9 tips for selecting the right person and making it work.
Not everyone looks forward to retirement. Some businessmen can’t imagine themselves sitting by a pond with a fishing pole — or whatever else your idea of retirement may be. But you likely will hand over the keys one day, and you must have a plan in place long before it’s time to walk out the door.
Developing a succession plan encompasses a host of strategic and financial decisions, such as determining your dealership’s value, establishing a buy-sell agreement with a business partner or gifting to a family member. But the cornerstone of your plan will take the form of flesh and blood rather than that of a price tag or a contract. Here are nine tips for choosing the right person to replace you and preparing your successor for the road ahead:
1. Start early. Many consider five years before retirement an ideal time to draw up an outline of who might succeed you and how it all will take place. If you’ve already chosen a successor — for example, an employee or a family member — getting a jump start on your plan will allow ample training time.
2. Decide whether your successor will be family or nonfamily. Do you have a business partner who’s interested — and able — to take on the responsibilities of ownership alone? Do you have a son or daughter who’s poised to take the reins, or will you be selling the business to an outside party?
3. Consider the candidate’s qualifications. Look for a well-rounded business education and senior management experience. Your candidate — even if he or she is a family member — should be able to present a strong work track record. In addition, make sure this person’s abilities match up with the complexity of your dealership’s operations. If, for instance, your son has great general business skills but isn’t the least interested in sales or marketing, this could be a deal breaker. If you’re looking internally, look at your strongest players in senior management. In the event you don’t have a qualified family or internal candidate, you’ll need to look externally. An executive search firm can help you locate and screen qualified candidates. Your trade association or Dealer 20 group also may be able to assist.
4. Consider the candidate’s personal traits. Beyond judging a candidate’s quantitative skills, assess his or her qualitative characteristics, such as having an open mind that can keep pace with industry changes and consumer demands. Other desirable qualities include being able to share and delegate responsibilities while accepting responsibility Your candidate — even if he or she is a family member — should be able to present a strong work track record. 3 Do you worry that your store may be missing out on thousands of dollars in warranty claims that should have been filed but never were? Do you get sweaty palms over the warranty audit that is scheduled with your manufacturer and what it might uncover? Wait a minute. If you’re assessing your warranty program regularly — and fixing whatever is broken — you shouldn’t have these concerns. Here are a few pointers about overseeing your warranty program and withstanding a warranty audit should one take place. Running your warranty program effectively for decisions and actions. Also seek someone who will be a good listener for employees and other managers at your store. Internal candidates will, of course, need to possess these qualities as well.
5. Involve all parties. The succession process might start with your attorney and financial advisor, but you’ll want to involve everyone who will be affected by your succession plan — including family members and employees. Workers may fear that the changeover will result in the loss of their jobs, so it will be your job to assure them otherwise.
6. Define your role in the transition. Your options are vast, from passing on daily management responsibilities while retaining overall control and ownership to handing over both control and ownership on an agreed-upon date. These decisions are multifaceted and depend on many strategic, economic and personal factors.
7. Train well and broadly. You’ll want to develop your successor’s know-how in a full range of dealer responsibilities across departments, including:
- Accounting and finance
- Sales and marketing
- Finance and insurance
- Office administration and operations
- Human resources
- Information technology
- Parts and service
- Customer relations
- Manufacturer communication
Ideally, your “owner-to-be” will have hands-on work experience in each functional area of your dealership. In the case of a family member, put extra effort into staying objective as you train him or her to run the show.
8. Make sure you have a viable business plan. The future success of your business depends on how realistically you see the vehicle-buying marketplace and your dealership’s role in it. During the transition, your successor will benefit from a well-thoughtout business plan that projects at least a few years into the future. Think of it as a guide rather than a blueprint.
9. Put your pride aside. Your successor will likely replace some of the ways you did business with methods and procedures he or she believes will work better or be more up to date. Don’t let an injured ego let you lose sight of your importance as a valued advisor.
Running your warranty program effectively
Do you worry that your store may be missing out on thousands of dollars in warranty claims that should have been filed but never were? Do you get sweaty palms over the warranty audit that is scheduled with your manufacturer and what it might uncover?
Wait a minute. If you’re assessing your warranty program regularly — and fixing whatever is broken — you shouldn’t have these concerns. Here are a few pointers about overseeing your warranty program and withstanding a warranty audit should one take place.
Give warranties priority
No one likes dealing with warranty red tape. But pushing this administrative task to the lowest level of the priority totem pole might decrease the number of repairs that qualify as warrantable — and increase your chances of being audited.
Assign an experienced technical individual to handle warranty claims from start to finish. Train this warranty administrator on how to effectively process claims using your manufacturer’s online warranty systems. These systems often are DOS-based and require the use of dozens of parts and labor codes.
Your warranty administrator also should be familiar with all current technician service bulletins (TSBs), because they recommend service solutions for common customer complaints and address whether the fixes are warrantable. TSBs are available through each manufacturer’s service portal.
Train your techs, too
Service technicians also require training in warranty protocol, including how to write a comprehensive customer concern description and how to split time between warranty and other repair work. You’re more likely to be audited if you submit more claims per vehicle serviced — or if your technicians spend more time completing the work — than other dealers do.
Examples of paperwork blunders in protocol include missing customer signatures, mileage readings that end in “000” and ambiguous customer concern descriptions. Verbiage that implies wear and tear, such as “bent, cut, dented or torn,” also raises a red flag.
Be proactive — and pretest
Proactive owners don’t wait for the dreaded “We’re coming …” letter. They mock-audit themselves each month by reviewing a random sample of warranty repair orders. Evaluate each claim as if you’re an outside auditor. Also check the repair backlog to ensure timely completion of warranty claims.
Consider asking your manufacturer’s representative for an honest assessment of your warranty claims processing. If the rep spends hours each visit helping the warranty administrator code simple claims, pick a new administrator. Your rep is there to evaluate more complex claims that require the manufacturer’s approval. Routine fixes often can be self-authorized online with proper coding.
Ready your shop
Organized dealers with dedicated warranty administrators have less to worry about when factory auditors arrive. They anticipate auditor requests, have paperwork and faulty parts ready to go, and set ground rules when factory personnel arrive. Keep in mind that most manufacturers require dealers to keep records for a minimum of 12 to 24 months.
Auditors will tour the shop to look for obvious concerns — packaging from aftermarket parts in your trash, for example — and then sift through a sample of warranty claims, looking at the three C’s: complaint, cause and correction. In addition to incomplete Evaluate each claim as if you’re an outside auditor. Strategies for keeping the lid on unemployment taxes 5 descriptions and administrative omissions, common reasons for expensive chargebacks include nonwarrantable add-on repairs, repeat claims and improper handling of battery claims.
Follow up with your manufacturer
A few weeks after your audit is over, your manufacturer’s rep will meet with you to discuss any proposed chargebacks and ways to improve your claims processing. Don’t be afraid to appeal unfair warranty audit findings, however.
If there are chargebacks, consider them a wake-up call and learn from your mistakes. Sloppy claims processing hurts both you and the manufacturer. Prove to yourself and your manufacturer that you can be highly efficient in this area.
Assess your program
Most manufacturers conduct warranty audits regularly, according to industry reports. Make sure your “i’s” are dotted and your “t’s” are crossed by assessing your dealership’s program now.
Strategies for keeping the lid on unemployment taxes
State-imposed unemployment taxes have skyrocketed since the onset of the recession. While there may be little you can do to reverse this nationwide trend, you can be more thoughtful in the hiring decisions you make at your dealership, so as to avoid future unemployment claims against you.
Unemployment tax rates for employers vary from state to state, both in terms of the amount and how they’re assessed. Your unemployment tax bill depends on several factors, which may include the number of former employees who have filed unemployment claims with the state, the number of current employees and the age of your company. As with many other forms of insurance, typically the more claims made against you, the higher your premiums.
Massive layoffs in the last several years have taken their toll on state unemployment trusts. Soaring numbers of unemployment 6 claims during the recession “broke the bank” in many states and forced them to borrow federal funds to compensate unemployed workers.
Many states are now struggling to pay principal and interest on those loans, while continuing to make large unemployment payouts. To produce more revenue to meet these obligations, some states have raised their unemployment tax rates, and dealerships are feeling the bite.
Your dealership might be able to influence its unemployment tax payments if certain situations apply. Some states allow you to annually buy down your rate. If it works out for your dealership, this could save you some substantial dollars in unemployment taxes.
Also, if you have recently acquired another dealership, it may have a lower established tax rate that you can take advantage of. You may also be able to request the transfer of the previous company’s reserve balance.
Careful future hiring
Even though auto sales are generally picking up across the country, you’re likely taking a conservative approach to adding new staff — and wisely so. And when your need to increase manpower becomes too strong to ignore, continue to move cautiously.
Remember, your unemployment payments are based partly on the number of employees who file unemployment claims. You don’t want to hire employees to fill a need now, only to have to lay them off when business slows.
A cost-analysis study, which can be performed with the help of your CPA, will enable you to see via black-and-white projections whether increasing your payroll is worth the investment. If it isn’t financially attractive to add staff, there are other options.
Your demand for extra staff, for instance, may parallel the peaks and valleys of your dealership’s year. A temporary staffing agency can help you meet those seasonal needs without permanently adding staff, so you can avoid layoffs. Using a temporary agency also is a good way to try out a candidate.
You may be able to do little about the unemployment tax rate your state levies. But you can be careful in hiring additional staff that you may need to release later and who might, in turn, file unemployment claims.
Keep in mind that, even if you fire someone for cause, which technically should disqualify them from receiving unemployment, they still might win a claim dispute. Measures like prehiring assessment tests (see “Hiring the right people, for starters” at below) and background checks can increase your odds of hiring long-term employees.
Hiring the right people, for starters
Often it’s worth a small financial investment to require job candidates to undergo prehiring assessments to see if they’re a good fit for your dealership and the position available. Standardized testing instruments are designed to reveal aspects of an individual’s character or psychological makeup that may affect their performance.
Well-established assessments include the MyersBriggs Type Indicator, a personality inventory that categorizes psychological types, and DISC, a group of psychological inventories that cluster certain characteristics into particular behavior styles. Analysis of the test results can tell you, for instance, if the candidate you’re considering for a service advisor opening has psychological or behavioral traits that are compatible with the customer-oriented responsibilities of that job.
Is your dealership in sync with the mobile revolution?
Auto shoppers are quickly moving to their smartphones and tablets as useful tools for selecting new vehicles. So, you need to make sure that your dealership website “reads well” on smaller screens — or your store may be left in the digital dust.
Approximately 20% of new-vehicle buyers use smartphones or tablets close to the time of their purchase, according to the 2012 New Autoshopper Study by J.D. Power and Associates, and some industry watchers believe that figure is higher. Google’s automotive market section, for example, recently estimated that 26% of new-car shoppers now use mobile devices to make queries to dealerships. Google forecasts that number to rise to 47% in 2013.
Test your website with mobile devices in mind. Can smartphone shoppers navigate your site easily to look at the images and descriptions of your new and used car inventory? Can they easily access directions to your dealership, hours of operation, service information, details on your auto parts selection, specials — and anything else you want them to see?
To aid mobile users, Google recommends a “responsive” Web design. This includes a configuration that serves all devices on the same set of URLs, with each URL serving the same HTML to all devices and cascading style sheets (CSS) changing how the page appears on each device.
It might take some time and effort to make your website mobile-friendly. But the alternative is a frustrated small-device user who will leave your site to go elsewhere.
Keep an eye on your books
A Maine woman is currently serving an 18-month prison sentence for stealing thousands of dollars from a dealership where she worked as an office clerk for several years.
The crime was discovered when the dealership noticed discrepancies between the amounts of money being deposited in the company’s bank accounts and the sums entered in the dealership’s ledgers. An internal audit uncovered that the woman had embezzled at least $202,000 over the previous two years.
Unfortunately, such a crime isn’t unique. Fraud and embezzlement cases are reported at auto dealerships across the country regularly. If you have any suspicions about activity at your store, your CPA can perform a fraud investigation if he or she is a Certified Fraud Examiner. And, to help prevent wrongdoing from happening in the first place, he or she can help you identify areas within your dealership where current internal controls and systems are inadequate to detect fraudulent activity.
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