Tag Archive | "Agent Summit 2013"

Building Your Agency for the Future

As agents today we have a dramatically different landscape than we did 10 or 12 years ago. The total number of franchised dealers fell 23% between 2000 and 2012. This reflects the closing or consolidation that has been going on for a very long time, but that was accelerated through our economic down turn in 2008 – 2010. At the same time, the public and mega dealers keep getting bigger and stronger. At last count the six publicly held dealer groups owned 1050 franchise stores, and all six are in buying mode. I’m not sure what you are seeing in your markets but I suspect that it is the same thing we are seeing in ours, which is that stronger dealers are all in buy mode. So if the six public dealer groups own 1050, we can only imagine how many dealerships are held by the next 200 mega-dealers and how much that number will grow in the next 24 months.

The Mom and Pop car dealer that was once a mainstay of independent agents has been going by the wayside, and the trend is speeding up. At the same time, the challenges that dealers are facing are becoming more complex. Their needs for outside assistance are greater than at any time in history. Let’s face it, there was a time when this wasn’t a very complicated business. You bought cars at wholesale and sold them at retail for a $2000 – $3000 profit. You would have a service department in case they broke down. You promoted yourself in the local newspaper and you sponsored a little league team. Being a dealer was pretty fun. A dealer’s biggest concern was whom he was going to get matched with at men’s league golf on Tuesday night. That is all a distant memory.

Today’s game is entirely different, and most dealers don’t seem to be having any fun. They have a very capital-intensive business. They have difficulty recruiting and keeping good people. The consumer has become very informed and demanding. The manufacturers have become clever in finding new ways to apply pressure. The margins are compressed on both new and used, and just for good measure the ever-growing buying segment of Gen Y buyers don’t like the buying process. We have leagues of people looking for ways to sue the car dealer, and government agencies devoted to coming up with new restrictions, new audits and challenging important dealer revenue sources. Can you even imagine what will happen when interest rates go up a couple hundred basis points?

While the shrinking dealer number would appear to threaten the independent agency model, these separate macro trends dealers are facing present a number of areas where independent agents can offer additional value. They can offer the types of services a manufacturer isn’t equipped to, and the flexibility that a big box solution isn’t built for. Said another way, dealers need good agents more than ever. They need agents who can provide real world solutions for the very real problems they face.

You see, it isn’t practical for a dealer to be an expert at everything. By definition they can’t focus on everything. The profit margins are thin enough that hiring a third party consultant or implementing a technology solution for every challenge isn’t economically feasible. Even mega-dealers have difficulty affording or finding enough management horsepower to carry out their game plans. What dealers do not need is a parasitical relationship whereby they act as the host to an agent who hands out spiff checks and from time to time helps out on a claim all while collecting fat commissions.

If an agent can transcend being a service agent and become a partner agent, there is a big opportunity. If they stack their existing relationship skills, their F&I training skills or their reinsurance skills and add to them additional difference-making knowledge and services, they will become invaluable partners to the dealers for years to come. But this won’t come without some pain. Some agencies may discover they have people on their team not up to the challenge. Or agency principals may decide that the point they are at in their career, they aren’t up for a major re-tooling of their business model. An individual representative probably won’t be able to service 20 dealerships and provide the level of training, support, expertise and follow-through necessary to become viewed as a true partner in the dealer’s eyes.

The stakes are high. For both agents and dealers, those who adapt and survive the fast-paced, changing landscape the rewards will be great. The agents or dealers that chose to do things as they always have will find themselves on the outside looking in.

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Menu Discipline is Key

At Agent Summit earlier this year, Gerry Gould, director of training for United Development Services, presented a panel on menus, and menu discipline. And to kick it off, he shared a compelling fact: 85 percent of F&I managers don’t use menus effectively. They don’t present every product to every customer, and they don’t have a consistent process in place.

That is something he wants to see changed.

“People who don’t buy into the menu concept just don’t have a good process,” Gould said. “There needs to be a consistent process every time. The presentation matters more than the size of the menu or the products presented.” He went on to stress that every customer should be presented with every product they qualify for, every single time. The menu itself, he contends, needs to be a disclosure of all the products available to the customer, not a hard sales tool.

The process actually starts long before the F&I manager gets to the menu. It should begin with the sales consultant on the floor. That person needs to set up F&I as a partner in the process, and an ally, and they should personally introduce the clients to the F&I manager, and hand them off with a reassurance that while they’re doing that, the sales person is still going to be working for them as well, getting the vehicle ready. Finally, the sales person can help to set up the expectations, asking about how long this will take. The F&I manager can then answer the question, and smoothly take over the appointment.

The menu itself should be prepared with all the proper terms, and with all of the products that customer qualifies for. The presentation should never take more than three minutes, Gould noted. The F&I manager should point out the features of each product — not the benefits — and should follow the “ABCs”: Always ask to proceed, Break down all the options, and finally Close on the options.

He advocates that F&I managers understand that the features are the story they need to be telling — those are what the product actually does. The benefits are the sale — that is what the product actually does for the client, specifically. And trying to “stair step” sell will just lead to fatigue, long before they ever get a chance to present every product. This is where the menu, and grouping similar products, when done well, allow them to present every product without making the customer feel fatigued and frustrated.

Some ways to reinforce that, Gould noted, are with certain catch phrases. These include “May I…?” sayings, such as “May I proceed?” or “May I share with you?” Other phrases can include ‘By choosing…”, “These are your payment options…” or “What that means is…” the F&I manager can control the pace of the presentation, come across as polite and helpful, and not seem like it’s a hard sale that will immediately get a customer defensive.

At the end of the day, a solid process that presents all the products, combined with a polite, helpful presentation designed not to overwhelm clients, will lead to more sales, and happier customers. “Self discipline is the final key ingredient,” said Gould. “You are the only one standing in the way of your own success.” If F&I managers can learn to use the menu effectively, they will get out of their own way, and everyone in the process will benefit.

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Agent Summit 2013: Great Information for Every Agent

Last month, the annual Agent Summit conference and expo was held at Caesar’s Palace in Las Vegas, drawing in more than 550 attendees. The show had 72 sponsors, with 42 of those exhibiting — a significant increase from previous years on all fronts.

“The spirit and the energy of this year’s conference was overwhelmingly positive,” said David Gesualdo, show chair. “The numbers prove that the idea of a show designed by agents, for agents is no longer a radical concept.”

For those who couldn’t attend this year, here are some of the highlights.

The First Annual Participation and Reinsurance Symposium
The show kicked off with a half-day event looking at reinsurance. Jim Ganther, Mosasic Compliance Services, was the emcee for the event, with four speakers: Mark Macek, president, U.S. Warranty Corp.; Steve Mailho, president, Mailho Co.; Steve Barrett, executive vice president, Resource Automotive; and Hugh Barit, chairman and CEO, PRP Proforma Ltd.

“By all measures it was a huge success,” said Ganther. “In the months leading up to the Symposium, its viability was questioned by some agents; after all, isn’t reinsurance as a topic about as exciting as watching paint dry? Not so. After the strong audience reaction to last year’s presentation on reinsurance by Randy Crisorio and Greg Petrowski, it was clear there was interest in an expanded treatment of the topic. When it finally came to pass, the room — with seats for 400 — was overflowing, and remained so for the duration of the program. Additional seats were brought in to accommodate the attendees left standing in the back, but even these were not enough to give everyone a chair.”

Macek’s session covered retros, dealer obligors and dealer-owned warranty companies. He explained the differences between each type of structure, and gave the pros and cons of each to the attendees. Mailho and Barrett took on “controlled” and “non-controlled’ foreign corporations. They disagreed on which was a better format, with each devoting a session to their specific type. At the end of the day, the best advice is for anyone looking to set up either one is to seek council, so they know all the benefits and risks before starting on either path.

Barit wrapped up this part of the conference by addressing what to do with the cash any reinsurance plan will generate. He broke down the complicated terminology — such as what, exactly, an asset allocation strategy is and how to use one — and gave attendees concrete ideas on how to proceed.

In all, the Reinsurance Symposium was a huge success and will definitely be repeated at the next Agent Summit.

The Nitty Gritty
The Agent Summit agenda kicked off with a keynote from Joel Kansanback, president, Automotive Development Group. He noted that the playing field for agents is changing quickly — there were 22,250 franchise dealerships in 2000, and only 17,540 in 2012. “That changes the landscape for us,” he said. More and more, he went on to note, those franchise dealerships are being held by large public companies, which have different expectations as to what they expect from agents than a smaller, single dealer or group, would have. And those smaller opportunities are where most agents find their sweet spot.

To reach that group, he said, “you have to solve a problem, and be a compelling option.” He went on to say agents need to be more proactive on all levels — with identifying and solving problems before the dealer even knows about them, to offering training before they are even asked. “Become a partner agency,” Kansanback said, “and set yourself apart from everyone else.”

Scott Karchunas, president, Protective Asset Protection, started day two of the show with a look at the economics of F&I. He is, overall, very optimistic about the current state of the industry. But he asked the agents in attendance, “Is that good enough, or should we be looking to grow beyond the good job we’re doing today?”

Times are good now, he noted, but it comes with an industry that has changed dramatically. The model for vehicles in general went from a push model, where OEMs sent models and products to dealers to sell to the customer, to more of a pull model, where the vehicles are shaped by customer preferences and demands. Now, he noted, is the time to innovate and invest in ideas, while the cycle is profitable, so both providers and agents can differentiate themselves in the market.

“The car is now an extension of technology and experiences that make up our daily lives,” Karchunas said. “F&I products must become part of that experience. We need to look ahead, rather than wait for demand to happen. We have got to be part of the conversation, or others will define it for us.”

Rich Moore, director of training, Protective Asset Protection, took a more direct approach with his session on prospecting dealers, challenging agents to create a “hypothesis of need” — how you will make that dealer better — that you know by heart before ever making the first call. This, he told attendees, will help position the agency from the start as a business peer, rather than a vendor. “You need to know why you’re calling, and exactly what you’re going to say,” he said.

To do that, Moore suggests taking a “3×3” approach, where you start with learning three items about the dealership to build your hypothesis of need, and then you take three minutes to begin the conversation and expand on that. At it’s heart, he noted, this is a process that takes time, because you’re building a relationship. “Become a conduit for sharing information,” he said. “Don’t talk about how great your product is; talk about what they want to hear about. They hate talking to sales people, but they love talking to other executives.”

Peter Chafetz, national sales training manager, Allstate Dealer Services, took a similar approach in his own session, noting that when it comes to an agent reaching their full potential, differentiation matters. “Sales people fail to reach their potential because they don’t fully understand the rules of the game, or the dynamics of the environment it’s played in,” he told attendees. “They fear losing something they never had in the first place.”

He told agents that it is they who decide who and what they want to be, and that the deals they get in the future are based, in part, on the deals they already have. “If you don’t deliver results,” he told them, “you will be vulnerable.” Like Moore, he noted that one of the most important pieces of information an agent can have when calling on a new dealer is “why should [the dealer] be willing to hand over a multi-million dollar piece of their organization to you?”

More to Come
Each panel held a wealth of information for attendees, and these were only some of the sessions that had attendees talking. The board of directors put together a list of sessions that gave agents the information they needed. And next year is already shaping up to break all records.

Every agent looking to increase their business, and profits, should start making plans now to attend next year’s show. It is scheduled for March 10–12, 2014, and will be held at Caesars Palace for a third straight year. We’ll be looking forward to seeing you there.

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What, Exactly, is a Dealer-Owned Warranty Corp?

One type of service contract program available to dealers is a dealer-owned warranty company. But as an agent, knowing what that is and how it works, and how it will effect the dealers you sell it to, is important. Mark Macek, president, United States Warranty Corp., addressed attendees at Agent Summit 2013 in March, educating them on what, exactly, a dealer-owned warranty company is, and how it benefits the dealers.

In this type of structure, the dealer actually forms a separate c-corporation structure, apart from the dealership itself, for the sole purpose of writing service contracts. The new entity, owned by the dealer, then becomes the obligor, and in a sense, the actual provider. In Macek’s case, U.S. Warranty handles all of the back-end functions and takes an admin fee out of each contract for that purpose. It’s important to note, however, that depending on the provider the dealer sets the reinsurance program up with, how those fees and taxes are handled can differ.

“This is their company, they own it,” said Macek. “We don’t touch their funds; all funds flow through the dealership. So things like coverage, rates, etc. are all controlled by them, based on the underwriter’s approval”

Basically, the dealer gains the ability to control every aspect of the service contract, from what coverage is offered, to what the rates are set. “We tell dealers to make it better than the factory warranty, or what’s currently on the street,” Macek said. Examples include offering first day rental, or providing extended rental terms. This entices the customer to buy the dealership’s contract over another option.

And that’s important, because at the end of the day, it’s a way for the dealership to increase profits. Macek gave an example of an $1,800 policy. Of that, $900 would go to the dealership as profit. Another $900 would go back to the warranty company the dealership owns, because in this case, it is a separate entity. Of that money in the warranty company account, a small amount would go to pay U.S. Warranty’s admin fee, and the rest would be profit after claims are paid. The money is then earning compound interest while in the investment account. The dealership warranty company can then use that profit however they wish, from loaning it back to the dealership, taking out dividends, etc. It can even be used as part of an incentive program to help keep managers or key F&I personnel attached to the dealership, giving them a stake in the warranty company and it’s profits.

In the end, rather than have the profits controlled by an outside party, this structure allows the dealership to have complete control over the cash, and complete transparency as to where that cash is invested. It gives dealers looking for a hands-on approach a great way to manage their own program. And it doesn’t have to just be service contracts. Macek pointed out that other products, like prepaid maintenance, or dent and ding, could easily be fit into this structure as well.

“It’s about more profit, and more transparent transactions. It’s a beautiful thing,” Macek said. For more information about dealer warranty corporations, e-mail email hidden; JavaScript is required.

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Provider Innovator of the Year Award Goes to F&I Express at Agent Summit 2013

San Pedro, Calf. – F&I Express’ automotive sales ExpressTablet iPad application for agents and providers was the winner of the first-ever Provider Innovator of the Year winner. The award was presented on March 5, 2013 in Las Vegas at the third annual Agent Summit organized by Agent Entrepreneur and F&I and Showroom. Tariq Kamal, co-chair of the eventt, presented the award to Brian Reed, president and CEO of Intersection Technologies – F&I Express.

“We received thousands of votes and F&I Express was the clear winner,” said David Gesualdo, Agent Summit Chair. “Brian Reed and his team brought game-changing technology to the market, and agents rewarded them for it.”

“Being awarded Provider Innovator of the Year recognizes that F&I Express not only knows technology but understands how to solve problems for the aftermarket F&I industry,” said Reed. “The ExpressTablet iPad application was designed as a mobile office solution for aftermarket F&I agents and providers and represents a significant advancement in tools to help the aftermarket F&I industry.”

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What If?

At the main keynote session given at yesterday’s Agent Summit in Las Vegas, celebrity musician and motivational speaker Mike Rayburn entertained the attendees, but also imparted a bit of wisdom that was repeated throughout the rest of the sessions. It was a simple question: What if?

Rayburn challenged attendees to break themselves out of their self-imposed mental boxes by asking that simple question. It doesn’t matter if it’s impossible, the challenge is to ask the question. What if we could build our ultimate F&I product? What would it look like? What would it do? As an agent, what if you could create the ultimate perfect portfolio? What would you want it to have? What if you could quadruple your sales? How would you do it? What if?

That idea was echoed the rest of the day, as speakers one after the other deviated from their planned talks to ask that same question. They challenged the packed rooms again and again to go beyond where they are today – even if where they are is profitable right now. The trick that Rayburn proposed, and others agreed with was simple – if you start off by imposing limits on yourself or your organization, then you are setting yourself up to be stuck in that same place. But by stepping outside of the comfort zone and forcing yourself, your team or your entire organization to dream big, then you have the start of real growth and innovation.

Rayburn took that concept one further, and challenged everyone to not just ask the question, but to come up with a goal that, right now, seems impossible. Set the bar so high, everyone you tell about it thinks that you’re a little crazy. Then ask – how would I get there? And start trying to achieve it. You might not reach it, and the odds are good it will change as you move forward, but, he again stressed, if you aren’t aiming high, then you won’t reach your full potential.

It was a powerful keynote that resonated with many in the crowd, and left a lasting impression. And it was just one of the many great sessions the show has had to offer so far. We’ll have more information in the coming issues, including a lot of great information from the speakers themselves on the topics they covered, but for now, I leave you with the thought that has inspired many in attendance in Las Vegas this week: What if?

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