In this week’s episode, I’m going to be telling the fantastic story about FedEx and more specifically a guy called Fred Smith.
Now, this is a story I heard maybe 10, 15 years ago from Tony Robbins. I’m not sure how accurate it is but it describes how Fred struggled to start his business, how he overcame technical and financial issues and I’m going to reveal how his story can help you and your service department.
Here are the highlights:
(01:39) Fred’s hub and spoke distribution centre idea
(02:58) When the distribution centre stops working
(04:56) About Fred Smith
(06:36) Let’s focus on the engineer and his invoice for $10,000 and relate it back to our businesses
(07:40) How long does it take to become a master technician?
(08:59) We’re not selling their time we’re selling their knowledge
(12:55) Don’t sell time, sell what your technician is going to do for the customer
(13:46) We always talk about a return on the investment
About Symco Training:
Symco Training was founded in 2000 by Simon Bowkett and it was his belief that the business had to offer its clients something different. That difference was clear to Simon from his days in the dealership when he experienced many sales trainers who had all the answers, but were unable, unwilling or both to actually show the delegate how they could be implemented. It remains the ethos of the business today. You see, Symco only employs trainers that are committed to delivering not only inspiring and insightful training, but are equally as happy to demonstrate these skills and techniques with real customers in your own showroom.
We believe in order for sales training to be effective and in Simon’s words ‘real world’, it needs to be tried and tested in the only place it matters, the showroom floor. There is no room for theory when your goals are for your team to sell more cars, hours or parts and retain more profit. In dealerships around the world the focus applied by many of the sales executives is to try and sell a deal. Symco specialise in getting your teams to focus on selling themselves, the product and then supporting this with the deal.
To find out more visit www.symcotraining.co.uk
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Welcome to Selling in the Motor Trade, an association with automotive management and symco training. This is the weekly podcast where we share best practice, tips and ideas on how to sell more cars, improve your service department and generally put more profit into your dealership or dealer group. I'm your host, Simon Bowkett, or some of you might already know me as Skippy. Firstly, I want to say thank you for taking the time to tune in. Hi, and welcome to another episode of Selling in the Motor Trade. Today, it's a story about FedEx or actually a guy called Fred Smith. I always worry how these stories have been embellished over time or stretched or quite frankly, not true at all.
I heard this from a guy called Tony Robbins. I heard it with my own ears at a conference in the Excel Center in London. It must be going back 10 years now, maybe 15 years. But here's the story about FedEx and how it might affect what you're doing in your service department. You see, the story starts that FedEx was started by a man called Fred Smith. Now Fred went to Yale University. He wrote a business paper on packages and how to move them around the world. His professor didn't like it, only gave him a C on his work. He went on to the Vietnam War, I believe it was, and he was working in logistics.
He worked out that hub and spoke distribution was a lot more efficient than straight line distribution. I mean, get everything into one place and then things say out to the front line when they need it. So you have this idea to come back and start a hub and spoke distribution center in Memphis when he finished in the Army. Marines, I think it was, don't quote me on that. He had this idea, he had, I think it was $4 million, which is nothing. He had this idea to build this hub and spoke distribution center. It went to lots of banks and venture capitalists and private equity and whatever. And they all said, no, no, we don't like the idea of it.
Part of his genius, he went to the Federal Reserve. And he got this idea to use his hub and spoke distribution to transfer checks around the country and speed up that process. They liked it and said, hey, you know what? If you build this thing, we would definitely use it to brilliant. Would you give me a letter of intent? But just says, hey, if you build this, we'll use it. It went back to all the banks again and said, hey, listen, I need $80 million to set up this hub and spoke distribution center. Hey, hey, they said, no, no, no, we'll leave it. Well, listen, I've got one customer at the moment, some local uncle saying, oh, that sounds different.
We'll give you the money. So he built this all singing, all dance and hub and spoke distribution center, again, the middle of Memphis. I mean, it's brilliant. The package has come in one way. They go out the other way. They're flowing around the world. It works brilliantly. Anyway, three o'clock in the morning, this whole thing stops. Now, this is disastrous for a few reasons. Number one, they're building their reputation on overnight delivery. But number two, if it's not overnight, people don't pay for the package to be. So not only is it reputation and cost them a fortune, in actually physical hard money, it's cost them a fortune. He's got the engineers on site trying to work out what's wrong.
Fred Smith himself is there and has the legend has it at three o'clock in the morning. They phone the engineer that helps set it all up. He comes out. He asks a few qualifying questions. He takes out a flat blender screwdriver, goes over to a control panel, tightens up a turn, three quarters of turn tight. And the whole lot starts again. Now, Fred Smith said, that's brilliant. They are bummed, that's sensational. Give me an invoice. I'll get it paid straight away. The engineer says, you don't know what it's going to do that for you. And hands him a bill for $10,000. Now, it's no, he's a smart character. He doesn't kick off. He doesn't want to have a fight with him.
He just hands it back to him and said, can you itemise that for me? I said, yeah, I can do that for you. And he scribbles on it and hands it back to Fred Smith. Fred Smith reads it and says, you know what? You're right. Let me go and get that check for you now. What could he write on the invoice for turning one screw $1 for knowing which screw to turn $9,999? Again, guys, I don't know how that story's been embellished in time. Tony Robbins said it happened and it was true. And I listened, Tony Robbins, I'm sure, would have had the conversation with him directly. But again, it may have been embellished. What a great story.
Oh, by the way, let me tell you about this Fred Smith character. Okay. So he started FedEx, which was called the Federal Express and they should shorten to FedEx. I think it was 1971. And after they got that 18 million, go, FedEx pulled out. Federal Reserve pulled out. That was disastrous, obviously. Okay. And they're scrambling around trying to get the other side of the business going. He tells the story brilliantly, but actually when people give you $80 million, you've got a whole lot of advisors that want to make sure that you make it. But he was struggling. He was losing something like a million dollars a day. I mean, in a month, 30 million gone.
I'll tell you what, that's really struggling. Apparently got down to the last $5,000 in the bank account. This is between 71, 73, something like that. Okay. $5,000. He couldn't put fuel in the planes to get the planes going where they needed to next week. Okay. He went for one last year to an investor, someone in Chicago, I believe it was saying, hey, listen, we need this 20 million to keep the company going. And it failed. He has booked the flight back from Chicago to Memphis. And on a win, he canceled the flight. Got a flight to Las Vegas, took the last $5,000 of the company's money to the Blackjack tables. And after many hours, apparently he won $27,000, enough on Monday morning to put the fuel in the planes to keep them going until he could get the investment from someone else.
Now, again, I don't know how these stories have been embellished, okay? But let's just think about the guy, the engineer, the turning one screw, $1. The knowing which screw to turn, $9,999. Isn't that what kind of happens our service department all the time? Too often I hear service advisors, sometimes service managers thinking our labor rate is, I don't know, 120 pounds an hour. It's going to be $160 an hour. It's going to be whatever, how many euros an hour? And we're focused on that, labor rate, what we can sell it to. However, we're competing with the independence, the threads in a shed. And so often I get people saying, yeah, I know, but we're a franchise dealership, the independence is so much lower in our area and they've beaten us up.
So we've got to bring our labor rate back there. Well, we're fighting with the wrong thing. Don't be thinking about your technician, that you're selling them out at a, whatever it is, 120 pounds an hour. Actually, you're not selling their time. You're selling what they're going to do for you. How long does it take that technician to be a master technician? What is it? Is it four years going through an apprenticeship before they can be a technician? What's it another four years before they can be a master tech? Master techs, how hard are they to get in our industry at the moment? Across the world globally, they're so hard to get. There's got to be a minimum of eight years for that master tech to be able to do that job.
In fact, how quickly can that master tech fix an issue that the independence of threads in a shed can't. In fact, people in the art department, how often is it that you get your, your parts department? Sometimes your biggest client in the parts department is the independence and the independence phone up your parts man and said, would you do me a favor? Yeah, yeah, yeah. Can you go and speak to one of the techs and ask them, how many metacluorians should run through the flight to capacitor on a 19 whatever this car? Okay, I'm sorry, that's the shot my age on a 2020. Portrait, blah, blah, blah. Okay. That's because the independent doesn't know that the X, they work on those cars all the time.
So think about that. We're not selling that hour of that time. They're selling their knowledge. They're selling what they can do. In fact, I remember a course at the National Automotive Dealers Association. A guy got up on the stage and he said, hey, listen, you know, servicing a modern car is free. Not when they have bloody clients. Okay, we want to charge us much again. That's our job. He said, no, no, no, listen to me. I can't remember the guy's name. I think it was Jeff Cowan or one of those guys. Okay. Might be David Martin, or probably Rick Messickman, tell me who it was. Someone that David introduced me to. Think it was Jeff.
But he said the story, yeah, yeah, yeah. Service in a modern car is free. And this is what you do. He got a flip chart or something like this thing said, right, thirsty, are there any sales managers in this group audience? I imagine lots of people put their hand up. He said, right, guys, could you three people get these cars in? Can you just get a consensus of what these three cars are worth? From then we are thinking the Q5. Okay. And then he generated, right. Listen, do we have any Audi dealers in the room? Yeah. Let's have a look at this and Audi Q5. Let's look at the next three years or four years, what it was.
ownership was going to cost that customer. Year one, what's it going to cost? I know $300. Year two, what's it going to cost? That's the big service. I probably need some tires, $400. Okay. Year three, what's it going to cost? Well, that's $250. Whatever it was. He got the total, $800. If that goes to Kmart, no, we'll remember that because we don't have Kmart in the UK or the Irish markets. But I remember Kmart from growing up in Australia. And I thought, well, of course, Kmart do servicing, all make servicing. And Kmart say, yeah, we can do all make servicing and you want it to be affected. Okay. So what's it going to cost if they do the servicing through Kmart?
Something else out half price. Okay. Now here's a third car. All right. What's it going to cost if you don't service it at all? Okay. Probably a marriage someone said because it's going to break down and you won't be in it. That's a fair point. And then of course, you probably know where he's going now. He said, okay. So the first year, first car, it was like $800, $900. Second one, let's call it $450, $500. Last one's free. So now let's get the valuation from the sales measures. Hey, listen, what's this outing? Q5 worth three years or four years down the track. I can't remember the exact numbers, but something like, oh, $50,000. Okay. What's this car worth?
That's got a service history from the independent. We decided to give that a bit of a kick and we said 48. What's the car worth if it hasn't got any service history? All three of the salesmen said, we don't want it. No, no, no, you've got a bit of value on it. No, we don't want it. We can't sell it as an approved use vehicle. It's tough. You've got to put a price on it. And they said, I don't know. Something like $45,000. Maybe the point's a little bit silly, but you get the point you was making. Okay. Actually, you're not paying for that 120 pounds an hour for the technician and service car. You're paying for their knowledge.
You're paying to retain the value of the car. In fact, the end dependence. How often do they charge 0.2 of an hour? Probably rarely. Listen, we've got fixed price servicing. We've got book times that we have to work to 1.2 hours to change that flux capacitor. Okay. And make sure there's not metacluorins running through it. Oh, sorry. I have to explain this. If you're under 20, when I saw a flux capacitor, I'm sorry. There was a documentary many years ago with this guy, had a DeLorean that could go back under time if it hit 88 miles per hour. Just go and speak to your father. He'll tell you about it. Okay. And don't go looking for one in the car in the dealership.
Okay. But you know what? It's actually don't sell time. Sell what your technician is going to do for the customer. That's what we really need to do. So remember, don't sell time. Sell what the technician is going to do for your customer. In fact, that FedEx story, if you want this, drop me a direct message. Okay. Get in contact with us. And we've got that on our A4 sheet of paper. You can put it up out in the back of your service department there and get your service advisors to remember what we're selling. In fact, some of our clients out there, you'll probably know that's what we do with you. We never talk about our daily rate.
Now don't get me wrong. Of course, we have a daily rate. Everyone wants to beat us up on the daily rate. We actually sell what we're going to do for you. It's not the daily rate. It's not that. We always talk about a return on the investment. Any one of our clients, they're going to have a look at the proposal we've done for you. The last stage will always be a return on investment. And if we can take it from here to there, if we get this result, that result, that's how much extra it's going to be. That's what's going to cost you per dealership per month for this program. And that's your return on the investment.
That's actually that said X story. Anyway, hope you like that one. Make sure you get all your service advisors just to have a listen to this story. And I'll see you next time. That just leads me to say that all details of this episode and other episodes on the selling in the motor trade can be found on our website simcotraining.co.uk. Go there to get a copy of our book, Words That Sell Cars. Go there to sign up to a free trial of our sales fitness online sales training program. Easiest way to get hold of me is Simon Bowkett, food link to it. Thank you.
