Dealer Business Journal, March 2014 by Dealer Business Journal

Joining a Leedom Twenty Group can take your business to the next level. Page 28

...Your Success Is Our Business

March 2014 DEALER BUSINESS JOURNAL | 1

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DealerBusinessJournal.com

Contents Volume 11, Issue 3

IN EVERY ISSUE

om a Leed e Joining oup can tak Gr to the Twenty siness ge 28 your bu el. Pa next lev

March 2014

4 March 201

LEGAL & LEGISLATIVE Legal Opinion 12 Job Security Compliance lawyers will never be out of work as long as used car dealers continue to run outrageous advertisements.

By Tom Hudson

General Counsel 14 The Rules on Credit Card Convenience Fees Legal considerations about charging convenience fees on credit card transactions vary from state to state and from card to card.

By Debra Dawn

LEADERSHIP & TRAINING Learn to Lead 16 The Truth About Dead Weight Do you have unproductive personnel that are dragging you down? It might be time to do something about it. By Dave Anderson

...Your Success Is Our Business

ess ...Your Succ

ness Is Our Busi

Online Banking 18 Donâ&#x20AC;&#x2122;t Let Your Guard Down Vigilance against cyber fraud has never been more important. You will fall victim if you arenâ&#x20AC;&#x2122;t careful. By Robert Parnas

ReInsurance 24 Doing the Smart-Right Thing A good dealer does the right thing no matter the cost, but could the right thing also be profitable?

DEALER

CORNER OFFICE Front Line BHPH Boot Camp IMPROVING PROFITS

L|1

S JOURNA

BUSINES

SALES & SERVICE

BUSINESS OPERATIONS

4 6 8 10

By Tim Byrd

Serious Business 26 Lose the Straight Jacket and Get Committed What kind of things can your business accomplish if you truly commit to it? By AJ Ager Business Basics 28 Twenty Groups: Time to Make the Move Pull up a seat at the table with some of the biggest and brightest stars of the business.

Sales Management 32 What Makes a Champion Sales Manager? There are good sales managers and then there are champion sales managers. Rules for training champions.

By Dani Sherrod

Customer Relationships 34 Great Internet Dealers are Great CRM Dealers Learning how to use your customer relationship management system will help you build stronger bonds with your customers.

By Greg Wells

Lead Generation 36 There is an Inexpensive Way to Snag Leads It may be simple, but effectively using the internet and social media can be the most economical way to connect with customers.

By Staci Striegnitz

March 2014 DEALER BUSINESS JOURNAL | 3

LEEDOM GROUP

Corner Office Calling All BHPH Dealers

elcome to another issue of Dealer Business Journal. I want to personally thank you for your support and readership of our dealer advocacy publication. Over the past month we have received some great feedback from our readers and I reminded myself to thank each of you that use our publication to get up-to-date information, stay abreast of industry trends and simply stay “in the know.” We do our best to deliver information and content that you can really use in your business – and we will keep up the effort on our end. This month I am issuing a call to all BHPH dealers. Dealers and exhibitors from across the country are less than a month away from the 20th Annual BHPH WORLD Convention held at the Bellagio Hotel in Las Vegas on April 14-16, 2014. This event has a most impressive array of speakers and information for you the dealer. I was talking to a dealer last week and he said he attributed $50,000 of his net this past year from a product he obtained in the Grand Expo Hall last year. I guarantee you if you simply attend the event and work the exhibit hall you should find a host of products and services that should improve your bottom line. Dealers consistently rank this the number one event for the BHPH industry – reserve your spot today at www.bhphworld.com. One of the key note sessions at the BHPH WORLD Convention will be delivered by Chuck Bonanno and will focus on how to beat your competition by providing world class service. This theme will be carried throughout the convention as we focus on helping those dealers in attendance out think, out work and outperform those that may not have the same advantage. Don’t miss this session as it will set the theme the entire event. Speaking of dealers as we talk to dealers from across the country we hear tax season is in full swing. My early indications show that February of this year is likely to be between six and eight percent better than last year. We expect this stronger sales volume to carry into March so if you are not seeing increased traffic and interest you may want to check your marketing message because the buyers are out there. Our data shows that 40 percent of a dealer’s volume is often notched in the first quarter, so stay focused and serve those customers! My closing thought for you this month is a simple suggestion and a small challenge. In this issue we have some incredible writers that contribute to the content of this publication. They develop content for us each and every month and really try to put information at your finger tips that you can use in your business. As you peruse this issue try to use one of these messages in your business this month whether it is in a sales or management meeting or perhaps just a strategy that you deploy to improve your operation. There is a wealth of material, you just have to find what is right for you. I look forward to seeing you at BHPH WORLD Convention in Las Vegas. While you are there stop by our Leedom Group booth and say hello. Until then good luck and have a great month!

dealer BusinesS JOurnal

A L e e d o m G r o u p P u b l i c at i o n

Dealer Business Journal 3700 S. Tamiami Trail, Sarasota, FL 34239 Ph: 800.966.8733 | Fax: 941.371.2874 Executive Publisher

Christopher M. Leedom | chris@twentygroups.com Associate Editor Buy Here-Pay Here

Chuck Bonanno | chuck@twentygroups.com Contributing Writers

FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733

or subscribe online at DealerBusinessJournal.com ADVERTISING INQUIRIES CALL 941.371.7999 OR SALES@DEALERBUSINESSJOURNAL.COM

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 application 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 publication of Leedom and Associates, LLC. POSTMASTER: Send change of address form to Dealer Business Journal, 3700 S Tamiami Trail, Sarasota, FL 34239

Chris Leedom

Executive Publisher 4 | DEALER BUSINESS JOURNAL March 2014

DealerBusinessJournal.com

Calendar APRIL

SEPTEMBER

April 14-16, 2014 20th Annual BHPH World Convention Las Vegas, NV

Sept. 2, 2014 Buy Here-Pay Here Sales Training Boot Camp, Atlanta, GA Sept. 3, 2014 Buy Here-Pay Here Manager’s Boot Camp, Atlanta, GA Sept. 4, 2014 Buy Here-Pay HEre Collections Boot Camp, Atlanta, GA

April 23, 2014 Buy Here-Pay Here Leasing Academy, Sarasota, FL

JUNE June 3, 2014 Buy Here-Pay Here Manager’s Boot Camp, Dallas, TX June 4, 2014 Buy Here-Pay Here Collections Boot Camp, Dallas, TX June 5, 2014 Buy Here-Pay Here Sales Training Boot Camp, Dallas, TX

AUGUST Aug. 5, 2014 Buy Here-Pay Here Leasing Academy, Sarasota, FL

NOVEMBER Nov. 3-5, 2014

BHPH SuperGroup, Sarasota, FL

DECEMBER Dec. 8-10, 2014 Credit and Collections Conference Dallas, TX Find out more about these events and register to attend online at www.TwentyGroups.com and click on events.

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March 2014 DEALER BUSINESS JOURNAL | 5

LEEDOM GROUP

Front Line

By Chuck Bonanno

The Four “C’s” of Buy Here-Pay Here Notes

The customer must be employed and that should be verified prior to vehicle delivery. This is easily verified by a phone call to the employer or by faxing a request for that information. This method works well but times are changing. Fewer and fewer employers are releasing this information for fear of legal exposure from privacy laws. So more and more dealers are using pay stubs as the proof of employment. This method is fine if you confirm the validity of a few items found on most pay stubs. Those items include the name of the applicant, the correct social security number, a recent pay date, a pay period amount as well as year to date information and a calculation of typical weekly/biweekly or monthly NET pay. Yes, net pay. That is part two In order to achieve a high of capability. probability of repayment from high The customer have risk customers we must create loans must sufficient that are collectable. To maximize income to afford the car collectability, the four “C’s” of payment being capability, consistency, character considered. and collateral must be in place. That is the responsibility of the dealer to calculate and allow be in place. Those for “C’s” are to the customer. Do not let the capability, consistency, character customer tell you what they can and collateral. Without all four afford. I have yet to hear one say “I of these elements, loan success is can’t afford that payment.” doubtful. There are many ways to The first element is capability. measure affordability such as We define capability as the doing complete budgets for the customer’s ability to repay the loan. customers or debt-to-income Without it you are just renting cars. uy Here-Pay Here is not a retail business in the purest sense of the word. There is a retail component, of course. We do sell cars to start the process but no money is made at the time of sale. The money is made one payment at a time over an extended period of time. Our job is to maximize our chances of being paid over that long period of time. In order to achieve a high probability of repayment from high risk customers, we must create loans that are collectible in the first place. To maximize collectability of these notes the four “C’s” must

6 | DEALER BUSINESS JOURNAL March 2014

ratios. One of the simplest and most predictive calculations is a payment qualification percent. This method simply allows the customer a percent of their NET income that can be used for a car payment. The prudent number is 20 percent of net. I have witnessed dealers be successful up to 25 percent (if the customer makes decent money) but have not seen evidence that dealers do well above that 25 percent amount. When you add car payment, insurance, gas and maintenance to that equation, driving costs can easily exceed 50 percent of take home pay. That is simply too high. The second element is consistency. This is a review of the customer’s stability in their lives, both personal and professional. We can rate the customer’s stability by verifying time on their jobs, time on their residence, their time in the market area and the number of personal references in the area. These are not guarantees of good loans but the lack of long term jobs, stable homes and local references is a recipe for bad loans. When we review applicant’s pasts we sometimes place too much emphasis on their (ancient) history. These people’s lives are in constant turmoil and change and their recent past is a much better indicator of predictability than what happened to them five years ago. The third element is the most difficult to measure. That is the element of character. We are looking to measure the character of DealerBusinessJournal.com

the man or woman using our very limited knowledge, resources and time. If the average deal takes no longer than one to two hours, how well can we really get to know the customer? The answer is not very well. There are ways to get some knowledge and do so quickly. The first measurement is a comparison of their credit application to the public record including credit bureaus, actual public records and Accurint type reports. These should match reasonably well. The second method to assess their character is to ask them to review their prior credit issues and explain them. We look for customers who take responsibility for their past problems. We don’t judge them but we are wary of people who blame the world for their problems. Those who take no responsibility for their situations now will probably act the same way in the future. We also deny credit to anyone who comes on the lot with an attitude. A bad attitude on delivery day typically only gets worse. The best and simplest way to get a feel for the customer’s character is to interview them. A good interview can be the difference maker in approval decisions. After all, this is a people business. The fourth element of a collectible loan is the collateral itself. We must never forget that if you put good people in bad cars the model doesn’t work. The tricky part is determining what is “good” collateral? The best answer I can give is to sell cars that are competitive in your market, that will run the length of the note with ...Your Success Is Our Business

few repairs, and fit the income levels of your customers. I know, I know, easier said than done. That’s the rub, though. The hardest part of Buy Here-Pay here is finding those cars! On the other hand, the great part of this business is that we can stop buying cars that don’t fit and move to ones that do. If you are a Ford dealer, you have to sell Fords and if Ford’s aren’t selling, you can’t become a Chevy dealer. The most important thing to remember when purchasing inventory is that we are in a “needs” business and not a “wants” business. We are here to provide affordable transportation. Don’t buy cars that make you happy. Buy cars that first will sell and second will pay out (that’s the ticket). There is actually a fifth “C” element and that is collections. That is actually the most important element but by ensuring you have the first four in place, the collection process will be much more successful. We will discuss that in future articles. Collections are the backbone of the Buy HerePay Here business and can’t be summed up in a thousand words or less.

Dealer Business Journal is a publication you will find in the hands of over 20,000 dealer principals, general managers and dealership executives each month. It is a magazine read by the decision makers of the industry. Don’t miss out on an opportunity to connect with this educated, experienced group of professionals in one of our many media outlets:

Print Advertising

Online Newsletters

Web Presence

Social Networking

Email Marketing

Chuck Bonanno is a partner of the firm, Leedom and Associates, LLC. He is an executive Conference Moderator of Buy Here-Pay Here and Automotive Finance 20 Groups. He is a nationally recognized speaker, author, industry trainer and consultant. He is a nationally recognized speaker, author, industry trainer and consultant and can be reached at chuck@ twentygroups.com.

For Advertising Information

sales@DealerBusinessJournal.com

941.371.7999 DealerBusinessJournal.com

March 2014 DEALER BUSINESS JOURNAL | 7

LEEDOM GROUP

BHPH Boot Camp

By David Brotherton

Look At the Whole Board

recently had a discussion with a distraught collection manager. His owner had recently discovered that some accounts had not been worked – or reviewed - in a timely manner. This led to a gap in coverage and the collection manager in question had some egg on his face. He is one of the good ones and, in spite of this mistake, works very hard to coach and train his people every day and generally does a good job. To be completely honest, gaps in coverage have been a recurring problem with his collection team and it has become quite frustrating. He was really concerned that he will never be fast enough to cover everything. I agreed. He will never be able to do it all. That’s why he has collectors. I then suggested that he think about collections like a game of chess. The best chess players think several moves ahead and take into account the potential moves of all of the pieces. This is called looking at the whole board. Looking at the whole board in collections means realizing that pawns are not knights, bishops or queens. Pawns are pawns and they have a vital job to do in the game. Pawns are your collectors. They have the day-to-day, account-by-account, task of collecting the portfolio. Like pawns, they can only move forward and have a limited (but vital) ability to take action on the board. While they may seem limited, properly using your pawns is generally what wins you the game, so it is important for someone tasked with watching the whole board to know how to use them best.

The other pieces in the back row are represented by team leaders, specialists, skip tracers, collection managers and, of course, ownership. Each has a specific set of moves they can make and they can all do things pawns can’t. Each, however, can be placed in jeopardy by making poor moves, not using your pawns properly and, most of all, by not thinking ahead. You must understand how each piece moves and then think about the best way to counter when the other side does something you don’t expect. The collection manager I had been talking with was now thinking about collections in a new way (which was my goal) and could put it in terms he and his team can understand. His collectors are deciding on their own who will and won’t pay and they stop working the ones that won’t. We cannot expect our collectors to think like management. They will not think long term. To a collector, a problem account is one to be gotten rid of either by getting the customer to pay or by charging them off. Either way, the customer is out of their queue. This is the behavior that has to be anticipated by management when reviewing accounts and coaching through problems. If it is evident that we won’t let you ignore a problem account, you won’t. We have to remember that everyone has their role in this process of keeping our customers paying. The collection manager needs to stop trying to do everything himself and reacting all of the time. Instead of reacting and chasing the problem, management needs to be focused on anticipating problems and addressing them when they are small. Playing defense all of the time isn’t any fun. My last words of advice were to remember what needs to be done daily and do it. Look at the whole board and watch for pawns that do not want to act like pawns. Remember that you have all of these pieces available and to stop trying to solve every problem and capture every piece yourself. David Brotherton is a consultant and Twenty Group moderator with the Leedom Group Contact him at davidb@leedomgroup.com.

8 | DEALER BUSINESS JOURNAL March 2014

DealerBusinessJournal.com

Each year the Alternative Financial Service Industry generates BILLIONS of DOLLARS in check cashing, prepaid cards, money remittance and bill payment revenues! Your customers are buying these services; why not buy them from your Dealership? Buy Here Bank Here (BHBH) is a real bank account! Not check cashing! Not a prepaid card! 80% of your customers and prospects are unbanked! Give the people what they want at your dealership! Give them a bank account! Why let them go to a check casher and then bring the cash to you? Streamline payments direct from their new bank account! And provide numerous value add financial services!!! Your BHBH “Bank & Drive” program produces Debit Cards branded with your dealership logos, retains all information about customers and their bank account, and maintains an ongoing relationship via text messaging that encourages the customer to return weekly or bi-weekly to deposit their pay checks, therefore funding vehicle contracts and reducing default risk substantially.

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SWORD, the paradigm shift in the evolution of banking. Bridging the gap between Alternative Financial Services and main stream banking! ...Your Success Is Our Business March 2014 DEALER BUSINESS JOURNAL | 9

LEEDOM GROUP

Improving Profits

By Jay Prassel

Get Ready!

’m not referring to the 1969 hit song by Rare Earth, but to our Leedom Group 20th Annual BHPH WORLD Convention to be held at the Bellagio Hotel on April 14-16, 2014. This is the industry event everyone talks about. This year we are planning a special 20th anniversary program you will not want to miss! You could go to the conference without a game plan, but will you be able to maximize your time? Do you know who do you need to meet face-to-face? Have you figured out which sessions, workshops, vendor spotlights and booths do you need to attend so that you can take advantage of opportunities? If you aren’t sure, then it’s very important to take the time now to thoroughly prepare before you arrive. Try to identify three to five areas that you would like to improve at your dealership. Here are some suggestions, based on the content you’ll find at BHPH World: Evaluating Your Dealership Performance by Analyzing Your Composite Overall Dealership Net to Gross • Compare to Group and Benchmark • Compare to last year (better or worse) Net to Gross by Department • Which ones are profitable • Who needs help Personnel Productivity Page (especially when the store is losing money) • Overall dealership Gross per employee • Gross per department • Units • Sales/Gross per employee Manager Compensation • Production based pay plan • Guaranteed draw • After controllable expenses (NEVER just on gross) • Number of Managers

10 | DEALER BUSINESS JOURNAL March 2014

• •

Based on personnel productivity Other Salaries and Clerical as a percent of gross

Advertising • As a percentage of a gross • Per unit • Based on forecasted sales volume • 60 to 90 days out Vehicle Average Gross • Analyze by Salesperson • Identify who needs help Fixed Operation Gross as a percent of Sales • Service/Parts/Body Shop • Areas of opportunity • Improvement ideas and suggestions Inventories Receivables Portfolio Delinquency After preparing your list, review the convention agenda and start scheduling your time. This year we will have more vendors and exhibitors than ever before covering areas like: Training & Consulting Twenty Groups DMS Providers CRM Providers BDC Experts Lenders and Capital Providers Portfolio Acquisitions Social Media & Internet Experts And many more. We look forward to seeing you in Las Vegas! Jay Prassel is the Leedom and Associates Vice President, Director of Operations. Jay has 37 years of automotive experience and has worked with over 300 dealerships as a profit improvement consultant and Twenty Group moderator. jay@leedomgroup.com DealerBusinessJournal.com

critical system you will make in your business.

Debra Dawn • 800.966.8733 • debra@leedomgroup.com • leedomgroup.com

DealerCentric Unveils ID Scanner Technology DealerCentric Solutions, the consumer finance management system innovator, today launched ID Drive, a patent-pending ID scanner technology that gives dealerships the most powerful protection against fake IDs and identity theft imaginable. ID theft is now a national epidemic, and more criminals are using fake IDs to test-drive, and even buy, cars. Developed in partnership with AssureTec Technologies, an ID authentication technology firm, ID Drive is the first solution that gives dealerships the same, state-of-the art protection used by Homeland Security and the U.S. military. With one scan at ID Drive, dozens of complex tests for thousands of ID types are automatically performed, leading to instant validation or red flags going up. But the dealer benefits don’t stop there: with that one swipe, a customer’s information is put into serious action: it’s extracted, purified and enhanced, and can be pushed into a dealer’s CRM and finance systems. The customer, the vehicle, any pre-existing lead or credit app data, the sales and F& I departments, and sales management are all electronically connected and able to communicate. So, when that test-driver returns, the right deal structure can already be in place, shrinking

time-to-close by hours. “The ID thieves hitting dealerships today are super-sophisticated and so is their technology. But dealer ID verification processes aren’t” said Pete MacInnis, CEO of DealerCentric. “With all that endless photocopying, barcodescanning and verification calling, they have remained in the Dark Ages, powerless against this fast-growing and incredibly costly problem. ID Drive may be small and sit on a desk, but it’s the most potent anti-fraud and test-drive security solution ever invented for dealerships.” National & Dealership Epidemic: ID theft is an American epidemic. According to the FBI, it has overtaken the drug trade as the most costly U.S. crime. According to an Open Security Foundation report in 2013, more than 267 million consumer records were exposed, and a record, 60 million pieces of personal ID wound up in the hands of identity thieves, last year. And more dealerships are reporting that more fraudsters are presenting impeccable-looking (fake) IDs for test-drives, and then driving off… or even successfully purchasing vehicles with them. The government requires dealers to take steps to flag identity fraud. But dealerships use barcode scanners, which can only verify that

data is present on a card, not that it’s valid. And dealers are forced to make time-consuming calls to organizations like the DMV to verify identities, but most cars are bought on weekends when these organizations are closed. It’s becoming an increasingly expensive, scary problem: some lenders are now requiring dealers to buy back ID-theft-related deals. ID Drive’s Extreme Technology: ID Drive was created through an exclusive auto retailing partnership with AssureTec Technologies, which is the ID authentication solution chosen by the Department of Homeland Security, the Department of State, the NYPD and DMVs nationwide. ID Drive incorporates the world’s most powerful ID-scanning hardware and software and customizes it for auto retailers, so they have the extreme technology they need to fight back against the fake ID wave. “At DealerCentric we’re on a mission to innovate solutions that will make the test-driveto-sales-to-financing process radically more efficient for both dealers and their customers,” MacInnis said. “ID Drive is a key component in what will ultimately be the first end-to-end dealership solution that bridges the gap between the auto sales and financing processes, at the pint of sale.”

September 2013 Dealer Business Journal

Fast Track Your Cash

DBJ_2013_SEPT.indd 19

8/29/13 4:11 PM

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March 2014 DEALER BUSINESS JOURNAL | 11

LEGAL & LEGISLATIVE

Legal Opinion

By Tom Hudson

Job Security

omewhere out there, there’s a line of work that offers more job security than being a dealer compliance lawyer. Undertakers, maybe, or garbage collectors. Those folks will always be in need, right? But I’ll always have a job, too. Here’s why. In January, the Federal Trade Commission announced that nine vehicle dealers agreed to settle deceptive advertising charges and that the agency is taking action against a tenth dealer in “Operation Steer Clear,” a nationwide enforcement sweep focusing on the sale, financing, and leasing of motor vehicles. Dealers settling with the FTC were from California, Georgia, Illinois, North Carolina, Michigan, and Texas. The remaining action involves a Massachusetts dealer. The FTC claimed that the dealers made misrepresentations in print, internet, and video advertisements that violated the FTC Act. Among other charges, the FTC said that some of the dealers ran ads falsely leading consumers to believe they could make no upfront payment to lease vehicles. Fast forward 30 days or so, and my email inbox lights up with a note from a friend who sees a lot of dealership ads. The ad, from a Florida dealership, screamed in very large, brightly colored type, “NO MONEY DUE. ZIP, ZERO, ZILCH!” Other parts of the ad (which I have doctored lightly to avoid identifying the dealer) went on to name the dealership, followed with “Where you get the 2014 [car make and model] for only $249 per month or the 2014 [car make and model] for only $299 per month with absolutely NO MONEY OUT OF POCKET!” The ad continued, “That’s Right! ZERO MONEY DOWN!!! At [Dealership name] you can choose from 2 of the Hottest [car makes and models] for 2 of the LOWEST PAYMENTS anywhere in Florida with NO MONEY DOWN! ZIP, ZERO, ZILCH!

Drive away today with….

ZERO OUT OF POCKET!” (That’s the actual print size.) At the bottom of the ad, in type that wouldn’t be visible if it were smaller, appeared the following: “Prices and payments include $598.50 Pre-delivery service fee. Plus tax, license and title fees. *”

What was this dealership thinking? The FTC has made it as clear as it possibly can that you cannot give with big print and take back with mouse type. It has announced a national campaign to clean up dealer advertising. It has nailed dealerships in an enforcement action for misleading customers by falsely claiming that cars can be leased with no money up front. And after all that, only a month later this Florida dealership runs this ad? How does “no money out of pocket” square with writing a check for $598 plus taxes, license and title fees”? Even a cursory review of this ad by anyone at the dealership in a position of responsibility should have revealed the internal inconsistency of the screaming big print and the sly small print. We’ve often said that Rule No. 1 in advertising is “Tell the truth.” There are two statements here – “zero out of pocket” and “$598 plus taxes, license and title fees.” One of those statements is patently not true. One of my favorite admonitions on dealer advertising comes from Illinois Attorney General Lisa Madigan, who said something like, “You can’t just say anything you want to in an ad to get people into your dealership.” But, evidently, there are a lot of dealers out there who disagree with AG Madigan and who will run anything in their ads, true or untrue, that will attract buyers. And that’s why I’ll always have a job.

Tom Hudson, Esq. (tbhudson@hudco.com) 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®, a monthly report of legal developments in all states for the auto finance and leasing industry. Call (410) 865-5411 or visit www.counselorlibrary.com. 12 | DEALER BUSINESS JOURNAL March 2014

DealerBusinessJournal.com

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March 2014 DEALER BUSINESS JOURNAL | 13

LEGAL & LEGISLATIVE

General Counsel

By Debra Dawn

The Rules on Credit Card Convenience Fees

have often been asked whether or not car dealers or their RFCâ&#x20AC;&#x2122;s can charge convenience fees for the use of credit cards as a way of augmenting revenue. In 40 of the 50 states, the answer is that the dealer or RFC itself can charge those fees provided the consumer is provided with proper notice. However, a third party payment processor cannot charge such a fee. The regulations of all major credit card associations prohibit third parties from charging a convenience fee to consumers. Third parties are defined as those entities not providing goods or services directly to a cardholder. Although in general automobile dealers as merchants with faceto-face contact with consumers are allowed to charge convenience fees, 10 states prohibit retail establishments from charging these fees entirely. The states with absolute prohibitions on convenience fees are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Under American Express rules, dealers must not impose any restrictions, conditions, disadvantages or fees when the American Express card is accepted that are not imposed

equally on all other payment methods, except for ACH funds transfer, cash, and checks. Dealers must not accept the card for: (a) amounts that do not represent bona fide, direct sales to card members made in the ordinary course of business; (b) costs or fees over the normal prices of goods or services or charges that card members have not specifically approved; (c) sales made by third parties or entities conducting business in industries other than the merchant; or (d) amounts that do not represent bona fide sales of goods or services at the establishment. For Discover, dealers may not institute or adopt any practice, including any discount or in-kind incentives, that unfavorably discriminates against or provides unequal and unfavorable treatment of any person who elects to pay using a Discover card versus any other credit card, debit card, prepaid card, or other payment card. Dealers may assess a surcharge on a card sale provided that: (a) the amount of the surcharge may not exceed the merchant fee payable by the merchant to Discover for the card sale; and (b) the merchant assesses surcharges on card sales conducted using other cards. Under MasterCard rules, a dealer must not directly or indirectly require any cardholder to pay a surcharge or any part of any merchant discount or any

14 | DEALER BUSINESS JOURNAL March 2014

contemporaneous finance charge in connection with a transaction. A surcharge is defined by MasterCard as any fee charged in connection with a transaction that is not charged if another payment method is used. A dealer is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or if MasterCard has expressly permitted the practice in writing. A dealer must not engage in any practice that discriminates against or discourages the use of a MasterCard card in favor of any other brand. Under the voluminous Visa International Operating Regulations, convenience fees cannot be charged by dealers or any other merchants whose payment channels are exclusively nonface-to-face. In addition, a convenience fee may only be charged by the merchant that actually provides goods or services to the cardholder. A convenience fee may not be charged by any third party. A dealer may not add any surcharges to transactions, unless local law explicitly provides that surcharges are permissible or unless there has been a written waiver by Visa. DealerBusinessJournal.com

Indus

So if you are in one of the 40 states permitting the charging of convenience fees, beware that the methodology you elect to use to collect those monies may make the difference between a permissible merchant collected fee and an impermissible third party charge. If a convenience fee is deemed a third party charge, the dealership may be subject to legal action by both the compliance divisions of the credit card companies and state regulatory authorities. Debra Dawn is Leedom Group’s General Counsel and Compliance Director Debra Dawn has formed AUTOLAW Group to assist dealers in all facets of dealership compliance. debra@leedomgroup.com

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LEADERSHIP & TRAINING

Learn to Lead

By Dave Anderson

The Truth About Dead Weight

ead weight is defined by online dictionaries as: “a person who makes no contribution; a useless, usually burdensome factor.” In the workplace dead weight comes in many forms. Here are a few of the most common examples: • A team member who may produce the numbers, but doesn’t live your core values. • An incompetent team member. • An unproductive team member. • An overpaid team member, whose compensation far exceeds the worth he or she brings to the organization. • A team member with potential, but who is currently cast in the wrong role and contributing little or no value to the organization. • An untrained team member who wants to do well, but hasn’t been taught the skills necessary to succeed. In consulting with companies in multiple industries over the past two decades the following concerning dead weight has become obvious: 1. There’s a lot of talk, whining and moaning about it, but little action to remedy it. 2. Managers spend more time defending it, making excuses for it, or working around it than they do dealing with it by either getting the person better or

getting a better person. 3. Dead weight is rationalized because if it is removed it will create a manpower shortage. 4. Dead weight is excused because the person has been with the company for many years, and is considered “loyal”. 5. Dead weight is tolerated because, overall, business is good and there’s no sense rocking the boat. 6. Dead weight is not a “problem” to solve, but a “fact of life” to live with because the dead weight is related to someone of importance in the organization. No one except that person can do something about it, and they won’t. 7. Dead weight sometimes exists because managers fail to do their job to develop the person into a productive performer. They don’t set clear expectations; give honest feedback, consistently train, coach or hold accountable for developing a solid skill and knowledge base. 8. Too much concern is given to the cost of removing the dead weight, and not nearly enough consideration given to the staggering cost of keeping it. Expanding on this point, consider the costs of keeping dead weight; some of which are incalculable. • Dead weight causes shortfalls in production. • Dead weight breaks team momentum as others clean up their messes and

16 | DEALER BUSINESS JOURNAL March 2014

shoulder their load. Dead weight lowers team morale, as all productive people feel diminished when sharing the workplace with misfits. • Dead weight hurts the customer experience and diminishes your brand. • Keeping dead weight destroys a leader’s credibility as his stated standards and commitments to excellence are often questioned and commonly mocked. The truth about dead weight is that these factors don’t inflict a onetime lump sum payment upon your organization, but create an ongoing form of misery on the installment plan. There are only a handful of viable options for dealing with dead weight. Here are a few: 1. Prevent it. This starts with a rigorous recruiting and hiring process designed to fire poor candidates before you hire them. 2. Create the conditions for success. This management responsibility entails: • Establishing clear performance and behavioral expectations. • Giving fast, honest feedback on a team member’s performance in relation to those standards so that solid results are reinforced and defective ones are confronted. • Train, coach and motivate

•

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the team member so they’re able to hit the standards. • Hold the team member accountable with consequences for failing to reach the standard. • Surround the team member with other solid performers to create a positive peer pressure to perform, and freeing him or her from the burden of working with non-contributors. 3. Transfer the dead weight to a position that better suits their skills and talents. Sometimes a solid performer is trapped in the wrong role. If their performance shortfall is the result of deficient skills or talent, a transfer can often work wonders. However, if they’re negative, un-driven or have questionable character a transfer only serves to

give them new platforms from which to damage your organization. 4. Terminate the dead weight. This is made far simpler if you’ve established clear expectations and values upfront, so that non-performers are flushed out faster. It’s always easier to decide who must leave the team after you’ve pre-established clear criteria for success. It’s important to understand that in a growing organization people will be outgrown. Not everyone wants to keep up, or is able to keep up. Thus, terminating those no longer cutting it is a normal byproduct of growth. While excessive turnover is symptomatic of key leadership failures, if the leaders are doing their job, some will be fired. The options are simple: if you can’t get someone better,

you must get someone who is better. Otherwise, you’ll drop the performance bar to accommodate the dead weight’s competence or comfort zone and damage the entire team in the process. Parting shot: If you are a leader with the authority to remove dead weight, yet fail to do so, you’re the problem; you’re the dead weight. I know; the truth hurts. But what really stings is having to update a resume because your boss decides the dealership deserves better. Dave Anderson is president of LearnToLead. He is an international author and speaker, giving 1,000 leadership presentations over the past decade in 14 countries. Call 818.735.9503, dave@learntolead.com, or visit www.learntolead.com.

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BUSINESS OPERATIONS

Online Banking

By Robert Parnas

Don’t Let Your Guard Down

our Buy Here-Pay Here dealership operation has inherent obstacles to continually overcome. Perhaps the biggest risk to your BHPH dealership operation financial security does not even come from this country. Russian and Eastern European organized crime syndicates have begun raiding bank accounts of U.S. businesses in a sophisticated and targeted online banking hacking scheme. This threat is real and it is growing. If your BHPH dealership operation uses online banking (payroll account transfers, wire transfers, ACH transactions, etc.), you are a target. The new computer attacks are different. In the past, cyber criminals attempted to get a hold of financial

1. Criminals research the dealership on Google and through other web tools to learn details like names and emails of key managers from the company’s website. They might even call the dealership and get additional company information from your receptionist. 2. Armed with this information, they compose an email to a specific employee that contains enough detailed information to trick them into opening a link to a website. For example, they might email a manager asking them to open a link about a sale going on at a competitor. The link will open a web page that will look real enough to be a competitor’s website, and the recipient may keep it open for a minute or so. During that time, malicious software (malware) is loaded onto the person’s computer without their knowledge. 3. Once loaded, the malware spreads from These are not mass emails computer to computer being sent to get access to on your network until a handful of individual bank it recognizes a user who is making online accounts. They are going banking transactions. after lucrative, targeted The malware records business accounts. keystrokes and sends it back to the hacker. Now and credit card information the criminal knows the specific by sending out mass emails in keystrokes to make an online hopes of tricking individuals and banking transaction. Equipped businesses into granting them with the correct identification access. Here’s how it works: numbers and password, the

18 | DEALER BUSINESS JOURNAL March 2014

hacker simply logs into your bank’s online banking site posing as you, and directs an ACH transaction to an offshore account, effectively cleaning out your bank account. These are not mass emails being sent to get access to a handful of individual bank accounts. These attacks go after more lucrative business accounts, and their targeted nature makes them different. The criminals are spending time doing research on the targeted business to increase their odds of penetration. Bank and insurance companies may not cover the loss Who is financially responsible when an attack takes place is currently a disputed area. Banks typically have deemed these attacks to be the fault of the business, arguing it was the computer system of the business that was compromised, not the bank’s. There are lawsuits back and forth on the issue, but it is not settled law. Meanwhile, it appears that attempts to get the bank to pay will be a long and possibly fruitless legal battle. This doesn’t change the fact that your account is depleted. Insurance coverage completely depends on the provisions of each individual policy. This type of risk is relatively new, so specific coverage in your policies is unlikely. Some policies have coverage written broadly enough to protect against the risk, but based DealerBusinessJournal.com

on the cases known so far, adequate insurance coverage often is not in place. Many of the businesses that have been hit are simply out the money with no recourse. Existing controls may not be enough protection Chances are your information technology (IT) director does a great job maintaining your network and keeping everyone up and running. In our experience, virtually every IT director we have dealt with insists their system is not vulnerable. But in most instances, vulnerabilities exist because dealership IT directors might be wearing multiple hats or need more time and resources to keep up on new security threats and adequately reduce risk from these targeted attacks. How to protect your dealership Educate employees One of the simplest ways to reduce the risk of accidently allowing malware to be opened is to teach your employees to recognize and report suspicious emails and websites. This dramatically reduces the chances of the malware being planted. But this is problematic because the emails can look so authentic. For example, our firm’s team of specialists recently tested a client’s vulnerability by sending a fake email that mimicked the type used by criminals to 18 different employees. Seventeen opened the link and kept it open long enough ...Your Success Is Our Business

for malware to be deployed. This result is not unusual, reinforcing the critical need for ongoing education on new threats and methods. Test and strengthen firewalls Just because the malware was deployed does not mean it will automatically spread. A strong firewall and other protective measures can help prevent the spread of the malware across the network. With this specific threat, the malware must be able to find which computers in your organization are used for online banking transactions. Protective software and other stronger online banking security measures can reduce the effectiveness of the malware. Talk with your bank and insurance company Communicate with your bank to make sure enhanced security measures are in place to make it more difficult for malware to operate effectively. Security measures such as multifactor authentication and ACH white listing (if available from your bank), can be effective. Often the available controls are either bypassed by the user for convenience reasons or are not put in place due to cost. In addition, you should communicate with your insurance company to make sure that these and other similar thefts are covered.

Prepare for New Payment Card Security Standards in 2014 Credit card security remains a “Hot Topic”. Most BHPH operators have a significant amount of credit card transactions and therefore, IT security issues delve heavily into this area. New security requirements are here for merchants, banks, and credit card payment processors. The new standards, set by the PCI Security Standards Council, are meant to protect the users of debit, credit, prepaid, ATM, and point of sale cards. Version 3.0 employs a more comprehensive approach built on the construct of “shared responsibility.” The new standard is effective January 1, 2014, but version 2.0 will remain active until December 31, 2014 so organizations have adequate time for the transition. Either way, change is on the horizon. If your BHPH dealership uses online banking services, take steps to prevent a potential attack on your business. If you can minimize the risk using your in-house team, get started today. If you need outside help, call on payment fraud protection professionals. These services will be far more valuable as front-end protectors than if called in after the fact to assess damage and reconstruct an attack for potential use in litigation. Robert Parnas, CPA, is Principal Dealerships, CliftonLarsonAllen LLP and can be reached at robert.parnas@ claconnect.com.

March 2014 DEALER BUSINESS JOURNAL | 19

LEEDOM GROUP AND PAYMAXX PRO ANNOUNCECELEBRATIONAT BHPH WORLD CONVENTION Sarasota, FL – The Leedom Group and PayMaxx Pro have announced an evening of celebration of all things BHPH as part of the upcoming 20th Annual BHPH WORLD Convention in Las Vegas. The event will be held the evening of Tuesday, April 15 at the Bellagio Hotel. “We have appreciated the support of thousands of dealers and vendors over the past twenty years and this is a chance for us to thank them and celebrate our industry”, said Chris Leedom, CEO of the Leedom Group. “We are extending an invitation for all convention attendees to be our VIPs for the night and promise an event you will remember”, said Leedom. Leedom founded the convention in 1996 with the first event being held in Dallas, Texas. The BHPH World Convention is now the longest running trade show dedicated to the BHPH industry and is an award winning convention. The special celebration will feature a “Roaring Twenties” theme and will be open to all convention attendees, exhibitors and anyone that is registered for the BHPH WORLD Convention. Hundreds of dealers are expected to attend the event, which is sponsored by the Leedom Group and PayMaxx Pro. You can register for the BHPH WORLD Convention by calling 800.966.8733 or visiting www.bhphworld.com.

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BUSINESS OPERATIONS

ReInsurance

By Tim Byrd

Doing the Smart-Right Thing

hen Bill Clinton was president he coined the phrase, “It’s the economy, stupid.” My good dealer friend and client Tracy Myers wrote a great book on branding yourself entitled “You are the Brand, Stupid.” The point of these types of phrases and titles is to point out the obvious. In recent years it has become painfully obvious that in the Buy Here-Pay Here business, the life blood is the steady receipt of payments. Many dealers who understand this have put into practice a “do whatever it takes to please the customer, as long as they make their payments” business plan. If the car breaks, fix it. If the customer lets their insurance lapse, as long as they are making their car payments, look the other way and hope for the best. I agree that taking care of the customer is very important to making sure payments are made. Whatever it takes can be expensive, but, is the right way to do things. As my friend and mentor Dave Anderson says, “Integrity means that we always do what is right not what is easy, cheap, popular or convenient-and we do so without excuse and regardless of the cost.” Again, there is the right way, and there is the smart-right way. I think there are a few things that are essential to the Buy Here-Pay Here dealer’s success. 1. Love your customer. If you can’t start here, get out of the business.

2. Set up a Related Finance Company, which includes a CPA that knows the BHPH business. 3. Have a great software provider. As with anything else, buy quality not price. 4. Join a 20 Group. “As Iron sharpens Iron, so one man sharpens another” Proverbs 27:17. 5. Surround yourself with great people and make sure they are never in need. 6. Set up a Dealer-Owned Reinsurance Company, with a managing agency that has the car business experience to help you succeed. With 25-plus years in the car business and having counseled with many car dealers, I have my favorites. Below, I have identified what I think are the three greatest obstacles for reaching the ultimate BHPH goal of avoiding repos and maintaining uninterrupted payments. One, is the customer’s personal financial mismanagement. There is little you can do about that and the reason why they are BHPH customers in the first place. Two is mechanical breakdown. This is for the most part unexpected and Murphy’s Law would dictate, at the worst possible time. Mechanical Breakdown I’m told, is responsible for one third of all repos. Three is lapsed insurance. What dealer can afford their collateral exposed to risk of loss? So, Lapsed insurance is responsible for a large percentage of repos. This is where owning a Reinsurance company is essential. You know mechanical

24 | DEALER BUSINESS JOURNAL March 2014

breakdown is going to happen, so why not reserve for it? Why not have a system in place that no matter where your customer drives that vehicle, should they breakdown you have a plan and the money set aside to get them back on the road and making their payments. The beautiful thing is they are the ones reserving for it. What I suggest is you warranty your cars for the term of the loan and let your customers provide the reserve to keep the cars repaired and on the road. How? Your reinsurance company will provide premium finance for your customer’s warranty. Therefore not requiring you to pay the full price of the warranty up front, which would deplete your lending pool. A prorated portion of the cost of the warranty is collected from the customer’s payment and forwarded to your reinsurance trust account. This will provide a constant stream of reserve to ensure when problems arise there is a well funded system in place. Problems are taken care of and your customers stay on the road and making payments. Lapsed Insurance or no insurance. There is a better way than insurance adjuster nightmares, collection calls burning up your man hours, repos or uninsured collateral. Why not circumvent the insurance companies? You have an RFC to circumvent the finance companies and it is very profitable and reduces tax liability, right? Well, you can do the same thing with a dealer- owned reinsurance company with a product or tool, called Debt Cancellation Coverage. Debt Cancellation Coverage DealerBusinessJournal.com

covers your collateral. By providing Debt Cancellation Coverage at the time of purchase, your collateral is never without coverage. Customers love it because it saves them time and money by eliminating the need for outside coverage from the insurance company and eliminates their entire debt when they have a total loss, freeing them up to buy a nicer newer vehicle from you. They will still need Liability Insurance required by the state. You will no longer have to make collection calls for the insurance company, let your customer ride insurance free or be at the mercy of the insurance adjustors. In the event of a total loss, you keep the car, not the insurance company, to scrap or whatever the situation calls for, but you are in control. Let’s not forget about another

wonderful benefit to having a dealer-owned reinsurance company—capital. Your dealerowned reinsurance company will provide a great capital resource. By owning a reinsurance company, you will provide your BHPH business with the tools needed to succeed and maintain control. The premium from your warranty and Debt Cancellation Coverage provide the capital you need to take care of problems that arise. Additionally what is not used to pay claims becomes the profit of the stockholders. Profit can be taken by the stockholders as a dividend distribution or can be loaned to your affiliated companies making it your profit, not some insurance companies. Now, I have many great dealers

that will tell you “this is a no brainer.” They will tell you that their single biggest regret is that they should have started a dealer-owned reinsurance company years before they did. I know you want to do the right thing, or you wouldn’t be reading this article. It’s time to do the smartright thing, reinsurance. Tim Byrd is Founder and President of Tim Byrd & Associates, Inc., DealerRE is 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.

Have a question? The answer is right at your fingertips. The Leedom Group’s online resources can help you find it. LeedomGroup.com TwentyGroups.com PaymaxxPro.com DealerBusinessJournal.com ...Your Success Is Our Business

March 2014 DEALER BUSINESS JOURNAL | 25

BUSINESS OPERATIONS

Serious Business

By AJ Ager

Lose the Straight Jacket and Get Committed

As I look up and think about what my team and I have accomplished in the last year I am amazed. We took on a dealership starving for leadership and ideas and tripled business in six months. We increased profits in all areas sales, shop, and the small but growing body shop. The question I keep getting is how. Well that has been a good question. In my mind, what we were doing just made sense. We were doing things the right way and wasn’t anything special. Then it dawned on me. We were committed to succeeding. There was no failing. We were committed to doing whatever it takes to succeed and would leave no rock unturned to learning what it takes to succeed. In today’s markets here are a couple of commitments to remember. Commitment to Processes This can be a tricky one because you have to make sure you have a good process in place. Once you have the process you have to treat it like law. Like the ground will open up and swallow whoever doesn’t follow the process.

Here are a few examples of these good processes: Tracking your customers. It is amazing to me how many dealerships really have no idea how many customers they have and how they have been handled. A Road to the Sale. I don’t care whether you use a seven step process or a ten step process, but whatever it is, the sales staff needs to know. It needs to be as ingrained as the Ten Commandments. Commitment to Inventory Inventory is tough to get, but not impossible. It is a fact that you cannot sell from an empty shelf. You also can’t sell cars that nobody wants. Make good wholesale friends. Search every auction you can find. Don’t buy a car just to fill a hole, but don’t be afraid to pay up for a car that could sell quick. The name of the game is to turn inventory fast and put as much money in the till that you can. You want those tags with your dealership’s name on them driving all over town. When I come into work I log-in to the auctions I plan on watching for the day and any free second I have I am looking for cars. I am running an entire dealership so there isn’t a lot of time that is for sure, but I also know that I am not going to get 30 cars from one place in one day without paying too much. So I try to handpick as much inventory from different places that I can so I always have the cars I want at prices I can stomach. Commitment to Follow Up Nothing will get a salesperson fired quicker with me than to not follow up with his or her customers. It is way too expensive to get customers on the lot and just let the salespeople flush them down the toilet. You have to do everything you can to sell the customer when they come in. If you can’t sell them while they are in you have to give them a 100 percent effort after they leave. The dealerships that just allow the endless parade of customers out the door are the ones that never get ahead and make all of the excuses as to why business is so bad. Remember the old ‘buy or die’ mentality and instill it in your people. Also commit to following up with your sold customers. It is far more expensive to try to get new customers than it is to retain your sold customers.

26 | DEALER BUSINESS JOURNAL March 2014

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Tax Lea

Commitment to Selling the Program (special finance) For those of you who are dealing with the sub-prime world, you have probably found that there is a ton of entitled customers coming through the door. People come in thinking that their past non-payment history should have nothing to do with their current ability to buy anything. So much for the good-old ‘get me done’ that was appreciative of what you can do for them. You have to start early in the process selling yourself, selling your dealership, selling them on their future car purchases, and you have to do a good selling job at it. In an article I wrote a few years ago I referred to this as Selling the Program. It is not easy that is for sure. If you result in the old, “let them pick out a car only to find out they don’t qualify,” or the “run a credit bureau without building any rapport and then surprise they don’t want the car,” you will find a very frustrating special finance existence. Remember there is a difference between telling and selling. We are not tellpeople, we are salespeople. Sell the customer on your expertise. Let them know how many people you have helped in the past like them. Take your time with the process. Do a good interview and get to know your customer. Know what their needs are and what you need to know to close the deal. It’s not a race, it is a commitment to the sale. Think big and grow big. Take short cuts and find yourself lost in the woods. Commit yourself and watch the results come in. A.J. Ager is the General Manager at Wilcoxson Buick Cadillac GMC in Pueblo, CO. He has been a leader in Special Financing and Team Bulding for the past 15 years at both Franchise and Independent Dealerships. He has founded many online Special Finance websites including New Wave Funding and Colorado Credit Zone. A.J. also has a production company he has used to market many of his prgrams. He can be contacted at AJAger@ wilcoxsonauto.com ...Your Success Is Our Business

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BUSINESS OPERATIONS

BusinessBasics Twenty Groups: It’s Time to Make the Move

eedom Group’s award-winning Dealer Twenty Group has been serving the independent dealer industry for over 20 years. Designed to help dealers be more profitable, the program matches dealers of similar size and similar business models and places them into groups of up to 20 members. The groups meet at various locations three times a year at venues decided on by the group to share best practices, their successes and failures, ideas to improve operations, and most importantly, their financial (composite) data. Twenty Groups have been in existence for more than 50 years. Until the early ’90s they were almost exclusively the domain of franchised dealers. Today, Leedom Group serves hundreds of clients, mostly independent dealers and franchise dealers with BHPH operations with Twenty Group services. Over the years, what we have found is that 98 percent of dealers who attend a meeting end up joining a Twenty Group. “We achieve success for our clients by providing them with information, training, expertise and financing. Most importantly, we create a forum through which they can build on their success by benchmarking their operation to

the best in the country and those who are working toward similar goals - excellence in their business,” Leedom Group President Chris Leedom said. Dealers find they are challenged by their fellow dealers to operate more efficiently. The group moderator and the dealers hold each other accountable. If a dealer’s goal is to reduce delinquencies, he is questioned at the next meeting as to the steps he has taken to achieve that goal and why it has or has not worked. Dealers are competive by nature, and being challenged by others who understand the business is a powerful motivator. Each month dealers report their sales and operations data to Leedom Group, which compiles the information and massages the data. Information is shared about benchmark operations for everyone within the group and also across all the groups managed by the firm. From this data, dealers can learn much about their operation and set their goals accordingly. The groups meet three times a year at a location of the dealer’s choice. Some groups opt for easyin, easy-out locations for all their meetings, others schedule one or two of the meetings at resorts, so

they can share some quality time with family or friends. It’s been said that the used-car business, is about relationships with suppliers, customers, even competitors. Nowhere is this more true than in a Twenty Group. Members often call upon each other when considering expansions, hirings, acquisitions and changes in their business model. The group moderator and fellow members often serve as a board of directors of sorts, that help them make better, more informed decisions. One recent tally, showed a group of 18 dealers with more than 400 years of experience. That kind of knowledge and expertise is unavailable anywhere else. Drawing upon this expertise is a fantastic way to avoid mistakes and a great way to head you in a new, more lucrative direction. In addition, part of each meeting is devoted to sharing best ideas and best practices. Dealers, put up a small amount of money, and each gives a proven idea that has either made or saved them money. Group members then vote on the ideas, with the best two each winning a share of the kitty. It’s a fun and competitive way to bring one good idea and leave with 19 others.

Take your seat at the table! Call 800.966.8733 or use the application on Page 31 for your invitation.

28 | DEALER BUSINESS JOURNAL March 2014

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JUNE 3, 2014

Manager’s Boot Camp

Presented by: Chuck Bonanno

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Staying abreast of proven technology and techniques is essential to keeping your collections team performing at a high level. Your collections managers and account representatives will receive training on how to best keep your customers current and how to collect the money instead of the car. This seminar is a can’t-miss opportunity for collection professionals.

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With more purchase and financing options available to the BHPH/LHPH consumer today, a passive approach to sales isn’t going to get it done. This seminar will highlight the prospecting tools and proven sales methods that will give your sales team an edge over the competition.

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SALES & SERVICE

Sales Management

By Dani Sherrod

What Makes a Champion Sales Manager?

here is mentality that still exists in sales mangers that is hurting dealership sales, and it is Industry wide. There is a sea of sales managers who can pencil deals and remember rates or terms for the average consumer applying to buy a car, but are missing key traits that would take them from average to champion. The champion is the one who embraces the high performing sales people or even the average sales person with good sales skills; he is the sales manager with the most gross and with the most car deals at the end of the month. The average sales manager says: don’t worry about the price; just get the customer in the door. The champion says: before we give price, let’s build value in the dealership and value in the vehicle. Then we give them the best price with warranty options. Ask for the appointment at least four times in the conversation, if the customer rejects because of financing, overcome his rejection, by telling him we have 15 different lenders and an amazing finance director that can help with any problem. If he objects over price, let him know that this dealership has never lost a deal over the price of a car. Then ask him again if today or tomorrow would be good day for the appointment. If he does not give you the appointment then pursue his information for future re-marketing opportunities. The champion always takes the opportunity to train and model.

The average sales manager barks out orders. What we know about internet shoppers is that 85 percent of all consumers have shopped your competition before calling or submitting a lead. They already know the price, so today’s shopper is looking for an experience which they can enjoy and that will help them build a lasting relationship for future purchases or service department visits. So, trying to hide the price will never work. Training and understanding your sales people is the answer. Our best, or potential best, high-performing salespeople have strong personalities. They are described as social and verbally aggressive. The traits that make them so great at sales also can lead to traits that present difficulties for managers. They can be impulsive, demanding and unrealistic in their expectations. They may lack attention to detail and are often disorganized. Adapt your management style to meet their needs. Here are some hints to help manage these people: Avoid rules. The one basic rule is to never tell them what they cannot do. Give them guidelines to follow, but as long as they are the top performers, don’t give them limits. As soon as performance drops below the acceptable line, then implement standards or rules to improve sales. Be a coach. You have already been through the ranks, now show

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your salespeople what you learned and exactly how it is done. Take control, ask questions, and lead them to a place of self-recognition. Tell them what they are doing good and what they can improve on. As you coach, take pride in the fact that your advice led them to a place of higher performance. Let them sell and build report with customers. Let them do what they do best. The biggest mistake managers make with great salespeople is they try to make them into appoint setters and/or phone receptionists. They are only good at selling, so hire an entry level phone closer and turn the customer over to the expert sales person. Peer Recognition. Top performers love to make money, but they also love to be recognized for top performance. They love their peers to know them that they are the best. Make a big deal out of their abilities. This will work in your favor as other salespeople want to become like this recognized individual. In summary, being a champion sales manager will require you to expend more energy in the training and coaching of your sales team. In the end it will improve your quantity and gross sales, not to mention build a winning team to take your dealership to the top. Dani Sherrod is a National Marketing/Internet Account Executive for Showcase Media. DealerBusinessJournal.com

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SALES & SERVICE

Customer Relationships

By Greg Wells

Great Internet Dealers are Great CRM Dealers

here are many great Internet dealers in our industry and they all have a few things in common. First and foremost is today’s Internet dealer knows to become a great Internet dealer you must first be a great CRM dealer. Secondly, Internet dealers live by the mantra that “if it’s not in the CRM it never happened.” Lastly, the managers are the experts with the CRM. For the rest of the dealers here are five tips to earning your black belt with CRM. One. You need the education. As much as you try to keep things

to do a better job training you how to use their tool to accomplish your goals. On your end, you need a CRM champion and ongoing CRM training, benchmarks and that yucky word, accountability. Two. It’s not CRM, it’s CRM. Answer this question, “What is your CRM initiative?” If you named your CRM provider you got it wrong. If you said it’s how we manage the relationship with our customers you got it right. CRM stands for customer relationship management. Note the “management” part. CRM is a management program. CRM is not a thing but a way of conducting business. If you don’t have a clear cut strategy for managing the customers and prospects in your database then your CRM solution is just going to help you wing it. Customer You’ll become a great internet retention, dealership when you define your prospect conversion and customer relationship strategy, your ability to choose the right tool to execute be timely and it and train your employees to be relevant with both is critical CRM experts. to your success simple in your operation, CRM can and continued success. Your vendor be complex. It is difficult to train offers a solution to execute that your team and instill the discipline strategy. necessary to be really good at it. Three. Do your homework. Learning how to use your CRM When choosing a CRM solution or tool is just the first step. Getting evaluating your current tool, you your team to use it correctly can be should be asking “can it do this?” a bigger challenge. Your problem is instead of listening to your rep say that your managers are analog but “look what it can do.” their business is digital and they I mean really, have you ever haven’t yet adapted. seen a bad presentation? The CRM A couple of things need to providers are pro’s at presenting. happen. The CRM providers need But the demo should be about

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fulfilling your initiatives. Know what you want with your CRM strategy and make them show it to you in the context of their solution. I’d ask a lot of questions about DMS integration, live data, importing lists, personalizing marketing campaigns, inventory integration, mobile application, social integration, reporting and ongoing support and education. Four. Dealers need to get serious about CRM in their store. When you think about CRM as a strategy and not a tool, you realize you are talking about your entire enterprise strategy. Because your game plan is centered around customer relations the CRM tool becomes the facilitator and your game plan is centered on customer relations in the true sense. Yet, I hear “I can’t get my people to use it.” A quick story, I have a cousin who is a regional sales manager at a national wireless company. We were talking shop and I explained to him the problem of dealership employees uneducated, unwilling or unaware of the CRM strategy. With his jaw agape, he told me if you worked for his company and didn’t properly use their software, you no longer worked for his company. Can you hear me now? This is what I mean by getting serious. Stop letting the tail wag the dog. Connect CRM use to everyone’s pay and it will be handled, end of story. Five. Everything is track-able. For years we’ve been tracking stuff on our logs, excel sheets and dry erase boards. Fairly accurate data for sure, but also very limited. You need to keep evolving. I can remember DealerBusinessJournal.com

We Buy With YOU Making a Profit We Buy Open Bankruptcies (7&13!) We Buy the using a Stuker box, then we evolved to excel we Buyer use to draw on graph paper) and First(charts Time finally a web-based CRM solution. The data was limited because we were only We Buy Deeper Than results and not behavior. Since results Our tracking Competition! are the product of your behavior, doesn’t it make

sense if you can track and measure behavior, and improve it, you can improve your results? Your CRM strategy and your CRM tool WITHOUT are theQUALITY, conduit to becoming savvy with today’s shoppers and AND your owner database. Define your PERFORMANCE customer relationship management strategy, SERVICE ... IT’S NOT choose the right tool to execute and train your A GOOD DEAL”to be CRM experts, employees you are on CHECand K O U your way to becoming a great O Internet Tdealership.

UR ALL NEW URRENTLY LICENSED IN: IA, W E BSITEAutomotive , IN, KS, MI, MO,isNE, GregMN, Wells the OH, President at AllCall !

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Dealer Business Journal September 2013

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March 2014 DEALER BUSINESS JOURNAL | 35

SALES & SERVICE

Lead Generation

By Staci Striegnitz

There is an Inexpensive Way to Snag Leads

ead generation doesn’t have to rely on luck. When the weather starts to get warmer and customers are abundant one day, and nonexistent on others, some extra selfpromotion as a salesperson can make a big difference in number of sales at the end of the month. Keeping within my field of internet marketing, there are a lot of opportunities for your sales staff to self-promote with the World Wide Web — ranging from their own blog or webpage to professional social media accounts, separate of the main dealership pages. Social media ranges from a variety of sites including blogs, Facebook, Twitter, LinkedIn, YouTube and thousands more. Each of these social media pages are free to use (there are paid upgraded LinkedIn profiles, but the basic is perfectly sufficient for most), and easy to set up. There are two major functions when utilizing social media for sales professionals: networking and sharing expertise. I have seen motivated, marketing savvy sales people across industries develop their own leads with the web. Networking for Sales A sales person that uses their professional pages for networking recognizes that not only do their friends and families sometimes need a car, but also the friends and families of their past customers. A

complete and active profile on a site that promotes personal networking, such as Facebook and LinkedIn is the first stepping-stone. As Facebook is the most popular single social site, and has a business friendly interface for networking, my focus continues with Facebook, but can be replicated with profiles on other sites. Upon creation of the sales person’s Facebook business page, it will be important to get fans for the page. Start with family and friends and then ask new and past customers to “like” your business page. Be sure to remind new customers after the sale or in a follow up to become a fan for updates about customer appreciation events, your referral program, vehicle maintenance tips, or any service discounts your dealership has for customers. The communication tone and style is typically more personal but still professional. Your friends and recent customers will appreciate the information and continue to be your fan, when they find helpful information without too many ads pushing sales. Sharing Expertise to Build Sales While networking has always been a great base to build sales, the web has enabled the best in the field to give customers insight, gain their trust, and eventually their sales. Enabled with the internet, customers start their search on the web to get the phone number to their trusted dealer or to research models, safety and financing. A sales person with industry expertise can provide information that reaches to the

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Internet buyer with a blog or video. First and foremost, it is important for the sales person to properly disclose that they are a licensed sales person at which dealership. Web viewers are smart and will recognize if even the most insightful blog or article keeps pitching the same dealership or sales person. Sales staff and F&I professionals have plenty of insight to cars and financing that customers seek. Insight about finance programs, vehicle models, maintenance are all helpful, if only a couple hundred words per blog post, will establish their online professional reputation. A sales person’s blog, with two or more articles each week can also appear in search engine results for keywords that are talked about frequently in the blog posts. More and more businesses and employees across industries recognize that communication is changing with the web. Recently our sales staff each created their own evidence manuals to sit on their desk, personalizing who they are, with customer testimonials, information and photos. Think of social media as a way to get that evidence manual on to the desk of your potential customers to build a stronger sales lead! Staci Striegnitz is the Web Marketing Manager for a family-owned buy here-pay here dealership, Marks Auto Sales in Lakewood, Colo, and is an independent web marketing consultant since 2010. You can follow her on Twitter at http://www.twitter. com/stacimarie13 DealerBusinessJournal.com

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March 2014 DEALER BUSINESS JOURNAL | 37

INDUSTRY NEWS

Vendor Update FEX DMS Announces Major Enhancements to its Consumer-Facing FEX EPS Pay Portal

EX DMS recently launched major enhancements to its Electronic Payment Service “FEX EPS”. The new enhancements revolutionize the way FEX DMS dealers can accept and post payments. “There are several valuable enhancements with this new EPS release,” states Jeff McCurry, Chief Technology Officer of FEX DMS. “While we continue to evaluate ways to help dealers manage their business, this application now allows dealers to control what they are willing to accept online—and gives their customers the convenience of online payment. Dealers have the option to accept or change both full and partial payments.” Each enrolled dealer can now have their own personal “myFEXaccount” public pay portal. FEX EPS offers dealers convenient tools to configure their tolerances, payment types and frequencies of payment. This unique, consumer-facing loan system makes it easy for customers to make secure payments online.

Customers can make immediate payments, schedule future payments, view/print receipts and make payment decisions on paying the current amount due or a select amount. The module is configurable on a dealer level and can be modified at an account level or a portfolio level. Dealers can configure the site to accept payments from current accounts and restrict the acceptable types of payments from past due accounts. Accounts designated as “out-for-repo” and “repo” status are not payable through the portal. Convenience fees can also be assigned with this enhancement. “We have seen comprehensive adoption with our first rollout of FEX EPS,” states Dave Huber, President and CEO of FEX DMS. “This enhancement helps further define FEX DMS as being the industry standard.” FEX DMS, a Finance Express product, is the automobile industry’s leading web-based, “no contract” dealer management software solution. FEX DMS is the perfect solution for Buy Here, Pay Here (BHPH) or Special Finance dealerships.

Used Retail Unit Sales Top 1.2 Million at the Seven Publicly-traded Dealership Groups

anheim’s consulting guru Tom Webb recently published his analysis of the used retail unit sales in the fourth quarter. On his blog at www.manheimconsulting.typepad.com, Tom says: In the fourth quarter of 2013, same-store used unit retail sales by the 7 publicly-traded dealership groups increased for the 18th consecutive quarter. Obviously, as this string has continued, the year-over-year comps have represented an increasingly high hurdle. Nevertheless, in each of the last three quarters, same-store unit sales rose at a double digit pace. And, with the benefit of acquisitions, total used unit retail sales rose to more than 1.2 million in 2013, an increase of 13%. Yes, gross margins have continued to narrow,

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but quick inventory turns, strong F&I income, and increased operating efficiencies have more than offset that decline. Last year’s favorable automotive retailing market was enjoyed by more than just the publicly-traded dealership groups. Indeed, many of the large privatelyheld dealer groups scored even bigger gains in their used operation in 2013. As we wrote in our annual Used Car Market Report, it was a great time to be a dealer – whether franchised, independent, Buy-Here Pay-Here, or wholesaler. In fact, if, as a dealer, you didn’t knock the cover off the ball in 2013 you might consider selling out while acquisition prices are high. The strong used vehicle retailing environment of 2013 will likely continue into 2014, but it won’t last forever. DealerBusinessJournal.com

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