dealer business journal november 2014

November 2014 DEALER BUSINESS JOURNAL | 1...Your Success Is Our Business

IT’S TIME TO WORK ON YOUR TEAM’S 2015

Are you building your playbook for how to achieve success for your business? We have some tips and strategies that can help!

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2 | DEALER BUSINESS JOURNAL November 2014 DealerBusinessJournal.com

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November 2014 DEALER BUSINESS JOURNAL | 1

...Your Success Is Our Business

Are you building your playbook for how

to achieve success for your business?

We have some tips and strategies that

can help!

IT’S TIME TO WORK

ON YOUR TEAM’S 2015ContentsIN EVERY ISSUE 4 CORNER OFFICE

5 UPCOMING EVENTS

36 INDUSTRY NEWS

37 CLASSIFIED ADS

LEEDOM GROUP BUSINESS OPERATIONS

BHPH Boot Camp6 Planning for the New Year It’s never too early to plan

ahead. Take the time to review 2014 and plan for 2015 now.

By David Brotherton

Financial Control8 Cash, Employees and the

Management Of Proper checks and balances

will make sure all of your most valuable assets stay in tact and accounted for.

By Rick Boucher

Dealer Operations10 Need a Line of Credit? With ever increasing

expenses, a LOC may be a necessity for your dealership, but be prepared for the largest financial commitment you’ll ever make.

By Paxton Wright

Payment Processing12 Payment Processing

Trends on the 2015 Horizon Paymaxx Pro is looking ahead

to the new technologies and trends that are just around the corner.

Volume 11, Issue 11 November 2014

LEGAL & LEGISLATIVE

Legal Opinion14 Dealers, Related Finance

Companies and the Federal Fair Debt Collection Practices Act

A bit of good news, for now, as recent judgements offer dealers added exemptions.

By Tom Hudson

Learn to Lead16 The “Loyal” Non-Performer Loyalty should not be

confused with tenure or seniority.

By Dave Anderson

Corporate Coach18 What Football Can Teach

You About Your Business With football season in full

gear, it is easy to spot the similarities between a well-run team and your business.

By Chris Leedom

LEADERSHIP & TRAINING

Business Basics24 Managing Business Cycles Every business will go through

ups and downs; be prepared. By Robert N. Parnas

Skip Tracing26 The Skip-Tracers Guide to

Effective Communication Electronic communication is

great, but it doesn’t beat face-to-face conversation.

By Alex Price

ReInsurance28 Overwhelmed Too many puppies in the litter?

Advice on managing the chaos. By Tim Byrd

Goal Setting30 A Valuable Lesson From the

Puzzle People A clear vision of where you’re

headed is crucial for success. By Greg Wells

20 Game Plan If you haven’t ever written a

business plan, then now is the time. Give your team a clear strategy for 2015.

COVER STORY

SALES & SERVICE

Smart Selling32 The Evolution of a Car

Salesman Car salespeople have

changed over the years—for better and for worse.

By A.J. Ager


Dealer Business Journal3700 S. Tamiami Trail, Sarasota, FL 34239Ph: 800.966.8733 | Fax: 941.371.2874

Executive PublisherChristopher M. Leedom | [email protected]

Contributing WritersDave Anderson | [email protected]

Rick Boucher | [email protected]

David Brotherton | [email protected]

Tom Hudson | [email protected]

Christy Taylor | Dealer Business Journal

Paxton Wright | [email protected]

Guest Columnists

Tim Byrd| DealerRE.com

Alex Price | MasterFiles

A.J. Ager | Joe Ferguson Buick GMC

Greg Wells | AllCall Automotive Contact Center

Robert N. Parnas | CliftonLarsonAllen

FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733or subscribe online at DealerBusinessJournal.com

ADVERTISING INQUIRIES CALL 941.371.7999OR [email protected]

DISCLAIMER: The information included in this publication is obtained from sources believed reliable and has been produced with reasonable care in production and editing. It is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult a professional for ap-plication in their particular situation. Copyright 2013 Leedom and Associates, LLC. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Dealer Business Journal is a publi-cation of Leedom and Associates, LLC.

POSTMASTER: Send change of address form to Dealer Business Journal, 3700 S Tamiami Trail, Sarasota, FL 34239

LEEDOM GROUP

Corner OfficeA Time of Thanks

It is that time of year again. Football is in full swing, cool weather is setting in, and another year of business is almost in the books. This month is also

the time when we traditionally stop and give thanks. I thought about what we have to be thankful for as dealer-owners. What comes along with the role of being a dealer-owner that we can be grateful for and embrace? Most dealers I meet truly enjoy the opportunity of owning their own business and charting their own course. Operating any business can be challenging, particularly in today’s environment, however in my opinion it is most rewarding to be able to provide a product, serve customers, take care of employees and most importantly be a “contributor” to society. Dealers may not always be painted that way in the media but I guarantee you the vast majority – greater than 99 percent - are hard working folks that try to do what they believe is right and to serve customers while growing a successful business. By my estimation independent dealers employ somewhere around 150,000 employees and provide above average wage opportunity for many of these individuals. A pretty significant number! Dealer-owners do not sit by expecting to be taken care of; they

work hard, provide a service and take care of themselves and those around them. Most dealers can find this challenging at times, yet most rewarding most of the time. We can also be grateful to be lucky enough to work in an industry where we literally provide the American dream. A vehicle provides you the ability to go where you want, when you want. We are mostly “car people”. Every dealer knows cars, appreciate cars, and many love cars. How can you not? They have been one of the most written about, filmed and romanticized possessions of the past

century. Think about all of the great movies and songs about cars over the past 50 years. Pretty cool stuff. Dealers get to live this dream. So, as you start to slow down a bit for the holidays take some time to think about how lucky you are to enjoy this and much, much more. Our goal at Dealer Business Journal is to feature information and provide a continuum so that as a dealer you can continue your success. This issue is dedicated to “what should you be thinking about as we approach 2015”. We have asked our contributors to provide their thoughts on what will matter next year. What will impact your business? What opportunities are present? What will it take to succeed? Enjoy the content and we hope you find it to be informative. Finally, I personally want to give thanks to the special dealers that are

DEALER BUSINESS

A L E E D O M G R O U P P U B L I C AT I O N

JOURNAL


Chris LeedomExecutive Publisher

Spartan-Partners.com

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Upcoming EventsDECEMBERDec. 8-10, 2014 Credit and Collections Conference

Dallas, TX For Dealer Principals, General Managers, Collections Managers, Collectors, Skip Tracers

JANUARYJan. 6, 2015 Buy Here - Pay Here Sales Training

Boot Camp, Orlando, FL For Buy Here - Pay Here Dealers, General

Managers, Sales and Finance Managers

Jan. 7, 2015 Buy Here - Pay Here Managers Boot Camp, Orlando, FL

For Buy Here - Pay Here Dealers, General Managers, Sales and Finance Managers

Jan. 8, 2015 Buy Here - Pay Here Collections Boot Camp, Orlando, FL

For Collection Managers, Collectors and Buy Here - Pay Here Dealers

members of the FIADA. Last month I had the sincere honor of being named the FIADA Quality Dealer of the Year. It was the most special honor of my 25 year career. I am most grateful for this honor and more importantly for the opportunity to work with and serve fellow dealers in the great state of Florida. It is a pleasure to represent this great group of dealers. For this I am extremely thankful. Enjoy the start of the Holiday Season and have a great month – Make it Happen!

Chris and Lisa Leedom at the FIADA Annual Convention, where Chris received the Quality Dealer of the Year Award.

www.leedomgroup.com

www.spartan-partners.com


LEEDOM GROUP

BHPH Boot Camp

Even though the Fourth Quarter just started, it is time for owners

everywhere to start taking stock of 2014 and planning for 2015.

Start with the following when reviewing 2014:

Step 1: Quantify 2014 Results Look at your 2014 results critically. Don’t

make excuses. The numbers are what they are and it is critical that they have integrity because they represent the foundation your projection will build on in 2015.

Units Per Month—Average number of monthly deliveriesRetail Price—Average selling priceUnit Cost —Average vehicle purchase price plus transportation and buy feesReconditioning—Average reconditioning costClosing Costs (Tax+Tag+Outside Service Contract)—Cash closing costs incurred Advertising—Total advertising expense per unit sold in 2014Sales Commissions—Average sales commission paid per car in 2014Wholesale Loss/Gain—Wholesale Losses/gains as a percent of sales in 2014Discount/Sales of Receivables— Discount rate (if you have RFC)Personnel Expenses—Average monthly personnel expenseOperating Expenses—Average monthly operating expensesFixed Expenses—Average monthly fixed expensesDown Payment—Average down

Planning for the New Yearpayment (including trade ACV and DIP/Pickups)Finance Charges—Average finance charge on contracts for 2014Total of Payments—Average total of payments on contracts for 2014Term – Average contract term (in months)Monthly Payment—Average contract monthly equivalent paymentCash Collected Per Active Account—Average cash collected for the month per active accounts at the beginning of the monthInterest Rate on Notes—Average Contract APR Charge off Rate, dollars—Average monthly charge off rate calculated in dollarsCharge off Rate, numbers—Average monthly charge off rate calculated in unitsMonthly Percent of Payoff Accounts—Average monthly percent of A/R in payoffs

Step 2: Project 2015 Now that you have accumulated data for 2014, it is time to look at each result and ask yourself the following questions:• What were your goals going

into 2014?• Did you meet or exceed them?• Where did you miss the mark?• What changes did you make in

2014 from previous years?• Which changes worked as

planned and which ones did not?

• Are any staffing changes warranted for 2015?

Being honest here is critical. This is your budget analysis for your business. Don’t hide from

By David Brotherton

uncomfortable truths or make excuses for underperforming team members. Be brutally honest! Once you have finished your soul searching, it is time to start projecting 2015 side-by-side with 2014. For each change, you should make a note for how you are going to get there. For example, if you are budgeting 10 additional sales per month, how will this happen? Will it involve additional staffing, compensation or advertising? Will you be able to buy 10 more of the same cost vehicle as in 2014 or should you budget an increase in ACV?

Step 3: Import your assumptions into a simple projection model that shows the impact on cash flow, receivable growth and profitability. This is the fun part. Once you have a working model, you can start testing “what-if ” scenarios that will really show where and how small changes in your variable expenses can have major impact going forward. This sort of exercise may seem tedious but it is essential to working “on” your business rather than just “in” your business. Out of control variable expenses like vehicle purchase price or reconditioning can be simply devastating to your cash flow. This analysis can help you quantify the dangers of not keeping your finger on the pulse of your business.

David Brotherton is a consultant and Twenty Group moderator with the Leedom Group Contact him at [email protected]


Leedom and Associates, The Industry Leader in Independent dealer Training, invites you to enlist your General Managers, Sales Managers, Finance Managers and Collections Managers in our

BHPH Sales Training Boot CampTuesday, January 6, 2015Your entire sales team will benefit from the training and tools presented in this academy as we help your managers and sales people get the most out of your advertising dollar. This training will focus on learning to work and manage a proven sales process that will help capture more leads and deliver better deal.

BHPH Managers Boot CampWednesday, January 7, 2015We will train your new Managers before they hit the “Front Line” and we will add to the knowledge base of your experienced “War Veteran” managers.

BHPH Collections Boot CampThursday, January 8, 2015Ensure you are collecting every dollar possible. Boot Camp Graduates will be lean, mean collecting machines.

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www.LeedomGroup.com

www.leedomgroup.com


LEEDOM GROUP

Financial Control

We all talk about the most coveted asset we have that

everyone wants, takes forever to build but can be lost overnight: CASH Every operation needs checks and balances to make sure proper accountability is in place and being followed. This will in turn safeguard your most coveted asset: your EMPLOYEES. We all know your controller or office manager is trustworthy, loyal, dedicated, hard-working, can act as your right arm and has access to all the records. Besides yourself this is probably the only person in the dealership that has access to everything you do and has implied authority through the dealership. No matter the level of trust and the dedication of the employee proper controls need to implemented and above all, followed and inspected by you. How do your MANAGEMENT skills measure up?

Cash, Employees and the Management OfDo you on a daily/weekly routine check the following?1. Bank balances per book

compared to bank and ask for a reconciliation.

2. Weekly cash requirements including payroll, lien payoffs, inventory purchases, vendor requirements in summary cash requirements.

3. Collections report of dollars collected reconciled to bank statement.

Do you on a monthly basis check the following?1. Check bank reconciliation.2. Bank statements opened by

you.3. Cancelled checks looked at.4. Vendor checks with PO

addresses verified by supporting documents and receipt of merchandise.

5. Voided checks signed off by you and checked to make sure they did not clear.

By Rick Boucher

A close professional working relationship with your controller or office manager, where you have established store policies that you want followed and expectations of job performance coupled with proper internal controls will result in complete control of your most coveted asset: CASH.

Rick Boucher is a professional Twenty Group Moderator and consultant with over 30 years of experience in various segments of the auto business. Rick has owned and operated dealerships and has served as CFO for several large BHPH organizations. He moderates several Twenty Groups and provides outsourced “CFO/Controller” services for small to mid-size dealerships. As a Certified Public Accountant, he provides consulting services relating to finance and accounting issues as well. [email protected]


www.goldstarGPS.com/dbjcms-today


LEEDOM GROUP

Dealer Operations

Transitioning out of summer brings many changes to our

daily lives and businesses. Football season is up and running, kids are back in school, clocks roll back and leaves begin to fall. Amidst these changes, many dealers are planning for what’s ahead. The next few months are critical, dealers want to finish the year off strong, yet also, need to be evaluating their businesses and preparing for the upcoming tax season. Questions dealers should be asking:• What can I do today that gives

me the best chance for success in the future?

• Do I need to revamp my policies and procedures?

• Do I have the right inventory for my customers?

• Do I have the right pay plan for my employees?

• Will I have the capital I need to execute my plan?

Those are just a few examples of excellent and necessary questions to consider. In this article we will focus on your capital needs. My goal is to ensure that you, the dealer, are properly prepared and understand how to navigate the process of securing a line of credit. A line of credit (LOC) can be a great tool to help BHPH dealers increase their cash flow, receivables and profits. However, if the LOC is abused or mismanaged, it can also become a burden. So, do you really need a line of credit to achieve your operational goals? Often times, the answer is yes! Over the past decade, many BHPH benchmarks are trending

Need a Line of Credit? in ways that make it difficult for operators to remain cash flow positive and profitable. Generally speaking, vehicles are more expensive, reconditioning costs are rising, and down payments are falling. All in all, the average cash in deal has increased 63.7 percent since 2004! Using Leedom and Associates Benchmarks, let’s look at this impact, in terms of dollars, for a dealer selling an average of 50 cars per month:

Today, the above business model would annually require $1,138,800 more in capital than needed in 2004. Add rising operating expenses, longer term notes and increased losses to the equation; now you start to understand the significant necessity for more capital. While there are numerous ways owners can raise capital for their businesses, for many, a line of credit has proven to be a fundamentally sound choice. However, for a BHPH dealer, this is not always as simple as it sounds. Traditional lending options such as local banks or credit unions, generally do not have an appetite for this space. Why is that? Many dealers have been profitable for years, produce

By Paxton Wright

substantial revenue and adhere to all state and federal regulations. So why is it challenging to secure traditional financing at low interest rates? Bottom line: BHPH dealers originate a portfolio of accounts backed by customers and collateral that, even individually, are unappealing to traditional lending sources. Without knowledge of our industry or experience lending to dealers, it is unlikely to find capital in that arena.

Thankfully, there are financial institutions that specialize in providing capital to BHPH dealers. They understand our customers, collateral and business models. While the interest

rates and expenses can be significantly higher than traditional lending sources, they offer the best alternative for providing the capital you need, structured in a way that allows you to succeed. Best of all, after a few years of solid financial reporting and portfolio performance, they can be a stepping stone to negotiate improved loan terms or even “bank rate” financing options. So, how do you get there? In my experience, with most all dealer principals, a line of credit for your business is the largest financial commitment you will ever make. With this understanding, comes significant responsibility and attention to detail in all aspects of managing this transaction and ultimately the line of credit itself.

2004 2013

Monthly Sales 50 50

Average $ in Deal $2,979 $4,877

Monthly $ in Deal $148,950 $243,850

Monthly Increase in $ $94,900


To best prepare you and your business for the due diligence process, here are a number of items you should plan to deliver: • Loan Request Letter - Commitment Amount - Initial Funding - Usage Plan• Company Profile: - Dealership Origins and Locations - Executive and Key Management Bio’s - Business Philosophy - Company Affiliations (State Association, 20 Groups) - Unique Competitive Advantages - Organizational Chart - Business Awards and Recognitions• Company Tax Returns, Income

Statement and Balance Sheet (two years or more)

• Company Cash Flow Statement (YTD)

• Company Bank Statements (90 days)

• Personal Tax Returns and Financial Statements

• State Licenses, including Selling and Finance License if applicable

• Company Formation Documents

• Policy and Procedure Manuals for all underwriting, collections and cash controls

• Static Pool Loss data (report generated from DMS)

• DMS Access (direct log-in for lender)

Following the delivery of these

items, most lending institutions will evaluate the information provided, review credit history and determine if your business is a viable fit for their program offerings. If yes, you will likely receive a letter of intent (LOI) outlining the size, scope, and expenses associated with their line of credit. For example, the LOI will show an anticipated commitment amount, loan term, interest rate, due diligence fees, and even legal expenses. This document will also spell out any key performance metrics and financial covenants that you will be expected to maintain. Once you have negotiated agreeable terms and executed the LOI, most lenders will schedule an on-site visit. A successful on-site due diligence is paramount in building a relationship with your lender and ultimately in receiving credit committee approval. The purpose of the on-site visit is to validate the documentation provided above, conduct management interviews, a loan file examination, and complete a payment testing review. While each step in this process is important, I can assure you from being on the inside, the management interviews are most vital. Take this opportunity to shine a spotlight on your team’s expertise and demonstrate why you will be a solid partner for your lender. At the conclusion of this process, typically an updated LOI will be delivered and accounts for any adjustments that needed to be made as a result of due diligence findings. Be sure to have legal representation that understands

your business and how these funds will be utilized and secured. Once both parties agree on final terms, the closing will typically occur within 14 to 45 days depending on the legal team, the lender and other circumstances. While this may seem like an intimidating venture to undertake, I can assure you that it is worthwhile. In fact, all of the required documents above should already be part of your standard operating procedures. If not, ask yourself why and then decide if you would lend millions of dollars to a business that is missing any component of what I’ve listed here. If your concern is cost versus benefit, I’m happy to assist you in completing that analysis and establishing the appropriate value. As stated earlier, my goal is to help you understand how to secure a line of credit and ensure you are properly prepared.

Paxton Wright is a professional Twenty Group Moderator and consultant with over 10 years of experience in lending, finance and BHPH operations. Paxton has worked with numerous lenders and understands BHPH financing and how to fund BHPH dealerships. He has deep operational knowledge and consults on an array of topics including credit facilities, asset sales, portfolio performance as well as general dealership operations. He is a recognized industry leader and has been featured at numerous national conventions as a speaker. [email protected]


LEEDOM GROUP

Payment Processing

Given all the advancement in new technologies, we should

all take a moment and consider where the payments industry is headed. There are a few notable trends that will be explosive in the coming years. Technology is going to be the game changer in all aspects of business, from accepting a customer’s payments to knowing how and where to market to your audience. Everything is moving towards digital streamlining; it won’t be long until we are no longer carrying around those crisp dollar bills. Statistics suggest that the more payment avenues you provide to your customers the more likely they are to make their payments, and make them on time. If the only way a customer can make a payment is to come into your store with a money order or cash, you are losing out on too many opportunities to collect that payment faster and more efficiently. Using technology to do something as simple as setting up a recurring payment option, whether it be via automatic withdrawals from a customer’s checking or savings account or taken directly from a credit card, could improve your delinquency on average, by 7 percent! You are instantly improving your bottom line by getting the payment and getting it on time. There are so many options out there that help you receive payments more efficiently and also don’t require extra labor hours. For example, for $49.99 per month you could have a secure web payment page that allows your customer to

Payment Processing Trends on the 2015 Horizongo online and make their payment, 24 hours a day seven days a week. They don’t have to go through the routine of getting cash out of the bank or purchasing a money order and driving to your store during business hours to make that payment. At that rate you would spend $600 per year on the site and most likely retrieve more payments then the cashier you have to hire paying $20,000+ per year, and who doesn’t work around the clock. Another great technology advancement that is gaining momentum is text-to-pay. Let’s first look at the statistics: 9.8 trillion text messages were sent in 2012, and of those text messages 95 percent were opened and read within one minute! A recent study also shows that 30 percent of consumers interact with a brand or business via text messaging. So what does all this mean? Texting is the new way to communicate, and for most of the younger generation it’s the only way. Dealers should tap into this and begin talking to customers via text messaging. There are new products out there that enable this communication via a portal on your computer, along with products that automate a payment text reminder to go out based on a customer’s loan payment structure. For example, if a customer is to pay $150 bi-weekly a payment text can be initiated three days before the due date every two weeks and all the customer would have to do is reply “Y” and the payment is made. For those of you that are not quite text savvy but would still like the automated reminders sent to

By Paymaxx Pro

your customers, an Auto Dialer or Pay by Phone that is integrated with a voice system is a great option. The system uses automated prompts to guide customers through making a payment. By utilizing an Auto Dialer along, you can schedule calls to go out to your customers that will allow them to make payment through the system if they answer the phone, or leave a customized voice mail if they do not. The good thing about technology is that most features can be tailored to meet your needs. Another thing to keep an open mind about is “Big Data.” Essentially, Big Data is a marketing tool that will help you pin point how and who you market to based on data that has been collected and analyzed. This data could be based on something as large as your industry or as small as your own day-to-day business. A great area to collect such data is in your payment processing. For example, what type of payments are you taking, when and how are you taking them. New technology is being developed for small businesses to harness this information and help guide your marketing approach, and change processes if needed. With all these advanced technologies on the horizon it is important that you understand how they work and how they work for your business. All products referred to in this article are available through Paymaxx Pro. Please feel free to contact us at 877-527-5658 or [email protected] for more information.

Training, Consulting, Workshops

TWENTY GROUPS

WOULD YOU LIKE TO INCREASE YOUR

PROFIT BY 48%?

Our data shows that dealers who join one of our Leedom and Associates Twenty Groups recognize a 48 percent increase in net profit after three years of membership. This is why countless clients say joining a Twenty Group “is one of the best things you can ever do for your business.”

888.599.1720 | www.TwentyGroups.com | [email protected]


Training, Consulting, Workshops

TWENTY GROUPS

WOULD YOU LIKE TO INCREASE YOUR

PROFIT BY 48%?

Our data shows that dealers who join one of our Leedom and Associates Twenty Groups recognize a 48 percent increase in net profit after three years of membership. This is why countless clients say joining a Twenty Group “is one of the best things you can ever do for your business.”

888.599.1720 | www.TwentyGroups.com | [email protected]

www.twentygroups.com


LEGAL & LEGISLATIVE

The federal Fair Debt Collection Practices Act imposes a

number of requirements on debt collectors. Buy Here-Pay Here dealers without related finance companies don’t have to worry about the FDCPA because it does not apply to a creditor

collecting obligations originated by that creditor. Dealers with related finance companies also enjoy an exemption from the FDCPA if the finance companies acquire credit contracts from their dealers at a time when the contracts are not in default. The RFCs enjoy another exemption from the Act, however, and a court in a recent case used

Legal OpinionDealers, Related Finance Companies and the Federal Fair Debt Collection Practices Act

that exemption as the basis for dismissing FDCPA claims against the finance company. Kimberly Golden bought a used car from Automotive Restyling Concepts, Inc. d/b/a Automotive Concepts. The security agreement she signed indicated that Golden made a $2,000 down payment and agreed to finance the remaining balance. Golden and Automotive Restyling also executed a Check Pledge and Note stating that if Golden’s $2,000 down payment check was not negotiable, Golden would make immediate payment in full. The parties disputed whether Golden made the down payment. The law office of William H. Henney later sent a letter to Golden on behalf of John W.

By Tom Hudson

Prosser and Prosser Holdings, LLC d/b/a A.C. Financial regarding the alleged $2,000 past due down payment amount. About a month later, Prosser, the chief manager of A.C. Financial and president of Automotive Restyling, wrote to Golden on behalf of A.C. Financial regarding the debt. Golden sued A.C. Financial, Automotive Restyling, and Henney’s law office for violating the FDCPA and Minnesota law. The parties cross-moved for summary judgment. The federal trial court first dismissed the FDCPA claims against Henney. Golden had argued that Henney violated Section 1692e because she did not owe the $2,000 at issue. The court found that an allegation that a debt is not owed cannot form a basis for a false and misleading practices claim under the FDCPA. Golden also argued that Henney’s letter was false and misleading because Automotive Restyling, not A.C. Financial, was her original creditor. The court found that even if the letter misstated the name of the creditor, it was not a material misrepresentation because the letter stated that the debt was related to Golden’s recent purchase of a vehicle. This information was sufficient for Golden to understand the letter and submit a response. The court also found that Henney did not use unfair or unconscionable means to collect

Many Buy Here-Pay Here dealers and their related finance companies comply with most of the parts of the FDCPA, but adopting FDCPA provisions as a best practice doesn’t negate liability if the creditor doesn’t quite get it right, so having this additional exemption is handy.


court noted that both entities were managed by Prosser. Many Buy Here-Pay Here dealers and their related finance companies comply with most of the parts of the FDCPA, like restrictions on when consumers can be called, as a “best practice.” But adopting FDCPA provisions as a best practice doesn’t negate the liability for a violation if the creditor doesn’t quite get it right, so having this additional exemption is handy. But the exemption won’t mean much if the Consumer Financial Protection Bureau is successful in its efforts to apply the FDCPA to

the debt. With respect to the FDCPA claims against A.C. Financial, A.C. Financial argued that it was acting as a creditor and not a debt collector. A.C. Financial handled Automotive Restyling’s in-house financing needs and was thus responsible for handling Golden’s down payment. The court found that even if A.C. Financial was a debt collector under the Act acting on Automotive Restyling’s behalf, A.C. Financial would still be exempt from the FDCPA under Section 1692a(6)(B)’s “affiliate exemption” because it was affiliated with Automotive Restyling. The

©2013 Sterling Credit Corporation

Fast Track Your Cash

Sterling Credit CorporationOffering Point-of-Sale and Bulk Purchase Programs

BENEFITS:

• Minimize risk

• Purchase inventory

• Accelerate your profi ts

• Reduce collection responsibilities

• Meet operating cost goals

• Grow your business!

Sterling Credit Corporation is your key to turning in-house sales contracts into fast cash. Our seasoned understanding of the industry will help you generate a timely return. Our professional team of fi nance experts can create a program designed

exclusively for you and your dealership. We’ll get you the cash quickly, treat your

customers with respect and free you from the hassles of collections, all with a personal touch.

We can help get your cash fl ow back on track. Call today!

©2013 Sterling Credit Corporation

Offering Point-of-Sale and Bulk Purchase Programs

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“first-party” creditors. It has issued a proposed rule to do exactly that, so stay tuned on this issue.

Golden v. Prosser, 2014 U.S. Dist. LEXIS 128423 (D. Minn. September 15, 2014)

Tom Hudson, Esq. ([email protected]) is the author of several compliance-related books that are available online at www.counselorlibrary.com. He is also the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®. Reach him by phone at (410) 865-5411 or visit www.counselorlibrary.com.

www.sterlingcreditcorporation.com


If you’ve ever managed to whine out a lame version of this “he’s

loyal” rationalization to justify your defense of mediocrity roll this publication up, hand it to the nearest person and ask them to smack you in the head with it. Frankly, if you dare fathom

the perpetual cost and misery that accompanies keeping a “loyal’ non-performer you’d agree a simple whack on the head is getting off lightly. For any of us who have had access to a dictionary during the course of our lifetimes, there is no excuse for confusing a word like loyal with concepts like “seniority,” or “tenure”. The following three definitions may help you discover that people you’ve labeled “loyal” do indeed have seniority and tenure, but are far from being loyal employees: Seniority: status obtained as the result of a person’s length of service. Tenure: the length of time in a position or office. Loyal: faithfulness to one’s duties and obligations. The truth about loyalty is found in its definition: “faithfulness to one’s duties and obligations.” This indicates that not only does the person show up to work, but


Learn to LeadThe “Loyal” Non-Performer

By Dave Anderson

he or she steps up while there and performs well. Based on this definition, you could also say that one of the most disloyal things someone can inflict on an organization providing their paychecks is to stop getting results. At the end of the day, to maintain a healthy organization loyalty must be assessed as thus: not solely by the amount of time someone puts in, but by what someone puts into the time; continued performance worthy of your organization. When I discuss this topic in my Up Your Business 2.0 Super Leadership Workshop the discomfort amongst attendees is palpable; especially from tenured employees representing their organization. Thus, I should also clarify something very important: if you have long-time employees, and they continue to perform well, they are your “A” players. You need to take good care of them, because you can’t really ask for more than performing consistently well over a long period of time. But, if you have to choose between performance and tradition; performance and sentimentalism; performance and old-time’s sake, you need to do what’s right for the entire team, your culture, standards, momentum, morale, personal credibility, and the customer experience and either get the “loyal” person better, or get a better person. If you’re still hung up on the

“but he’s been with me X years” excuse, consider this: if a couple is married for 40 years, an outsider might comment that the gentleman must be a loyal husband to have stayed married for so long to the same woman. But, if in the course of those 40 years he was detached, indifferent, selfish, and had multiple affairs you’d probably change your assessment that he was loyal. The time he put in would be subordinate to the fact that the behaviors he put into the time were unacceptable, and sometimes egregious. As much as we may appreciate long-time service, the sad truth is that tenure can become a license for laziness. This is not a certainty, but is a real possibility and is in evidence in positions where seniority rules: college campuses, certain government jobs, and the like. Whenever one takes something for granted he is likely to become lazy in that area: take your health, kids or marriage for granted and you may be compelled to abandon sound disciplines that you once paid attention to in those arenas. A job is no different. When one starts to take it for granted, which is common amongst those employed there for many years, they are prone to let up, believe rules or standards others must meet don’t apply to them, and start to expect that their tenure, experience or credentials should somehow substitute for results. Incidentally, if this happens,

“I know I should probably get rid of the guy, but he’s been with me 25 years; he’s loyal.”


shame on you, for perhaps also taking your tenured employee for granted and failing to continue to invest in his development, stretch her with new challenges, or allow performance and behavioral expectations to become vague over time. Another point to consider is that if you’re going to use the time someone puts into a job as your primary criteria to crown one as loyal, that would also mean the new star employee who has only been with you six months but is outperforming everyone in his department couldn’t be considered as loyal because he hasn’t been with you very long. That would be a ridiculous way to look at things, wouldn’t it? But it’s actually no sillier than claiming loyalty from an employee simply because he or she has cashed your paychecks longer than anyone else. My short-list of traits that helps determine loyal employees is simple: 1. They perform in a manner that

meets, and often exceeds your expectations for the position.

2. They add value to others in the workplace.

3. They share and live the company core values.

4. They create exceptional customer experiences that build your brand and increase customer loyalty.

5. They represent the organization well away from the job, through their behaviors and by speaking well of it.

If you have a “loyal” non-performer, don’t get trigger-happy after reading this piece and overact by firing him; at least

not yet. Chances are that you’ve got a lot invested in that person and should do all you can to turn their performance around before letting him go. I suggest you do the following if you desire to keep him in the position he’s in:1. Have a frank and specific

conversation with him concerning his performance.

2. Take responsibility for allowing him to veer so far off track on your watch, but pledge to do your part to define expectations immediately.

3. Redefine what you expect and by when. Put it in writing.

4. Affirm that you’ll do what you can to help him get there and that you’re pulling for him to make it.

5. Pre-establish an appropriate consequence for him not reaching the desired performance level.

6. Know that if you must remove him because he didn’t perform

adequately, that you will not have caught him by surprise, and take solace in the fact that you gave him an opportunity to right his course. While you were firm with him, you were also fair.

7. Move on. 8. Now, look reality dead in the

eye and deal with it. Closing Note: I’ll cover many of these points live at Best Training Day Ever, January 22nd in San Francisco. www.thebesttrainingdayever.com

Dave Anderson is President of LearnToLead which provides in-person and virtual training to many of the world’s best dealerships. Dave speaks to dealer groups over 125 times each year and has given seminars in 15 countries. He has spoken at eleven NADA Conventions and is the author of twelve books. Follow Dave on Twitter @DaveAnderson100 and visit his website at learntolead.com for free articles and videos on sales and leadership.

Loyalty is not just about the amount of time someone puts in, but about continued performance worthy of your organization.


Just about everyone that knows me understands I’m a football

fan, and since we’re now well into the season, I thought I’d discuss why football is my favorite sport and how it’s a metaphor for our business.

What I appreciate the most about football is it’s a team sport, with rough edges, where constant training, preparation, practice, drive, determination and lots of passion are all necessary for a successful outcome. It’s a sport where you must leave everything on the field. There is a winner and loser and you are judged by your fans and your critics on both how well you’ve played and by whether or not you’ve succeeded. Each week the coach carefully analyzes the opposition and looks at its strengths and weaknesses. He trains his players to attack the weaknesses and how best to challenge its strengths. Every good coach knows he can’t do everything himself, can’t coach each position himself, he needs his assistants to help him prepare the team and make the team better. He looks to his assistants to manage the practices, let him know about injuries, weaknesses, strengths and progress of the players. Then it’s game time and everything you have prepared for is now put into live action and the sharp focus of competitive reality. Football is a metaphor for our business, especially our business.

What Football Can Teach You About Your BusinessEven a dealer with just two or three employees is a coach of a team. Often the dealers I work with have multiple layers of management, in some cases, multiple stores. They have a dozen or more employees who must be coached, trained, and put on the lot (the field of play) to engage our customers. Whether those employees are reconditioning cars from the auction, actively selling to prospects, closing deals, collecting or repossessing vehicles, each has a specific duty to perform. Importantly, good coaches, good managers teach their team members if a job is done well or poorly affects everyone else on the team and their performance affects the bottom line. It’s our way of keeping score. Training events like our upcoming Credit and Collections Conference and Buy Here Pay Here World, Twenty Groups, one-on-one consulting and more, we are helping coaches and assistant coaches to hone their skills, to make them better at what it is they do so they could go back to their stores and work with their teams and make them people of championship caliber. Each week, each month it’s game time at the dealership and all of us must be able to answer the questions: Are we operating as efficiently as possible? Is our strategy working or do we need to make adjustments? Do we have the right personnel at the right positions and are they working at optimal efficiency? Are our customers being treated well and are they satisfied with the products and services we provide?

Ultimately, the key question is this: Are we making money? Does our profit margin justify our efforts?That last question is truly “our score.” The answer determines whether we are successful or if we are failing. At our Leedom Group events, I see owners and managers immersing themselves in a variety of topics. They learn about sales, marketing, collections, personnel management, legal and regulatory compliance and more. They network with vendors and fellow dealers. They listen to experts and from dealers who have succeeded. No one feels they have all the answers or all the skills they need to continue to succeed. For each week, each month there are new competitors, new challenges, new rules dealers must contend with to be able to answer the last question above in the affirmative. So what’s our Super Bowl? What’s our championship? I’d make a case for April 15 of each year. It’s the day when we pay our taxes and our accountants determine what our net profit for the previous year was. It’s the final stat that will be placed in your permanent business almanac, you’re win-loss record.So practice well and play hard and as always, enjoy what you do and make it happen!

Chris Leedom is the Chief Executive Officer (CEO) of The Leedom Group, Inc., a Twenty Group training and consulting firm. He is frequently featured as a key speaker at state and national conventions and is a recognized “coach” and adviser to more than 3,500 dealers. [email protected]

By Chris Leedom


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How was your 2014? Good, bad, could’ve been better? Wherever your answer ranks, there is almost always

room for improvement in any business, but hoping or praying for it won’t make it happen. If you want to see big results, you have to focus your energy into a strategic plan of attack. Just like the head coach would never start a football game without a sound game plan or a general would not invade without a strategy, dealers can’t expect to reach their business goals without a clear plan on how to do it. More specifically, effective leaders execute well-planned strategies, and the best way to lay out a sound business strategy is to write a thorough business plan. If you haven’t written one yet, you are making one of the most costly, and often fatal, mistakes of running a business. A business plan in itself does not guarantee success, but you can’t capture continued success without one. Even a draft of a plan on the back of a napkin is better than no business plan at all. Hopefully, you understand the need of a well-written, and organized business plan and if you do not have one written for your dealership, you are ready to write one or freshen up the one you have. When you do, make sure you include the following elements:

Vision. The vision of where you are going should be explained in the Executive Summary. Every team needs a vision of what the future will be like when you reach your goals and are operating successfully. The executive summary is an overview of that vision. It describes who you are, what you do, why you do it and how you are going to achieve your goals. It should contain a vision statement, a mission statement, and proveable statistics and insights about the market and what you see as the business opportunity.

COVER STORY

Continued on Page 22

IT’S TIME TO WORK ON YOUR TEAM’S 2015

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COVER STORY

GAME PLAN continued from Page 20

History. This is your story told as a brief account of how your company began. Though the history of your dealership is exciting to you, it may not be for outsiders. In an official business plan, it is best to keep the corporate history short and to the point. It’s relevant because it illustrates the foundation of the company and gives insight to the direction of the future.

Goals and Objectives. Anyone can set a goal, but to set a goal that can inspire real accomplishment, it must be SMART. That means every formalized goal needs to be specific, measurable, achievable, realistic and time-phased.With a clear goal, your team can focus their thoughts, actions and energy on the identified target and perform with maximum efficiency. Goals can be further broken down into objectives, which act as the stepping stones that will help you attain it. If constructed well enough, goals will provide your business direction that will help guide it and build momentum.

The Team. Your success is in the hands of your employees and how well they can carry out the plays. Every team has all-stars. These are the players in key roles who are charged with executing the business plan. In your written business plan, include the biographies of these Key Players. No matter how good the plan is, its ultimate success depends on the talent and drive of the key players. Your best plays and strategies will ultimately fail without a focused and talented team, just like the best teams and best players will ultimately lose without a game plan. Build the hype for your team, and share your enthusiasm for their skills and accomplishments.

The Product or Service. This is the “what” of what you do, and ultimately why people will pay you money to do it. In this section you should describe in the product(s) or service(s) you offer. Go into detail and be as specific as possible. A good business plan can be even better if you go past what’s expected and add the things that make you unique. Sell it to yourself, to employees, to investors, to banks and ultimately, to customers. That means thoughtfully answering that question everyone is going to ask: Why should I buy a vehicle from you?

The Market. Who is going to buy your products and services? The market. So, the marketing section of your plan has a distinct and important purpose of describing the market demographics of your business and associated buying habits in reference to your product or service. Describe your niche in detail to illustrate your understanding of your customer and why they will choose you. Use this portion as an exercise in determining who your “perfect customer” is and what they need.

Strategy. Now the fun begins. The actual plan part of your Business Plan is found in the strategy. It is the nuts and bolts of your business idea. This is where you draw the circles and arrows that will describe your winning game plan in detail. Give specifics on how you’re going to achieve your goals and objectives. This section holds the entire plan together by giving the orders on a detailed strategic plan of action and covering contingency plans for any problems that may arise.

Financial Projections. The numbers won’t lie, and are needed to ensure your plan will work. The financial projections section of a business plan

typically accounts for a five-year period, with two years of historical and comparative data and three years of informed projections based on the demand of the market and the company’s ability to meet a percentage of that demand.

Exit Strategy. It may seem odd to include an exit strategy for plan that might just be beginning, but most businesses have a specific life cycle. They start up, they grow, they change hands, they close. The exit strategy depicts the projected life cycle of the business and the long-range plans of the owners. Including an exit strategy can ensure a happy ending rather than a tragic end. It also helps investors specify and minimize the financial risk of their investment in your company.

SWOT Analysis. Any organization, business or company that is truly committed to reaching the next level will make sure it has evaluated itself objectively with a SWOT Analysis. A SWOT Analysis highlights four strategic factors of influence that are used to evaluate the Strengths, Weaknesses, Opportunities and Threats of a business. The first two factors highlight the key strengths and weaknesses of the organization while the second two illustrate the current opportunities for expansion and threats to the existing business model. The purpose of the SWOT analysis is to identify the internal and external factors that will affect the ability of the organization to achieve its stated goals.

Writing and preparing a business plan takes some time and effort. When you put in the practice, work and dedication it takes to make a solid plan, though, you will find the rewards you are looking for.


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The BHPH operator’s long-term success is often contingent on

how well changing industry cycles are managed. Inherently, industry cycles are inevitable and present

challenges for management. The key to success is often related to how well business strategies are executed, particularly if there are changing

industry cycles and trends. Our clients that have stability of key employees and managers that have a proven track record coupled with strong operational structure and accounting controls seem to be able to manage risk and succeed in adapting to changing market conditions. To the contrary, we have noted BHPH operators who operate in a less structured environment perhaps implementing more “trial and error” operational changes to react to changing industry cycles without fully evaluating the long-term financial ramifications in an accounting or data analytical sense appears to have greater chances of struggling or failing based upon our observation. The more challenges presented for the BHPH operator during industry operating cycles,

Managing Through Business Cycles

we continue to enjoy a nice run of lower interest rates, but most expect increasing The successful public and larger BHPH operations often claim they have a competitive advantage over whom they often refer as the “mom and pop” operators. Often they cite not size, but strong operating structure, ability to procure and retain the best talent available, particularly in key positions, provides a high level of care given to customers, great processes/risk management and care to managerial data (key statistical analysis) and accounting. They often purport that they manage well within industry cycles, are well capitalized and can obtain financing at lower costs of capital. And finally, there is a study of

BHPH industry statistics and cycles and always anticipation of changing economic conditions which is inevitable. Successful operators expect that industry operating cycles occur, understand historic trends and are prepared to address the issues/

develop strategies in advance to the extent possible (i.e., necessity to de-leverage or scale operations, deal with rising interest rates on debt, etc.). We have noted some smaller to medium sized operators, that are struggling, often try to adapt to changing industry cycles by making significant strategic decisions sometimes without

the greater the separation appears to be between the top 35 percent performers and the lower 35 percent in operating performance. Changes in the BHPH industry cycles do not happen over-night and often are determined based upon after-the-fact data analysis. Many have felt that over the last couple of years that the BHPH industry cycle has changed. For many, unit sales have leveled off or decreased due to higher competition for BHPH customers and charge-offs have increased. One cause may be attributed to the wave of money being invested into the subprime loan market whereby traditional subprime lenders have increased their stake in the deep subprime market and there, may have taken a slice of the BHPH

market. Another is increased competition from new or growing BHPH operations. Eventually, as we have seen before, during times of industry growth, there are many new entrants that may not succeed. Also, subprime lenders may reduce lending in the deep subprime arena if unfavorable charge-offs vs. cost of capital scenarios occur, which many feel is inevitable. And finally,

Business BasicsBUSINESS OPERATIONS

By Robert N. Parnas

The smaller to medium sized dealers who try to adapt to changing industry cycles by making significant strategic decisions without understanding the long-term financial ramifications are struggling. “Winging it” is always risky.


understanding the long-term financial ramifications as well as not having their “house in order.” For example, we have noted some acquire additional facilities or expand to other locations trying to grow in the midst of current unresolved underwriting/charge-off issues. In other cases, they change business philosophies, for example acquiring higher ACV vehicles but not analyzing static pool/charge-off ramifications of higher ACV vehicles vs. standard to determine if the decision is

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the right one for the company. Therefore, “winging strategies” are risky. The involvement in Twenty Groups certainly helps the effort in regards to the performance and evaluation of key trends and ratios, as well as networking and sharing of ideas. Essentially developing, maintaining and adapting a short range and long term business model and a business budget are important. In a nutshell, industry cycles will occur and how well your

operation executes core operations from department to department and adapts business strategy will increase likelihood of success. Our clients which focus on core competencies (the blocking and tackling) in the business seem to manage through ever changing business cycles in the business.

Robert Parnas, CPA, is Principal, Dealerships, with CliftonLarsonAllen LLP and can be reached at [email protected].

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With the growing prevalence of technology and social

media such as Instagram, Facebook and Twitter, many have lost the social skills or the ability to carry on a good conversation. I have seen conversation slipping away

in my personal life. My son or daughter will text me or my wife while they are in the next room! Yes, you read that correctly. They will send texts asking what’s for dinner from their rooms rather than getting up and walking 30 feet to ask the question face-to-face. As a skip-tracer, my ability to communicate and talk to people is the very essence of what I do. Extracting information from people who may not want to talk or who do not know the value of the information they have can only

be effectively exploited through ordinary verbal conversation. Nothing beats in-person, face-to-face meetings but if that is not an option, a phone call is the next best thing. Without the related reference of tone-

SkipTracingThe Skip-Tracers Guide to Effective Communication

of-voice and other verbal cues, misunderstandings are common. I can’t tell you how many times I have received an e-mail that I perceived as being combative or insulting, then picked up the phone to call the sender to have a confrontation on the issue, only to discover that it wasn’t their intent at all. If you are relying on e-mails and texts as your main form of communication, you’re losing a potentially competitive edge in the marketplace and your skip tracing skills are likely suffering as well. There are five conversational tools to help you get the information that you need for skip-tracing or any other investigation. We will review some that we have touched on before and talk about some we haven’t. Start your conversations by asking questions you already know the answer to, such as “You’re Bill’s sister?” And, “You current address is at 45 Oak Lane, Correct?” The reason to start here is so that you

can hear how the person responds to your questions when there is no need for deception. You’re listening for the speed, tone, and verbiage of the responses. How long is it between the question and the answer? When someone is being

By Alex Price

BUSINESS OPERATIONS

honest, they will react the same way almost every time. Don’t think that a longer pause is always a clue to deception. At times it is simply a human’s way of searching the brain for a memory, yet it could be a stall used to fabricate an answer. Some people are like my son. When he’s trying to be deceptive, he will talk very fast hoping he can get the conversation over quickly. He will also try to change the subject. I listen for throat clearing, a crack in the voice, or the overuse of “Um…” or “Ahhh” that tells me he doesn’t know the answer or he’s trying to make one up. Open-ended question can’t be answered “yes” or “no” and are used to explore a topic and to gather information. For example, “How are you doing?” Or, “What is Ann up to these days?” These questions will require a minimum of a sentence to answer. The more you engage someone in conversation, the more information they reveal. Your standard response to any of answers to open-ended questions should be “Really? Tell me more.” People like to talk, and to be heard. Use human nature to your advantage. You will open the floodgates of information just by saying, “tell me more” if it is communicated at the right moment. After an open-ended question like “When was the last time you heard from Dave?”, you might be told, “Oh, gosh, it has been months.” That’s the perfect time for a bait question: “That must

If you are relying on e-mails and texts as your main form of communication, you’re losing a potentially competitive edge in the marketplace and your skip tracing skills are likely suffering as well.


be so hard for you. It would be so hard not to talk to my son for that long. Have you always had a rocky relationship?” No one wants to have their parenting skills, honesty, character or faith called into question. They will usually answer you without thinking. “No, we used to be close until he moved to Chicago and started dating that girl Sue!” A-ha! We need to find out who Sue is. This is the time to say, “Really? Tell me more. What did she do to bring him down?” Now I’m a confidante instead of an adversary. When it is time for direct answers, close-ended question cut right to the chase. It calls for a one-word answer such as “Yes,” “No,” “Guilty” “Innocent.” Once you have gathered all the background information and clues you need, you can go with direct, closed-ended questions such as: “I bet you know exactly where Dave is, don’t you?” When using this type of question you need to be careful not to sound combative as that will shut your conversation down completely. Use the right tone. You don’t want to get a door slammed in your face, but if it happens, this should be at the end of the conversation, not in the opening minutes. There is an old saying that silence is golden. It can be golden for you if you know how to use it. In radio or television there’s nothing worse than “dead air.” We are conditioned to expect a conversation to flow back and forth, on and on. Break that rhythm. The other person will try to fill an awkward silence. A well-timed pregnant pause occasionally will force the other party to jump in to fill the void and give away valuable information. In summary, a skip-tracing conversation is one that you control. Begin with baseline questions to establish an understanding of how your subject responds without the need for deception, noting the pace of the response, the words that are used, and the intensity of the tone. This gives you a barometer to detect deception and a way to plan the next type of question to deploy. Move on to open-ended questions to see what you can learn. If there is reluctance, try bait questions to draw your subject out. When you’ve explored the topic, you may choose to challenge the person with a close-ended question. And at times, careful use of silence will pay off. For example, at the end of a conversation if you hesitate before saying good-by, the person may jump in with one more point that you can use.

In any personal or business communication today, it’s easy to send a text or twitter or e-mail. But now, before I send an electronic message to a friend, a client or a prospect, I consider whether a phone call would be a better solution for this subject matter. I would challenge each of you do to do the same. When we meet on our path of life, let me know how it turns out. Nothing would make me happier than to have a nice conversation with you.

Alex Price is a nationally-recognized expert on the Art of Skip Tracing. Currently he is the Executive Vice President for MasterFiles and author of Skip Tracers National CertificationProgram, The Florida Records Guide, The Military Installations Guide and blogger with over 25+ years of experience in skip-tracing, collections and public speaking. Contact [email protected] or call (972) 735-2353 for more information.

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First, I feel I must explain. On November 1st, 2014 our

company celebrated its 20th year in business. A pretty good milestone considering the challenging times we in the car business have faced together. And hey, even though

I am proud of those demanding accomplishments, it takes up just part of my life. You see, between my sweetheart and me, we have eight children, nine dogs (Labs and Yorkies), and two horses. In other words, if each of the children has only one crisis every eight days, I am faced with...well, you see where I’m going. By the way, three are teenage girls, ages 14, 16 and 17. Whew! Anyway, to add to that, I breed Yorkies and Chocolate Labs, initially as a life lesson for my children. Recently, I had something unexpected happen. I had a Yorkie that was pregnant. I knew she was pregnant. I knew about when she was going to have her puppies. What I didn’t know was a Chocolate Lab female that I had for four years, and had never wanted to breed, was also pregnant. A couple of weeks before she was due it became obvious that she was pregnant. I started scrambling, after my initial shock, to get prepared. “She’ll have around six pups” I told myself. She had ELEVEN. Three days earlier,

ReInsuranceOverwhelmed

a Yorkie litter of three came. Suddenly, I had 14 puppies to deal with, to go along with the eight kids, nine dogs and two horses. Overwhelming! Do you ever feel that way about your Buy Here-Pay Here business? Like the guy spinning plates on a stick? You have sales putting new customers in the street, collections trying

By Tim Byrd

BUSINESS OPERATIONS

to keep them in the street and as Murphy’s law would dictate, “BAM” cars breaking, customers screaming, payments stopping, cash flow suffering. Good grief! Overwhelming! Let’s unpack just one of these things we know is evident: we know that cars break, we just don’t know which ones or when. Sometimes, it seems they all break at once. So, the smart thing to do is, like the Boy Scouts say, “Be Prepared” by reserving for it. Like anything else, there is a right way and wrong way to reserve for the inevitable breakdown. You can set aside funds in an account from each sale and when you have a claim, you take it out of that reserve. Well, this beats a sharp stick in the eye, but there are a few glaring issues. One, you will have to come up with a written contract outlining what is covered and what is not and two,you will pay taxes on that money as gross profit up front, then you can net out the claims. If the customer is out of town and breaks down, you’re left hostage to an out of state shop. Everyone, including your employees, will know that you have the pot of money that makes their troubles go away. Finally, it looks less than professional, to say the least. You can buy a Vehicle Service Contract from a third-party, sending them the reserve. You will have nationwide coverage. You will look professional. However, there are drawbacks to this as well. First, there is 100 percent loss ratio to

Do you ever feel that way about your BHPH business? You have sales putting new customers in the street, collections trying to keep them in the street and BAM, cars breaking, customers screaming, payments stopping, cash flow suffering. Overhwelming!


Leedom & Associates, LLC offers consulting services and guidance for dealers just like you. Our training leaders are able to review your operation and provide an action plan to help your dealership achieve benchmark performance. Virtually every week of the year our consultants are onsite, in dealerships identifying opportunities and creating net profit improvement for dealers. Some of the programs we offer include :

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you, the dealer. In other words, once you have sent them that reserve money it is no longer your money, but their money. They have the final say on what is covered, if it’s covered and for how much it’s covered. Whatever reserve not used to pay claims, becomes the profit of the warranty company, which leads us back to the second point, and the conflicting objectives that tend to arise. You can own a Dealer-owned Reinsurance Company. A Dealer-owned Reinsurance Company looks just like a third-party warranty company from the outside. It has nationwide coverage. You maintain a professional image and service. However, no one need know that you own it. Now, you can decide what you want to cover to maximize customer satisfaction. You, knowing your customer best, have the unique position of helping guide the claims process to what is right for all involved. The reserves are set aside in a Trust with your name on it. That reserve goes only to pay your customer’s claims. Whatever reserve is not used to pay your customer’s claims becomes solely your profit. And by the way, owning your own reinsurance company provides a long list of additional “stress reducers” that address those “customers screaming, payments stopping, and cash flow suffering” issues, but that’s comforting news we’ll leave for later.Unfortunately, life and business deal out overwhelming circumstances, but peace of mind can be found in preparation and always doing the right thing. Fortunately, owning an affiliated Dealer-owned Reinsurance Company makes it easier for you to have that peace of mind in your BHPH business.

Tim Byrd is Founder and President of DealerRE a Tim Byrd & Associates company, a managing agency located in Gloucester, Virginia. An Auto Industry Expert on Dealer Owned Reinsurance Companies, BHPH Operations and F&I Development. A 25+ year veteran of the car business, Tim is a trusted advisor to many car dealers. Tim is a sought after speaker and co-author of the best-selling book “Unfair Advantage.” Tim can be reached at www.DealerRE.com or by calling 804-824-9533.

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GoalSetting By Greg Wells

BUSINESS OPERATIONS

Is every detail stamped out to fit perfectly with the other pieces of the equation? Each teams initiatives ineterlocking to reach the goal?

It happened one Thanksgiving Day. My Mom, and her sisters,

gathered around the dining room table and placed a 1,000 piece jigsaw puzzle on it. I’d seen them do it every Thanksgiving Day of my life. They were a remarkable team when it came to

placing those puzzles. And one of them, in an unrivaled gesture of leadership, would always stand the box top on its edge at the head of the table. What I had always seen, but never really saw until then, was the role of the box top. That box top was the vision. It was a crystal clear exact representation of the goal. There was no mistaking it. There was no margin for error or confusion in what to do. The placing of that puzzle was a “zero defects” process to a T. It all started with an outline. Identify the straight edge pieces and work together to form the boundaries of the puzzle. After the outline was established, they worked with precision and purpose, each teammate knowing exactly what to do and how their efforts fit in to the overall picture. Adding team members was a cinch. Someone would walk up to the table, and by simply looking at the box top,

A Valuable Lesson From The Puzzle Peopleknew exactly what the goal was and how to help reach it. Someone may say “That’s what we are doing” and it was all it took. When they finished the puzzle, they admired their work and congratulated each other. And why not, those puzzle placers had reached the goal, and it looked exactly like the goal defined in the beginning. The results were built in to the process. The finished puzzle looked just like the box top. Does your dealership have a box top for 2015? The coming year is going to be a record breaker. But just how good or great 2015 will be in your store depends on how clearly you project your vision to your organization, your managers

and your front line employees. It goes beyond training. Well-trained dealership employees will instinctively do things right, but are they doing the right things? For example, if one of your goals for 2015 is to increase owner loyalty through more personalized service to your customers, does everyone know what that looks like? Without a mapped out process for making your services more personable, how do front line employees know what is really helping and what just feels like it is helping. Is every detail stamped out to fit perfectly with the other pieces of the equation? Each teams initiatives interlocking to reach the goal?

Do your Guest Services personnel, BDC staff and Service Advisors all understand how to do things in a way that helps the other teams be successful? As business grows, so will the need for hiring new employees to take care of the customers. Can you honestly say you could hire a new employee today and point to something and tell them this is what we are doing? Chances are that you do have a box top-in your head! All leaders do. But are you demonstrating that “unrivaled gesture of leadership” to your troops by standing the box top on edge for all to see. This is really more than a metaphor. It’s a model we need to adapt moving forward. Clearly state the goals for


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your company and precisely where you want the organization to be at the end of 2015. Then, put it in the hands of your talented and “we are the ones actually doing it” front line consultants, advisors, appointment coordinators and support staff. Show them what you want and let them map out the processes to get there. With a box top, they’ll get it done. It will be easy for them to see what fits and what doesn’t fit. Process improvement teams breed ground swell support for the vision of the dealership leadership team. When front line employees get to define the “how” they take responsibility for it. Instead of doing the right things because you told them to, they are doing the right things and doing them right because it fits their game plan. They own it. If you’ve never run Process Improvement Teams, get help. An experienced facilitator will guide cross-functional teams through the process, empowering your employees to be creative. Let the facilitator lead them to a place where all dealership processes are mapped out and where performance standards, accountability and discipline become part of your dealership culture. Then train front line employees on the processes, and put measures in place to assure adherence and prevent process erosion. It is a simple process but not always easy. We are talking about change, which is never easily accepted across departmental lines. Secondly, managers have to stay out of the process. Let the facilitator keep the companies best interest in play. When managers are involved, front line employees don’t open up. Fear gets in the way of the best possible results. We’ve all heard the saying “A leader’s job is not to see the company as it is, but as it can be.” You see it; now share it with the rest of your team! At the end of 2015, you will be able to stand back and admire your work as the puzzle placers did. Just follow their process, the results are built in.

Greg Wells is the President at AllCall Automotive Contact Center. A US based outsource BDC serving dealers in the US and Canada. Greg is a popular industry expert on BDC’s, Internet Sales and Digital Marketing.

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When I get together with other dealers the topic always

seems to come up, where do we get good sales people? It never seems

that we can recruit, train, hire, promote, or steal a good sales person. We always remember ‘years ago’ when sales people did super human feats

and sold cars to the seemingly unsellable and made money doing it. I remember taking a theater class years ago back in college and we talked about Death of a Salesman. My professor made the case that there is nothing more American than the Salesman and that this play hit the hearts of many Americans because they could relate. As a twenty year old who had never made more than six dollars an hour at the point in the crummy college jobs I had taken, I saw no common ground for me. (On a side note, for someone who is now a career salesperson I can definitely relate to Arthur Miller’s writing) I thought it would be fun to look at the car sales person over the years, especially since there is a growing belief that we have seen the death of the real car salesperson.

Early Salesperson I’m sure the first car salesperson was much like the electronics and jewelry sales people of today. When the technology first

The Evolution of a Car Salesman

came out, they had to convince people that the “horseless carriage” was not just a fad. People would be going away from their trusty team of noble steeds soon and it was important to get on board with the vehicle. However, only the wealthy could afford them. They were slower than a horse and they couldn’t go as many places, after all there were not exactly that many roads. So this sales person had to know what the car could do that the horse couldn’t and paint a picture for the customer of how people will envy them with the newest technology.

The Door to Door Car Salesperson So we finally convinced people that cars were the way to go. The horses retreated back to the stables and in many places in America became a pet. Families needed to have a car and convinced themselves that it is a part of a modern convenience they need for day-to-day living. Car lots popped up all over, but occasionally the Salesperson had to wander off the lot for business. The Car Salesperson became a door to door salesperson. Typically the wife was at home, think June Cleaver, and the salesperson would knock on the door and show the customer the new model of the year. From a customer’s living room, the Salesperson would build value in a car that he wanted the customer to purchase. Usually this was done from pictures and catalogs. If they were lucky, they got to bring out

a demo for the customer to see. Now after preaching the values of the demo drive to my sales staff for years and years, how tough is it to build value in something that the customer cannot touch, feel, smell, or try out. To do a TO with a sales manager they either had to come back the next day or ask the customer to use their phone, no cell phones, and call their managers. This took skills.

The Plaid Jacket Salesperson People had always leaned more by touching, feeling, smelling, and trying a car out before they bought it and dealerships started carrying more cars in inventory so the lots started to explode. People would plan on taking their whole Saturday to come down to the car lot and look around and the Salesperson evolved in this. This era of salesperson believed that the wearing of plaid and slicking back of the hair was the best way to buy a car. By plaid, we mean that their jackets needed to look like Godzilla ate three old couches, drank a shag carpet smoothie, and flossed with dead maple trees and then puked them up. That was the type of jacket that was necessary. New cars were the preferred sale because the customer didn’t want to “buy somebody else’s problem.” Customers bought American because they had just finished fighting the Japanese a few months earlier and weren’t going to buy their cars. Think of this as the age of tying a dollar to a fishing pole

SALES & SERVICE

Smart Selling By A.J. Ager

Continued on Page 34


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and trying to steal your neighbor’s customer (you’re welcome Kurt Russell fans).

The Hammer Closer As more and more lots start to open up the competition starts getting steep. Trainers start popping up all over the place preaching their closing techniques, follow up, and you may only see this customer once so make all the money off of them while they are here. Don’t think about the future because it may not come. Bleeding from the 80’s into the 90’s the Car Salesperson made some bank. They tossed keys on the roof, used three or four different closing managers on a deal. Knew every close in the book and held gross. It no longer came down to what the customer had saved up since their last purchase to buy a car, it came down to monthly payments. As long as the payments made sense then the customer didn’t care what they were paying. Open ended leases were huge. The Salesperson partied almost as hard. They would show up 20 minutes late for a meeting, throw up in their trash can, pop in some eye drops and hit the lot. This Salesperson worked 70-80 hours a week, ate nothing but fast food, and lived off of 20 hours of sleep for the week. When this salesperson got a hold of somebody that customer was in danger of buying a car. This Salesperson is responsible for so many of today’s customers being afraid to even get out of their car on a lot. They closed hard, lived hard, and played hard.

The Generation X Salesperson As more and more stores

became corporate there was a more touch-feely approach to sales. We don’t want our customers to feel bad about themselves when they come in. Not only that, we don’t want people to associate us as slimy car salespeople. We are going to make this so easy for our customers that they are going to want to do nothing but buy from us. We will give them every bit of information that they want. We are not going to ask them to buy. So these corporate types, who had never sold a car in their life and probably were seven pounded

the last time they bought one, came up with ways to make the customer feel safe when they came in. They made salespeople not paid on gross. One price stores started popping up all over the place. If a customer didn’t have to negotiate or worry about what the sales people were making then they would have to buy from those stores right? What they found was that the customers didn’t believe the hype, still wanted to negotiate, and the lack of training of the salespeople kept them from having the skills to close or overcome objections. The old car people who were still around saw the writing on the walls and got out. Their paradise of making money was gone. They either retired, became realtors and made their fortune during the housing boom,

or opened their own lots and ran things their way. Weak salespeople get promoted into positions they aren’t qualified for and trained other weak salespeople how to be weak salespeople.

The Millennial Salesperson After years of having weak managers, there should be a shift in corporate car dealers to more of the old car ways of closing deals. Wrong! A little thing called the Internet made car dealers not only have to continue many of these same ways to sell cars, but double

down. They must become even more transparent. You have a Salesperson now who believes that they are entitled to car deals and don’t live for the thrill of the close. Just because they leave the house, they deserve to sell a car whether they have put the work in or not.

Not only that, but the customer changes too. Where a customer used to come in with their hat in their hands because they had had a repo, now you have customers trying to negotiate and get attitude because you can’t break the laws of mathematics for somebody with three repo’s. This salesperson doesn’t understand why they have to work so many hours. They don’t understand that with a bad closing percentage on Internet Leads that they shouldn’t get anymore. They don’t know their product as well. They don’t know the competition. They will quit and work at five different dealerships and fail at each one and blame the dealerships. The previous generations understood that ‘buyers are (or at least can be) liars” and you deal with it to make a car

SALES EVOLUTION continued from Page 32

SALES & SERVICE

Doing the right things can reverse the weakening of our species and take back the future for car salesmen. No matter how much shopping online somebody does, people still buy cars from people.


deal and don’t take it personally. This salesperson believes that it is OK to call off your third day on a job, dress in a T-shirt and jeans for the interview, and sending a text message to somebody once is just as good as a weeks worth of phone calls. As most things have evolved to get better, this salesperson in many cases is not equipped to deal with the more evolved customer. So what do you do? Just accept that everybody you hire is probably just going to stink like the three month old diaper you find in the back of a car? Absolutely not! Remember that these are probably the same type of people your competition has. If you can fight the sales Darwinism and put together a great sales staff, you will have the competitive advantage. Remember these things:

1. Hiring – Don’t hire a bunch of weak retreads. Car Salespeople have been going downhill for a couple of decades. Odds are too experienced Sales People will only bring bad habits that could spread to others. Look for people who are winners. I want people who don’t know how to fail, have to make money, and are leaders in whatever they do.

2. Health – Sales staff health is what I am talking about. Cut out the cancers. People who are negative only spread to others. I fired the three year running top salesperson at a store that always put people down around him. Sales went up 10 percent. Most of the deals he was closing were ones that could be closed by anybody and the rest of the crew had a renewed vigor when they

showed up which resulted in more sales.

3. Training – I am a believer in the Monday and Friday Sales Meetings. Do training every day in DAILY one-on-ones. Training is important because everybody needs to know the direction that you are pointed in. They need to know the rules of the store so everybody says the same things and does the same things. Hold people accountable. Nurture your sales people, remember that they don’t have the thick skins of salespeople past and that you have to encourage them when they do well. Get help from Joe Verde, George Dans, Grant Cardone, or any of the other great trainers that are out there. If you don’t have managers that march in the same direction then they need to go. Make sure your people know your product better than anybody else does. Make sure you know what programs, whether from manufacturers or banks or credit unions, that can be exploited to make money for the dealership.

4. Culture – Build a culture that makes people want to succeed and rewards them for hard work. Figure out how to make money off your customers instead of stealing from your salespeople. Have a strong digital presence and show your salespeople that this is the way of the future and train them on terms like “Market Value vs Book Value.” Train them on how to hold their gross in a world with smaller margins thanks to E-commerce. Get rid of

cancers and track everything. Hire traffic controllers to watch your traffic and give you accurate numbers on what you are seeing and selling. Do team building events. Make sure your salespeople know how to use your service department for their advantage. Then do a service walk for future customers or introduce current customers to an adviser.

Doing the right things can reverse the weakening of our species and take back the future for car salesmen. No matter how much shopping online somebody does, people still buy cars from people. Check the numbers and you will find that price is hardly ever the top buying factor when it comes toward a purchase being made. It usually comes down to a customer finding a salesperson and a dealership that they like and trust and vehicle that they love. If you can overcome the odds, you will find that your dealership will continue to grow at leaps and bounds, and your sales staff will be strong. Better yet, you will find that your sales staff will tend to stay with you longer and you won’t be constantly hiring new sales staff. This leaves you more time to work on getting inventory, advertising, and trying to find a plaid suit online.

A.J. Ager is Finance Director at Joe Ferguson Buick GMC in ColoradoSprings, Colo. He has been a leader in special financing for over 12 years at both franchise and independent dealerships. He is the founder of New Wave Funding and Colorado Credit Zone. His production company is also responsible for many internet marketing programs.


INDUSTRY NEWS

Cars.com forecasts October light, new-vehicle sales will hit

1,282,000 units, up 6.4 percent year-over-year and up 2.9 percent from September. A SAAR of 16.3 million is expected for the month, an increase of 6 percent from October 2013 and a decrease of 0.8 percent month-over-month. This marks the highest October SAAR since 2007. “Lower gas prices helped fueled sales of SUVs and trucks in October,” said Jesse Toprak, chief analyst at Cars.com. “Consumer demand for new vehicles remained very healthy, resulting in the best October, in terms of unit sales, since 2004. We expect this robust pace of sales to continue in the months ahead and to finish the year with 16.5 million total units sold.” Retail sales remain strong and are projected to make up 83 percent of total sales in October, down 4 percent from September and 0.9percent from this time last year.

Cars.com Projects Highest October SAAR Since 2007

Market Forecast

Unit Sales

Manufacturer October 2014 Sales Forecast

YoY MoM

Fiat Chrysler 171,100 22.1% 0.7%

Ford 182,400 -4.6% 1.6%

GM 232,600 2.7% 4.1%

Honda 125,200 9.3% 5.9%

Hyundai/Kia 101,800 9.1% 5.3%

Nissan 100,600 10.5% -2.3%

Toyota 180,200 6.6% 7.7%

Volkswagen Group 47,400 6.1% 6.5%

Total 1,282,000 6.4% 2.9%

Unit Sales

Manufacturer October 2014 Sales Forecast

Sept-14 Oct-13

Fiat Chrysler 13.3% 13.6% 11.6%

Ford 14.2% 14.4% 15.9%

GM 18.1% 17.9% 18.8%

Honda 9.8% 9.5% 9.5%

Hyundai/Kia 7.9% 7.8% 7.7%

Nissan 7.8% 10.5% 7.6%

Toyota 14.1% 14.1% 14.0%

Volkswagen Group 3.7% 3.7% 3.7%

Insurance Auto Auctions, Inc.recently announced the

acquisition of two facilities from Auction Systems, a West Texas based salvage auction company. Located in Abilene, TX and Amarillo, TX, the acquisition further expands IAA’s presence in the Texas Panhandle

Insurance Auto Auctions Expands With Two New Facilities

New Locationsand the West Central Region of the state. These facilities are essential to IAA’s continued growth in the state of Texas and further expand the company’s footprint of facilities across North America to provide buyers and sellers with the best options.

“With the addition of these two facilities, we are pleased to offer buyers and sellers in these regions greater inventory and more convenience at auctions,” said John Kett, CEO and president, Insurance Auto Auctions, Inc

Healthy consumer demand, low gas prices bring highest October unit sales since 2004


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INDUSTRY NEWS

A dangerous scam that hides major problems with used

cars from consumers is on the rise. According to new research from Carfax, nearly 800,000 used cars lurking on America’s roads right now may be part of an emerging fraud called title washing. What’s also alarming is that more than 500 are likely being used as taxis. Consumers in New Jersey, North Carolina, Mississippi, California and Georgia are most at risk, but thousands of title washed cars are in every state. Title washing makes rebuilt wrecks and cars with odometer issues look like problem-free used cars on paper. Professional con men illegally alter vehicle documents to get title brands such as ‘salvage’ or ‘flood’ removed from a car’s title. They’ll often patch up the wrecked

New Carfax Research Shows Title Washing Is Growingcars, move them to other states and sell them with a clear title to unsuspecting buyers. Victims can lose thousands and put their lives at risk purchasing used cars with washed titles. “Our research is clear evidence that title washing continues to fly under the consumer’s radar,” said Larry Gamache, communications director at Carfax. “These cars are sold mainly by perfect strangers who bank on you not taking the proper steps to protect yourself. Demand more information than just the car’s title from any seller and shop at places where vehicle history information is readily available, like the all-new Carfax.com. Knowing what you buy and who you buy from are equally important to help avoid dangerous schemes like title washing.”

Market Observations Every Motor Vehicle Department in the U.S. and Canada reports branded titles to Carfax. With this information, consumers get unprecedented protection from Carfax to help identify and avoid hidden problems. Car buyers and sellers can rest assured they’ll know about reported title brands under the exclusive Carfax Buyback Guarantee. Plus, Carfax Vehicle History Reports alert people to cases of potential title washing. An inspection by a certified, trusted mechanic is also recommended before buying any used car. Titling laws can differ from state to state. To help, Carfax offers consumers a Used Car Buying Guide with free information about car titling and used car scams, as well as tips to help purchase safe reliable used cars.

Ally Financial Inc , the second largest U.S. auto lender, said

on Wednesday that its third-quarter profit jumped from a year-earlier loss thanks to higher demand for loans from car dealerships. Commercial auto loan balances, which includes the financing of dealers’ inventories, real estate and other operations, increased around 11 percent to around $31 billion. That pace was nearly double the growth in consumer auto loan balances over the same period. Ally made $11.8 billion in

Auto Dealers Drive Profits Higher At Ally Financialconsumer auto loans in the third quarter, up 23 percent from a year earlier. The increase was driven by a record quarter in used car loans. Expected lower loan losses also contributed to the lender’s bottom line, even as delinquencies ticked up modestly. Ally set aside $109 million for future loan defaults, 38 percent less than a year earlier, even as the share of borrowers who were behind on their payments rose to 2.28 percent from 2.10 percent. The bank’s net income applicable to common shareholders

Power Playersrose to $356 million, or 74 cents per share, from a loss of $109 million, or 27 cents per share, a year earlier. Analysts had forecast that Ally would earn 41 cents a share in the quarter, according to consensus estimates compiled by Thomson Reuters I/B/E/S. The loss in the third quarter of 2013 was driven by legal expenses tied to Ally’s settlements with the U.S. government over legacy mortgage issues.

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