OPEN ROAD
L O U I S I A N A I N D E P E N D E N T AU T O M O B I L E D E A L E R S A S S O C I AT I O N
S TAT E A F F I L I AT E
O C T O B E R / N O V E M B E R 2 016
WHAT LENDERS WANT TO KNOW ABOUT YOUR DEALERSHIP Vendor Management PA G E 12
DALLAS, TEXAS Permit No. 2079
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PRSRT Standard U.S. Postage
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04.....................................................Secret to BHPH Success 10..................... Tradition and Trends Need to Work Together 12........What Lenders Want to Know About Your Dealership 14............................................................. Washington Update 18...................................................What to Post on Facebook 20........................................................ Tips to Convert a “No” 22...................Reasons You Need a Substantiated Valuation
WHAT’S NEW
The NIADA National BHPH Summit will be held
Dec. 6-8 in Dallas, Texas. This year’s theme is “Reaching New Levels of Excellence.” The conference features industry leading speakers covering best practices in various BHPH related topics as well as industry updates and strategies for the upcoming year.
For more information contact Diann Flanders at diann@niada.com or (888) 906-8283.
ADVERTISERS INDEX
ABC Baton Rouge................................................................. IBC ADESA ...................................................................................15 AutoZone................................................................................18 Black Book................................................................................5 DAA Dealers Auto Auction Group, LLC.................................17 LA’s 1st Choice AA................................................................IFC Manheim ..........................................................................10, 11 Manheim Pennsylvania..........................................................13 NADA........................................................................................7 NextGear Capital ...................................................................12 Peritus Portfolio Services...................................................... 19 Spireon....................................................................................16 Texas Direct Auto.................................................................8, 9 VAuto....................................................................... Back Cover
OFFICE
For information on how to become a member please contact Dwayne Tambling louisianaiada@gmail.com 877-513-6275.
NIADA HEADQUARTERS
NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 The Open Road is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of the Open Road or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute anendorsement of the products or services featured. Copyright ©2016 by NIADA Services, Inc. All rights reserved.
STATE MAGAZINE MGR./SALES
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
Christy Haynes • christy@niada.com Christopher Hanley PRINTING
Nieman Printing
COMPETING WITH FRANCHISE DEALERS AND COMING OUT ON TOP >> Correction
THE ARTICLE Competing with Franchise Dealers and Coming Out on Top in the August/ September issue inadvertently listed the wrong author. It was actually written by Kathy Tafolla of Lobel Financial. Our apologies. MARKET WATCH / BYJOHN STERNAL, SWAPALEASE.COM
ARE YOU ON YOUTUBE?
>> You Could be Missing a Key Opportunity
MANY CAR DEALERS use Facebook as a way to target, reach and promote deals to car shoppers. But are they missing out on a key opportunity by focusing mostly on Facebook? According to a recent poll by national car lease website Swapalease.com, most car shoppers actually turn to YouTube when researching their next vehicle. The online car lease marketplace polled roughly 2,500 car shoppers across the country in June and found the following social media preferences among car shoppers: • YouTube: 43 percent.
PRESIDENT Eric Stroderd
MyDealerSupply.com 850 Kaliste Saloom Rd Lafayette, LA 70508 ericstroderd@mydealersupply.com 337-288-7842 cell 877-427-1238 office
VICE PRESIDENT Kevin Reeves
Dixieland Autoplex 15600 Florida Blvd. Baton Rouge, LA 70819 kevin@dixielandautoplex.com 225-248-6519 office
EXECUTIVE DIRECTOR Dwayne Tambling
Dwayne Tambling Auto Brokers 46001 HWY 22 St. Amant, LA 70774 dwaynetambling@gmail.com 225-675-3675
SECRETARY
PRESIDENT EMERITUS J.L. Richard P O Box 481 Carencro, LA 70520 jlrichard@carencro.org 337-258-2272 phone 337-896-6278 fax
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• Facebook: 33 percent. • LinkedIn: 10 percent. • Twitter: 9 percent. • Instagram: 7 percent. • Pinterest: 5 percent. “Millions of car shoppers now utilize the Internet as a way to research their next vehicle, as well as look for the deal that’s right for them, and this includes social media websites,” said Swapalease. com executive vice president Scot Hall. “Our research tells us that YouTube is an effective social channel since it gives shoppers a virtual tour of the vehicle they’re looking at, as well as an opportunity to see how it handles on the road. Online videos can be powerful in car shopping, particularly as people gravitate toward the Internet and away from actual test drives at the dealership.”
BOARD MEMBERS
Robert Perry Doug Perry Wholesale Cars 311 N. 4th St. Monroe, LA robertperry2010@yahoo.com 318-372-7322 phone 318-343-8611 fax
www.louisianaiada.com
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INSIDE
EDITORIAL NOTE /
TREASURER Rudy Martinez
Ponce’s Imports 6060 Florida Blvd. Baton Rouge, LA 70806 rudymp@cox.net 225-268-9556 225-927-4246
BOARD MEMBERS Scott Ledet
Ledet’s Auto Sales P.O. Box 1505 Gonzales, LA 70707 scottledet@ledetsautos.com 225-644-2886 phone 225-644-2419 fax
Jeff Hernandez
Airline Auto Mart Inc. 4520 Airline Hwy Baton Rouge, LA 70805 Phone 225-357-1597
Scott Rabeaux
Rabeaux Auto Sales 6882 Johnson St. Lafayette, LA 70593 Phone: 337-991-9100
Ronald Stark
Eagle Eye Auto Sales 15840 Florida Blvd. Baton Rouge, LA 70819 Phone: 225-246-8738
Jacob Warren
David Albritton
Bobby Hines
Daniel Guinn
Louisiana 1st Choice Auto Auction 18310 Woodscale Road Hammond, LA 70401 jacob@lafcaa.com 985-345-3302 phone 985-343-5735 fax Ace Auto Source LLC 24477 Hwy 190 Lacombe, LA 70445 hineshines@aol.com 985-626-1948 phone
Chuck Hill
Redline Motors, LLC 605 Cypress Street West Monroe, LA 71291 dcalbritton@gmail.com 318-605-3655 office 318-372-3573 cell 318-605-3991 fax Guinn Auction Company, Inc. PO Box 690 Jennings, LA 70546 daniel@guinnauctions.com 337-824-0422
Oakview Auto Auction 13451 Florida Blvd. Baton Rouge, LA 70815 Phone: 225-272-5139
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Success depends on your available capital and your day-to-day involvement, your commitment to collections, and so much more.
BHPH PERSPECTIVE / BY DUSTIN KERR
WHAT’S THE SECRET TO A SUCCESSFUL BHPH BUSINESS?
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>> Some Best Practices for Success
I HAVE THE PLEASURE of meeting Buy HerePay Here dealers all over the country when I travel. I see owners of both small and large operations. Sometimes, I meet a BHPH owner who is just starting out. Other times, I meet one who’s been going strong for many years. I’ve even encountered retail dealers who are seriously considering a jump into our industry. Even with all these differences, there’s one universal question that unites these people: What’s the best way to run a BHPH business? You may not like my answer. It’s a question I take very seriously, so I answer it honestly. And I’m not going to lie. So, generally speaking, they aren’t very satisfied with my answer! Why? Because I genuinely believe there are many successful ways to run this business. There’s no cookie-cutter solution. Success depends on your available capital and your day-to-day involvement, your commitment to collections, and so much more. How the business performs is heavily influenced by your temperament and your market – there are dozens of factors that can make or break BHPH dealerships. I see different business models every day that are highly successful. Pick your method – but follow best practices. Even though I heartily believe the right success model depends on your circumstances and attention to detail, each of the profitable BHPH businesses I’ve encountered operate with a few best practices I believe you should follow to maximize your business and mitigate your 4 OPEN ROAD / OCTOBER/NOVEMBER 2016
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exposure to risk. 1. Understand this is a collections business, not just a sales business. I see more dealers struggle with this idea than any other because they just don’t understand this simple, but crucial, point. It’s especially hard sometimes for someone who has built a successful franchise or independent business where sales, gross and expense control were the keys to success. In the BHPH business, we cannot just sell our way out of bad collections! To make the most of the business, our collectors have to be the dealership’s most talented, best trained and best compensated employees. A well-run collections department can make up for a lot of mistakes in other areas. 2. Get serious about compliance. If you don’t have the wherewithal to devote time every day to compliance, I suggest not getting into this business. If you’re already in and still not serious about compliance, I suggest getting out while you still have a business and a choice! The CFPB and the Department of Justice will do everything they can to put you out of business if they even think you are not following their rules. Ignoring compliance puts everything you have in jeopardy. If you can’t (or won’t) manage that reality, you shouldn’t have a BHPH dealership. 3. Be an advocate for BHPH businesses. Reread No. 2. If you want life in the BHPH industry to be easier, you have to fight for it. One way is to join the state and national associations that are fighting for your business’s survival against the likes of the CFPB and DOJ. Not only should you be a member, but it is very important you contribute financially to these associations so they can fight for your rights. Connect with your city council members, senators and state/national representatives and other important political figures in your area. Make sure they understand just how much your business contributes to the local economy – and educate them about the industry, so they realize you aren’t the “bad guy” consumer advocacy groups like to make
you out to be. Find out their stance on the CFPB and DOJ and vote accordingly. Remember the quote by Edmund Burke: “The only thing necessary for the triumph of evil is that good men do nothing.” Stand up for yourself and others. 4. Join a 20 Group. The best career move I ever made was joining a 20 Group. Nothing else I tried made me a better operator – or provided a better ROI – than the insights I gained from that group. The power of peer collaboration and accountability you receive in a 20 group setting is magnificent. Imagine sitting in a room with 20 other dealers talking about your business. You get to see the good, the bad and the ugly, and have literally hundreds of years of experience in the room with you! The one warning I will give you, though, is that you must have an open mind and be ready to go back to your dealership and make meaningful change because your fellow 20 group members will hold you accountable to making your business better. Even when you’d prefer they didn’t. BHPH success is possible – and important. I love this industry. Although we often get a bum rap, BHPH dealerships provide a valuable service to the vulnerable in our community. We help people learn to be financially responsible, and we give them the means to get up on their feet and improve their lives. It’s amazing. So, no, there’s no perfect business model for success in this industry, no matter how many times people may ask me to show them the way. But if you take our work seriously, commit to helping people while making a profit and follow the best practices I’ve outlined above, you’ll make it. And if you encounter bumps along the way, give me a call and I’ll help you out! Dustin Kerr has been in the automotive industry for 15 years with the last 10 spent exclusively in the Buy Here-Pay Here and Lease Here-Pay Here industry. Dustin serves as an NCM consultant and sales and collections trainer to the Buy Here-Pay Here industry. This article originally appeared on NCM’s Up to Speed blog (http://blog.ncminstitute.com) and is reprinted with permission.
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AUCTION NEWS /
LOUISIANA’S 1ST CHOICE AUTO AUCTION HONORED >> Two Industry Awards
LOUISIANA’S 1ST CHOICE AUTO AUCTION of Hammond, La., has received two important industry awards, proving that one of the best auctions to work for is also one of the most generous in supporting its community. LFCAA was recently named the recipient of the inaugural 2016 Southern Chapter Auction of the Year Award from the National Auto Auction Association, and was designated one of Auto Remarketing’s Best Auctions to Work For. LFCAA was the only auction in the industry to be chosen for both awards. “Receiving both the NAAA Award and the Auto Remarketing Award means a great deal to us,” said LFCAA manager of special projects Georgianne Poteet. “We have worked hard to make our auction a great place to do business, to create a dynamic and nurturing
environment for our both our customers and employees. “At the same time, we have also recognized our responsibility to contribute to the community around us. It is thrilling to be recognized for our efforts, and acknowledge that our success is a combined effort that involves wonderful customers, supportive employees and a devoted team.” The NAAA Auction of the Year Award honors excellence in community service. LFCAA is one of four auctions – one selected from each of NAAA’s membership regions – to win the award. Each regional chapter award winner receives $5,000, which will be donated to the charity or charities of its choice. NAAA President Mike Browning said, “We want to congratulate Louisiana’s 1st Choice Auto Auction and thank those involved at the auction who consistently give unselfishly of their time, effort, and money to so many wonderful community service organizations.” Each year LFCAA holds fundraisers, donates to and supports many worthy organizations. These include Options, Little Angels Foundation, Mary Bird Perkins Cancer Center, the LASPCA, Tangi Humane Society, and St. Jude Children’s Research Hospital. The
auction hosts a yearly charity golf tournament in November and holds frequent sale-day bake sales in support of these organizations. Employees purchase dog food for animal charities, participate in the yearly Rotary Club charity Shamrock run, collect soda can pop tops to donate to St. Jude Children’s Research Hospital, and donate Christmas gift baskets to Samaritan’s Purse. LFCAA estimates more than $400,000 has been raised for these and many other charities and service organizations in the region over the 14 years the auction has been in operation. The auction’s most recent efforts to reach out to the community include a GoFundMe campaign for its employees who have been affected by the devastating floods plaguing Louisiana. With a target of $25,000, the auction has already raised more than $15,000 to help their team members get back on their feet. LFCAA’s support for its community may be one of the reasons the auction was also named one of the Best Auctions to Work for in the U.S., the result of a workplace study conducted by Auto Remarketing, teaming with Best Companies Group. 2016 was the inaugural year for this study, and LFCAA was one of 25 auctions in the country to receive the designation.
AUCTION NEWS /
LOUISIANA’S 1ST CHOICE GATHERS DONATIONS >> Please Help if You Can
SOUTH LOUISIANA has been devastated by severe, record breaking flooding. Approximately 40,000 homes have been damaged and 13 people lost their lives. Louisiana’s 1st Choice Auto Auction has several auction employees who have lost everything. LFCAA has set up a GoFundMe for the 13 employees whose lives were devastated by the Louisiana flood. They seek to provide immediate assistance to them and humbly ask for assistance. Donations are going directly to those who need financial assistance to rebuild their lives and homes. In addition to the GoFundMe account, LFCAA is collecting specific items needed by these employees including toiletries, clothes, blankets/pillows, and cleaning materials. Please help us help them by donating to those who need it. If you would like to help, please consider making a donation to this site https://www.gofundme. com/2k2p3ng. Our thoughts and prayers go out to all of the victims impacted.
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MANAGEMENT GAMEPLAN / BY SCOTT BERGERON
TRADITIONS AND TRENDS NEED TO WORK TOGETHER
>>
>> Finding a Successful Blend
THERE’S A REASON traditions exist. They grow out of established, credible and timetested circumstances. Trends, on the other hand, can be today’s hot attraction, which may or may not stand the test of time. How can a dealership capture the best of today’s trends and blend them successfully into a tradition-based program that drives more
sales on a consistent basis? CRM and Personal RelationshipBuilding There’s no question technology-driven Customer Relationship Management programs are firmly established as a trend. In all likelihood, CRM will become a tradition over time. But for now it’s still a relatively new and shiny toy many dealerships have embraced as a bedrock organizational and sales tool. CRM enables data mining about customers as well as regular communication with them. In essence, it can serve as the engine that drives relationship-building because it brings evidence-based intel to the table. Depending on the CRM used (and how consistently and completely it is adhered to), salespeople can gain valuable information about buying history and preferences, and communication preferences. It’s gotten to the point where CRM can tell a dealership how often to communicate with a customer via email, and what not to do (e.g., overwhelm with too many emails that end up alienating the customer). But without tires the vehicle won’t move very far. All the technology-driven protocols in the world can only go so far toward the time-honored tradition of relationship-building. This is the ability through interpersonal contact to establish and maintain trust, comfort and likeability with prospective and present customers. In the rush toward technology trends (e.g., Internet car-shopping and pricing tools), there’s a tendency to embrace the former and forget the latter. The truth is successful salespeople need both – the “scientific” piece that CRM systems can bring to the table and the “artistic” ability to develop rapport one-on-one. When the two work in harmony, dealerships get the best of both worlds. Buyers are “primed” by the CRM outreach that shows the dealership understands them and gives them useful information. In-person relationshipbuilding then seals the deal. Here’s what can happen if the two aren’t working side by side: a prospective buyer walks into a dealership and is basically ignored by salespeople nearby because they’ve been schooled not to be too pushy or aggressive. (In some cases, it’s just plain laziness.) Armed with the amount of information available online, salespeople today too often assume a prospect will seek them out if interested. In the interim, they give them space. In reality, this is the worst way to proceed. It’s happened to me. I wound up feeling ignored rather than valued. Instead, a salesperson could have introduced himself/ herself and offered to help – without coming across as pushy. This would have set the tone for a pleasant and productive discussion and potential sale.
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art of the deal. If they can’t feel like they’ve achieved a lower price through negotiation, they won’t buy at all – or at least they will be reluctant. Here’s another perfect example of how trend and tradition can complement each other perfectly. The trend is nohaggle pricing. The tradition is to play the negotiating game. Both are valid. It depends on buyer preferences.
The trend is no-haggle pricing.
The tradition is to play the negotiating game. Both are valid. It depends on buyer preferences.
So find out what those preferences are, then go one direction or another – or both. Read the prospective buyer carefully, then adjust as gut feelings dictate. If someone comes in and is adamant from the get-go about a firm price, so be it. If it’s unclear what their preferences might be, ask. (Then, have an option to fit their preferences. If they want to negotiate, be prepared to shift
gears from one-price shopping.) Then, of course, there’s the hybrid – a buyer who wants the firm price and wants to negotiate from there. Decide if/how to address this scenario. In short, prepare your salesforce to deal with all types of buyers. Because just as the U.S. is a melting pot of different ethnicities, so is the car buying population a melting pot of preferences. Those preferences can best be addressed by honoring both trends and traditions. Former dealer executive Scott Bergeron is the founder and principal at Daily Gameplan (www.dailygameplan.com), a sales team performance company. Daily Gameplan’s Red Books and cloud-based CRM have been used in thousands of dealerships throughout the United States. Bergeron can be reached at 303.918.3169 or scott@dailygameplan.com.
Internet Shopping vs. Instinct Another “trend” (yes, many will say it’s here to stay) is Internet-based car shopping and pricing. There’s no doubt the abundance of Internet information has led to much more savvy and educated buyers. This is great because it opens the door for a salesperson to build rapport based on instincts instead of just answering pedestrian questions about a potential car or sale. However, exercising those traditional instincts seems to be a lost art in too many dealerships. Salespeople often are cast as order-takers, there to follow through on customer requests. As with the CRM example above, this is leaving a big (some would say the biggest) piece of salesmanship on the salesroom floor. Instincts can be wonderful because they work at a level technology doesn’t. Properly tuned in, a salesperson can intuit buying clues just by observing a prospective buyer’s body language, movements, gestures and actions. For example, a prospect is viewing pricing information on a particular vehicle, then throws up his hands. That well could indicate frustration, or is it exhilaration? The alert salesperson will make sure to find out, and take the conversation in the direction it needs to go from there. While instincts themselves can’t be trained, awareness of when and how to use them can. This needs to become, once again, a key part of salesforce training – at the time of hiring, and periodically thereafter. Even if the new hire is a seasoned pro, the “hows” of exercising instinct may need to change depending on previous experience and current dealer aims. Iron-Clad Internet Pricing vs. Art of the Deal Following through on the trend of all things Internet, one-price-no-dickering shopping has become the rule, not the exception. Why? Yes, I know a gazillion surveys have said buyers don’t want to haggle or be hassled in the price-shopping arena, and that a oneprice policy makes them feel much more at ease and trusting. Well, that’s great for those people. But what about those who like to haggle? There are still many buyers out there who live for the
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DEALER BEST PRACTICES / BY CHET HEUGHAN
VENDOR MANAGEMENT
>>
>> What Lenders Want to Know
About Your Dealership
VENDOR MANAGEMENT has become somewhat of a buzzword in the consumer lending industry, especially around auto lending. It has always been a financial institution’s responsibility and obligation to know who they are doing business with and how loan applications are reaching their institutions. The Consumer Financial Protection Bureau, however, has further emphasized financial institutions are responsible for the end product. This is to say that any negative actions taken by the dealer will become a problem for the lender. Within franchised dealerships the vendor management requirement is aided by a strong presence from the manufacturer. For example, a franchise dealer has certain covenants that require financial reporting, including minimum capital thresholds, required training and certifications. Franchised dealers also benefit from the monitoring of customer satisfaction surveys, detailed inventory tracking and industry benchmarks provided by other franchise dealerships selling the same brands. Independent auto dealers represent a unique challenge for many lenders. Independent auto dealers often vary in size, financial strength, operational models, inventory and experience. Unlike most franchise dealerships, independent auto dealers do not have the support of a franchise offering multiple checks and balances. It is easy to understand why lenders then tend to gravitate toward independent dealers that look and act more like a franchise dealership. As indirect auto lending has become more competitive and lenders struggle to increase yield, many have had to broaden their credit spectrum and move closer toward subprime lending or expand their dealer network outside their traditional relationships. To do this lenders have had to modify their dealer underwriting and dealer management models to fit smaller dealerships with more diverse revenue and sales models. In years past independent auto dealers had to meet the same minimum criteria for doing business with the lender as a franchise dealership, but times are changing. Many lenders have multiple programs and mitigate the risk of smaller dealerships with low working capital and minimal experience by using a third-party risk mitigation platform. With many of these platforms, small or new independent dealerships can gain access to the same national programs as large franchised stores. Lenders are able to serve independent dealers because thirdparty risk mitigation platforms are helping bring efficiency and transparency to the transaction. 12 OPEN ROAD / OCTOBER/NOVEMBER 2016
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For example, independent dealers may be subject to more frequent underwriting, additional verification steps and less direct access to loan underwriters. While there is more work on the dealer’s side, these steps also benefit the stores’ owners by helping identify fraud attempted by customers or rogue employees. The days of simply signing a lender’s dealer agreement and providing a few supporting documents to gain access to their retail financing program are drawing to a close. Lenders are being required to truly know and manage their dealer relationships. This means updating key pieces of data and underwriting each dealership on an annual basis. As an independent auto dealer it’s important to understand what lenders are looking for and be prepared to provide the documentation needed annually to avoid disruptions in your lenders’ retail financing programs. Lenders will be evaluating the dealer principals, the dealership itself and inventory. They will be looking at credit reports that indicate bankruptcies, tax liens, past-due accounts, and potential fraud or identity theft. In addition, lenders will check criminal history reports and verify addresses, property ownership, bank statements, business financial statements and tax returns. Lenders will also be looking at more subjective data such as references from your auctions, floor plan lenders, warranty providers and personal references. You should be prepared to provide proof of insurance, copies of bonds and licenses, and expect a yearly site visit and basic inspection of your facility. Lenders really want your business, but they must first know who you really are. Creating your own internal process for managing due diligence requests from lenders and thirdparty risk mitigation service providers will make this process easier and more efficient for you. Understanding what lenders are looking for and providing it in a timely manner goes a long way toward building a strong profitable relationship along with the ability to compete with your neighboring franchise stores. Chet Heughan is director of AppOne® Risk Mitigation Services and Indirect Lending for Wolters Kluwer. For more information, please visit www. wolterskluwerfs.com.
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WASHINGTON UPDATE /
NIADA GOVERNMENT REPORT
>> Latest Governmental Issues and Activity Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA senior vice president of legal and government affairs Shaun Petersen and NIADA lobbyist Sante Esposito of Key Advocates. REGULATORY REPORT Federal Trade Commission The FTC has warned dealers about misrepresenting the scope of Volkwagen’s settlement with the FTC regarding buybacks of VW and Audi diesel vehicles that were equipped with devices designed to cheat emissions tests. The terms of the settlements between VW and the FTC, other government agencies and private owners can be found at vwcourtsettlement.com. The FTC has also published a blog, available at www.ftc.gov/news-events/blogs/ business-blog/2016/08/dealers-vw-ownersdeserve-straight-story, explaining dealers’ expectations concerning the settlement and buyback opportunities. Department of Labor Enforcement for misclassifying employees: DOL settled an enforcement action against a plastering company for paying workers as independent contractors as opposed to employees. The workers, hired as independent contractors, did work only for the company and provided no services to any other business. In addition, the company supplied all of the materials and paid hourly rates set by company staff. The company was found to have violated the overtime pay requirements and was required to pay $365,291 in back wages. Consumer Financial Protection Bureau The CFPB settled an enforcement action against First National Bank of Omaha related to ancillary products associated with credit cards. For a decade, the bank offered debt cancellation products with its credit cards, which the bank promoted as providing a monthly payment to the cardholder’s account in the event of certain hardships like involuntary unemployment, hospitalization or disability. Cardholders were charged a monthly fee. The bank also offered credit monitoring products to monitor cardholders’ credit for potential identity theft or fraud and to provide consumers with copies of their credit reports. The CFPB alleged the bank engaged in unfair billing practices and deceptively marketed the debt cancellation add-on products to consumers.
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The bureau claimed the bank forced consumers to listen to sales pitches about debt cancellation products by implying they had to stay on the phone while their cards were activated, when that was not the case. It said the bank led some consumers to believe they would not have to pay for the debt cancellation products or they were eligible for the product when that was not the case. The CFPB also claimed the bank made cancellation difficult and billed for services that were not provided. The bank is required to refund $27.75 million to 257,000 customers and pay a $4.5 million penalty. DEPARTMENT OF JUSTICE Dealer pleads guilty: Timothy Williams, owner of Lindsey Street Motors in Norman, Okla., and finance manager Stephen Butz pleaded guilty to bank fraud. Court records say Williams entered into a floorplan agreement with the Bank of Union on behalf of Lindsey Street Motors, then he and Butz sold collateralized vehicles out of trust without the bank’s knowledge or permission. Williams and Butz obtained duplicate vehicle titles, which they provided to buyers, without notifying the bank of the vehicle sales or repaying on the floor line. Both men admitted their conduct caused a loss of $550,000 to $1.5 million. The defendants face up to 30 years in prison, a $1 million fine and up to five years of supervised probation. They will also be ordered to pay restitution. Repossession settlement: DOJ settled with HSBC Finance Corporation over allegations the company violated the Servicemembers Civil Relief Act by repossessing 75 cars owned by protected servicemembers without obtaining the necessary court orders. DOJ claimed HSBC conducted repossessions without court orders even when it had evidence in its own records suggesting a borrower could be a protected servicemember. HSBC will pay up to $11,000 per repossession and repair the credit of all affected servicemembers. LEGISLATIVE REPORT Return from Recess Congress returned from its annual summer recess after Labor Day and began work on the fiscal year 2017 appropriations bills, arguably the most important legislation. At press time, however, those bills were considered unlikely to pass before FY ‘17 began on Oct. 1. As in most prior years, Congress will have to pass a short-term continuing resolution to keep funding flowing to federal agencies. CRs usually provide funding at current levels. The big question was how long the CR will be. Some were pushing for a short CR through December with the hope Congress can complete some or all of the individual agency funding bills during the post-election lame duck session – perhaps packaged together in a series of “mini-bus” bills. Others wanted to extend the CR into the
The fiscal year
2017 appropriations bill passed by the House in July includes provisions to curb the CFPB’s authority. spring to give the new administration a chance to get settled in and establish its funding priorities. Still others suggested a yearlong CR. Congress is expected to meet in a lame duck session after the November elections, but until the results are known and it is clear which party will control the White House and the Senate, it is difficult to speculate on what might be accomplished during that short session. Any legislation not signed into law by the time the 114th Congress concludes in late December is dead. H.R. 5485 Financial Services and General Government Appropriations Act, 2017 This bill is among the FY 2017 appropriations bills still pending after passing the House in July. As previously reported, the bill includes provisions to curb the CFPB’s authority – among them, a provision that the CFPB would be funded through the annual congressional appropriations process rather than through transfers from the Federal Reserve as currently provided by DoddFrank in order to make the bureau more accountable. It would also require the CFPB to report quarterly to various House committees about funding, obligations made during the previous quarter and actions taken to achieve its goals, objectives and performance measures. And it would change the bureau’s leadership from a single director to a five-member board appointed by the President. Another provision would require the CFPB to further study pre-dispute arbitration agreements before issuing any regulations on that issue. After conducting a controversial study, the bureau in May proposed a rule that would prohibit arbitration agreements that bar consumers from filing or participating in class action lawsuits and would require the lender to submit arbitration records to the CFPB. None of those provisions were included in the Senate’s version of the bill.
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BHPH PERSPECTIVE / BY DAVID MEYER
HOW MUCH RISK ARE YOU WILLING TO TAKE?
>>
>> A Way to Cut Costs and Mitigate Risk
AFTER YEARS OF declining sales, the automotive industry is once again on the rise. Fueling much of the resurgence in vehicle sales is the recent growth in subprime automotive financing. So what is fueling the increase in subprime auto loans? In the wake of the recent economic crisis, increasing numbers of car buyers found themselves saddled with poor credit resulting from job loss, foreclosure, bankruptcy and other financial woes. While still struggling with low credit scores, many of those customers are now moving toward financial recovery. They’ve found new jobs and careers, are earning decent salaries, have wiped the slate clean and are lowering their debts. Despite that progress, those creditchallenged customers still cannot qualify for traditional auto financing. But they still need vehicles. To meet that demand, increasing numbers of dealerships and lenders are approving more subprime auto finance, and are going deeper and deeper in the process.
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According to a recent report by Experian, “The percentage of auto loans to buyers with the poorest credit ratings is growing faster than the rest of the auto finance market.” Almost 21 percent of open auto loans are held by individuals with subprime and deep subprime credit ratings. However, with the uptick in auto loans, we are also witnessing one of the largest increases in auto loan delinquency rates on record. According to Fitch, increased loan originations, higher lender competition and looser underwriting standards in the subprime loan market have caused an influx of higher auto delinquencies. That’s a problem. Higher delinquencies mean higher rates of default. Which leads to the question: How can you better manage your portfolio and risk for success? As subprime auto lending continues to gain momentum and loans dive deeper, the associated risks continue to rise. Dealerships and lenders who offer subprime auto financing should be prepared for an increase in delinquencies, defaults, repossessions, collection staff time and resources – all of which come with significant costs that cut into profitability. BHPH dealers and lenders are now turning to GPS tracking as a smart business strategy that cuts costs and mitigates risk while also encouraging their customers to pay on time and improve their credit.
GPS tracking, in its most effective form, is a system that enables dealerships and lenders to verify customer information faster, ensure more on-time payments and locate vehicles in real time to manage their liability with high-risk vehicle collateral. The more advanced GPS vehicle tracking and collateral management systems include additional features such as payment reminders and advanced reporting. Those features further reduce business costs while also promoting on-time payments that help customers stay in their vehicles and rebuild their credit. In a study conducted on Spireon’s GoldStar GPS vehicle tracking, 87 percent of vehicle finance customers saw an increase on their return capital. Further, 77 percent saw a significant improvement of their customers’ credit ratings. The right type of GPS vehicle tracking can improve business profitability, reduce risk, help maintain CFPB compliance and help customers improve their credit. David Meyer is executive vice president of sales and client services for Spireon, bringing more than 28 years of vehicle finance and BHPH industry experience his role overseeing the company’s Automotive Solutions Group.
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SOCIAL MEDIA / BY KATHI KRUSE
5 WAYS TO FIGURE OUT WHAT TO POST ON FACEBOOK >> Engage Your Customers and
Reach Your Goals
ONE OF THE most common challenges for independent dealers is social media. It’s actually a challenge for most companies simply because it’s a medium not well understood. Not to oversimplify it, but Facebook and other social channels are just another medium to connect with customers. If you think about the “traditional” media such as TV, radio, print, billboards, email and phone, they are all places where customers spend time, and it’s your job (through marketing and advertising) to attract them to your store. Once a dealer has decided to venture out into Facebookland, the first question that comes up is “What do I post on Facebook to attract more customers?” The answer is a simple one but not so easy to find. Engagement is king on Facebook. It drives everything. There are two types of Facebook engagement: organic and paid. Organic simply means you did not pay to promote your post. Organic is the best kind of engagement and it’s the hardest to achieve.
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Solid, original, high-quality content achieves organic reach and engagement. People like, comment and share, which builds more authority with Facebook’s algorithms. It’s key to pay close attention to what’s working and what’s not. You must learn through data how best to promote (pay for) your content to improve on what’s happening organically. But what do you do when you hit a brick wall for ideas? These five ways will help you figure out what to post on Facebook to engage customers and reach your goals. 1. It all begins with your why. If you’ve done the work to determine your true why – why you’re participating in this race, and why your customers choose you over your competitor – the search for what to post on Facebook gets so much easier. Simon Sinek said, “People don’t buy what you do, they buy why you do it. The goal is not to do business with people who need what you have. The goal is to do business with people who believe what you believe.” Without inspiration, motivation and passion to craft meaningful content, your Facebook page falls flat. Pro tip: If you’re new to determining your why, take a look at your online reviews. Look and listen for commonalities from what your customers are saying – that will help you know why your customers choose you.
2. Determine what your target customers want to know. Building relationships with buyers is how business gets done (with or without Facebook, right?). Knowing your customers’ interests and challenges helps you create content for your page that matters to them. Whether you realize it or not, there’s a story happening in the mind of your customer. They are the hero of their story, and when you actively participate in that narrative in a meaningful way (which Facebook is ideal for), you position your business within your customer’s story... and have a great shot at the sale! Pro tip: Begin to notice ideal customer experiences within your store and find a way to document them.
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>>
Review your list
and discover you've just experienced what it's like to know what to post on Facebook.
3. Identify and develop your resources. Part of your plan for what to post on Facebook is sitting down and assessing just what it is you have available. Failing to identify and develop your resources makes it even harder to know what to post on Facebook. Answer these questions: • Who will produce our content? • Who’s in charge of our content? • Who will maintain our content? (Content is a business asset!) • Examine and describe what forms of content are most comfortable right now (written, images, audio, video). • What types of content do you want to focus on in the next 12 months? • What do you need to do to get there?
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4. Encourage employee participation. Most dealers agree they need to A) produce more content and B) connect on a deeper, personalized level with today’s hyperconnected buyers. Shifting your internal processes to engage employees (especially salespeople) in content creation helps with both of these challenges. When you showcase employees as thought leaders in the automotive industry, the company receives more recognition online. Employees reap the benefit of their voices being broadcast, paving the way for more referrals, leads and sales. The company looks smarter because its employees look smarter. 5. Don’t make it too complicated. If you’ve been managing a Facebook page for a business, chances are one or more of these statements apply to you: •Y ou’re a current or potential customer of that store. •Y ou possess similar attributes to the customers you’re trying to attract. •Y ou have empathy for customers’ struggles and feel a connection. This means you are uniquely positioned to understand your customer (because they’re just like you). You have an idea of what would be valuable to post on Facebook and you need to give it wings. Try this: identify four to five Facebook pages you like and what it is about them you admire. Write down your answers. Review your list and discover you’ve just experienced what it’s like to know what to
post on Facebook. Those pages you identified are successful for the reasons that attracted you. They are the same or similar to the reasons customers like your page. Brainstorm with others within and without your organization to come up with a game plan to create content that elicits the same interest, excitement and belonging you feel when you visit those pages on your list. Pro tip: We all get busy and it’s nice to have one place to refer to our game plan. A content calendar helps you think through what to post on Facebook, gives you the room you need to plan your strategy and allows you to schedule posts into the future to save time. Fact: figuring out what to post on Facebook is a creative process. Not everyone is cut out for it, but those who are usually realize it’s fun once you get things in place. Don’t be afraid to test different types of content with your fans. This will build your self-confidence and motivate you to keep going. The answer to “what to post on Facebook” is simple, but not easy. Do the work, test your ideas and make good use of a content calendar. You’ll soon stop struggling, find the answers and become a Facebook superstar. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc. Kruse Control coaches, trains & delivers webinars focused on integrating social media and online reputation management into dealership operations.
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ACCELERATE / BY GWC WARRANTY
5 TIPS TO CONVERT A “NO” >> It Takes Discipline, Patience
and a Calculated Approach
F&I SALES can sometimes feel like a war of attrition. If you just ask the same question enough times, you’ll eventually wear down a customer into buying a product. But is that really the approach you want to take? It’s one that puts pressure on the customer and leaves them unsure whether they truly needed the product they just spent their hard-earned money on. Overcoming a “no” and converting it into the coveted “yes” is a difficult proposition that takes discipline, patience and a calculated approach. Once you have it down, though, you stand to create a more profitable business with happier customers. Find out if it’s really a “no.” Oftentimes, the real objection lies well behind the initial one-word negative response. Don’t be afraid to ask additional questions beyond your initial presentation. Investigate whether the customer had one in the past. Do they know a mechanic and that’s why they’re turning it down? Were they burned by a disreputable company in the past? It’s extremely rare one of these examples isn’t the true objection hiding
behind those two ugly letters. Be nimble. Once you’ve uncovered the true objection to a vehicle service contract, ask a few more questions about their specific situation. You’re taking on the role of detective in uncovering more information about their individual situation and how the experience and products you offer can change the perception they have of what you’re offering. Be prepared to pivot and address any number of potential true objections. Be ready with evidence. If you’ve gotten to the bottom of why a customer really is declining a service contract and you’ve gotten to know their objections on a more personal level, be ready to pounce with supporting evidence. If it’s someone who was burned in the past, bring up your reputation and show past repair invoices that were covered by a VSC. If they say another VSC didn’t cover anything, know the details of what’s covered with your products – especially non-component items like rental car or lodging reimbursements. Make a U-turn. If a VSC really isn’t hitting the mark with a customer, try talking about other protection options you offer. If they continue to decline, circle back to the VSC and explain why it’s even more valuable than the ancillary products they’ve also declined. Sometimes the comparison in coverage can shed light on the value of VSC protection.
LIADA AUCTION MEMBERS
ABC Baton Rouge
3960 Blount Road Baton Rouge, La 70807 225 778 3737 www.auctionbroadcasting.com Sale Thursday
ADESA Shreveport
7666 Greenwood Road Shreveport, LA 71119 318-938-4400 Phone 318-938-7623 Fax www.adesa.com Sale Wednesday at 9 a.m.
Alexandria Auto Auction 515 N 3rd Street Alexandria, LA 71301 318-484-9672 Phone 318-484-9699 Fax www.alexandriaauction.com Sale Tuesday at 5:30 p.m.
America’s Auto Auction Houston 1826 Almeda Genoa Rd. Houston, TX 77047 281-819-3600
Brown’s Auction Co.
Don’t make it about yourself. It can be difficult to hear “no” from a customer three, four or even five times in the F&I presentation. It’s even more difficult to maintain focus on the customer’s needs while continuing to push a service contract. Be sure your questioning is always focused on the customer and their specific situation. The moment a customer feels you’re pushing products for your financial gain rather than their benefit, you run the risk of losing a sale, referrals and a lifelong customer.
Greater Shreveport-Bossier
Manheim New Orleans
Insurance Auto Auction
Mid-South Auction
Louisiana 1st Choice Auction
Mike McTurner Dealers
1315 Grimmett Drive Shreveport, LA 71107 318-221-3362 Phone 318-221-3372 Fax www.gsbautoauction.com Sale Wednesday at 1 p.m. 29000 Frost Road Livingston, LA 70754 225-686-9197 Phone 225-686-8197 Fax www.iaai.com Sale Monday at 9 a.m.
18310 Woodscale Road Hammond, LA 70401 985-345-3302 Phone 985-343-5735 Fax www.lafcaa.com Sale Tuesday at 9 a.m.
Long Beach Auto Auction 8494 County Farm Road Long Beach, MS 39560 228-452-2030 Phone 228-452-9588 Fax www.lbautoauction.com Sale Wednesday at 1:30 p.m.
6249 Hwy 190 Eunice, La 70535 Phone: 337-457-4919 Manheim Lafayette www.brownsauction.com 1611 St. Mary Street Sale is quarterly (call for more Scott, LA 70583 information). 1-337-237-5620 Phone Sale Thursday at 10:00 a.m.
Copart
21595 Greenwell Springs Rd. Greenwell Springs, LA 70739 225-261-0102
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Manheim Mississippi 7510 U S Highway 49 Hattiesburg, MS 39402 601-268-7550 Phone 601-579-7202 Fax www.manheim.com Sale Thursday at 9 a.m.
61077 St. Tammany Slidell, LA 70460 985-643-2061 Phone 985-643-2122 Fax www.manheim.com Sale Wednesday at 9 a.m. 1657 Old Whitfield Road Jackson/Pearl, MS 39208 601-956-2700 Phone 601-956-5603 Fax www.midsouthaa.com Sale Tuesday at 9 a.m. 136 Gregory Drive Monroe, LA 71202 318-343-8200 Phone 318-343-8259 Fax www.dealersautoauction monroe.com Sale Tuesday at 10 a.m.
Lake Charles Auto Auction
2435 E Broad Street Lake Charles, LA 70601 337-433-8664 Phone 337-436-7197 Fax www.pedersenandpedersen.com Sale Wednesday at 5:30 p.m.
Oak View Auto Auction
13451 Florida Blvd Baton Rouge, LA 70815 225-272-5139 Phone 225-272-5314 Fax www.oakviewautoauction.com Sale Friday at 10 a.m.
www.louisianaiada.com 9/14/16 1:14 PM
LIADA DEALER SERVICE PROVIDERS ATTORNEY
McGlynn Glisson Mouton Attorney at Law Christopher D. Glisson chris@mcglynnglisson.com 340 Florida St. Baton Rouge, LA 7080 Phone: 225-344-3555 Tureau & Tureau, APLC Ralph Tureau & Steven Tureau steven@tureaulawfirm.com 12320 Hwy 44 Suite 3C Gonzales, LA 70737 Phone: 225-647-8529 Fax: 225 647-8530 AUTO PARTS
ABC Auto Parts Larry Pyle dereck@abcauto.com P.O. Box 3627 Longview, TX 75606 Phone: 903-232-3060 AutoZone Derlyn Odom deryln.odom@autozone.com 6517 airline why Metairie LA, 70003 228-990-5669 Pull A Part Toby Thompson Baton Rouge, LA 70814 Phone: 225-247-9160 AUTOMOTIVE REPAIR
Coy’s Diesel Sales, Service & Performance Coy Redmond coysdieselspecialties@gmail.com 13317 Airline Hwy Gonzales, LA 70737 Phone: 225-647-3699 Fax: 225-647-2699 BODY SHOP
Custom Colors Pete McKnight--Billy Rapp customautocolors@gmail.com 11550 Cloverland Ave. Baton Rouge, LA 70809 Phone: 225-752-5947 Fax: 225-752-5940 CONSULTING
DealerDynamix Joseph Ventura jventura@dealer-dynamix.com 6671 W Indiantown Rd. Jupiter, FL. 33458 Phone: 866-970-8929 DEALERSHIP MAINTENANCE
Integrity Audio Visual LLC Steve Clay steve@integrity-av.com 39089 South Angelle Court Gonzales, LA 70737 Phone: 225-235-1528 DEALER MANAGEMENT SYSTEMS
Frazer Computing Inc. Michael Frazer accounting@frazer.com 6196 US Hwy 11 P.O. Box 569 Canton, NY 13617 Phone: 1-888-963-5369 Fax: 1-888-963-3366
DEALER SUPPLIES / FORMS
My Dealer Supply Company Eric Stroderd ericstroderd@mydealersupply.com 311 A West University Lafayette, LA 70506 Phone: 877-427-1238 Romano Promotions LLC Megan Romano megan@romanopromo.com 42062 Gardens Blvd Hammond, LA 70403 Phone: 985-634-8274
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DETAILING
Jose Upholstery Jose Delgado 4776 Fairfields Ave. Baton Rouge, La 70802 Phone:225-316-4575 M M Topshelf Detailing & Recon Lonnie McCauley lmccauley@eatel.net 4452 Jeffery Dr. Baton Rouge, LA 70816 Phone: 225-603-4600 Fax: 225-622-5994s
CarBucks Floor Plan Brandon Ziebarth www.usecarbucks.com 381 Halton Road Greenville, SC 29607 Phone: 225-819-6747 NextGear Capital Stuart LaBauve slabauve@discoverdcs.com Phone: 225-620-1660 Fax: 866-550-8694 GLASS/WINDSHIELD
Babin’s Auto Glass Inc. Brent Babin FINANCES babinsautoglass@eatel.net American Credit Acceptance 13283 Airline Hwy. Rachel Swain Email: callie.kwiatt@acacceptance.com Gonzales, La 70737 Phone: 225-647-1369 Phone: 864-308-4380 961 E. Main St. GPS Spartanburg, SC 29302 Position Plus GPS AppOne Zanita Phillips Penny Bearb zanita@positionplusgps.com 6815 Saukview Dr. 950 Market St. St. Cloud, MN 56303 Shreveport, LA 71107 pbearb@appone.net Phone: 318-286-6297 www.appone.net INSURANCE & BONDS Phone: 877-277-6631 x1228109 Affordable Insurance Solutions Automotive Finance Company Janis Fallaw 11221 Cedar Park Ave. agentj0912@aol.com Baton Rouge, LA 70809 751 Hwy 51 Julie@teamhonda.com www.automotivefinancecompany.com Madison, MS 39110 Phone: 601-856-9447 Phone: 225-293-6488 Carmouche Insurance Inc. Center Street Finance, LP 516 N. Burnside Ave 200 N. Mesquite, Suite 202 Gonzales, LA. Arlington, TX 76011 Phone: 225-647-8552 Phone: 682-777-2002 Charles Carmouche Fax: 817-887-4976 charles@carmoucheinsurance.com Central Credit Inc. Dwight W. Andrus Insurance Charles E. Spedale Bonnie Dozier skebdees@yahoo.com bbd@andrus.com 4303 Plank Rd. P.O. Box 60970 Baton Rouge, LA 70805 Lafayette, LA 70598 Phone: 225-356-4656 Phone: 337-981-7300 Fax: 225-356-4656 First Consumers Financial, LLC Insurance & Bonds, LLC John Sonnier Bob Chedville 9131 Interline Ave. #10-B bob@fcfcarloan.com Baton Rouge, LA 70809 14580 Florida Blvd. Jsonnier60@gmail.com Baton Rouge, LA 70819 Phone: 225-922-3700 Phone: 225-272-9009 S. Brown Associates Nationwide Acceptance 150 River Rd. M3 Martin Less Montville, NJ mless@nac-loans.com Phone: 973-270-2270 3435 N Cicero Ave. Chicago IL 60641 Safe Lily Insurance Agency Phone: 800-622-7605 Laquica Fisher lfisher@safelilyins.com Preferred Loans LLC 720 Burnside Ave. Shana Quick Gonzales, LA 70737 preferloans@eatel.net Phone: 225-450-2009 12241 Roddy Rd. Gonzales, LA 70737 US Agencies Low Cost Insurance Phone: 225-644-0304 Sharon Miller Fax: 225-644-6862 Sharon.Miller@confiegroup.com 440 Third St. Westlake Financial Services Baton Rouge, LA 70802 Rob Wilson Phone: 225-615-0957 4751 Wilshire Blvd, Suite 100 Fax: 225-987-5144 Los Angeles, CA 90010 dealers@westlakefinancial.com US Agencies Low Cost Insurance www.westlakefinancial.com Kenneth Champagne Phone: 888-8YES-YES kchampagne@usagencies.com 440 Third St. FLOOR PLAN Baton Rouge, LA 70802 AFC Phone: 225-408-8492 Tim Ormiston Fax: 225-987-5144 1610 A St. Mary St. MARKETING Scott, La. 70583 timothy.ormiston@autofinance.com Cars.com www.Afcdealer.com 75 W. Jackson Blvd. Suite 800 Phone: 337-593-8992 Chicago, IL 60604 Phone: 312-601-5188 AFC Interactive Financial Marketing Michael Meyers Group Michael.Meyers@autofinance.com Travis Weisleder 18310 Woodscale Rd. dealerinfo@interactivefmg.com Hammond La. 70401 1509 West Main St. Phone: 877-739-0218 Richmond, VA 23220 Phone: 804-225-1880
Showroom Logic 47013 N. Morrison Blvd. Hammond LA 70401
CTR Warranty, LLC Ken Rugg 319 North 3rd St. Monroe, LA 71201 PAINT TOUCHUP AND INTERIOR REPAIR Phone: 318-323-6385 MasterMatch Ferrell Dealer Services Eddie Krueger 18016 Shadow Creek Ave. eddielsufan@yahoo.com Baton Rouge, LA 70816 1104 Pine St. Suite A Phone: 225-978-5111 Monroe LA 71207 fspruell@gmail.com Phone: 318-322-2886 GWC Warranty SECURITY SYSTEMS James W. Hester jhester@gwcwarranty.com Integrity Audio Visual LLC 40 Coal St. Steve Clay Wilkes-Barre, PA 18702 Steve@Integrity-av.com Phone: 225-771-9766 39089 South Angel Court Gonzales, LA 70737 GCWS, LLC 225-235-1528 GWC Rock Brunet RENTAL CAR rockbrunet@gmail.com Enterprise Rental Car 101 Shumard Dr. 3545 N 1-10 Service Rd., Ste. 101 Lafayette LA 70508 Metairie, LA 70002 Phone: 337-258-2998 Phone: 504-454-1717 PWI RENT TO OWN Sharon Coleman scoleman@gmail.com Seadra Inc. PO Box 278 John Garner Orwigsburg, PA 17961 john@seadraonline.com Phone: 800-548-1121 10555 Lake Forrest Blvd. New Orleans LA 70127 Phone: 504-241-0211 TITLE – NOTARY
Dealertrack (Casey & Casey, Inc.) Dan Casey & Henry Casey dcasey@autotitle.com hcasey@autotitle.com 3939 Veterans Blvd., Suite 204 Metairie, LA 70002 Phone: 504-456-7438 Express OMV Brooke Barnett Phone: 225-243-6925 485 Florida Blvd. Denham Springs LA 70726 LeBlanc Auto Title Company 1116 E. Cornerview St. Gonzales, LA 70737 Phone: 225-644-4591 Fax: 225-644-8207 hopeleblanc@eatel.net TOWING & RECOVERY
Smart Tow Kevin Rembert 3045 Rosenwald Rd. Baton Rouge, LA 70807 kevinpremert@yahoo.com Phone: 225-356-3002 Fax: 225-356-3222 TRANSPORTATION
Masney Auto Transport Inc. Greg Hedges page@masney.com 831 Maguire Rd. Ocoee FL 34761 Phone: 407-877-8882 VEHICLE HISTORY
Carfax Kathy Collins kathycollins@carfax.com Phone: 703-934-2664 5860 Trinity Pkwy Centreville, VA 20120 WARRANTY
AUL Corp Shelton Green shelton@sadrinc.com 1250 Main St. Suite 300 Napa, CA 94559 Phone: 504-722-8123 Centurion Automotive Consultants Danny Delich centurionautomotiveproducts@gmail.com Atlanta, GA Phone: 470-955-9757
OCTOBER/NOVEMBER 2016 / OPEN ROAD 21 9/14/16 1:14 PM
MANAGEMENT MATTERS / BY LAURA LEMCO
THE GOOD, THE BAD AND THE UGLY Substantiated Valuation
>>
>> Reasons You Need a
I GREW UP IN DEALERSHIPS. My parents owned a Honda, Suzuki and Harley-Davidson motorcycle dealership, and were among the first in the country to start selling Honda cars. They grew the automobile dealership into Honda, Buick and a line of motorhomes. Fast forward a few years… I have been a consultant in the motorcycle and automotive industries, first working with my dad in the consulting firm he built, then on my own when he got back into retail by buying three Harley-Davidson dealerships. Dad was a master at analyzing the numbers and advising dealers on the actions needed to be more efficient and make more money. In short, he was a dealer advocate, helping them combat “the swirl.” I have spent the last three years studying with the American Society of Appraisers and the National Association of Certified Valuation Analysts to get accredited as a business appraiser. After years of assisting with dealership transitions, I have seen several reasons a dealer needs a substantiated valuation of their dealership. I have broken the reasons down to the good, the bad, and the ugly THE GOOD
Retirement: Do you plan to retire someday? How? A retirement plan and/or a succession plan require an appraisal – a base valuation so you can see where you are and plan how you want to accomplish your plan. Transition: Do you have a son, daughter or protégée you want to see successfully transfer in? A valuation serves as a foundation from which to construct that transition plan. Expansion: Are you having so much success you are looking for more? What could a capital infusion do to your expansion plans? Providing a well-supported valuation to investors helps them understand how well you have succeeded so far, and that the risk of backing you is well justified moving forward. Sales: Maybe it is time to move into something else and you are starting to consider selling your dealership. A valuation provides you a way to plan for a sale, as well as a third-party appraisal you can use to work with a broker in setting your price, and with a potential buyer in negotiating your price.
THE BAD
We don’t always have control over everything that affects our businesses and sometimes we have to be reactive instead of proactive. Unfortunately, you, your friends and/or fellow dealers have gone through divorces, lawsuits or court proceedings that
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required a business appraisal. Sometimes a downturn in the economy causes the bank to require extra financials and assurance their risk is mitigated before they will extend your line of credit. None of these are pleasant circumstances, and having had a recent valuation can sometimes fill the need. Even if an updated valuation is required, it takes less time, effort and expense than having to start from scratch.
THE UGLY
I call them the 4 D’s, and I’m sorry, they really are ugly: • Death • Disease • Disability • Disaster You can, of course, imagine that if any of these things happened, you (or those close to you) will have to scramble to keep everything going as best as possible. There are things you can do ahead of time that make it easier on everyone – most importantly, having a will and a succession plan in place. Both use a dealership valuation to establish base values and a foundation from which to plan. Having a valuation done annually or even bi-annually before one of the ugly D’s strike will save you and your loved ones a lot of hassle. Let them focus on the things that really matter during those tough times. Somehow squeeze some planning and organization into your hectic life to be prepared. Hopefully, none of the ugly D’s will touch your life, and you can put your dealership valuation to use for some of the good reasons! What goes into a dealership valuation? Any appraisal must answer the question: Value to whom and for what purpose? Value to an investor who wants to continue the business? Value to a developer who wants someone to move the business out of that location, scrape the lot and build a hotel? A valuator not only assesses the performance of your dealership, but also the environment (local, national and even international if it has an effect on your dealership). They analyze the risks that affect your dealership, what benefits are most likely in the future, and then determine a value after applying the research and analysis. There are three methods of doing a valuation: market, income and asset. You are familiar with the market method used in real estate appraisals. Appraisers look at comparable properties in the neighborhood and use these “comps” heavily in deriving a value. Income approach looks at a benefit stream such as free cash flow, EBITDA or seller’s discretionary cash flow. They quantify the risk in a discount or capitalization rate, and apply that to future benefit streams. This is the most complicated, but also the method most relied upon by the IRS, financial institutions and the courts. The asset approach typically applies to asset-heavy businesses or a business that
will no longer be a going concern. Basically, all the assets are appraised and added up. This method can apply to your dealership’s new unit inventory. When someone says “a multiple of earnings plus inventory,” they are including all three methods in one phrase (perhaps without realizing it) – earnings (income method), multiple (income method and market method) and inventory (asset method). Depending on the availability and quality of information, appraisals can take anywhere from a couple weeks to a couple months. Honestly, I understand there is never a convenient time to get a valuation done. No dealer wakes up in the morning and says “Hey, I think I’ll get a valuation today!” Most of my engagements arise from an urgency or outside requirement. I get it. But the valuations I have done for proactive reasons are more valuable and less stressful for the dealers. I am not saying, “Drop what you are doing and pick up the phone now!” But I do encourage you: weave a valuation into your next strategy planning session, or start thinking a bit about where all your hard work is going. From growing up in dealerships, I know when I walk into a dealership it is not just a nice building with inventory and staff. This is an owner’s blood, sweat and tears over many years. This is someone’s dream and they made it happen. When you can, find out its value to help you chart your course to maximize that value into the future. Laura Lemco is a business consultant focused on helping improve dealership operations and providing financial analysis and business valuations. Call Laura at (303) 994-6919 for a free, confidential consultation. Learn more at www. DealershipValuations.com.
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