The Dealer Playbook
The Dealer Playbook

Episode · 7 months ago

Tom Kline: Mitigate Risk, Save Thousands


Tom Kline is the founder of Better Vantage Point; a dealership dispute, compliance, and risk mitigation company. With over 30 years of experience, and a history co-owning his family dealership, Tom is on a mission to help dealers mitigate the risk which costs them millions per year.

What we discuss with Tom Kline:

  • The retail automotive industry is wasting hundreds of millions of dollars per year by not properly managing risk. From employees and poor culture to inadequate insurance policies and compliance.
  • How Tom recently saved a single-point dealership $29,000 per year in a matter of minutes.
  • Why car dealers need to pay attention to their advertising and media messaging to avoid PR nightmares and potential lawsuits from customers
  • Tom's history working with dealers and how he got involved in risk mitigation as an owner of his family-owned dealership. 
  • Why dealers need to be careful as they evolve into an online retail/at-home-delivery sales model. There are compliance and legal issues to consider! 

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...the car business is rapidly changing and modern car dealers are meeting the demand. I'm Michael Cirillo and together we're going to explore what it takes to create a thriving dealership and life in the retail automotive industry join me each week for inspiring conversations with subject matter experts that are designed to help you grow. This is the dealer playbook. Tom Klein is the founder of Better Vantage Point, a dealership dispute compliance and risk mitigation company with over 30 years experience. And by the way, his family's been in the car industry owning dealerships for like almost 100 years or maybe 100 years. Like there is some history in this deal. He's on a mission to help dealers mitigate risk by getting them out of trouble and staying out of trouble. Tom Thanks so much for joining me here. I'm the dealer playbook podcast. Thanks for having me, Michael. I appreciate it. I was just telling you, I've probably done more research for this episode than perhaps any of the other episodes I've conducted because in fact, risk mitigation is not a topic I think we've ever discussed on the show. Now we've probably, there's probably been some sort of, you know, rhetoric in and around minimizing risk or, or whatnot, but not specifically about this topic. And and so I guess my first question is I saw a recent linkedin post of yours where you answer the question specifically what is risk mitigation and I loved the visual, you, it was like a pole. Now we're taking the listener on a journey here. But it was a poll with all these bike locks on it and the bike locks were just like on the ground around this pole. And of course no bikes, they were not attached to any bikes. They were not protecting any bikes. And So in your experience in the last 30 years, my question to you is this how many, how many dealers are even thinking about minimizing their risks? And if you had to wager a guess, how much is that perhaps costing this industry annually? Yeah, it's a great question Michael. Um, I think that dealers don't focus on risk quite as much as they should. And it's really a game of what if, what are you going to do if the local news media rolls up and wants to get you on camera? How are you going to handle that? Do you have a policy? What if your parts driver has a catastrophic accident and hits a family, uh, in a, you know, an suv or a station wagon? Do you have enough coverage? And generally I find that dealers are superior at focusing on sales and numbers and gross and absorption rate in the service department. But they kind of leave, uh, the insurance and the what ifs they kind of just leave it out or they rely on their insurance agent to provide enough cover. And what I've come across is the insurance agents are sometimes nervous or apprehensive about proposing products to the dealer because the perception of the dealer is uncovered and that's that I didn't the insurance thing, my renewal is over. I don't have to think about that again for another year. And insurance, an insurance policy isn't something that should sit on the shelf. It's something that it's like a living breathing document to use that kind of analogy and it's something that the dealer should pull off the shelf and say, okay, well what happens if the building burns down and there's a big pile of rubble? Do we have enough coverage to get rid of the pile of rubble as an example? Right? Yeah. And...

...that's very interesting to think about because you're right. I think generally speaking our minds around insurance especially, it's like, uh, you go to best buy, they're trying to sell you the insurance because what if and you go to the, but you've just outlined very real scenarios that are happening every single day. In fact, I remember one of your posts in which you had highlighted how the insurance Policy as a living breathing thing. Once you assessed a policy for a dealership, you had saved them something like $30,000 or something like that by simply making revisions and highlighting perhaps things they didn't need or didn't need as much of. Can you maybe walk us through that process. Um, because I think that's what piqued my question. I'm like man, if he's saving one dealership 30 grand a year Or I think the exact number is 29,000 you had said right And you multiply that by whatever 12-15,000 franchise dealers. Let's forget. I mean there's what 40,000 independence uh, in the United States alone. So let's call It 60,000 dealers we're talking about you know, I'm no mathematician, but we're talking about a butt load. It's sort of a certified butler. Yes. So what would you recommend dealers look at in order to perhaps assess where they can, where they can keep more money in their pockets? Sure. So in that particular instance, I was hired by a dealer group out of Washington D. C. And they hired me about two weeks before their renewal and they said, you know what can you do for us? And I said well you know, typically I like to start six months in advance but send me your policy and let me read it. And it was 362 pages. So I read the 362 pages as a result of the 362 pages. I came up with 100 and seven questions that I called the agent and went over the 107 questions out of 100 and seven questions, we had 26 items that were actionable. A lot of the items on their policy on this particular dealers policy were like legacy items like nobody ever checked. They had, I don't know like 70 or 80 D. Tags when in reality they only had 20 and insurance companies rate you on D. Tags. I mean it's things that simple, but somebody's got to go in and say, hey, do you have 70 D. Tags or is that left over from a previous number or their previous agent? Just stick that on a policy and you didn't even know about it. So I have 26 actionable items. That's what saved the the 29,000 and then I went back and said, Okay, here are a lot of different areas that you're just, you don't have enough coverage on that. We need to bump the coverage is up. A lot of coverage is like had only $25,000 in in my mind, there were minimums. I used the debris removal example uh, that's a specific specific thing on a policy that if you're building burns down, there's a specific pocket of money in each insurance policy for debris removal. And typically on a basic policy it's $25,000 or if you're building burns, you can imagine that won't even get a, a bulldozer out to move the stuff much less to get rid of it. So by going through with the dealers and saying, hey, you know, are you comfortable with this? Another example is, um, do you ever buy truckloads of vehicles because there's a certain coverage that if you buy a whole truckload of vehicles and...

...something happens to them. Are you covered? I mean, so these are, there are all kinds of things that happen in a dealership on a daily basis that are insurable that dealers don't think about. And so those are the areas I focus and with the 29,000 savings, we ended up spending about 8000 of that savings trying to build up some of those other coverages. Yeah, super interesting. Um, it really highlights or, or I guess underscores the fact that as a business owner you must think about all of these what ifs because when one of those, what ifs happens, It is very uncomfortable to learn at the 11th hour and 59th minute that you did not have what you needed. Now I have a, I guess more specific question because you're right, something you had said earlier in this industry, most of the conversation is about how to move more metal chip shortage. Um, um, you know, I don't know, culture employees, how do I hire retain all these sorts of things as you were coming up in the dealership. I think it's fascinating because you know, you do have a, a similar story in how you started in the business to some others, but where it ends is none of them go. But you know this like really perceived boring thing over here, I'm gonna go specialize in that they're usually like, I'm gonna go run the thing and then I, you know, have a timeshare in palm desert. And we play golf. What was it about? Like how did you like tell me about how this happened? Because you know you could have I'm guessing picked a path in in the story. That was the complete opposite end of risk mitigation. But what was it that led you down this path specifically while you were working at your dealership? Good question. Uh so I'll start with I was working in the office and it was as you mentioned in the introduction it was a family business and and my family's been in the car business since 1925. So it's literally in my d. n. a. So I was working in the office as a controller. My brother called me in and said I just fired the collection manager for doing coke. You're the new collection manager. So thrown in there you go. You're you're now the collection manager. And so as as the business grew I had as many as seven collectors in an in house attorney working for me. And those a lot of those a lot of uh there was a lot of buy here pay here paper there was a lot of bounced down payment check. You know the regular. Um So what happened was the problems started bubbling to me because they were generally the result of secondary finance problems and because those because I was the collection manager, I was then in charge of the bigger problem. And so if you I cut my teeth, if you will on dealing with customer problems vis a vis the collection department then as the years went by, it made sense to uh consolidate the insurance with me because if you're doing a good job on handling the customer problems, then you're not going to have as many insurance claims related to that. And so that part, that part kind of moved to me. And so it ended up that that the three different areas of risk mitigation in a dealership and that is reputation management or dispute resolution, which are really the same. I call it reputation mitigation. It's kind of a more accurate because if you're doing...

...that right, when the customers post, they're upset. You actually pick up the phone call them. Which this is a unique thing. Apparently you pick up the phone, you call them, you get them into the store, you sit them down in front of you, you make them happy or satisfied or the words I used. We don't want to be upset with us. Once you be satisfied with your purchase or your situation, then you ask them to update their review. Not change it. Because if you ask them to change it, they're going to feel manipulated. They're going to feel like the only reason you're helping them is because you'll update their, you know, to change the review. And so the dispute resolution peace grew out of the collection piece. And then I started handling all the legal affairs for the dealership and the legal affairs are. How can we resolve these problems as quickly as possible and with as little money as possible. And when they get complicated, can we turn them over to the insurance company? What do the policies look like, where the holes in our policies, what what else should we think about? What other um, policies are there in the world that we don't know about maybe and, and research and so try to continually to patch all the *** in the armor if you will. And so that's kind of how all three when it comes to compliance. I call it three legs of the stool, right? We've got compliance, you've got dispute resolution and then risk transference, which is, you know, insured the insurance part of it. That's why there are three legs of the stool in any any one of which if you, if they fall over the stool or you pull up the legs of the stool falls over. So that was kind of the evolution of it. I think this is so fascinating. Um, one of the things you've said and by the way, I think you might be the only other individual in my adult, maybe I need to get better friends, but you're the only other person I've heard who said something that my father, you know, being raised by an entrepreneur, he's the only other person that I've heard say this and now of course it's part of my vocab, he said it's not about how much money you make, it's about how much money you keep and you are the only other person. In fact, I was just having a conversation with my team about this because to your earlier point, we're so focused on new, new new sales, sales, sales, sales that we forget everybody's chasing this. Oh did you hear about Uber's 1.7 billion whatever? And did you hear about club house is now worth $4 billion? And we're like new, new, new. I had spent earlier in my career as I was building our company, I spent years chasing this ideal of there's all these other companies that compete with me that are bigger than me and doing. And it was shocking to me when they would go to sell how little they actually received. Predicated on the fact that they had zero money in the coffers, they were barely breaking even and perhaps even wasting money and I couldn't help but think how much of that was uh the direct impact of just mismanagement of what ifs. So for example, one that we talk a lot about in the industry in my opinion, maybe this is a stretch, but it's where my brain goes and I'd love your take on this is the impact of culture and employee happiness because I think when I look at a P and L. I see a line item for salary. What I don't see is inefficiency within salary. How happy is that employees have they give me grieve viant grievances that I have not done anything about. Is morale low? Does it now take them three times longer to complete tasks? All I see is the line item for salary, but it doesn't actually give me an indication on what the actual expenditure is, how much money I'm bleeding. Are there...

...other instances in your experience, are there other instances that dealers need to look at that? Perhaps don't immediately reflect on a P. N. L. But that are definitely having an impact on how much money they keep sure the problems at a dealership start one of three ways. In my experience it's either a customer problem, an employee problem or an advertising problem. If you can handle those three, you're going to get rid of 90% of the problems so to address the employees so employees will create problems. So absolutely culture has a lot to do with how the company runs and the importance of keeping those employees happy. So at a minimum Michael, they don't go to the E. E. O. C. And complain and they don't post on Glassdoor. I asked dealers all the time do you ever look at Glassdoor and a lot of dealers don't know what glass door is and for for the listeners. A glass door is a site where employees can go and complain about their employer, either during their employment or after their employment. So there's, there's no requisite like they have to quit to post a review of of the company. And I know a lot of people who will read glass door before they'll think about even interviewing with the company because they want to see what the culture is like. So I definitely think that handling your employees and treating them well. First of all go a long way to resolve problems and a lot of the problems that employees have candidly our communication issues, they don't know where to go with a problem. And one of the things that I've done about that just briefly shameless plug coming here. Um I started a company called Always Do Better dot com and you'll see the sign right over here and that is a digital comment box. So the dealer puts up signs that says, you know, you can see right there, it says let your voice be heard so that employees as well as customers can give the dealer feedback without going on on glass door and without going on google and yelp and yahoo and all these other ones and saying that the dealer sucks and it's terrible to be there. So you want to capture that feedback from your employees and whatever way you do it and whatever is good for your culture, but it's important to actually capture the feedback so that you can try to fix the problems because there's an untold and I don't have statistics, but there's an untold amount of money that gets lost when you have an employee quit, who's been there and knows their job and all of a sudden you have a retraining. And that takes, that takes time. I mean the retraining takes time. They make mistakes. Their boss has to take time to do the retraining. So employees are very key. And as a part of risk mitigation, you had said advertising, what's an example of an advertising problem that would cause a headache for dealer? There are so many. Um, let me, let me, let me start with a recent experience when I was shopping for uh, an suv for my fiance and I and I wrote an article about this, but I called up and I said, hey, I'm a former dealer. I've been in the car business for 30 years. Please don't jerk me around. Can I get this car at this payment? That was my question, can I get this car at this payment? Well, it turned out that the dealer had the highest level trim in the pictures, but the payment was for the lowest level trim. So the difference between those two, the delta...

...was like 6 79 to $1080 or something. I mean it wasn't even close. Um, so, and there are other problems with that particular dealer, but there are website problems where rebate stacking happens where a dealer will show that you can get the first time buyer along with the military rebate along with the conquest. But maybe you can't get all those together. But they still show the price netting out to be, you know, the bottom number is net with all those. So that's a problem showing payments on physical vehicles or in advertisements without the A. P. R. And the amount of down payment and the length of the term of the loan the FTC has gotten uh, is getting more active in terms of its enforcement. I was actually on the FTC website yesterday reading about Tate automotive, which is now out of business than the in order to stay out of jail, the owner paid $450,000 to basically settle it with the FTC. I mean it goes on advertising problems go on and stuff. Tv shows are made out of, right? Yeah. So you know that, this is interesting because your example purchasing the vehicle for your fiance, congratulations by the way thank you. Um, is something that happens all the time. In fact, I mean there's many instances I can think of where O E. M even shows the caveat being of course or the loophole being the in the bottom corner they have a little thing that says, this is the blah blah blah and starting at and all of that kind of stuff. But it's interesting that you bring that up because what immediately comes to my mind is what's going to happen as we all, um, actively pursue a car Vonna esq online shopping experience. Because the first thing you said about rebates stacking, I immediately thought, well, hey, I'm a tech guy, Does my tech allow people to rebate stack or is it intelligent enough to know, is it getting the accurate data feed from chrome data who supplies the incentives? Who's, you know, got the monopoly, you know, are they supplying pure enough data? And is it going down the supply chain to website providers or tech providers who provide this? Or is it just the way things have always done where it's like, here's the data gets visualized on the website. Now you've got the stacking issue, Nobody is aware of it because maybe tech vendor is disconnected from dealer world compliancy, all those sorts of things. Um, so you've really got my mind thinking, what, what do you see? Because it's kind of hard to ignore at this point. We're all pursuing this carbon, uh, oh, there's Carbonneau, there's room, there's, I mean in Canada, there's Canada drives auto trader and they're all doing this similar thing, deliver vehicle to home, buy it online, etcetera. What do you see, looking down the road as some of the new issues perhaps or evolved risk issues that dealers are going to face as we move into a remote retail environment. Yeah. So it's amazing to me when dealers, i it's one of the questions I asked when I go in and say how many sales are happening at customers houses. And in the States, there is a law called the Home Solicitation Act, which originally was, I think, I think the history behind that is a vacuum cleaner salesman who would bring on your ring, your doorbell, throw dirt on your carpet and then, you know, vacuum it up, right? And so...

...people would buy vacuums and, and they, you know, they got sold vacuums for way overpriced and then the fence came in and said, we can't can't do this anymore, stop throwing dirt on people's carpets. They don't like it anymore, right with the home solicit. And there's, I've talked to various lawyers who disagree on this. So amongst lawyers, this is uh, not, not a simple answer, but if you do, of course that's a lawyer and I'm just picturing a group of lawyers sitting there going, you know, who really grind zug is door to door vacuum said they got to be the scum of the earth, you know, like, I don't know why they're from the Bronx or whatever, but that's right. But the hope that the home solicitation act says that if you do any selling at someone's home, that you're required to follow the act. The worst part of this is if you don't follow the act and the act is you have to sign a piece of paper giving them three days to bring the car back or whatever. You know you're buying. But if you do any negotiation or any selling at their house, then you're required. The way I read it and I'm not a lawyer, but I'm a compliance guy. So I read it is you have to you have to follow it if you don't follow it, the penalties are extraordinary. The penalties are that at any time there's no time frame built into the code. So a customer could drive a car for four years and then come back to the dealer and say, uh, you didn't follow the home solicitation act. And I'd like all my money back. And the way that it reads is the dealer would have to give all the money back. That's the way it reads to me. So if you're doing any selling at a customer's house and I don't know what car Vonna or room or doing about this. Um, but if they're not following whom solicitation act and they're listening, they can hire me. And I'm going to tell them they should follow the home solicitation act is what's the big deal. I mean, the big deal is you have a three day right of rescission. A lot of these companies are giving people seven days to back out anyway. Right? Carmax have, I don't remember what their their their most recent test drive, I think you test drive for 24 hours or seven days. I don't remember. But this is just not a big deal. And and they shy away from it because it's where compliance needs sales and some dealers get a little upset when those two things, you know, collide. But, but the way that things are moving, for example, that's something from a compliance perspective that's going to have to be dealt with. Amazing. This is um, I'm not gonna lie. I didn't know how I was gonna feel coming into such a deep, uh, I don't know what you want to call this academic conversation. I don't know if I'm just undermining my own intelligence or not. But this was fascinating and I'm so glad we had this conversation. I would urge those listening that you got to think about this stuff and you need to do something about it more importantly. Um how can those listening tom how can they get in touch with you To learn more short? My best ways. My cell number 7574347656. Or if you can't remember that, go to my website, which is better vantage point dot com. Amazing. Love to have you back on because Lord knows we're gonna need it in this rapidly evolving digital sales escape and we're going to need your best advice when the proverbial crap hits the fan, so to speak. And dealers are scrambling so they should call me before the crap hits the fan. There you go there. That, that right there. Let's underscore that before crap hits the fan. Not after. Yeah, yeah, yeah. Maybe our egos are inflated because we've weathered the pandemic somewhat well, but this is the kind of...

...stuff you don't want to wait on and you certainly don't want to be behind the eight ball tom. Thanks so much for joining me on the dealers Playbook podcast. Thanks Michael. I appreciate it. Mhm. I'm Michel Cirillo and you've been listening to the dealer Playbook podcast. If you haven't yet, please click the subscribe button wherever you're listening right now. Leave a rating or review and share it with a colleague. Thanks for listening. Mhm.

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