PSADA Winter 2010 by PSADA

So, who measures up? In an independent survey* of Service Managers nationwide, the company chosen number one for fluid maintenance products, services and equipment was BG Products. And, when asked the reason for using BG, their number one response was product quality! The result: BG Products means more satisfied customers, fewer returns and more profits for your dealership.

*Scientific, independent survey of U.S. new car dealerships conducted by The Research Partnership, Inc. 2008.

The Puget Sound Dealer

A Message from the Editor

Official Publication of the Puget Sound Automobile Dealers Association 16101 Greenwood Avenue N Bldg 2100 Seattle WA 98133 The Power of Dealers Phone: 206 542-3551 This July marks the 32nd anniversary of PSADA’s historiFax: 206 542-7561 Email: jim@psada.com cal relationship with Shoreline Community College (SCC) and www.psada.com the Professional Automotive Training Center (PATC). More

President Sue Byers Bob Byers Volvo, Seattle 1st Vice President Jason Courter Honda Auto Center of Bellevue 2rd Vice President Jim Morino Acura of Lynnwood 3rd Vice President Sara Carter Carter Subaru, Shoreline Immediate Past President Craig Campbell Campbell Nelson Volkswagen, Edmonds Campbell Nelson Nissan, Edmonds Trustee Steve Klein Klein Honda, Everett Mike Scarff Mike Scarff Subaru of Auburn PSADA Staff James R. Hammond Executive Director Ron Olson A-YES State Manager Joyce Nichols Executive Assistant Linda Halverson Office Manager Susan Leonhardi Secretary

Inside this Issue

For information on advertising in this publication contact Jim Aitkins Blue Water Publishers, LLC 360.805.6474

Cover photo by Mark Cutshall 4

than 30 years ago the PSADA/SCC relationship was the first major manufacturer-specific automotive industry/education initiative designed to serve new car dealers on a community college campus. What happened, thereafter, is historical and has involved thousands of men and women in hundreds of new car dealerships and multiple automotive factory headquarters who believed in the dream and helped make it happen. What started as a small NADA “Fundamentals of Automotive Service Technology” program in Chuck Olson Chevrolet’s dealership garage, has blossomed into the nation’s #1 automotive training center which has inspired dealer associations across America to follow suit. Recently, the PATC completed its Phase Two expansion of the facility which created sorely needed space for the Center’s rapidly growing programs. Today, thanks to the belief and support of our dealers, the expanded PATC has the nation’s top rated post-secondary programs for Toyota T-TEN, GM ASEP, Chrysler CAP, and Honda PACT. At the PATC lives are being changed daily and young people are finding satisfying and successful technical careers in new car dealerships. Recently Hyundai Motors America became the PATC’s newest manufacturer with a permanent regional training facility in the Center serving their dealers. Hyundai joins Toyota, Chrysler, and Volvo as permanent building tenants, as well as a host of other manufacturers that use the PATC on a regular basis. As many as 10,000 dealership people are trained at the PATC annually. And, with this newest expansion, Snap On Industrial and Hunter Engineering now have permanent training rooms and quads that provide regional training for their needs as well as an incredible interface for our post-secondary manufacturer programs. Thirty-two years ago who would have dreamed that the PATC would become the comprehensive and nationally recognized center that it has become. And it all comes from “dealer power.” Dealers and their manufacturers dared to believe that what was accomplished at the PATC was possible. The close partnership and vision of Shoreline Community College, dealers, and PSADA remains strong. And the mission has remained the same for over three decades – “To Serve Dealers.” Jim Hammond Executive Director

Message from the President - Sue Byers

Rumors of LIFO - What’s the Real Story?

Peterson Sullivan - A Northwest Accounting Firm Icon

Creating & Enforcing a Mechanic’s Lien

How Media Buying Has Changed!

Ford President, Alan Mulally, Joins BECU to Give Away Seattle Auto Show Ford Fusion

Jerry Smith - The Heartbeat of a Capitalist

NADA - Preventing Dealership Fraud

Jeff Forsberg - How Financial Tune-ups Became Profitable

Solving Problems

Choose Your Partners Wisely!

Coffee Break - Why Do We Say It?

Increasing Your Bottomline

Building Rapport with Customers

Message from the President

Sue Byers Bob Byers Volvo Seattle

PSADA Can Save You Money

It’s a privilege to be your 2010 PSADA President! You’ve got a great hard-working board here to serve you! There is a lot going on at PSADA headquarters! Our multi-million dollar expansion to the Professional Automotive Training Center is almost complete and will be dedicated in June - you really must come by and see it! It is state of the art and has the most upto-date equipment available. We are so fortunate to have it in our own back yard! I hope you made it to the Seattle Auto Show in November--attendance was up 15%! We haven’t had a double digit increase in years! Thanks to all the dealers and manufacturers for their support and kudos to Jim and crew for pulling it off once again. As dealers we have an endless number of resources available to us. One of the most inexpensive and useful resources is PSADA. I encourage you to log on to www.psada.com so you can check out all of the valuable materials that are available to you at no cost. Last year PSADA put all of its personnel resources, except for employee handbooks, online. The volume of useful products is impressive. Now you have full access to all state and federal forms, and “ready to use” kits and manuals. As you may know, there have been some significant changes made to personnel law this year that affect FMLA, hiring and recruiting processes, employee applications, and discrimination laws. Go to the PSADA website. You can download information and forms that cover all of these topics. All online legal materials are reviewed and approved by Ryan, Swanson & Cleveland and are always kept up to date. To get your login code and password, call PSADA at 206-542-3551. You will find much, much more on this excellent website. Another great tool that can give you terrific information and help you with your dealership planning is the PSADA Wage and Benefit Analysis Report. You should be getting your pdf copy directly to your personal email sometime in early April. It is really an excellent tool. If you would like more information on ways you can use this document, give Jim Hammond or Joyce Nichols a call at our Association office.

Rumors of LIFO.  By Brian Kennett, Partner Peterson Sullivan LLP

What’s Happening on the LIFO Front There hasn’t been a whole lot to talk about on the LIFO (Last-in, First-out) inventory front for quite a while. However, as we approach tax return deadlines for the 2009 tax year, it has garnered a great deal of discussion. Inventory levels are at historic lows for many dealers, and as a result, concerns about LIFO recapture -- and the higher tax liability that comes with it -- have come to the forefront. Despite the legitimate level of concern about LIFO recapture from an operational standpoint, many of the recent articles I have read on the subject, and comments I have heard, seem to be geared less toward providing dealers with useful information, and more toward scare tactics designed to grab their attention. Some have gone so far as to suggest that dealers should have purchased significant inventories prior to year-end in an effort to stave off recapture, or even elect off of LIFO altogether to be able to spread the recapture income over a few years instead of recognizing income this tax year. While these measures may be appropriate for a very few, most would not benefit from them -- and in many cases, they could do more harm than good. LIFO Inventory Accounting - The Basic Concept First, let’s do a mini-refresher course on LIFO. The Last-In, First-Out method of valuation inventory allows the taxpayer to price the value of the inventory at the end of the year at previous years’ costs and thereby shifting the current year’s pricing (generally higher due to inflation) to the cost of the vehicles sold during the year resulting in less gross profit. Less gross profit means less taxable income and therefore less tax. It is that simple. The computation is much more complicated, but that is why you have good automotive tax accountants. Less tax is why roughly seventy- five percent (75%) of the dealer body uses LIFO. The computation itself is much more complicated -- it is a function not only of the inventory you have on hand at year-end, but of changes in the cost of that inventory relative to prior years. Where new vehicle LIFO is concerned, there are services that specialize in tracking this cost data, and complex software programs designed to assist in calculating the reserve. Due to the complexity involved, the outcome of the LIFO calculation may not always be intuitive.

The Benefit of LIFO Generally, I believe that almost all dealers should be on LIFO for new vehicles. Most dealers benefit from LIFO, especially in the long-run. The LIFO reserve represents deferred taxable income and is effectively an interest-free loan from the government on the tax that would otherwise be due on that income. The interest saved from the free use of those funds will almost always exceed the computation cost. The longer you are on LIFO and the larger the reserve becomes, the more benefit you stand to receive. This may seem like an oversimplification, but as costs rise over time, the basic premise underlying LIFO should hold true. It won’t change unless Congress decides to take away the LIFO method altogether. (See the “Real News with LIFO” below.)

impossible. That, combined with some Chrysler and GM dealers losing brands and dealers really managing their inventories, resulted in many dealers ending up with very low inventory levels across most lines.

it -- increased floorplan costs, more lot attendant time to maintain it, and a potential drag on the morale of sales staff, not to mention stress at the manager and owner level from the “weight” of the inflated inventory.

Conventional wisdom would have you believe that when inventory is up you have increase in LIFO reserves and that when they go down the opposite is true and the reserves go down. This is not necessarily the case and, in fact, you can have a LIFO increase with a small decrease in inventory levels. That said, it is true that a significant decrease in inventory it likely to bring at least some recapture of LIFO reserves. It is this situation that some of the other articles are using to scare dealers to grab their attention.

These costs -- explicit and implied -- can wipe out, or certainly reduce significantly, any tax savings you may garner by artificially supporting your inventory at year-end. You never want to have the tax savings “tail” wag the operational “dog.” The Decision to Elect Out There are only a couple of situations where a dealer should consider the drastic decision of terminating their LIFO election. One such case is with a few single point dealers -- they are phasing out their operations and have no other

You never want to have the tax savings “tail” wag the operational “dog.”

2008 and 2009 Year Ends I don’t have to tell you that the last two years have been quite challenging for the automobile business. The 4th quarter of 2008 was one of the worst quarters in decades for new vehicle sales. It led to bulging new vehicle inventories for most -- especially domestic dealers whose manufacturers were dumping inventory to stay afloat. Many dealers saw their LIFO reserves increase at year-end due to the increase in inventory levels.

The end of 2009 was just the opposite. Whatever you thought of the “Cash for Clunkers” program, it certainly was very good for most dealers. Many of my clients had record profit months. The program, however, really took a toll on inventories (in some cases it was a great thing for dealers to rid themselves of a few vehicles that had been aged). With many manufacturers having previously shut down plants, building those inventories back up was a challenge, if not

Inventory Levels and the Use of LIFO Whatever those other articles may say, this fact remains: a dealer should keep the level and mix of inventory to meet their individual sales needs and goals, and let the LIFO calculations fall wherever they may. I highlight this statement because it is extremely important. A dealer should never just add inventory for the sake of the LIFO reserve. To change the level and mix of your new vehicle inventory to maximize the LIFO tax deduction is a dangerous game. It seems unlikely that manufacturers will have the inventories to support extra allocations of high-demand models. The units you end up with are likely to be the ones that are a harder sell. This can, of course, easily lead to over-aged inventory and all the negatives that come with

new vehicle franchises to bolster their inventory. The other such case is one year before the sale of all of the dealership’s assets. In both scenarios, it may be to the dealer’s advantage to terminate their LIFO election. That way, the taxable income from the recapture of the reserve would be spread out over the next four years, instead of essentially having it brought in over two years -- 2009 and 2010 -- as new vehicle inventory is reduced to zero. But these situations are fortunately few, and the dealer need not make this decision until the filing of the return, giving the dealer time to consider other options. To terminate a LIFO election just because year-end inventories are low, however, could be short-sighted. Not only is there a possibility that the recapture in 2009 might not be as great 9

as you think, you would preclude yourself from realizing the benefit of future deductions as inventory levels are restored in 2010 and forward. Once you elect to go off of LIFO, you are not only locked into bringing the entire reserve into income, you cannot elect to go back on LIFO for a period of five years. The Real News with LIFO The real news to consider where LIFO is concerned is not the prospect of short-term recapture due to low inventory levels, but rather a few significant voices in Congress advancing an argument that LIFO should be repealed altogether. To many automotive CPAs, including myself, it is this that dealers should really be worried about. If the LIFO method is taken away, it will not only be off the table for future years, but those who are currently on LIFO will be required to bring their reserves into income. Under most proposals, this recapture is spread out over a number of years -- in some cases a longer period than is provided if a dealer voluntarily elects to go off of LIFO under existing law. This may be of little consolation, however, to a dealer whose reserves are running in the millions, especially when combined with the prospect of increased tax rates. The Take-away The use of the LIFO method of valuing inventories is almost always a good thing for dealers. Inventory level should always be what you need for your operational and sales goals and efficiencies and should not be influenced by the potential LIFO or other tax ramifications. While 2009 year end inventories will generally be low, only a very few should consider terminating their LIFO election. Your qualified automotive tax accountant will be able to assist you with these kinds of challenges. I hope this begins to answer some of the questions that have been posed by certain articles posted in various automobile dealership publications and/or suggestions from twenty group leaders and others. As with this issue and any other tax or accounting issue please contact a qualified automotive CPA. 10

Peterson Sullivan A Northwest Accounting Firm Icon Peterson Sullivan has come a long way since the start of the firm in 1952. At that time, a young audit manager, Ralph Peterson, wasn’t satisfied with his job at Touche Ross (now known at Deloitte and Touche) and decided it was time to make a change. Ralph thought buying his own practice would be an ideal opportunity - thus began his search. Ralph purchased a practice from a man named Ray Fisher who was serving about twenty-five auto dealership clients. This was the auspicious start of Peterson Sullivan. Although Peterson Sullivan has moved their office a couple of times, they have remained in the heart of downtown Seattle and are now in the Two Union Square Building. What has also never changed is that they have continued to serve the auto dealership industry under the same name for over 50 years … but their auto niche has grown a great deal since the original twenty-five dealers. Today, the firm is recognized as the Puget Sound industry leader providing excellent service to over one hundred auto dealer clients, mostly in the Pacific Northwest. Peterson Sullivan is one of the only CPA firms approved to perform audits for GM’s Motor Holdings Division and is the only Washington State member of the exclusive AutoCPA Group. Way back when Ralph Peterson started his practice, there was one bookkeeper and one CPA. Today, Peterson Sullivan is among the top ten accounting firms in the Pacific Northwest with over 90 professionals including 11 Partners. In addition to the thriving auto dealership niche, the firm has expanded to provide services to closely held and publicly-traded companies, individuals, non-profit organizations and a wide variety of clients and industries including biotech, high-tech, hospitality, manufacturing, real estate, retail/wholesale, construction contractors, investment advisors, and energy. Joining Moore Stephens, a global accountancy and advisory association with its headquarters in London,was a perfect fit for Peterson Sullivan. “There were a number of reasons we joined Moore Stephens North America,” says Chris Russell, Partner. “Our partners are constantly looking for opportunities to better serve our clients. We see our association with Moore Stephens as another way for us to connect with our clients locally and globally, while furthering our continued commitment to firm growth.” “Peterson Sullivan has been an active part of the Seattle business community. As our clients continue to expand across the nation and throughout the world, we believe our affiliation with Moore Stephens provides us with the global reach we need to best serve them,” adds Ray Holmdahl, Partner and Chair of the Firm’s Executive Committee. “The world economy has greatly expanded – far beyond its historical boundaries. In today’s market, it is fairly commonplace for a client to need tax advice for an acquisition in the U.K., or an inspection of a mining property in Brazil, or their inventory counted in Russia. Moore Stephens fits the ever expanding international demands of our practice perfectly.

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Peterson Sullivan LLP, one of the nation’s most successful specialists in auto dealership accounting, serves more than one hundred dealers in the Pacific Northwest. We are one of only a few CPA firms approved to perform audits for GM Motor’s Holding Division. And we are the only Washington State member of the exclusive AutoCPA Group. Following are only a few of the many areas where we are trusted advisors to our automotive industry clients: UÊ >Ã ÊV ÌÀ ÃÊÊ UÊ ÌiÀ > ÊV ÌÀ ÃÊ UÊ ÃÌÊÃi}Ài}>Ì ÊÊ UÊ ,-ÊÀi« ÀÌ }ÊÀiµÕ Ài i ÌÃÊ UÊ i> iÀÃ «ÊÛ> Õ>Ì ÊÊ UÊ -> iÃÊ> `Ê E"ÊÌ>ÝÊV ÃÕ Ì }Ê UÊ ÃÌ>ÌiÊ> `ÊÃÕVViÃÃ Ê« > }ÊÊ UÊ />ÝÊ« > }Ê UÊ > V > ÊÃÌ>Ìi i ÌÊ> > ÞÃ ÃÊ We believe strongly in building long-term relationships with our clients. We aim to understand your business so well that our advice becomes indispensable. Please contact Kevin Allison to see how we may assist your business needs at (206) 382-7777 or by email at kevina@pscpa.com. Peterson Sullivan. Driving your success.

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Creating & Enforcing a Mechanic’s Lien

By Rick Lentini and Amanda Bley Ryan, Swanson and Cleveland

An automotive mechanic’s lien is a statutory lien governed by RCW 46.71 (otherwise known as the Automotive Repair Act or “ARA”). The ARA is a consumer protection statute designed to “increase consumer confidence; reduce the likelihood of disputes arising; clarify repair facility lien interests; and promote fair and nondeceptive practices…” RCW 46.71.005. Dealers must scrupulously comply with the ARA’s requirements to assert their lien rights. I. Right to a Lien

A mechanic is entitled to enforce a lien for the value of parts and services provided to a customer only if the mechanic fully complies with the following three requirements of the ARA: 1. Replaced parts are returned to the customer if requested by the customer (RCW 46.71.021); 2. A written cost estimate (or statutory alternative) is provided to the customer (RCW 46.71.025); and 3. The required signage is properly posted (RCW 46.71.31). If any of the above-mentioned requirements are not met, the lien is barred for the value of unauthorized parts or labor and the customer may be entitled to damages. Each requirement will be more fully discussed below. A. Replaced Parts Must be Returned to the Customer upon Request Under RCW 46.71.021, “the repair facility shall return replaced parts to the customer at the time the work is completed if the customer requested the parts at the time of authorization of the repair.” There are two exceptions to this general rule. First, parts covered by warranty or parts that must be returned to a distributor need not be returned to the customer. If a customer requests return of such a part, the mechanic must only offer to show the part to the customer before the part is sent back to the distributor. Second, parts that must be disposed of according to law need not be returned to the customer. Again, if a customer requests return of such a part, the mechanic need only offer to show the part to the customer before properly disposing of the part. B. Written Cost Estimates and Statutory Alternatives Under RCW 46.71.025, a mechanic “shall provide the customer or the customer’s designee with a written price estimate of the total cost of the repair, including parts and labor…”

All estimates that exceed one hundred dollars shall be in writing and include the following information: the date; the name, address and telephone number of the mechanic; the name, address and telephone number, if any, of the customer; if the vehicle is delivered for repair, the year, make, and model of the vehicle, the vehicle license plate number or last eight digits of the vehicle identification number, and the odometer reading of the vehicle; a description of the problem reported by the customer or the specific repairs requested by the customer; and a choice of alternatives described in the statute… Whether or not a written estimate is required, parts and labor provided by an automotive repair facility shall be clearly and accurately recorded in writing on an invoice and shall include, in addition to the information listed [above], the following information: a description of the repair or maintenance services performed on the vehicle; a list of all parts supplied, identified by name and part number, if available, part kit description or recognized package or shop supplies and an indication whether the parts supplied are rebuilt, or used, if applicable or where collision repair is involved, aftermarket body parts or nonoriginal equipment manufacturer body parts, if applicable; the price per part charged, if any, and the total amount charged for all parts; the total amount charged for all labor, if any; and the total charge. RCW 46.71.015. After properly documenting all above-mentioned information on the estimate, the mechanic must have the customer sign (verifying its receipt and contents). There is one exception: If the customer’s vehicle was brought to the mechanic’s regular place of business

without face-to-face contact between the customer and the mechanic, the mechanic is not required to give the customer a written estimate. Face-to-face contact means “actual in-person discussion between the customer or his or her designee and the agent or employee of the automotive repair facility authorized to intake vehicles or components.” RCW 46.71.025(3). Where there is no faceto-face contact, a mechanic must obtain either oral or written authorization of the customer or customer’s designee prior to beginning repairs. Accordingly, the employee receiving the authorization must note on the estimate or repair order the date and time of obtaining authorization, the total amount authorized, the name or identification number of the employee who obtains the authorization, and the name of the person authorizing

and they would “check it out.” Seattle Engine obtained neither oral nor written authorization prior to disassembling the engine and determining the cause of the failure, but argued that Ms. Campbell’s act of bringing the engine into their shop impliedly amounted to authorization for such repairs. Rejecting this argument and Seattle Engine’s lien claim, the court stated Because the ARA is a remedial statute, its provisions must be liberally construed. In particular, full effect must be given to the plain language of the ARA ‘even where the results sometimes seem harsh to the mechanic’s interests.’ The relevant provision in this case, RCW 46.71.050, expressly states that an automotive repairman’s right to assert a lien is barred in the absence of ‘oral or written authorization of the customer.’

Whether or not a written estimate is required, parts and labor provided by an automotive repair facility shall be clearly and accurately recorded in writing on an invoice. the repairs. RCW 46.71.025(3). Washington Courts require strict compliance with ARA requirements. To illustrate, in Campbell v. Seattle Engine Rebuilders & Remanufacturing, Inc., 75 Wn. App. 89, 876 P.2d 948 (1994), Seattle Engine failed to preserve its right to assert a mechanics lien against Ms. Larena Campbell’s automobile by failing to adhere to the estimate documentation requirements. Seattle Engine rebuilt an engine for Ms. Campbell in 1991. After 3,000 miles, the engine failed and Seattle Engine, via telephone, told Ms. Campbell to bring the engine in

Here, Campbell gave neither. The Campbell case illustrates the importance of both recognizing and adhering to the requirements of the ARA. A failure to do so may result in the loss of the mechanic’s right to assert a lien for payment and potentially monetary damages. C. Required Signage Under RCW 46.71.01, an automotive repair facility shall post in a prominent place on the business premises one or more signs readily 13

YOUR CUSTOMER RIGHTS

YOU ARE ENTITLED BY LAW TO:

1. A WRITTEN ESTIMATE FOR REPAIRS WHICH WILL COST MORE THAN ONE HUNDRED DOLLARS, UNLESS WAIVED OR ABSENT FACE-TO-FACE CONTACT (SEE ITEM 4 BELOW); 2. RETURN OR INSPECTION OF ALL REPLACED PARTS, IF REQUESTED AT THE TIME OF REPAIR AUTHORIZATION; 3. AUTHORIZE ORALLY OR IN WRITING ANY REPAIRS WHICH EXCEED THE ESTIMATED TOTAL PRESALES TAX COST BY MORE THAN TEN PERCENT; 4. AUTHORIZE ANY REPAIRS ORALLY OR IN WRITING IF YOUR VEHICLE IS LEFT WITH THE REPAIR FACILITY WITHOUT FACE-TO-FACE CONTACT BETWEEN YOU AND THE REPAIR FACILITY PERSONNEL. IF YOU HAVE AUTHORIZED A REPAIR IN ACCORDANCE WITH THE ABOVE INFORMATION YOU ARE REQUIRED TO PAY FOR THE COSTS OF THE REPAIR PRIOR TO TAKING THE VEHICLE FROM THE PREMISES.

visible to customers, in the above form. The first line of each sign must be in letters not less than one and one-half inch in height and the remaining lines shall be in letters not less than one-half inch in height. As a good business practice, posting these customer rights in a location also visible to employees can remind employees of the ARA requirements. II. Right to Payment Separate from recovery under the ARA, a mechanic is entitled to payment for all money owed for the repair. This is the rule regardless of whether the mechanic does or does not comply with the terms of the ARA; however, the mechanic must prove that all repairs were authorized, either orally or in writing. This concern arises where the total cost of repairs clearly exceeds the estimate (by at 14

least 10%). In such a case, the mechanic may not recover for all repair charges in excess of his or her authority. III. Right to Foreclose a Lien Where the mechanic adheres to all above-mentioned ARA requirements and a customer fails to pay for the labor and parts provided, the mechanic may choose to foreclose the mechanic’s lien. To do so, the mechanic must have possession of the vehicle. Generally, attempts to repossess a vehicle already removed from the mechanic’s premises are futile. Therefore, it is important to decide whether to enforce the lien before the customer takes possession of the vehicle. Foreclosure may be accomplished either through a judicial process involving the courts or through the use of a summary procedure. The summary procedure

provided by statute involves selling the vehicle in a commercially reasonable manner following notice to the owner and subordinate lien holders. This procedure may be the most advantageous where a customer decides to abandon the vehicle at the mechanic’s shop as the mechanic need not wait any certain number of days before foreclosing. Remember, however, that prior lien holders (such as a bank or finance company appearing on title) have priority over the later mechanic’s lien. At any time before the mechanic has disposed of the vehicle or entered into a contract for its disposition, the customer or any other secured party may redeem the vehicle by tendering payment of all obligations incurred by the mechanic in holding and preparing the vehicle for disposition, arranging for the sale, and reasonable attorneys’ fees and legal expenses. IV. Risks of Non-Compliance Failure to comply with the foreclosure statute may subject the mechanic to liability for damages incurred by the customer or damages amounting to ten percent of the value of the lien. Violation of the ARA in this regard also leads to a per se violation of the Consumer Protection Act, which may subject the mechanic to treble damages and payment of the consumer’s attorneys’ fees. V. Conclusion The mechanic’s lien procedure is technical, with numerous opportunities for error. Keep in mind that compliance with these rules is not only the law, but good business practice. Establishing clear procedures in line with ARA requirements can prevent costly mistakes. Properly educating employees about the ARA requirements and your estimate procedures is key to preserving the right to a statutory lien.

  By Kathy Neukirchen Media Plus+

Things change and we all have to adapt to these changes to stay relevant and do the best job for our clients. That being said, we’ve gone from a few choices to a lot of choices to too many choices. Whatever the next new thing is gets a lot of hype, marketers scratch their heads and ask “what does this mean to me”, and after a few years the new thing that sounded like the next big thing has gone away because it wasn’t, or it was and we have found its true worth and embraced it. Or as other wise sages have put it more eloquently, “we always overestimate the short-term impact of technology and underestimate the long-term impact.” While it is exciting to want to jump on a bandwagon, I have always cautioned our clients and peeps here at Media Plus+ to remember that they and we need to be in business tomorrow as well as five years from now. So, it is important to deal with what is happening right now while making sure that we are preparing ourselves for what will be. And how do we do this – by understanding the relative benefits of each medium and where it fits in the product purchase cycle and separating hype from reality. So, regarding TV, it is considered forward-thinking to say that “nobody watches TV anymore”. In reality, however, TV still garners the largest share of most clients’ ad budgets, and

while the TV landscape certainly has become more fragmented, TV viewing (number of hours viewed daily) has never been higher due in large part to more TVs in the home, more content to choose from and DVRs. So buyers have to be smarter, and understand and dissect research better, when selecting networks/programming for their client’s product or service. As an example, I am a fan of high body count movies and lose count of the number of XBOX 360 commercials I see in them. So obviously, high body count TV is still a good medium to reach men 18-34 (and me). We know that TV is still the strongest brand builder, but it also puts a client’s product or service on the consumer’s shopping list, and it is a big web driver. Big changes have come to buying radio, brought on for many reasons, but most notably by PPMs (Portable People Meters). While there has been a certain amount of wailing and gnashing of teeth over PPM data (versus what we believed based upon the previous diary method), PPMs are an improvement in the way radio listening data is compiled and what can be made available. As with TV, it has never been more important to have proper research and the tools to analyze it. Respondent level data (RLD) lets us look beyond standard dayparts, takes a close look at ethnic audiences and 17

Ford President, Alan Mulally, Joins BECU To Give Away Seattle Auto Show Ford Fusion Giving away a car at the Seattle Auto Show in November 2009 was a first for Boeing Employees Credit Union (BECU). Having Ford CEO Alan Mulally show up to help deliver the vehicle to the lucky winner was another first. The contest was sponsored for BECU by AutoNation. The delivery took place at Ford Lincoln Mercury of Bellevue. The lucky winner was Rosie Lemoux from Tacoma, Washington. This was the second year in a row that BECU sponsored the Seattle Auto Show as a major corporate sponsor, promoting the event to its 600,000 credit union members. From left to right, Luk Blackwell, General Manager of Ford Lincoln Mercury, Bellevue; Alan Mulally, President and CEO of Ford Motor Company; Rosie Lemoux, from Tacoma and winner of the Ford Fusion; and Todd Pietzsch, from BECU. (Photo BECU).

Media from page 17

lets us drill down demographically and geographically. While we used to have to rely on station sponsored research to provide individual sporting event audience/ ratings, RLD now lets us pull this data. And what we are seeing isn’t good. PPM data shows sports draw a fraction of the radio audience past phone-based research indicated. Might we be seeing performance based media/sports contracts? With the compression of radio station ratings, RDL data adds an important other dimension to buying radio. In just the past five years, we have seen major changes in online. Larger shares of client budgets are allocated to it while, at the same time, CPMs (cost per thousand) are dropping dramatically as the marketplace is inundated with inventory. Ad networks can be purchased at a few dollars per thousand impressions, and 18

remnant space can be had for $.60 per thousand. Honestly, I don’t see how sites can stay in business with such low rates. Glad we’re on the buying end. Growth in regional spending is coming in large part due to geo-targeting technologies. While local sites are valuable for local news and information, online users spend most of their time on national sites. Geo-targeting gives local/ regional marketers access to these on-line audiences and real-time ROI provides copious amounts of data, such as tracking cost-per-click to cost-per-acquisition. We can expect more audio-visual components to become available and, unfortunately from a user perspective, bigger, more intrusive ads. All of this means that buying firms such as Media Plus+ are adding Atlas or DoubleClick or

Nielsen Net Ratings – and the software to manipulate it – to their research arsenals. Oh, and then there is the growth in social media as marketers switch from just reaching consumers to developing a relationship with them. It is becoming increasingly important in the mid-point of the purchase cycle – when consumers are gathering data – because social media is such an influencer via opinion and word of mouth. Kathy Neukirchen is President of Media Plus+, one of the largest media agencies in the Pacific Northwest. Her expertise extends back to the 1970s. For more information about media please contact Kathy at 206-282-5677 or Kathy@mediaplussea.com .

Finding the right navigator is crucial for the journey.

Join us June 24–25 in Phoenix as our experienced professionals present our fourth annual

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Everett | Seattle | Tacoma

CERTIFIED PUBLIC ACCOUNTANTS BUSINESS CONSULTANTS

W W W. M O S S A D A M S .C O M 19

Mark Cutshall

Jerry Smith The heartbeat of a capitalist By Mark Cutshall

Hungry, broke and getting skinnier by the week, Jerry Smith stood in line at the grocery store with everything he planned to eat that coming week: a carton of eggs and a small block of cheddar cheese.

He remembers standing back in that checkout line and admits, “I’ve been broke, but I’ve never been poor.” He has more than a pocketful of memories to prove it.

In the summer of 1975, with graduation from the University of Washington a year away, he was paying the cost of a double-dip economic recession. His last quarter of tuition, $188, had drained his entire life savings.

Unlikely auto career Most people retrace their past with photographs; Jerry Smith uses roadmaps.

“I was just about ready to sell my camera, because I needed the money to eat.”

“Growing up in Glendale, and then Pasadena, and then Balboa Island at Newport Beach, California, and finally Puget Sound, I had no family. What I had were friends and relatives who said, ‘Come live with us.’”

Huck Trudell at University Ford needed a salesman, and fate steered Jerry into his office. “They really did wear plaid jackets and white belts,” he recalls.

“I lived in a lot of very functional households. Because of that I learned there are a lot of ways to do the right thing. And I had a lot of opportunities.”

Several months later, the dealership went under, but not before Jerry made his share of sales. “Even though I did all right, I didn’t want to have anything to do with the car business.”

Today, he looks out a large living room window of his wooded home in the Seattle Highlands. The people who were there for him years ago remain taller in stature than the surrounding evergreens.

Jerry wanted to make money. “When I was 12 years old, I told people, ‘I didn’t want to be a capitalist. In my mind I already was one.”

There was the next-door neighbor on Balboa Island, John Wayne (yes, the John Wayne, the Duke). “When I was a teenager, he was larger than life, deep voice, outgoing, friendly and honest.”

And there was Frances and Betty Ball with whom Jerry lived during his senior year in high school in Lakewood, near Tacoma. He was an Air Force C141 pilot, and she was a nurse and former army officer who grew up next to Henry Ford (yes, the Henry Ford). “Frances is very gregarious, very positive. Betty was a feminist before the word was invented and remains so today at the age of 90.”

Not problems, but solutions Today, Jerry Smith’s name is on many large signs: Jerry Smith Chevrolet on his fifteen-year old Anacortes complex, Smith Kia of Bellingham, and Jerry Smith Kia in Burlington. “I love telling success stories. I have a director of fixed operations for

“Suddenly, we had to lay off people.” His voice cracks. “In reality, we weren’t laying off people, we were laying off families—husbands and wives, moms and dads and children, who did nothing wrong, who were getting clobbered by the economy, some of whom were in danger of losing their homes.”

And then, by marrying a young woman named Molly, Jerry quickly got to know her father, Chuck Olson (yes, the one and only, on Aurora North).

Turns out Jerry made not one but several moves working at Chuck Olson Chevrolet—from salesperson, to F&I manager, and then to used car manager. “Chuck was, and always will be, a student of the auto industry. Of all the things he’s taught me, perhaps the most important lesson was to do what’s right for the customer, regardless of what it costs. One day at the dealership he said to me, ‘See that sign? That’s my name up there. It takes a lifetime to build a reputation that can be lost in an instant—and that’s never going to happen.’”

Mark Cutshall

“Chuck was, and is, the most honest, hard working, and ethical person I’ve ever met,” says Jerry, who wasn’t yet sold on the man’s livelihood. “Before we got married, I told Moll that, since I expected car dealers to go broke, I needed her to agree with me that her parents couldn’t move in with us.” all three stores who has worked at our dealership longer than me. He actually started out washing cars. This man, Dallas Walkenhauer, has developed an attitude to fix any problem put before him. In fact, there are no customer ‘problems’ in his vocabulary. There are only transportation solutions.” Since becoming dealer-principal in 1991, Jerry has been profitable the first month and is relieved to have been profitable in 2009. “In November 2007 we took a big downturn. In September, business became like a water faucet that got turned off.

In a suffering economy, an eternal capitalist grew rich with hope. “We asked our techs if they would go to a 32-hour week, and they did. We decided there would be no more layoffs. We all bonded together. It was unbelievable how people rallied and supported each other. It made me really proud and honored to work with our people.” Jerry Smith’s affection for education continues to deepen and grow. Two years ago, Governor Christine Gregoire appointed him a trustee of Shoreline Community College.

Attending 24 different schools growing up has earned Jerry a degree of deep affinity for Shoreline’s 13,000 students in nine distinctive programs of study, including automotive tech and nursing. “The community college system is all about giving people access to the quality education they need for building a worthwhile career and a rewarding future. And the most fulfilling thing for me is to be part of the learning community that SCC’s president, Lee Lambert, continues to develop and lead.” Today, Jerry is remarried. His wife, Annie Byrne, is an accomplished advertising executive who recently led the team that brought Bing into the world. His three grown daughters –Sarah, a PhD in theology, who speaks seven languages, Greta, a prosecuting attorney in Olympia, and Anna, a graduate student at the University of Oregon studying for her PhD in physics--remain close to his heart. Because of them--and everyone else who has helped shape his life--Jerry Smith still hungers to help better the life of someone else.

Preventing Dealership Fraud

The opportunity to commit fraud, plainly stated, is a weakness in a company’s internal controls that has been exploited by the fraudster. Whenever fraud occurs, there are three aspects prevalent—the incentive to commit fraud, the rationalization of one’s actions, and the opportunity to commit fraud. While incentive and rationalization are difficult to control, management can prevent many opportunities for fraud by monitoring and updating its system of internal controls. Preventive controls are put in place before a transaction is entered into the company’s books, and include: •

Segregation of Duties – Ensure no one individual has complete control over any one process.

•

Policies and Procedures – Address appropriate behavior, expectations, and consequences.

•

Spending Limits – Assign based on the individual’s role within the company. Thresholds for a second or third reviewer should be defined in company policies and procedures.

•

Preapprovals/Required Approvals – Outline the circumstances under which purchases and/or decisions are approved in advance.

•

Budgets – Establish and prepare on a department-by-department basis.

•

Passwords – Should never be shared or written down; should be of appropriate length and consist of a combination of letters, numbers, and special characters. Passwords should be changed periodically—typically every 90 days.

•

Document Control Numbers – Pre-number invoices and receipts and account for every number.

•

Computer Backups – Back up data on a regular basis and periodically verify the reliability of the backup.

•

Job Rotation – Rotate jobs periodically to ensure adequate coverage in the event of employee turnover, as well as to change who is handling sensitive information on a regular basis.

•

Drug Testing – Conduct before an individual is hired, upon promotion, or on a random basis. An individual with a drug problem will need money to purchase drugs.

•

Credit Check – Conduct before an individual is hired or promoted into a more sensitive position. If hiring for a financial position, be wary of hiring an individual with bad credit—he/she will be coming into the company with incentive to commit fraud.

If you implement one new control, let it be the perception of increased detection and the assurance that the company is willing to impose consequences appropriate to the situation, up to and including prosecution. 23

Mark Cutshall

Jeff Forsberg How financial tune-ups became profitable

By Mark Cutshall

So you think you know your cars? It’s time to test your knowledge of a car-loving CPA who just might be able to save you some serious dollars. The man on the adjoining page: • •

•

once owned 25 vehicles by the time he was 25 works for a firm that assists in the preparation of the financial statements and tax returns for the largest automobile dealer association in the state of Washington has a brother who also is a CPA with ties to the auto industry

More than a taxing profession . . . Looking out from his 23rd floor office at Two Union Square, he recalls, “As the son of a banker, I learned the lesson of credit early on. I used this to my advantage, knowing that establishing credit was my best argument for buying a Honda motorbike from a loan, which I dutifully repaid from a Seattle Times paper route in south Seattle.” “My

The 100-plus dealer-clients Jeff’s firm serves may be surprised to hear him say, “Accounting wasn’t love at first sight for me. I wanted to be an architect, but at the time, architects were doing more drafting work than design, so I chose something that combined my interest in business

“My fulfillment comes from helping dealers learn a faster, better way to track their financials...My goal is to be part of the automotive industry and possibly identify the next big thing that either saves clients money, or generates it.”

“I’ve always been very curious, which occasionally leads me outside the box of financial statements and tax returns,” says Jeff. “The business of car dealerships is rich with variety.”

first exposure to accounting was at Tyee High School in, what is now, SeaTac. Of course, personal computers were still a dream of Bill Gates and Steve Jobs. Back then it was paper, pencil and a ruler. Slide rules were for engineers, but I vividly recall a large mechanical adding machine with rows of buttons and a handle that would intrigue any gadget guy like myself.”

To know Jeff’s story is to appreciate what drives his unbridled curiosity and well-tuned financial mind.

After graduating from Central Washington University with honors, Jeff passed the CPA exam on his first try and became the first in his family

Of course, when It comes to Jeff Forsberg, Partner with Peterson Sullivan LLP, the respected CPA firm that has been involved with PSADA’s financials for years, the answer is “D” – all of the above.

to graduate with a four-year college degree.

and cars. My interest in computers grew after the industry evolved past punch cards.” The sum of Jeff’s career knowledge of accounting, tax and impending legislative issues, plus his inherent love of the industry, has added up big-time for the region’s dealers. “I’m interested in helping dealers wherever I see an opportunity, and sometimes it’s outside the compliance arena of tax 25

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and financial reporting. But accurate accounting records are really a first step and prerequisite to helping dealers. The financial statements are truly a roadmap to improvement only if the data behind them is accurate.”

dealers to call me with their questions— about taxes, LIFO (Last In, First Out) and other financial issues. Often, the question can be answered in a relatively short amount of time and it doesn’t need research. I want them to know the clock is not running.”

images numbers in the thousands. And his enduring love for cars drove him (once again) to linger next to the new 2010 models and concept vehicles at this year’s Seattle Auto Show.

If the matter deserves more than a few minutes by phone, and the dealer realizes the seriousness of the issue, Jeff brings his CPA experience to the table— and goes to work. Recently, by getting inside one client’s financials, he was able to reclassify certain account balances that significantly increased the tangible net worth reported to the bank. At another dealership, the owner was surprised to learn that hundreds of thousands of customer and factory receivables were at risk and needed immediate follow-up.

would like to engineer a dealer management system that improves on the choices dealers have today, I’m confident we’ll see more modern software from vendors using Microsoft technologies. It’s long overdue. My goal is to be part of the automotive industry and possibly identify the next big thing that either saves clients money, or generates it.”

“There is much to be gained from ‘looking under the hood’ of a dealer’s financial statements. By investing a modest amount of time and money, a Dealer-CPA can spot financial red flags and profit opportunities from a review of the accounting records.”

And, if he could accomplish one thing before it’s all done? “As much as I

Jeff’s advice to dealers: “Make sure you understand the scope of the work that goes into preparing your tax return. It might just mean simply asking your CPA if he or she is looking at the computer schedules.” “Tax returns tend to be viewed as a commodity, but they’re not. Like all business owners, dealers should know the level of review that’s being performed on their financials before those numbers make their way to the tax return.” A profitable working arrangement with Peterson Sullivan can start with a simple ten-minute phone call. “I want

Yet, Jeff’s satisfaction to serve people can’t be measured in dollars and cents. Jeff joined the board of One Reel Productions, the not-for-profit arts, cultural and special events organization behind Bumbershoot and Tetro Zinzanni. His private collection of digital

625”

Mark Cutshall

Last October, at the American Institute of Certified Public Accountants convention in New Orleans, Jeff gave a presentation on how CPAs and dealers can leverage dealer management systems (DMS) to improve oversight and accountability. “It’s not uncommon that a lack of financial review can spell the difference between a profitable dealership and an unprofitable one. Often, what’s needed is a new level of scrutiny to correct misstated assets and liabilities reported by the dealer’s DMS.”

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. . . to a profitable working arrangement

“THEY’RE ALWAYS KEEPING ME IN FRONT OF SHOPPERS’ EYES.” Tammy Darvish Vice President

Ronda Nassib Advertising Consultant Greater Washington, D.C.

MARKETING THAT WORKS FOR TAMMY Tammy is a people person. And the more people in the D.C. area

sponsorships of MLB on FOX, NASCAR on FOX, NFL on FOX,

who see her cars, the better. So she knows that our high-profile

BCS on FOX, as well as the NBA on TNT will attract millions

ads in the biggest shows on the biggest networks are important in

more. Hey, like Tammy says, “We are in this together.” For videos of

attracting millions of customers to her 27 dealerships. And our proud

success stories from dealers like Tammy, visit results.autotrader.com.

©2009 AutoTrader.com, Inc. All Rights Reserved. “AutoTrader.com” is a registered trademark of TPI Holdings, Inc. used under exclusive license. New England Patriots trademarks, including the Patriots logo, are the property of New England Patriots L.P., and are used pursuant to a licensing agreement with New England Patriots L.P.

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

By John Strom

Got a problem to solve? Of course you do! That’s what managers do – solve problems. Everyday we come to work and face problems to solve – customer problems (always first priority!), employee problems (…often related to those customer problems), process problems (the process isn’t getting the results we’re looking for), organization problems (what we’re asking people to do isn’t aligned with what needs to be done). The list goes on…and on… Gathering Relevant Information The first step in solving problems is to gather relevant information about to the situation. Here you need to go to three sources. 1. Your People – those who work a process know it best – what do they think should be done to improve it? Take a few minutes and talk to them. 2. Customers – what would they like to see done differently to improve their experience with your dealership? Customer comments from your surveys are most helpful. You can do some exit interviews to find out directly from them (highly recommended!). 3. Observations – observe the process in action and see for yourself what parts should be retained and what should be improved. Too often managers don’t take time to gather relevant information from all three sources. Remember, your decisions can only be as good as the information you used to make them. If you don’t have the all the relevant information pertaining to the situation, your decision on what action to take will likely not be the optimal one. (I think this explains why so many actions we take don’t really “solve the problem – for good!” We didn’t have all the relevant information when we made our decision so our action really wasn’t the right one, the complete one.)

You see your goals for the future.

We see the best path to get there. Dea lershi p Services Team Spotlight: Dealershi Rick Rekdal, CPA Rick serves as the Director of the Dealership Services Team at Clothier & Head. His dedication and expertise in the areas of management consulting, strategic business planning, mergers & acquisitions, auto dealership valuations, internal control consulting, and tax planning, preparation & compliance has won recognition for the industry specialization as a trusted authority in the Northwest. With over 20 years experience, Rick has maintained his commitment to leadership and has developed a team of highly competent and enthusiastic accounting professionals. Meet the rest of our team at www.clothierandhead.com . 1301 Fifth Avenue, Suite 2800 Seattle, WA 98101 206.622.1326 phone 206.622.4486 fax e-mail@c-h.com www.clothierandhead.com

DEALERSHIP SERVICES -

Department Operations Consulting Dealershi p Valuation Cost Segregation Sales & Use Compliance Fraud Examination Internal Control Evaluation Tax Planning & Compliance Succession & Estate Planning Safeguarding Evaluation Merger & Acquisition Support

For more information, please contact Rick Rekdal, CPA or Mike Hopkins, CPA at 206.622.1326.

Certified Public Accountants and Business Advisors

Getting to the Root of the Matter Key to making the right, complete decision on what action to take is getting to the “root cause” of the problem. To do this, you and your team of problem solvers need to ask yourselves some questions. I’ve developed a Problem Diagnostic Checklist to help with this process. It’s reproduced here for your benefit. I recommend you give everyone on your team this checklist to complete before you meet to discuss what to do. Ask them to fill it out independently, without talking about it with anyone else. Then come together and share your perceptions. Here are some guidelines for the best way to use this: Before starting any discussion: 1. Be sure everyone has fully completed the checklist. Any discussion will invariably influence our thoughts. You want to get everyone’s best “independent” thinking. 2. Make sure they’ve assigned a Priority to the items they believe need attention. 3. Be sure everyone has notes as to why they believe the area is OK and what they think should be done. Again, this better captures independent thinking and leads to better problem solving. Start the discussion by taking a poll of Priorities: 4. Ask everyone to look over their Checklist and come up with what they believe is the Overall #1 Priority Item to Address. (The form asks for

a prioritization of 1-3 for Clarity of Outcomes and a second prioritization of 1-3 for the Execution. You’re now asking them to look at all the items and choose the overall #1 Priority item. They can have more than one item.). Don’t ask for why they feel as they do, just tally the votes. This can lead to a quick concensus* on what needs to be addressed, or it may show there is a need for considerable discussion. 5. Get a discussion going as to why they feel as they do. Start with the item with the most agreement and work through ALL the items chosen. Encourage everyone to share their thoughts by not evaluating what they say (and be sure others don’t evaluate either). 6. Take another vote. Often after hearing others’ thinking, we change our view. Again let people share why they think as they do and work towards a consensus* of the top priority area(s) to address. Once you’ve agreed on the what needs to be addressed, you can move on to discuss what actions to take. 7. Get everyone’s thoughts on what needs to be done. Follow a similar process to the above to reach agreement on the actions to take. 8. The ultimate test of your actions is that they are good for the customer, good for the dealership and make good business sense!

Create an Action Plan A good action plan lists Who will do What by When. Before ending the session have each person who is tasked to take an action read back to the group “what they’ll do and when they’ll have it done.” Getting this public verbal commitment significantly increases the likelihood they’ll get it done. The key to success is to follow-up to be sure actions are being effectively taken when they’re supposed to be taken. Celebrate when good things happen; coach when things aren’t happening as they should (review my previous columns on how to do this). Problem solved – for good!!! * Concensus is not unanimity (everyone agrees). Concensus is when everyone has had their opportunity to influence everyone else and though they may not totally agree on the final decision they are willing to support it and work for it. If you’re trying out these suggestions, please let us know how it’s working. And I’ll be glad to talk with you about this and other management issues. I can be reached through our web site – www.perdevgrp.com – or by direct email – jstromsa@gmail.com. John Strom has been helping retail automotive managers improve their performance for over 25 years. He has held a number of management positions in both single-point and multiple franchise operations, including General Manager. His company, Strom & Associates, is a member of the Performance Development Group. To learn more about their services, visit www.perdevgrp.com.

 The importance of consolidating your marketing efforts! By Dusty Dunkle

As we know, there are positives that result from economic disasters. Approximately 90% of all US auto dealers survived 2009. Many are now running extremely lean, and may be able to add the “mean” once again. The 2009 auto industry tagline could be, “We’ve never worked so hard for so little.” But wait! You pushed extra hard in the past year for a reason, and as the industry improves, your hard work will pay off. Dealers that are currently surviving and thriving have scrutinized every expense. This has often led to cutting back or eliminating some services from each of their vendors. The most effective and efficient partners remain, and most surviving dealerships have successfully trimmed a large percentage of the fat from their operating expenses. One cost-cutting strategy that must be considered by every dealership is reducing or eliminating overlap in vendor services. I cringe when I see a dealership engaging multiple marketing vendors, all with overlapping services and all communicating with your customers. To everyone’s

credit, this isn’t nearly as common as it once was. Overlap costs a dealership thousands of dollars each month, and it can lead to a frustrated customer base inundated with redundant and mixed messages. Trying to manage and integrate several marketing vendors also creates inefficiencies in dealership operations. The Cost of Using Multiple Marketing Companies Let’s assume you believe you have completely eliminated the overlap of services. Are you still working with 3, 4, or 5 companies that are all communicating with your customers in some way? Do they all claim they offer the best ROI? What’s certain is you are paying for each vendor’s overhead, customer service representatives, sales agents, bookkeeping department, and more. They all access your DMS/Customer Base (whether you use a provider that attempts to make it difficult or not). They have completely different reporting and tools, and they all provide you with what seems to be your 500th Internet login and password. If you have a call center partner or BDC, what happens when they are

unable to contact the customer? These customers need to immediately be placed into a queue that will send another form of communication. We firmly believe in the effectiveness of live agent telephone calls, but we all know they cost more. Therefore, use telephone for the campaigns where it’s essential, like driving in “lost customers” or for that personal touch on a CSI call immediately after a sale or service experience. With the balance of your customers, incorporate a multi-channel communication approach to both increase effectiveness and decrease costs.

No one method of communication is most effective for all consumers, and all methods have their unique advantages and disadvantages. Statistics prove that a blend of communication methods is by far the most effective and generates the best results. What worked in the past, doesn’t necessarily work today. Many business rules have been re-written, and the most forward-thinking individuals are viewing these hard times as a great opportunity.

If you use a company that provides only email services, what do they do when an email bounces, there is no email address in your DMS, or they can’t find the email through their append service? Hopefully, your direct mail vendor handles those folks, but how do you coordinate between those two companies while avoiding the risk of over-communicating, and turning customers away?

We all know that consumers are more educated than ever. Let’s look at Generation Y customers, for example. They are the first native online population; they have always been surrounded by massive amounts of media, marketing, and messages. By nature, they are pros at screening out messages-your communications--unless those communications are handled perfectly.

Even with the perfect message, a multi-channel approach is worthless if the timing and coordination are off. We all know how important it is to maintain your database (your gold mine). Using a single-source vendor with proven expertise in each communication field is a safe way to ensure proper coordination. That same vendor should also be your resource for managing opt-in / opt-out lists, CAN-SPAM Act requirements, Do Not Call legislation, and other essential database maintenance.

The Y’s are also a very cynical generation. According to Carol Phillips, a marketing instructor at the Mendoza College of Business, Notre Dame University, Gen Y believes “all advertisers lie.” In dealing with Gen Y consumers, you must communicate properly, while sending a carefully composed message. It’s imperative to either communicate with your customers using the method they specifically request, or properly blend all effective methods of communication.

Multi-Channel Communication - The Key to Success You are probably familiar with a number of companies offering a singleline service. Many provide only one specific method of retaining, generating, or marketing to customers. Many are only capable of a single method of communicating with your customers.

services they offer by forming a stronger bond and learning the most efficient ways to interact with them. You can concentrate on the details behind each service and report, which allows you to use their tools most effectively. You’ll deal with just one representative for all active services and programs. You’ll receive just one invoice each month, and call just one bookkeeping department if you have questions about it. The less time you spend managing vendors, the better your bottom line. Working with one vendor who understands your vision and knows what best fits your needs is much better than attempting to get five different vendors on the same page to meet your marketing goals.

Statistics prove that a blend of communication methods is by far the most effective and generates the best results.

Advantages of a Single Source Marketing Partner In order to run even leaner, reduce the overall number of companies you work with. Utilizing one partner will increase your buying power. In return, you should be offered discounts across the board for the volume you deliver. You will now be able to properly integrate the

Selecting the Right Marketing Partner You are reading this today because you survived 2009. You survived because you made smart business decisions and surrounded yourself with talent. My advice in selecting a single-source partner is to find a company that effectively utilizes multi-channel marketing, completely encompassing: • • • • •

Direct mail Email Telephone – Live Telephone – Automated Messaging Telephone – Text Messaging

This company must have the capabilities to integrate their approach over a number of core services. They must provide reporting that meets or exceeds 35

your requirements, and they should have proven experience in helping dealers succeed by: 1 - Retaining active customers after their visit • CSI Follow-up • Prospect Follow-up • Thank You Communications 2 - Marketing properly to existing customers • Data Mining • Reminder Services • Lost Customer Recapture • Recall Services • Email Append Services • Direct Mail, Email, and Text Sending 3 - Reaching out to obtain new customers • Conquest Marketing • Lead Generation • Direct Mail Services Congratulations on the tremendous efforts you’ve put forth to weather this storm. Although the industry looks to be on the upswing, competition will continue to be fierce. Those who embrace technology, continue to keep their focus, and push for additional efficiencies will win. 2009 will one day be a distant memory! Dusty Dunkle is the President of Customer Research, Inc. CRI, a one-stop Customer Loyalty, CSI, and Revenue Generating service provider that utilizes multichannel communications, was founded in Seattle in 1967 and works exclusively in the automotive industry. To learn more about this article, contact Dusty Dunkle or Rich Moore at 800-886-3472, by email at Info@CustomerResearch.com, or visit the CRI website which provides information on all available solutions (www. CustomerResearch.com).

Coffee Break

WHY

Do We Say it?

Pigeonhole. Why is one of a tier of compartments called a “pigeonhole”? Because a dovecot – the home of domesticated pigeons – is usually divided up into many little compartments, each one, literally a “pigeon hole.” Pig in a Poke. What is the reason we refer to buying something sight unseen as “buying a pig in a poke”? A “poke” is a bag – from the Irish word for it, poc. It was once the custom to bring small pigs to market in a bag. And if you bought such a “pig in a poke” without looking at it you didn’t really know what you were getting. Mad as a March Hare. Why do we say “mad as a March hare”? March begins the rutting season for hares and the hares run about wildly at that time – apparently quite “mad.” Skinflint. What is the reason we call a parsimonious person a “skinflint”? Bits of flint were once used to make fire. The rocks could be split into smaller and smaller pieces and each piece could be used for this purpose. A “skinflint” was once one who, in trying to save a penny on flint, would split a piece down to its final layer or “skin.” Slick as a Whistle. What is the reason we use the word “whistle” in the expression “slick as a whistle”? It’s because it is “slick” – that is, “sleek” – inside. Wind blown into a reed pipe is slowed up by the reed but a whistle has no obstruction at all. True Blue. What is the origin of the expression “true blue”? The term originally referred to the blue aprons and jackets once worn by butchers, which did not show blood stains. But it got its present meaning from the adoption of blue as the color of the pro-Parliament Scottish Presbyterian Party of the seventeenth century – in contradiction to the royal red. Haul Over the Coals. Why do we call a thorough questioning or reprimand being “hauled over the coals”? Because at one time those suspected of heresy were literally “hauled over the coals” of a fire in order to induce them to confess their sins and adopt the true faith. These excerpts are from “Why Do We Say It?” from Castle Books, Copyright 1985 by Book Sales, Inc. Check your local bookstore for your own personal copy so you can enjoy the stories behind the words, expressions and clichés we use.

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By Scott Dreisbach

Every dealership in the country is constantly searching for ways to increase the bottom line of the store. Beyond working the various aspects of the basic formula for profitability, (which is sales minus cost of sales equals gross profit and gross profit minus expenses equals operating profit) there lies the reality that increasing vehicle turnover will accomplish positive changes to the bottom line. That reality is: 1. Increased vehicle turnover will increase sales revenues. 2. Increased vehicle turnover can reduce the average cost of sales. 3. Increased vehicle turnover almost always reduces expenses such as compensation %, advertising and floor plan interest, just to name a few. 4. Increased vehicle turnover also increases Return on Investment. Over the years I have found that by far, most of the dealership’s advertising dollars spent in print media are focused on trying to move vehicles that have been slow turners for the store. Effectively, we are continuously spending money to advertise distressed merchandise. For one reason or another, the store has too many of the wrong type of vehicles, colors and / or equipment and the original mistake of ordering, acquiring, or holding on to, too many of those vehicles is magnified because we end up spending more money to move these units. We are also usually willing to take less gross for these units and are likely to put some kind of “spiff”, “flat” or “bonus” money for the sale of the unit as well. All of this is in addition to the lost keys, missing floor mats, switched out equipment and other policy costs associated with over-aged, overstocked inventory. If you are still reading this article, you probably agree that increasing vehicle turnover is a good thing for the store and are wondering how to do it. It is not by spending more money on advertising. It is not by increasing commissions. It is not by increasing inventories. It is not by lowering your prices. It is by having more of what your customers are looking for a greater percentage of the time. How do we do this? It will sound relatively simple but the answer is by monitoring demand and measuring movement and doing something about it. Monitoring Demand: When I ask fellow dealers, “how do you track lost sales for vehicles in your store”, I almost always get a response that boils down to, “we 39

don’t”. Monitoring demand can be rather subjective when it comes to the new and used vehicle department. It is very easy for the parts department. When we get a call for a part that is not in inventory, the standard procedure is to mark that inquiry as a “lost sale”. Very few dealerships have a method or process in place that tracks this type of activity for new and used vehicles, however. When a prospective purchaser leaves our store without buying a vehicle, we usually attribute it to having something to do with price. If we know that it is because we don’t have exactly what they are looking for, we usually respond by assuring the customer that we can get the vehicle for them. Sometimes this works, often times it doesn’t. Most vehicle purchasers want to be able to “touch” the vehicle they are buying. If your true closing ratio is around 25%, that means that some portion of the other 75% who are not buying is due to not having the right inventory at the time the customer visits the store. Figuring out what portion that is will go a long way toward phasing in a more active inventory. Chances are, you have upwards of 50+ individual model numbers from which the prospects can choose for the new vehicle department, not to mention the wide variety of engines, transmissions, colors, trims, and equipment. A simple method of tracking “inquiries” is to have that list of available model numbers at the desk and simply put a mark next to the model number that the customer was interested in and did not buy. Whether you have inventory in the particular category or not, track the inquiry. The same principle holds true for the used vehicle department. The categories, however, are somewhat different. I like to use the following 11 sales categories and the eight most recent model years within each category. The categories are: Small Car, Sporty Car, Mid-Size Car, Full- Size Car, Small Truck, Small Sport Utility, Large Truck, Large Sport Utility, Mini Van and Van. Over time, this 40

inquiry list will be very revealing. Most every desk manager will say that they know what the customers are looking for, but without an accurate log, nobody really knows. Monitoring demand is the first step in increasing turnover. The next step is measuring movement. Measuring Movement: Measuring movement is a much easier system to build and implement than monitoring demand, yet few stores really have a system that measures movement in terms of true inventory management. First, any system must track each individual model number within each car and truck line for the new vehicle department (there are multiple types of Silverados, for example). Other important factors to track are color, equipment packages, engines, transmissions, trim level, days held, cost of sale, and gross profit. The object is to be able to positively identify the “quick turners” with data, not “gut feel”. For the used vehicle department I suggest tracking the same 11 sales categories and eight most recent model years as stated above. In the used system, pay particular attention to the quick turners by category, model year and cost of sales. We want to phase in used vehicles that most closely mirror those that are leaving the inventory. After tracking these indicators for everything you sell for a minimum of 90 days, definite patterns will emerge that will help you begin to truly phase in a more active inventory and phase out those units that simply are not worth the effort. The costs of carrying new vehicles more than 120 days almost always outweigh the gross that they may generate. The days held for used vehicles is significantly less. A 45-day supply of both units and dollars is the target. The hardest part of true inventory management (once you have a workable system and process in place) is separating the emotion from the decision-making process. For some strange reason,

people who order inventory (or manage the used inventory) become emotionally attached to the decisions that were made when acquiring the inventory. This bond of emotional attachment is very difficult to overcome for a lot of people. However, when they begin making decisions based on hard facts, and they see those decisions pay off, they will become your strongest advocates of the inventory management system. The basic principle of economics tells us that supply and demand equals price. All too often dealerships make decisions that determine a supply without effectively measuring and monitoring demand, and price usually suffers as a result. Do yourself a huge, bottom line producing, favor. Implement, monitor, and insist upon the use of an inventory management system in your store. The return will far exceed the investment. If you want to implement a system and not wait for 90 days to see what you need to do, we can download your sales for the past two years and immediately identify the ideal “target supply” for any given model number (new) or model year and category (used). Your parts manager would not even think to try and manage his inventory without a “stocking guide”. The same “stocking guide” tool is available for your vehicle inventories. If you would like to learn more about “precise vehicle inventory management”, please drop me an e mail or give me a call. I will be happy to answer any questions you may have. For more information about this topic contact Scott Dreisbach, Vice-President of Valuinsight, Inc., 561-404-8450 or sdrize@valuinsight.com.

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Name? Account number? Zip code? Mother’s maiden name? Sounds like a scene from a prison movie, doesn’t it? Well, it’s not. It’s the start of an average call in many a call center. Why? In most cases, the call center agent hasn’t been shown another way to answer a call. This next story illustrates why it’s important for agents to gather information from callers without sounding like Wanda the Witch or Warren the Warden! My wallet was stolen a few months ago. Fortunately, I remembered the names of the credit cards I was carrying. Unfortunately, my wallet with all the credit cards also had my checkbook. My first response was to list the cards that I knew were in my wallet. I then began the daunting task of calling each of the major credit card companies to report the loss. Perhaps because of the type of work I do every day and because of the horror stories I’ve heard, I have become “Mrs. Perfect Customer.” I don’t yell, I don’t belittle, and I don’t

 By Nancy Friedman

get angry. I smile and try to help the call along. I’m really a good customer. With this in mind, I picked up the phone and made my first call to one of the credit card companies. “Hi, my name is Nancy Friedman,” I said. “I’m in Orlando, Florida, and my wallet with all my credit cards has just been stolen and I wanted to report it right away.” “NAME?” said the agent with the voice of a warden.

never got around to memorizing all my credit card numbers, and if you recall, my wallet with that information was stolen.” Dead silence. Then I heard, “PHONE NUMBER?” Well, it went downhill from there. I won’t burden you with the rest of the conversation. Suffice to say, I was disappointed. There wasn’t one word of empathy from this agent. She sure

I always give It is crucial that an agent build rapport with my name up front, every customer at the beginning of each call, as I had this time. whether the customer is calling to discuss a Obviously, the agent who anproblem, a concern or an inconvenience. swered the phone didn’t hear it, didn’t write it down or didn’t remember didn’t have what I refer to as the ‘care it. So I repeated my name and spelled gene.’ She had a job to do and by gosh, it for her. she was going to do it - and in record time, too. “ACCOUNT NUMBER?” the agent continued. I had six credit cards in my wallet. When I called to report the loss of each I thought one of us had better have one of them, none of the credit card a sense of humor, and I could tell it companies acknowledged my problem. wasn’t coming from the other end, so I It was hard for me to believe, too. Probsaid, “Well, I have my phone number, ably the worst experience I had was address and birthday memorized. I when I called the bank concerning my 41

checks. When I told my saga to the bank, the woman I spoke with asked the questions as though I had been the one who stole the wallet. What does the behavior of the agents at the bank and the credit card companies say to me, the customer? It says that maybe I should take my business somewhere else. To keep customers satisfied and loyal to your company, it is crucial that an agent build rapport with every customer at the beginning of each call, whether the customer is calling to discuss a problem, a concern or an inconvenience. The agent who answers the call should acknowledge what the customer is saying and use the same words that the customer says, as in the following example: Caller: â&#x20AC;&#x153;I just lost my wallet.â&#x20AC;? Agent: â&#x20AC;&#x153;Your wallet? Iâ&#x20AC;&#x2122;m so sorry. Let me get your name and weâ&#x20AC;&#x2122;ll see how we can help.â&#x20AC;?

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Learning how to build rapport is an art, not a science. You may recall Yul Brynner, the great actor, who appeared in the musical â&#x20AC;&#x153;The King and Iâ&#x20AC;? in more than 2,000 performances. He said the same words, night after night. Yet each performance was award winning. Why? Because each performance he gave was to a different audience. I imagine he got tired of the script sometimes. Yet because he knew the audience was new each night, he made his lines sound fresh every time.

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For call center agents, the telephone is your stage and the connect button is the curtain. One of the best ways agents can be sure to convey empathy is to practice the lines they say the most so that the delivery sounds different each time. I sympathize with agents who work in centers that receive enormous numbers of calls. But I also hear all sorts of excuses. One of the most common is: â&#x20AC;&#x153;Gee, Nancy, we have to say the same thing over and over. It gets so boring.â&#x20AC;? Or â&#x20AC;&#x153;Nancy, weâ&#x20AC;&#x2122;re limited for time for each call.â&#x20AC;? Or â&#x20AC;&#x153;Our policy is to get on and off the phone as quickly as possible.â&#x20AC;? These are excuses. Not reasons. Although the person on the phone may say the same thing over and over again, itâ&#x20AC;&#x2122;s probably the callerâ&#x20AC;&#x2122;s first time asking the question. And it isnâ&#x20AC;&#x2122;t enough for agents to know the answers. They also have to reassure customers that theyâ&#x20AC;&#x2122;re ready to help them. When customers reach call center agents, they donâ&#x20AC;&#x2122;t care how much they know â&#x20AC;&#x201C; until they know how much they care. For more information about this article contact www. telephonedoctor.com . 42

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