and we'll throw in a calculation and be able to show the dealer here's before income tax, here's after income tax. So we'll show both numbers. But it's just like for our purposes today, I just want to focus on the operational part and just say, what does it cost us to run this business? And yes, we all understand we've got to pay the IRS for their due. And you folks from the IRS that are listening in just know we are dealers are going to pay you. They're going to pay the taxes. We just haven't. And we're going to help them get some, we're going to use that related finance company strategy to make sure that they can pay the income tax from cash instead of from paper phantom profits. And see, and that's like a real thing. So all of you IRS people that are listening. Yeah, you have my number. I shared my number. You folks at the IRS, call me. Yeah, it's a little bit different. Okay. So anyway, it's, it's, it's definitely something, but yeah, I think. Cool. So I think it's just kind of helping dealers to grasp the part about how much, how much of the money that I put in, like, where's it going? Right. How's it broken down? And then what I didn't share and let me just find it. And I, cause I think it'd be helpful to have this information because dealers are going to ask and they're going to want to see, you know, what does that, what does that look like? Let me jump out to eighteen months on, So we put in one point one million of our own money. Right. And we have at the end of eighteen months, two point one million in receivables. Now there's some inventory. Right. But there's my thing that I'm trying to really illustrate here is that. Going back to where I started with talking about amount writing, this is why you have to be careful about thinking about something like a simple calculation about amount writing. I see it in a lot of different software. Dealers have asked for it. And so the software company generates this number. What's my current cash position in this car? Well, I think what we recognize here is that it's not your true cash position because you're not allowing for overhead. And I just think If you and I could run a business with no overhead, we'd be very successful. It doesn't matter. Taco stand, shoe store, you name it. If we could run a business and no overhead, wow, we would do really well. So if I put my current cash position on my tacos or my shoes or whatever, and it says, look how much, look, it's false. Yeah, I get it. Well, it's incomplete and to place all of your level of comfort on that is... not the wisest thing to do. It's just, it's interesting. And it, but I think it's arbitrary, but it also strokes people's egos because they're like, I have this much, I have this much where it's like, no, you don't. Let's look at this a different way. And, and you know, we see frequently, uh, It's like, well, it's the new dealer. It's intoxicating. It's like, I have two... My business now has two million something something. And it's like, no, it doesn't. That's on paper. That's not real. And understand, you're not going to collect all that. And understand, yeah, all this stuff. So, yes, I get it. You can do adjustments for market value or whatever. But I'm just saying, I think the main thing I was trying to drive home here is if you just did a simple... And I have it in some of my old stuff, but I almost never referred to it because I just told dealers, it's just what you heard me tell them just now. I was like, I think you got to be careful about what the significance of that number. It really is. It's arbitrary. It doesn't give you the whole story. And like I said, yeah, if, yeah, if you could run your business with no overhead, Yeah, the numbers are going to look great. Any business would do great if you could do that. It's like, oh, I can sell lemonade for ten cents a piece because I don't ever have to buy lemonade. Yeah, and you know, our dealers paying themselves for their time and there's all different things you can begin to look at. So it's like there's all this stuff to figure out, but I just think If we just look at hard cash, this is today was just bank accounts like just that's that's putting in the overhead that is, you know, again, using eighteen hundred dollars. I rounded it to an even eighteen hundred per car sold. So you can go back and look and see how your numbers would compare to that. And if your numbers are higher than if you have the same assumptions in terms of average down payment selling price, then your red bar on that donut would be. would be larger, right? You'd have more overhead tied up in your piece of the pie, so to speak. So I think it's just trying to illustrate the thing in a different way and help us recognize that when you really look at the whole picture and all the cash that we put in, tax, title, license, and all those things eat up cash, right? So now we can get it to a place where we're cash positive and You know, the good news is now that we get cash positive, we start to if I were if I were using investment or a line of credit now at past eighteen months, I'm generating positive cash. I can start to pay myself. I can start to pay my down my line of credit or whatever I'm going to do. And so this is just but now, you know, this this doesn't, you know, at thirty let's go to thirty six months, thirty six months or two point eight million. At these ratios that I put in based on the averages, these are three-month averages for the conversion rates on the portfolio. My big takeaway, too, is understanding that there are a lot of moving pieces and that everything going out does not all have to come up from the dealer because you've got payments coming in and And this cash flow modeling software, or the tool that Jim has created, it accounts for repos. It accounts for all of the just different things except for taxes. So, you know, we've got to- Well, it does taxes too. We just didn't talk about it here. Okay. Yes. The charts and stuff were not reflective of taxes. Right. I get that. It's like, all right, maybe helping new dealers to understand there's a lot of things that you need to look at when you go there. I think the biggest piece of a valuable takeaway from this, this is from my perspective, is what was that number that Brent, who deals with a lot of people, and he said, your overhead This is the this is the industry average is your overhead is at how much per car sold? Eighteen hundred dollars per car sold. So if you're selling dealers out there, this is something it's a good barometer check about whether or not your overhead is in check. And this, just to be clear, Brent indicated that was and I've got the numbers we could refer, but it's basically for dealers that are smaller. We're about eighteen hundred. So, OK, so for those dealers which are now when you say that, is that like the one hundred to five hundred accounts? I don't think that's the way. I think his was driven off of volume. I'd have to refer back to it. But here's just something for you to kind of weigh and measure when you're a smaller dealer and all of that is where am I at on my overhead? And so that's a really good place to just do a temperature check. Right. Am I, um, where am I at with how much I'm paying myself, how much I'm paying other people, how much, how much, like if, uh, or the, the, the, what's my labor rates for the shop, what's the, you know, all of the different things or whatever, that's a good number. Or does that include the number for a shop or is that all part of recon? Um, I'd have to look. I can't recall. It's a good temperature check is what I'm saying. I can tell you it's what dealers are listing on their P&L as expenses. I can't say whether they're putting labor in expenses or in their recon. I don't know without digging in deep. If you're trying to maintain a certain volume and you still feel like you're not bringing in what you feel like you should be, that's probably a really good place to start looking is what are you spending on overhead? Yeah. And I think when I see these numbers too, if I'm a new dealer, you know, the dealers would hear this and say, It's one point one million. Where am I going to find one point one million to do fourteen sales a month? And I would just say that we, you know, you may start with private money. You may start with some of these. They're providers that can provide, I'll call it supportive capital, you know, during the first eighteen months or so. So there are places to get that. But I think you have to have this kind of information. You want a good business plan, a good strategy and a good forecast because, you know, I don't think anybody wants to provide money. I wouldn't want to provide money to a dealer who didn't have a good plan. Yeah. Right. Yeah. So I didn't know what it was going to take to get past the money. Right. So. So it's like you just kind of have a have a plan. I think this is part of what we do. And, you know, the capital providers in the space know how to help you come up with that plan. I mean, for the most part. But if you're looking for capital outside of those that are specifically in this space, there's a lot of capital providers out there and they're going to want to see the stuff. I think so. And in a different way, because I think, you know, imagine Karen is listening. She's with SDA. Imagine that. Imagine she meets dealers who say, well, I need some money because I, you know, I can sell fifteen cars a month, but right now I'm only can afford to finance eight. Well, OK, what next? Like, How can you, what's your overhead? Like, I need to know all the stuff. Like, if I'm going to provide funding to this person, I need to kind of understand, you know, what's your financial structure? What's your financial strategy? And like you said, for me, I'd want to know, how how long like what's the what's the projected time frame that we're going to go from here to there and then what's next you know I mean anyone we we deal with uh with um investors capital we have conversations whether it be personal or you know um and in business because we we we we know a lot of people that do, that they invest in businesses, not necessarily buy here, pay here. And these are questions they all ask. You know, it's like, So how long is it going to take? And what's going to be the, you know, the, what's, what's your plan? So, yes, absolutely. All right, what else? Jim Collison, I think that's it. We've gone nearly an hour here, so we surely talked about something that would be helpful. I'm doing my part. Hi, Bart. There's the music. Hi, everybody. It is Friday. Don't forget, a week from Sunday, we've got the Marriott Convention in Atlantic City. And then we've got LHPH coming up. You saw FIADA October fifth. So folks, get out there and get edumacated. And we do have room in our V-Eight groups, and we will create more groups as we need to. So it's humbling how many people have stepped forward to say, I would like to help moderate. Yeah. So we have what we need for that and we're working on getting some of the data stuff so that it can be happening. We're drawing up confidentiality statements now, so we'll have moderator trainees this month. We have a space for you if you're interested. Give us a call if there's anything we can do to help you with that or other things. Yeah, feel free to reach out to us. Have a great weekend. Thanks again for joining us, and we will be back on Monday for another episode of The Morning Show. Have a great afternoon, everybody. Thanks so much.
