Accountability is task #1 at Sebastian Jung’s new Nissan store
When Sebastian Jung in December acquired Nissan of Tifton, a dealership in Georgia, one of his first moves was to replace the general manager. That’s a key step in the transformation Jung aims to bring to his latest acquisition.
“I believe that when a store doesn’t perform, it’s not because of the people,” he said, “I believe the leadership is not there.”
The general manager must share his vision, which is “employee first, then customer first,” Jung said, “because employees will then take care of the customer, right?”
He aims to create a culture where employees look forward to coming to work, Jung said. “I think that’s the huge … the biggest opportunity when I acquire a store,” Jung said.
Accountability counts
That doesn’t mean the employees aren’t held accountable, however. Indeed, another immediate change that Jung made at the former Tennison Nissan was to begin measuring key performance indicators, or KPIs, in the fixed operations area.
He started measuring the effective labor rate, found it low, and said he would immediately ask for a labor rate and parts rate increase from the manufacturer.
The dealership has 12 service bays and three quick lubes, but the utilization rate was also very low, Jung said. “It has a ton of potential,” he said.
Jung graduated from the NADA Academy in December and will start putting to work some knowledge he obtained there, he said. For example, Nissan of Tifton’s service department will now benchmark a labor gross profit rate of 78%, Jung said.
“These guys were under 70%,” he said.
There was also a lack of accountability on the sales side, Jung said. For example, a salesperson’s “ups,” or customer contacts, were not being accurately measured. The salespeople and manager both had to start logging in ups on paper and in the CRM system and reconcile them daily.
The general sales manager and four of the 10 salespeople left after the new process was implemented, Jung said. He has hired three more salespeople.
Structuring an attractive deal
Jung is dealer principal and majority owner. The remainder is owned by Trey Womack, who was a minority owner under the previous dealer principal. After his partner passed away, Womack became a 100% owner of the dealership after the previous owner’s widow didn’t want to run the business, Faris Syed, president of SAR Partners, a dealership mergers and acquisitions consulting firm, said. He represented Womack in the transaction.
However, Womack also didn’t want to run the store, Syed said. Meanwhile, Jung, whom Syed also knew, wasn’t interested in acquiring 100% of the Nissan store because of the hassle of going through the manufacturer’s approval process.
Syed came up with a solution. “I had to structure the deal so it would be attractive to Sebastian,” Syed said.
He suggested to Jung that Womack remain a silent partner with a minority ownership while Jung became dealer principal and majority owner. Jung agreed and the deal was closed.
Due diligence with an eye on future growth
Jung, who owns six additional new car franchises, has a list of due diligence items for every acquisition.
Three months before the Nissan of Tifton deal closed, for example, he brought in an outside accounting firm to audit the store’s books to “basically make sure what I have been presented by the seller is true,” Jung said, and “to make sure my pro forma can come true.”
That outside firm, the Pomykala Group, goes over all the numbers including the parts report and the pending Repair Orders “to make sure the beginning balance is correct,” Jung said.
While such audits cost around $30,000, it is well worth it, Jung said. “The accounting is a nightmare if you don’t have the correct balance,” he said. “You do that if you don’t want to have a nightmare for the next three years.”
Jung also has the Pomykala Group audit his other stores’ books every six months so there are no questions when he looks to acquire future franchises. “My goal is to keep growing,” Jung said. “I want it set up for growth; I don’t want anyone outside questioning my accounting.”
Each of his stores has a controller, Jung said, and he also has a corporate controller.
The sky’s the limit
In addition to the just acquired Nissan store, Jung also owns another Nissan franchise, a Chevrolet franchise, a GMC franchise, two Ford franchises, and a Mitsubishi franchise.
The majority are in the South and as he expands, “I want to stay in the South,” Jung said.
Jung doesn’t want to grow too fast and outstrip the management talent available to run new stores. But he hasn’t set a maximum number of stores he would like to own. “I think the sky’s the limit,” Jung said.