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Do You Know Your Residual Flow Factor?

Guest Post By Sean V. Bradley, CEO, Dealer Synergy

Question: What is your Residual Flow Factor?

No idea what I’m talking about? Don’t feel bad. There are thousands of dealerships in this industry that have no idea what I’m talking about when I ask that question. Even worse, they’re not tracking this very important variable of their Internet Sales department.

Residual Flow Factor is the amount of leads that carries over from month to month.

For example, let’s say your dealership generates 500 leads in the month of August. You close 10 percent of those leads and deliver 50 units. How many leads carry over on September 1? That’s right, 450.

The average buying cycle is between 45 and 90 days. So some of these carry-over leads are “dead,” inactive, non-viable opportunities for any of the following reasons:

  • Bought elsewhere
  • Changed mind
  • Can’t afford the vehicle
  • Credit challenged
  • Upside down on trade
  • Unrealistic
  • Bad lead
  • Etc…

However, dead leads should only account for about 200 out of the remaining 450 leads (about 45%). That means that on September 1, you will have a Residual Flow Factor of 250 leads.

So you’ll start the month of September with a minimum of 250 carry over leads, plus you will have another 500 fresh leads for a total of 750 opportunities for the month of September.

Now for the important part: Dealers need to respect the Residual Flow Factor, because it literally cripples dealers every month. Many dealers do not understand the concept of the Residual Flow Factor and in turn do not plan accordingly. They do not have enough sales consultants or appointment setters to handle all of the total opportunities. So dealerships wind up only doing “the best they can” with the leads. They are not able to put enough attention or focus on the leads. They are simply spread too thin, so they covert only the low hanging fruit and let other opportunities pass by.

Let me share an awesome, easy formula you can use to track your department’s reality:

Create a spreadsheet for all SOLD units. Then create three additional columns:

  1. Date the lead came in on
  2. Date the lead closed
  3. Window period

For example:

  1.  Lead came in: August 5th 
  2.  Lead closed on: August 8th
  3.  Window period = 3 days

So, if you sold 50 units in the month of August, you will have 50 “window periods.” Add them all up and divide them by 50. This is your dealership’s “gestation period” (average selling period).

My prediction is that your dealership’s gestation period is between seven to 11 days. And that is NOT GOOD! Remember, the average buying cycle for Internet prospects is 45 to 90 days. If your average selling ratio is only seven to 11 days, it means that your dealership is leaving a lot of money on the table.  Chances are you are not maximizing your dealership’s Residual Flow Factor.  Armed with this knowledge, you can change this today!

If you have any questions about this article or if you would like me to evaluate your dealership’s Residual Flow Factor, please email me at or feel free to give me a call at (267) 319-6776.

Sean V. Bradley is the founder and CEO of Dealer Synergy, a nationally recognized training and consulting company in the automotive industry.

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Automotive Internet Sales - What To Do If Someone Asks "Is That Vehicle Available" or "Do You Have..." from Dealer Synergy on Vimeo.

This is a VINTAGE Sean V. Bradley / Dealer Synergy video. It might be an "oldie" but it still is a GOODIE!

Sean talks about What To Do If Someone Asks "Is That Vehicle Available" or "Do You Have..."

If you want to find out more about Sean V. Bradley or Dealer Synergy training, please go to:

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Email Customers - Hot or Not? Earning the right to the phone number.

I decided to write this as soon as the deal ended while it was still fresh on my mind. I've noticed in my personal department that over time email customers become looked upon as dead or cold leads before they have even been touched. I was recently reading an article about a very successful Internet Department that explained how we must "earn the right" to have the phone number with many customers. Dealer Synergy has taught the same principle on the phone through their phone scripts that enable the coordinators to earn the number. The same goes for email only leads. Hopefully this short example will remind us to work email customers just as hard as phone customers.

The customer submitted the lead this morning, it was an email only lead. Right off the bat my coordinator was upset. I stated this is a hot customer, but instead of sending an email template as usual, send the Value Package followed by a personal email to start the trust building process. The customer replied within a few minutes wanting price, like most. From this point I personally took over the customer and worked the customer. We emailed over price, trade value, and financing options. In each email I was very personal and expressed my confidence in the dealership, the product, and in myself. Not in a single email did I ever give the customer an exact price whether it be on trade or on the vehicle he was interested in. Rather I continued turn the customers focus from absolutes to the value of our dealerships. I did give the customer a range to keep him confident. After about 4-5 emails the customer said "outstanding" and emailed me his number. I immediately called the customer and was greeted by a happy customer. He was excited and enthusiastic about the deal and set the appointment. In the end the customer wanted all the paperwork done before he got here so he could sign and drive.

The conclusion is this "Email Only" customer turned into an easy sign and drive customer. This deal might have even been easier than a simple phone up appointment. Through building value, gaining trust, and gaining confidence, the customer bought. Not every deal turns out this way, and this is in no way an attempt to blow smoke. I am sharing this to remind everyone that every lead is considered hot. Buy or Die right? Remember to treat every type and source of lead equal, you just might not know which one is ready to buy today.

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We recently conducted a survey in which we asked Internet department personnel to share some key metrics. In one question, we asked:

How much total gross does your Internet department generate for every $1,000 spent on Internet leads from all sources (SEM, independent and third-party leads, classified site subscriptions, etc.) ?

Of the 183 responses, the answers broke down:

3X or less: 33%

4X-6X: 18%

7X-10X or greater: 20%

Don’t Know: 29%


These answers reveal there is quite a large disparity between auto dealers’ return on investment (ROI) on Internet spending, as well as a surprisingly large percentage that don’t even know their ROI.  So I wanted to know: what should a dealership target for a reasonable Internet marketing ROI?

 One of the experts we consulted for measuring this metric was David Kain, President of Kain Automotive. He suggested that 5X ROI was the absolute minimum that a dealership should strive for, and ideally Internet departments should be seeing 7X ROI on their Internet spend.

But how do you calculate your ROI? Basically, ROI is what you get for what you spend. Here is a simple formula:

(Gross Profit – Marketing Investment) / Marketing Investment = ROI

 This formula represents three steps.

 1)   Marketing investment should be simple to figure out as it is the total cost of a campaign. For instance, if you spend $1,000 per month on a Pay-Per-Click campaign, $1,000 per month on independent leads and $1,000 per month on a subscription site, then your total marketing spend on Internet leads that month is $3,000. For the sake of simplicity, I’m going to suggest here that the cost of overhead, while included in some ROI measurements, should not be included when figuring out ROI for Internet leads, regardless of source. So in this formula, don’t worry about including labor costs (for staff), web site maintenance costs, etc.


2)   Gross profit is the next metric you’ll need to figure (my first GM used to say, “Volume is vanity. Gross is sanity.”). If you can pull the actual grosses on all Internet deals, that’s great. If not, take the number of sales and multiply it by your dealership’s average front and back combined gross profits. So if $3,000 in marketing spend delivers 10 sales at an average of $3000 combined gross, then your total Internet-related gross profit will be $30,000.


3)   Next, you need to subtract the initial marketing investment ($3,000) from your gross profit ($30,000) for a total of $27,000.


4)   Divide that number by your initial marketing investment ($27,000/$3,000) and in this scenario you end up with 9X ROI, an excellent result.


Why is it important to know your ROI? Any time you spend money on anything, whether on Internet leads or a marketing campaign, it is an investment. Like any investment, it should be measured, monitored and compared to other investments so you know where you should be spending your money.


Also, knowing the ROI for all your lead sources gives you leverage. How many Internet marketing budgets were slashed in 2009 and 2010? Perhaps some cuts were deserved, but do you know which ones? Cutting back on a lead source that returns a high ROI is only going to hurt the bottom line.


Of course, our question focused on the overall Internet marketing spend, not on the ROI of various lead sources. But applying this formula to your separate lead sources is highly recommended and gives a better measurement of success than just closing percentage or other metrics. After all, ROI is what goes to the bottom line.


I’d love to hear some feedback: how do you calculate your dealership’s ROI on your Internet leads spend? What do you consider a good ROI? In my next blog, I’m going to give some tips on how to drive your team to improve ROI.

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How Bad Do You Want It?

Out of thousands of videos that we have ever seen relating to inspiration and motivation, literally none seem to encompass the spirit of hard work and determination as this one video. “How Bad Do You Want It?” features former East Carolina running back Giavanni Ruffin along with a speech given by Eric Thomas aka “The Hip Hop Preacher”.


Giavanni Ruffin, a 6’1, 215 lb. running back, played college football at East Carolina where he mainly served in a backup role. Even as a backup, the thought of making the NFL never left Ruffin’s head.


“I’m hungry and determined,” Ruffin told Who’s Next Football. “When you start from the bottom you always want more. I’m one of the hardest workers you'll ever meet. I hate losing and I love to win. Every day, I take the necessary steps to become better for the team and for myself.”


After watching this video, you will completely understand the type of athlete and person Giavanni Ruffin is. Besides running an impressive 4.4 40-yard dash time, Ruffin may possess some of the more unique qualities found in a football player: a never-ending determination. There is nothing shallow about him. He lets his actions speak louder than words.


In this video, Ruffin is training his heart out during the NFL Lockout, hoping that someday he can make it on an NFL roster.  


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INSIDE a LIVE Training WORKSHOP on Objections, Expectations & Rebuttals... Automotive Internet Sales Ninjas in TRAINING!

VERY POWERFUL!!! Notice... They are NOT using ANY Scripts or Books!!! All on the FIRST DAY! Go Team GO!



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