The Dealer Playbook
The Dealer Playbook

Episode · 2 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! 

Full show notes and resources can be found here: 

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...the car business is rapidly changingand modern car dealers are meeting the demand. I'm Michael Cirillo andtogether we're going to explore what it takes to create a thriving dealershipand life in the retail automotive industry join me each week forinspiring conversations with subject matter experts that are designed tohelp you grow. This is the dealer playbook. Tom Klein is the founder of BetterVantage Point, a dealership dispute compliance and risk mitigation companywith over 30 years experience. And by the way, his family's been in the carindustry 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 dealersmitigate risk by getting them out of trouble and staying out of trouble. TomThanks so much for joining me here. I'm the dealer playbook podcast. Thanks forhaving me, Michael. I appreciate it. I was just telling you, I've probablydone more research for this episode than perhaps any of the other episodesI've conducted because in fact, risk mitigation is not a topic I think we'veever discussed on the show. Now we've probably, there's probably been somesort 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 isI saw a recent linkedin post of yours where you answer the questionspecifically what is risk mitigation and I loved the visual, you, it waslike a pole. Now we're taking the listener on a journey here. But it wasa poll with all these bike locks on it and the bike locks were just like onthe ground around this pole. And of course no bikes, they were not attachedto any bikes. They were not protecting any bikes. And So in your experience inthe last 30 years, my question to you is this how many, how many dealers areeven 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. Andit's really a game of what if, what are you going to do if the local news mediarolls up and wants to get you on camera? How are you going to handle that? Doyou have a policy? What if your parts driver has a catastrophic accident andhits a family, uh, in a, you know, an suv or a station wagon? Do you haveenough coverage? And generally I find that dealers are superior at focusingon sales and numbers and gross and absorption rate in the servicedepartment. But they kind of leave, uh, the insurance and the what ifs theykind of just leave it out or they rely on their insurance agent to provideenough cover. And what I've come across is the insurance agents are sometimesnervous or apprehensive about proposing products to the dealer because theperception of the dealer is uncovered and that's that I didn't the insurancething, my renewal is over. I don't have to think about that again for anotheryear. And insurance, an insurance policy isn't something that should siton the shelf. It's something that it's like a living breathing document to usethat kind of analogy and it's something that the dealer should pull off theshelf and say, okay, well what happens if the building burns down and there'sa big pile of rubble? Do we have enough coverage to get rid of the pile ofrubble as an example? Right? Yeah. And...

...that's very interesting to think aboutbecause you're right. I think generally speaking our minds aroundinsurance especially, it's like, uh, you go to best buy, they're trying tosell you the insurance because what if and you go to the, but you've justoutlined very real scenarios that are happening every single day. In fact, Iremember one of your posts in which you had highlighted how the insurancePolicy as a living breathing thing. Once you assessed a policy for adealership, you had saved them something like $30,000 or somethinglike that by simply making revisions and highlighting perhaps things theydidn't need or didn't need as much of. Can you maybe walk us through thatprocess. 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 is29,000 you had said right And you multiply that by whatever 12-15,000franchise dealers. Let's forget. I mean there's what 40,000 independence uh, inthe United States alone. So let's call It 60,000 dealers we're talking aboutyou know, I'm no mathematician, but we're talking about a butt load. It'ssort of a certified butler. Yes. So what would you recommend dealers lookat in order to perhaps assess where they can, where they can keep moremoney in their pockets? Sure. So in that particular instance, I was hiredby a dealer group out of Washington D. C. And they hired me about two weeksbefore their renewal and they said, you know what can you do for us? And I saidwell you know, typically I like to start six months in advance but send meyour policy and let me read it. And it was 362 pages. So I read the 362 pagesas a result of the 362 pages. I came up with 100 and seven questions that Icalled the agent and went over the 107 questions out of 100 and sevenquestions, we had 26 items that were actionable. A lot of the items on theirpolicy on this particular dealers policy were like legacy items likenobody ever checked. They had, I don't know like 70 or 80 D. Tags when inreality they only had 20 and insurance companies rate you on D. Tags. I meanit's things that simple, but somebody's got to go in and say, hey, do you have70 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 26actionable items. That's what saved the the 29,000 and then I went back andsaid, Okay, here are a lot of different areas that you're just, you don't haveenough coverage on that. We need to bump the coverage is up. A lot ofcoverage is like had only $25,000 in in my mind, there were minimums. I usedthe debris removal example uh, that's a specific specific thing on a policythat if you're building burns down, there's a specific pocket of money ineach insurance policy for debris removal. And typically on a basicpolicy it's $25,000 or if you're building burns, you can imagine thatwon't even get a, a bulldozer out to move the stuff much less to get rid ofit. So by going through with the dealers and saying, hey, you know, areyou comfortable with this? Another example is, um, do you ever buytruckloads of vehicles because there's a certain coverage that if you buy awhole truckload of vehicles and...

...something happens to them. Are youcovered? I mean, so these are, there are all kinds of things that happen ina dealership on a daily basis that are insurable that dealers don't thinkabout. And so those are the areas I focus and with the 29,000 savings, weended up spending about 8000 of that savings trying to build up some ofthose other coverages. Yeah, super interesting. Um, it really highlightsor, or I guess underscores the fact that as a business owner you must thinkabout all of these what ifs because when one of those, what ifs happens, Itis very uncomfortable to learn at the 11th hour and 59th minute that you didnot have what you needed. Now I have a, I guess more specific question becauseyou're right, something you had said earlier in this industry, most of theconversation 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 thingsas you were coming up in the dealership. I think it's fascinating because youknow, you do have a, a similar story in how you started in the business to someothers, but where it ends is none of them go. But you know this like reallyperceived boring thing over here, I'm gonna go specialize in that they'reusually like, I'm gonna go run the thing and then I, you know, have atimeshare in palm desert. And we play golf. What was it about? Like how didyou like tell me about how this happened? Because you know you couldhave I'm guessing picked a path in in the story. That was the completeopposite end of risk mitigation. But what was it that led you down this pathspecifically while you were working at your dealership? Good question. Uh soI'll start with I was working in the office and it was as you mentioned inthe introduction it was a family business and and my family's been inthe car business since 1925. So it's literally in my d. n. a. So I wasworking in the office as a controller. My brother called me in and said I justfired 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. Andso as as the business grew I had as many as seven collectors in an in houseattorney working for me. And those a lot of those a lot of uh there was alot 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 startedbubbling to me because they were generally the result of secondaryfinance problems and because those because I was the collection manager, Iwas 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 collectiondepartment then as the years went by, it made sense to uh consolidate theinsurance with me because if you're doing a good job on handling thecustomer problems, then you're not going to have as many insurance claimsrelated to that. And so that part, that part kind of moved to me. And so itended up that that the three different areas of risk mitigation in adealership and that is reputation management or dispute resolution, whichare really the same. I call it reputation mitigation. It's kind of amore 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 uniquething. Apparently you pick up the phone, you call them, you get them into thestore, you sit them down in front of you, you make them happy or satisfiedor the words I used. We don't want to be upset with us. Once you be satisfiedwith your purchase or your situation, then you ask them to update theirreview. Not change it. Because if you ask them to change it, they're going tofeel manipulated. They're going to feel like the only reason you're helpingthem is because you'll update their, you know, to change the review. And sothe dispute resolution peace grew out of the collection piece. And then Istarted handling all the legal affairs for the dealership and the legalaffairs are. How can we resolve these problems as quickly as possible andwith as little money as possible. And when they get complicated, can we turnthem over to the insurance company? What do the policies look like, wherethe holes in our policies, what what else should we think about? What otherum, policies are there in the world that we don't know about maybe and, andresearch and so try to continually to patch all the *** in the armor if youwill. And so that's kind of how all three when it comes to compliance. Icall it three legs of the stool, right? We've got compliance, you've gotdispute resolution and then risk transference, which is, you know,insured the insurance part of it. That's why there are three legs of thestool in any any one of which if you, if they fall over the stool or you pullup the legs of the stool falls over. So that was kind of the evolution of it. Ithink this is so fascinating. Um, one of the things you've said and by theway, I think you might be the only other individual in my adult, maybe I need to get betterfriends, but you're the only other person I've heard who said somethingthat my father, you know, being raised by an entrepreneur, he's the only otherperson that I've heard say this and now of course it's part of my vocab, hesaid it's not about how much money you make, it's about how much money youkeep and you are the only other person. In fact, I was just having aconversation with my team about this because to your earlier point, we're sofocused on new, new new sales, sales, sales, sales that we forget everybody'schasing this. Oh did you hear about Uber's 1.7 billion whatever? And didyou 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 spentyears chasing this ideal of there's all these other companies that compete withme that are bigger than me and doing. And it was shocking to me when theywould go to sell how little they actually received. Predicated on thefact that they had zero money in the coffers, they were barely breaking evenand perhaps even wasting money and I couldn't help but think how much ofthat was uh the direct impact of justmismanagement of what ifs. So for example, one that we talk a lot aboutin the industry in my opinion, maybe this is a stretch, but it's where mybrain goes and I'd love your take on this is the impact of culture andemployee happiness because I think when I look at a P and L. I see a line itemfor salary. What I don't see is inefficiency within salary. How happyis that employees have they give me grieve viant grievances that I have notdone anything about. Is morale low? Does it now take them three timeslonger to complete tasks? All I see is the line item for salary, but itdoesn't actually give me an indication on what the actual expenditure is, howmuch money I'm bleeding. Are there...

...other instances in your experience, arethere other instances that dealers need to look at that? Perhaps don'timmediately reflect on a P. N. L. But that are definitely having an impact onhow much money they keep sure the problems at a dealership start one ofthree ways. In my experience it's either a customer problem, an employeeproblem or an advertising problem. If you can handle those three, you'regoing to get rid of 90% of the problems so to address the employees soemployees will create problems. So absolutely culture has a lot to do withhow the company runs and the importance of keeping those employees happy. So ata minimum Michael, they don't go to the E. E. O. C. And complain and they don'tpost on Glassdoor. I asked dealers all the time do you ever look at Glassdoorand 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 theiremployer, either during their employment or after their employment.So there's, there's no requisite like they have to quit to post a review ofof the company. And I know a lot of people who will read glass door beforethey'll think about even interviewing with the company because they want tosee what the culture is like. So I definitely think that handling youremployees and treating them well. First of all go a long way to resolveproblems and a lot of the problems that employees have candidly ourcommunication issues, they don't know where to go with a problem. And one ofthe 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 signright over here and that is a digital comment box. So the dealer puts upsigns that says, you know, you can see right there, it says let your voice beheard so that employees as well as customers can give the dealer feedbackwithout going on on glass door and without going on google and yelp andyahoo and all these other ones and saying that the dealer sucks and it'sterrible to be there. So you want to capture that feedback from youremployees 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 fixthe problems because there's an untold and I don't have statistics, butthere's an untold amount of money that gets lost when you have an employeequit, who's been there and knows their job and all of a sudden you have aretraining. 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. Soemployees are very key. And as a part of risk mitigation, you had said advertising, what's anexample 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 experiencewhen I was shopping for uh, an suv for my fiance and I and I wrote an articleabout this, but I called up and I said, hey, I'm a former dealer. I've been inthe car business for 30 years. Please don't jerk me around. Can I get thiscar at this payment? That was my question, can I get this car at thispayment? Well, it turned out that the dealer had the highest level trim inthe pictures, but the payment was for the lowest level trim. So thedifference between those two, the delta...

...was like 6 79 to $1080 or something. Imean it wasn't even close. Um, so, and there are other problems with thatparticular dealer, but there are website problems where rebate stackinghappens where a dealer will show that you can get the first time buyer alongwith the military rebate along with the conquest. But maybe you can't get allthose together. But they still show the price netting out to be, you know, thebottom number is net with all those. So that's a problem showing payments onphysical vehicles or in advertisements without the A. P. R. And the amount ofdown payment and the length of the term of the loan the FTC has gotten uh, isgetting more active in terms of its enforcement. I was actually on the FTCwebsite yesterday reading about Tate automotive, which is now out ofbusiness than the in order to stay out of jail, the owner paid $450,000 tobasically settle it with the FTC. I mean it goes on advertising problems goon and stuff. Tv shows are made out of, right? Yeah. So you know that, this isinteresting because your example purchasing the vehicle for your fiance,congratulations by the way thank you. Um, is something that happens all thetime. In fact, I mean there's many instancesI can think of where O E. M even shows the caveat being of course or theloophole 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. Butit's interesting that you bring that up because what immediately comes to mymind is what's going to happen as we all, um, actively pursue a car Vonna esq onlineshopping 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 rebatestack or is it intelligent enough to know, is it getting the accurate datafeed from chrome data who supplies the incentives? Who's, you know, got themonopoly, you know, are they supplying pure enough data? And is it going downthe supply chain to website providers or tech providers who provide this? Oris it just the way things have always done where it's like, here's the datagets visualized on the website. Now you've got the stacking issue, Nobodyis aware of it because maybe tech vendor is disconnected from dealerworld 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'reall doing this similar thing, deliver vehicle to home, buy it online,etcetera. What do you see, looking down the roadas some of the new issues perhaps or evolved risk issues that dealers aregoing to face as we move into a remote retail environment. Yeah. So it'samazing to me when dealers, i it's one of the questions I asked when I go inand 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 whowould bring on your ring, your doorbell, throw dirt on your carpet and then, youknow, 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 inand said, we can't can't do this anymore, stop throwing dirt on people'scarpets. They don't like it anymore, right with the home solicit. Andthere's, I've talked to various lawyers who disagree on this. So amongstlawyers, this is uh, not, not a simple answer, but if you do, of course that'sa lawyer and I'm just picturing a group of lawyers sitting there going, youknow, who really grind zug is door to door vacuum said they got to be thescum of the earth, you know, like, I don't know why they're from the Bronxor whatever, but that's right. But the hope that the home solicitation actsays that if you do any selling at someone's home, that you're required tofollow the act. The worst part of this is if you don't follow the act and theact is you have to sign a piece of paper giving them three days to bringthe car back or whatever. You know you're buying. But if you do anynegotiation or any selling at their house, then you're required. The way Iread it and I'm not a lawyer, but I'm a compliance guy. So I read it is youhave to you have to follow it if you don't follow it, the penalties areextraordinary. The penalties are that at any time there's no time frame builtinto the code. So a customer could drive a car for four years and thencome back to the dealer and say, uh, you didn't follow the home solicitationact. And I'd like all my money back. And the way that it reads is the dealerwould have to give all the money back. That's the way it reads to me. So ifyou're doing any selling at a customer's house and I don't know whatcar Vonna or room or doing about this. Um, but if they're not following whomsolicitation act and they're listening, they can hire me. And I'm going to tellthem 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 ofthese companies are giving people seven days to back out anyway. Right? Carmaxhave, I don't remember what their their their most recent test drive, I thinkyou test drive for 24 hours or seven days. I don't remember. But this isjust not a big deal. And and they shy away from it because it's wherecompliance needs sales and some dealers get a little upset when those twothings, 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 bedealt with. Amazing. This is um, I'm not gonna lie. I didn't know how I wasgonna feel coming into such a deep, uh, I don't know what you want to call thisacademic conversation. I don't know if I'm just undermining my ownintelligence or not. But this was fascinating and I'm so glad we had thisconversation. I would urge those listening that you got to think aboutthis stuff and you need to do something about it more importantly. Um how canthose listening tom how can they get in touch with you To learn more short? Mybest ways. My cell number 7574347656. Or if you can't remember that, go to mywebsite, which is better vantage point dot com. Amazing. Love to have you backon because Lord knows we're gonna need it in this rapidly evolving digitalsales escape and we're going to need your best advice when the proverbialcrap hits the fan, so to speak. And dealers are scrambling so they shouldcall me before the crap hits the fan. There you go there. That, that rightthere. Let's underscore that before crap hits the fan. Not after. Yeah,yeah, yeah. Maybe our egos are inflated because we've weathered the pandemicsomewhat well, but this is the kind of...

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

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