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CONTENTS 26 ©2023 Utah Auto Dealer | The newsLINK Group, LLC. All rights reserved. Utah Auto Dealer is published four times each year by The newsLINK Group, LLC for the New Car Dealers of Utah and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the New Car Dealers of Utah, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Utah Auto Dealer is a collective work, and as such, some articles are submitted by authors who are independent of the New Car Dealers of Utah. While the New Car Dealers of Utah encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003. PUB. 5 2023 ISSUE 1 16 5 EXECUTIVE DIRECTOR’S MESSAGE Gearing Up for a Successful Year By Craig Bickmore, Executive Director 6 DEAN FITZPATRICK Hall Of Fame Inductee Introduced By Gail Miller 12 BART WARNER Hall of Fame Inductee Introduced by Brother, James N. Warner 16 UTAH INTERNATIONAL AUTO EXPO SUCCESS 18 IS YOUR DEALERSHIP PREPARED TO DEAL WITH CYBERCRIME? Identify Threats and Build Defenses By Erik Nachbahr, President and Founder Helion Technologies 22 THE SECRET TO CONTROLLING DEALERSHIP EXPENSES By Sharon Kitzman, VUE DMS 24 SUCCESSION PLANNING FOR DEALERS IN AN EVOLVING BUSINESS ENVIRONMENT By Bank of America Corporation 26 OVER-SHARING IN THE WORKPLACE? Why Your Company May Need a TikTok and BeReal Policy By Fisher Phillips 22 4
By Craig Bickmore, Executive Director Executive Director’s Message NCDU Gearing Up for a Successful Year As winter comes to an end and we start looking forward to spring, I am confident and hopeful that our members — and the industry as a whole — have many bright days ahead. The past few years have tested us as an industry, but I am proud to say that we triumphantly weathered the storm. Once again, we are gearing up for a successful new year and many more to come. The Utah International Auto Expo was held in January. The event was a great success and allowed us to show the public not only everything new on wheels but how Utah’s auto dealers are committed to their craft. A big thanks to all of our sponsors and dealers that participated. While at the Auto Expo, two new Hall of Fame Inductees were introduced. You can read more about Dean Fitzpatrick and Bart Warner and their extraordinary lives in this issue. Also, I want to remind you that the FTC’s Safeguards Rule has been delayed six months, and dealers MUST comply with this federal requirement by June 9 of this year. The Safeguards Rule requires financial institutions under FTC jurisdiction to have measures in place to keep customer information secure. It creates significant technical and administrative compliance requirements for dealers and others, like internal penetration testing, vulnerability assessments, data encryption, security awareness training, and the performance of written risk assessments. We will continue to advocate for you on this issue and keep you posted on any changes. As your Executive Director, I am happy to serve you and am pleased to provide you with information and guidance. I will do my best to answer any questions you may have. You, as auto dealers, have a unique opportunity to make a difference every time you interact with a customer, vendor, or employee. I share with you the commitment you make to do your very best. Because that is what I want to do for you: my very best. If you need anything, please reach out to us here at NCDU. We are glad — and proud — to be here for you. Sincerely, Craig Bickmore 5
Dean Fitzpatrick Hall Of Fame Inductee Introduced By Gail Miller Congratulations, Dean, this is a recognition well-earned and well-deserved. Your career with the Larry H. Miller Group of Companies has left an imprint that will remain forever. Your work and your accomplishments are legendary. Let’s Recap Dean’s Journey In 1988, just nine years after we opened our first dealership, Dean was hired at the Larry H. Miller (LHM) Chrysler Plymouth store in Murray, Utah. At that location, he was the Finance and Leasing Manager and the New Car Manager. In 1995, he was asked to move his family to Broken Arrow, Oklahoma, to become the General Sales Manager, where he served until 1997. After that, he came back to Utah and became General Manager at the Larry H. Miller Chrysler Jeep Dodge Ram store in Sandy. He held that position until 2010, when he became the President of the Larry H. Miller Automotive Operations. He was transformative in that position until 2022, when all the dealerships were sold to Asbury Automotive. He became an employee of Asbury Automotive before deciding to retire to spend more time with his family and explore other options. When asked to give some highlights of his career, he said: • He supplied turnaround leadership for an underperforming dealership operation by building and leading a team that transformed the operation into one of the most successful Chrysler dealerships in the country. • He developed team members and helped to provide deliberate opportunities for employees to enhance their skill set and progress in their careers. He personally cultivated eight group General Managers and supported others’ career growth into management positions within the organization. • The LHM dealerships experienced a near doubling of sales and significantly improved profitability through sustainable organic growth as well as aggressive M & A activities during his tenure as President. Dean’s employment with our group spanned 33 years, yet he only named three highlights. Granted, they are significant, but his record speaks for itself: we would not be the company we are today without Dean Fitzpatrick. He will always be regarded as a giant in our business. His quiet strength, his humility, his get-it-done attitude and his ability to guide and develop people stand out to me. It was comforting to have his knowledge of the automotive business and to know I could always could on him for honest answers to my questions and concerns. He never wanted attention for his accomplishments and avoided the spotlight, but everyone knew he was the backbone of our success. As I was visiting with my family and people he worked with, these were some of the things that stood out to them: Greg Miller, LHM, Vice Chair, Board of Directors, said: “Dean’s impact on the profitability and strength of the Larry H. Miller company cannot be overstated. His understanding of our culture and practices, as well as his ability to scale them, led to unprecedented growth in the decade or so he was the President of MAO … Dean personified quiet strength. Dean had a gift for establishing and developing healthy relationships with all of the automotive manufacturers.” Steve Miller, LHM, Chair, Board of Directors, said: “When I think of Dean, I think of a workhorse. I remember meeting him for the first time at 5780 South State in the Chrysler Plymouth building. Dad told me he was going to be ‘really good’. And he was. Dean was fair and honest. One of the best gifts he ever gave anyone was when he held them accountable for what they committed to. He never let anyone slide or get off easy. This often made him come across as a ‘hard-ass’, but in the end, it almost always brought out the best in people and made them better. Dean’s pedigree was remarkable too. He mentored a lot of our best people and turned them into our best GMs. When he was named President of MAO, our operations reached remarkable new heights. I always enjoyed working with him and trying to learn from him. He taught me a lot about the car business and life.” 6
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Brilliant Miller, LHM, Executive Director of Culture, said: “When I think about Dean, I think about all the times I forwarded him a customer complaint I received from someone who was so frustrated with an experience they’d had at one of our dealerships that they went online and found my email address — along with every other family member and LHM executive they could find — and sent a mass email. I always trusted that Dean would handle those issues promptly, professionally and thoughtfully — and though I didn’t often hear what the resolution to most of those issues was, I would sometimes hear that, in fact, they had been addressed and resolved fairly and quickly. I also think about how many leaders Dean cultivated — how many men and women who worked directly with him went on to be General Managers of dealerships or to hold other important leadership positions in the group. To me, that is the hallmark of a great leader … not just someone who consistently ensures that his organization delivers great results, but someone who inspires and develops people to grow personally and professionally. That’s what Dean did. I also think about how he’d patiently explain to our board members how the auto industry works, where it has been, 8
and where it’s going. He has a deep understanding and mastery of this industry. I see Dean as a true professional and extraordinary leader. I feel fortunate that he stayed with our company for so many years. This Hall of Fame award is well deserved.” Steve Starks, LHM, Chief Executive Officer, said: “In addition to Dean’s very steady personality, work ethic, and loyalty to the company, I would offer this one story: In 2014 or 2015, we went to California to meet with Acura to discuss an open point they were considering awarding us in Beverly Hills. The night before the meeting, we went to dinner in the hotel and the next morning Dean called me at 7:30 letting me know he had been sick all night and didn’t know if he could make it. He said, ‘I will try to meet you in the lobby at 8:15, but if I am not there, please go without me.’ At 8:15, I saw Dean dressed in his suit, walking to meet us. Throughout the morning drive to their offices, and then throughout the meeting, Dean was so sick he had to excuse himself multiple times. Despite this, he participated in the full meetings and contributed greatly. At the end of the day, we dropped him off at the hotel where he stayed the night and recovered. Dean has always been an incredibly hard worker and his dedication that morning exemplified his long and exceptional tenure at LHM.” Rourk Kemp, who worked closely with Dean for several years and had the privilege to observe him through a set of eyes that gave him a front-row seat to Dean and his impeccable character, said: “Here are some quick thoughts that come to mind as I think about Dean and the strengths and skills he brought to our organization: 1. Maturity: Dean is the most mature man I have ever worked with. By this, I mean that he is fully developed. He has strength, wisdom, intelligence and is always calm under fire. I watched Dean closely for years. I know that he wasn’t always this way. I know he grew throughout his career — and I can see that he made a deliberate choice to work on his maturity level and to let this pursuit truly push him into territory that few men have experienced. Personally, seeing his level of maturity certainly caused me to want to be more like him and I hope that I am progressing along the proper path. 2. Confidence in others: It has always been important to Dean to let those he works with know that he trusts them to make good decisions. He was deliberate in allowing us to make decisions and manage our respective areas of influence. Obviously, good decisions were not always made. He was always quick to coach and correct us, as necessary, and he was not afraid to be firm. But I never saw him as a tyrant (not once). Dean could easily have made any number of decisions on our behalf. He always knew which decisions were his and which should be in our hands. He pushed us to be good stewards because he knew that it took all of us pushing forward to get the best performance out of our organization. 3. Chain of command: Dean fully understood the proper chain of command. He would never go around someone (both up and down their chain of command). Additionally, I never saw Dean belittle someone that he disagreed with, even behind their back which is where one tends to see those things done. I would know if he was working with someone on development, but Dean is not the type to call someone names behind their back. This is difficult to describe, and it speaks to his maturity, but, oh, was it beautiful to work with him over the years and truly see how he respected others, even when I myself may have thought they didn’t deserve respect. I guess I am saying he was great at keeping his negative opinions to himself. He would manage what needed to be managed, but he was not interested in destroying reputations along the way or in pulling others down to lift them up. We have all heard stories of the “tough guy” Dean. I never saw it. Yes, he could be direct. Yes, he could correct me when I did something wrong. I never once felt belittled by him and I was never ashamed to be in his presence. I remember Greg Miller telling us to never do something that you wouldn’t do in front of your mom. Dean’s mom would be proud.” I wanted to recognize Dean as a family man, too, with a wonderful wife, Karen, and beautiful, accomplished children and grandchildren. Karen, your support of Dean and the demands placed on him in his work life do not go unnoticed. Everyone knows it takes a good companion to share the load and support and sustain a hardworking man. Thank you! Dean, thank you for spending so much of your career with the Larry H. Miller Group and for all you have done to lead and bring honor to our family and our organization. There will never be another Dean Fitzpatrick! 3 9
Running a dealership comes with its share of uncertain terrain. But one thing is certain. Our Dealer Financial Services team is dedicated to being by your side with the resources, solutions and vision to see you through. Paul Cluff paul.cluff@bofa.com 385.268.0556 business.bofa.com/dealer Making business easier for auto dealers. Especially now. “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4826555 08-22-0145 CAD-08-22-0145_Utah ADA (New Car Dealers of Utah).indd 3 8/18/22 11:43 AM Running a dealership comes with its share of uncertain terrain. But one thing is certain. Our Dealer Financial Services team is dedicated to being by your side with the resources, solutions and vision to see you through. Paul Cluff paul.cluff@bofa.com 385.268.0556 business.bofa.com/dealer Making business easier for auto dealers. Especially now. “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4826555 08-22-0145
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Bart Warner Hall of Fame Inductee Introduced by Brother, James N. Warner Bart Warner developed a passion for the car business at an early age working for our father at Rick Warner Ford. Much of this passion can be attributed to the thrill of working on commission rather than an hourly wage. Some of Bart’s essential business tools include: • Steven Covey’s Seven Habits of Highly Successful People: In the mid-1990s, Bart hired Jim Cox who became a certified trainer for the Seven Habits program and trained all the managers and many employees. • Dale Carnegie’s Personal Development Course: Bart loves this 12-week course and has personally taught it many times to small groups of employees over the past 25 years. • Weekly Manager and Sales Training Meetings: Bart must have conducted thousands over his career. Typically, he would share and discuss the ideas from the latest business book he had read or other industry articles he had studied. • His HP-12C financial calculator: He makes sure his managers and sales teams are schooled in how to use the HP-12C to be able to calculate loan payments. For the more advanced students, the calculator helps them understand and calculate Net Present Value and Internal Rate of Return. Early Career Bart was given opportunities to solve problems as a manager. He excelled and gained a reputation for being a problem solver. Those who know Bart well will understand that you better not bring a problem to him that you don’t want to be solved. He likes to dive into the details and find solutions quickly. Bart gained notoriety with the manufacturers as the dealership became a top performer. With this came opportunities to serve in leadership roles on National Truck Dealer Councils and Manufacturer Association Boards. Career Influences Rick Warner: Our father had a unique way of building relationships and hiring talented people. He also set a high bar for integrity and customer care. Harry Pritchard: Harry is a dealer consultant based out of Detroit. He taught Bart Principles of Management that included profit centering (also know as The Management Charts) and getting the right people in the right roles with the right incentives. 13
Jerry Zmyslo: Bart and Jerry were long time business partners. Jerry was working for Ford Motor Company in the late 1970s and explains, “Bart was traveling to Detroit to buy used trucks. My father-in-law, Harry Pritchard, who was a consultant to Rick Warner, called and asked me to assist Bart in any way I could. Bart came out quite often; we got to know each other. I was able to ‘bootleg’ him some new trucks. I also introduced him to several used car managers at dealerships I worked with to give him an opportunity to expand his network.” In 1980, at Bart’s request, Rick Warner invited Jerry out to Salt Lake City for an interview, which led to Jerry accepting a Controller position at Rick Warner Ford. Jerry became an amazing business partner for Bart, working in various capacities such as Controller, CFO, and COO. Jerry set a high bar for everyone with his work ethic and standard of excellence. He is highly respected and loved by his former coworkers and employees. Russ Castleberry: Russ is a longtime employee and Sales Manager of Bart’s. Russ shared, “On March 1, 1984, Bart Warner allowed me to begin the ‘truck transportation journey’ with him and his team. Bart has done a great deal in the past 39 years to encourage and help not only me, but many others towards goals and self-improvement —occupationally, personally, and spiritually … Bart understands that if you want to achieve your goals, you need the right people in your life. If you want to be successful, you will need some help along the way … Bart has been the ‘right person’ to help, encourage, and inspire me to reach higher on many levels.” Family Bart could not survive the demands of his career, his church service, and raising four children without the steadfast love and support of his wife, Liz. She has stood by his side through the good and the tough times, including challenges that come through family business transitions, health scares like when Bart had a pulmonary embolism in the late 1990s, and the many financial risks that come with being married to an entrepreneur with big ideas like building the biggest truck dealership facility in the country. Bart’s son, Tony, shares this about his dad: “I’m grateful for the example and legacy that my father has created and established. He has shown us the benefits of forward and progressive thinking, taking calculated risks, discipline, and employee focus within all the organizations he’s established. He seeks to share the work and the success of his dealerships with the employees and is personally dedicated to each employee becoming the best version Success is no accident It is hard work, perseverance, commitment, never giving up, sacrifice, getting results and the LOVE of what you are doing. For over 24 YEARS we have been LOVING what we do…. WHY WOULD YOU TRUST YOUR BUSINESS TO ANYONE ELSE? 24 years of putting YOUR dealership profits FIRST! www.firstinnovations.com www.firstinsuredgroup.com The First Group Family of Companies Better Products • Better Prices • Better Service 14
of themselves, often seeing and developing potential they didn’t know they had.” Personality Bart is resourceful. When he could not find any more diesel mechanics to hire for his new giant freightliner dealership, he approached DATC (Davis Applied Technology College) to help create more and better diesel mechanic training programs; Bart even sponsored some scholarships. Subsequently, Bart was asked to serve on the DATC Board of Directors, which he did for four years. Later, he convinced the SLT-ATC (Salt Lake Tooele) to become a Tenant at the Warner Truck Center with a dedicated mechanic training center. Bart has a deep drive to give back. He and Liz have had a long history of supporting many charitable causes in our community including: • Sponsoring the Youth Enrichment Foundation in 1994 which continues today, providing for full-time teachers of music and art in inner-city schools. • Volunteering his time with the LDS Employment Services for several years. Bart has been very generous with his time and dedicates one afternoon a week to coaching individuals seeking employment. Bart loves to learn. But more than that, he loves to teach. This dialogue illustrates Bart’s philosophy on training: “What if we train them and they leave? What if we don’t train them and they stay?” — Unknown. A Legacy Bart was 37 years old when he was presented with the opportunity to buy “Rick Warner Ford.” At the grand opening of the newly constructed Ford Dealership on 7th S. and W. Temple, Bart commented, “Only in American can someone as young as me acquire so much debt …” Now, I pause and look back at the flourishing businesses he has built and hundreds of jobs he has created over many decades and think about how fortunate I have been to be part of it. Closing Remarks Let me close with one last quote from James Logan, General Sales Manager at Utah Tank & Trailer, which expresses so well the influence Bart has on those with whom he works: “I’ll keep it brief, although I could write a novel on the gratitude that I have for Bart. Bart is always a glass-half-full kind of guy. He sees potential in everyone and tries to give them the opportunities to show it. His nickname should be ‘the librarian’ as he is always giving out books to everyone to expand their way of thinking. He is excited by what he learns and wants to share it with all of us. He has changed my life, personally, for the better. I was always a goal-driven person. Under Bart’s tutelage, I have learned that processes are more important than goals. ‘Results without processes can’t be duplicated, and processes without results are worthless.’ – Steve Ewing (One of Bart’s favorite quotes). Instead of setting goals, I create processes in my life that will lead to successes that I never knew were even obtainable. He has opened my eyes to a higher plane of thinking, and I will forever be in his debt for it. He is my boss, mentor, and friend. I will always be grateful for him. So glad that he is being recognized for his achievements.” Congratulations, Bart! 3 15
Thank you to everyone who joined us for the 2023 Utah International Auto Expo at the Mountain America Exposition Center on January 13 – 16. It was amazing to see people of all ages enjoying the newest cars, trucks, and SUVs from the numerous different auto brands on display. Thank you to all the sponsors who made this event possible, and we hope to see you again next time. 3 Utah International Auto Expo Success
By Erik Nachbahr, President and Founder Helion Technologies Cybercrime poses a constant threat to businesses and their customers, with criminals committing fraud by stealing identities or using phishing to illegally gain access to a company’s computer network. In recent years, cybercriminal attacks have caused major consumer information breaches at retailers, on social media platforms, and with credit information providers. Seventy-four percent of companies have been the targets of attempted or actual payments (check, wire, or ACH) fraud. The pace of attack increased in 2020, with two-thirds of companies reporting an increase in fraud attempts since the COVID-19 crisis began.2 And anti-fraud professionals are almost unanimous in predicting an increase in fraud.2 Cybercrime attacks — from ransomware to payments fraud — show no sign of going away. “Many dealers don’t think hackers are looking at them,” explains Erik Nachbahr, Certified Information System Security Professional (CISSP) and President and Founder of Helion Technologies, an IT/cybersecurity services provider exclusively serving the needs of auto and heavy truck dealers. “Dealerships are increasingly a target of cyber threats with their high volume of large dollar transactions and lack of digital security.” As criminals develop more sophisticated cybercrime techniques and states implement stricter consumer privacy legislation, cybersecurity and data protection should be top priorities for dealers. That means heightened security to ensure data privacy, combat potential attacks, and mitigate losses. According to the 2021 IBM/Ponemon “Cost of a Breach Report,” it takes an average of 287 days to identify and contain an attack. Data breaches that took longer than 200 days to identify and contain cost an average of $4.87 million, while those that took less than that cost an average of $3.61 million. Lost business accounted for 38% of the overall cost, including increased customer turnover, lost revenue from system downtime, and additional marketing expenses to overcome damage to the business’s reputation.3 Key Dealership Cybercrime Threats Dealerships generally have a complex technology architecture that makes cyberattack protection challenging. “Many dealership computer systems have hardware added in a one-off manner, are built without a complete system plan, and utilize older, outdated software. In some cases, they underpower their virus protection by using freeware software. Further, weak security protocols that allow user account sharing can undermine a dealer’s business,” Mr. Nachbahr explains. Increasingly sophisticated ransomware attacks targeting dealerships are on the rise. “These criminals know dealerships have money and are aware of dealer vulnerabilities. That makes dealerships a lucrative target,” continues Mr. Nachbahr. “The attacks aren’t typical automated intrusions; they are enterprise-grade attacks with live hackers combing through a dealer’s systems. Because dealers have many, disparate components and don’t tend to use standard protocols, once their systems are exploited, the breach is difficult to fix.” Other cyber threats focus on personally identifiable information (PII) which can be stolen and resold to bad actors. Forty-four percent of data breaches included customer PII, making it the number one type of data stolen.3 Dealerships regularly handle vast amounts of PII, particularly financial information, so it’s no wonder they’re an attractive cybercrime target. In today’s environment, protecting dealership computer systems and their customer data is essential. “As cybercriminals are becoming increasingly adept, more dealers are realizing an attack could be a ‘business-ender.’ Forward-thinking dealers are investing in technologies that protect against these full-scale attacks. Information technology security is now being viewed as a priority, not simply an expense to be controlled,” states Mr. Nachbahr. Identify Threats and Build Defenses Is Your Dealership Prepared to Deal with Cybercrime? 18
with each accordingly. Simple protection measures along with insurance for business crime, cybercrime, or data breaches can dampen losses. Measures to limit risks include: 1. Employee education is the top method for lowering the risk of fraud in general, and cyberfraud in particular. A company culture that values overall fraud prevention sends a powerful signal to employees. Employee education about fraud awareness is one of the best ways to get started. Fraud barriers include: • Clearly defined fraud prevention roles and responsibilities for you and your employees • Separation of duties, checks and balances, and multifactor authorizations for funds transfers • Secured computers with password protection, changed periodically • Restricted user account access to individual owners with no shared access • Web filters and controls that block clicks on potentially fraudulent links Simple protection measures along with insurance for business crime, cybercrime, or data breaches can dampen losses. The Cost of Cybercrime The likelihood that a business will experience financial damage after a cybercrime attack is rising quickly. The average cost of downtime from a ransomware attack has doubled over the past year to $274,200.4 The average downtime is now 19 days, a three-fold increase from 2019.2 Direct economic losses are compounded by lost revenues from operational disruptions, brand reputation damage, and decreased customer loyalty. A 2021 IBM/ Ponemon Institute survey found that a data breach costs U.S. businesses an average of $180 for each accessed/stolen record containing customer PII.3 For dealerships with thousands of records, the damage can add up quickly, not to mention the impact on customer relationships. A Ping Identity consumer attitude survey reported that 25% of respondents would stop using a business after a data breach.6 The potential for cybercrime to inflict direct losses, reputational damage, and customer loss highlights the importance of making data security and cyberfraud defense a priority. A salesperson responded to a phishing email, opening a malicious file with ransomware and providing cybercriminals access to that computer. The salesperson did not suspect an intrusion. Once behind the firewall, the hackers were able to access the dealership’s entire system and servers. The hackers used the compromised computer to probe the network, looking for vulnerabilities to lock up the dealership’s computer operations. The criminals were able to shut down the dealership’s systems for over a week — asking for payment in bitcoin to relinquish control of the systems. All of the dealership’s servers and emails and one-third of their 300 computers were inoperable. They chose not to pay the ransom, but instead took the next month to rebuild their systems completely. How could this cyberattack have been prevented? • Through employee education on the hazards of downloading unsubstantiated files or clicking on suspicious links • With proper web filters and controls to block hazardous links • By implementing fraud software to quickly find, mitigate, and recover information compromised by fraud and ransomware attacks Limiting Primary Fraud Threats When it comes time to address criminal activity targeting payments, banking transactions, customer data, communications, and computer systems, it is important to analyze both non-cyber and cyberfraud. Equally important is identifying the sources of threats — internal and external — and dealing Positive Pay Daily reconciliations/ other internal processes Payee Positive Pay Segregation of accounts 85% 62% 59% 54% Payment Fraud Prevention Measures1 % of organizations using these measures 19
2. Check and wire fraud are the top two payment fraud threats for any business. Sixty-six percent of companies reported that check payments were subject to fraud, and 39% were victims of wire fraud attempts.1 Dealership payment volumes — both paper and electronic — make an attractive target for fraud. Implementing a few simple, inexpensive processes can protect your dealership: • Use positive pay services. You’ll be able to verify the authenticity of checks by looking over the issue date, check number, amount, and payee name to catch check fraud. • Protect check stock with dual authorization before use. • Further enforce authorization through online banking platforms which require additional authentication for wire transfers through assigned user ID and password logins, requestor authentication, and dual approvals. 3. Phishing and social engineering attacks scam employees into believing an email is from a reputable company or dealership employee. The recipient then reveals sensitive information, passwords, and credit card or account numbers. Phishing emails can appear to be from the dealership owner, ordering large sums to be wired to external accounts, which then vanish moments after the transfer. Phishing emails entice unsuspecting employees to download innocent looking files or click on malicious links and infect computers with spyware, viruses, or ransomware. “Phishing attacks are one of the most common and damaging ways for hackers to access your systems,” Mr. Nachbahr explains. “Your employees should be the frontline defense against attack — your ‘human firewall’. Ongoing employee training, education, and support allows them to recognize social engineering attacks and thwart costly episodes before they begin.” Preventative measures include: • Web filters and controls that restrict access to phishing links • Multi-factor authorizations for wire transactions • Limits on payment amounts that a single employee can authorize • Cloud backup for restoration following a malicious software attack • Intrusion detection software to identify suspicious network activity 4. Synthetic identity fraud is another risk to dealers today. Imposters use fake information to create fictitious identities, combining stolen identity information to create new credit files. These new synthetic identities allow criminals to qualify for a loan to buy vehicles, putting dealerships at risk for losses. Background checks verifying customer identity offer the best protection. Check Fraud Wire Fraud 39% 66% Fraud by the Numbers1 % of companies experiencing fraud: Cost of a data breach: $180 per PII record stolen3 Loss of customer loyalty: 25% of customers say they will leave after a data breach6 19 days in length5 $274,200 average cost of related downtime4 Cost of ransomware attack downtime: The Cost When Cyber Criminals Strike 20
When cyber fraud does penetrate a dealership, speed is the key to mitigating its impact — the faster an attack in progress can be detected and stopped, the less its damage. Quick detection and speedy remediation deploys an entire set of technologies, processes, and expertise — including digital forensics, threat hunting, malware reverse engineering, and technical surveillance countermeasures — that most dealers don’t have. Mr. Nachbahr explains, “Dealers need a Security Operation Center (SOC) to monitor the network 24/7/365 looking for signs of malicious behavior. Tools like advanced endpoint threat protection and security information event management (SIEM) allow security professionals to sift through and correlate data and identify suspicious patterns of behavior so they can shut down the attack early and limit damage to the dealer.” “Dealers are quickly recognizing the need for a SOC, but security professionals with the training and certification to run the centers are hard to find. Most dealers are turning to outsourcing to protect their business.” Cyber Liability Insurance Cyber liability insurance protects your dealership when cybercrime happens. “Many dealers don’t think cybercrime will happen to them and are not prepared when it does,” explains J. Travis Johnson, Auto Dealer Practice Leader at McGriff Insurance, a subsidiary of Truist Insurance Holdings, Inc. “Due to their systems and transaction levels, dealers are one of the many low-hanging fruits for cyber criminals. While some OEMs do require cyber liability insurance, dealers who aren’t required to purchase policies typically don’t think the premium money spent is worth it. Not realizing the overall benefit of a cyber liability policy is relatively inexpensive when compared to the damage a cyberattack can cause.” Dealerships interested in cyber insurance policies undergo an extensive cyber risk review that rates them on existing cybersecurity vulnerabilities and defenses in place. Your level of cybersecurity preparation determines your premiums. Some of the coverages include the cost of identifying where the attack came from, making ransom payments, paying rewards for informants, repairing or replacing computer hardware, and potential court costs. If an attack happens, most insurance carriers offer a 24/7 on-call teams to advise you on next steps and help you get the problem resolved as quickly as possible so you can get up and running again. Don’t Think You Are Flying Under the Radar Headline-making data breaches typically occur at large, wellknown companies, but that doesn’t mean your dealership can rest easy. Fraud criminals are constantly looking for the easiest marks, and sizeable transaction volumes combined with disparate systems make dealerships particularly vulnerable. Take protection measures seriously to avoid being a victim. Can I Afford to Ignore Cybercrime? A serious cybercrime attack can be crippling. A ransomed network, infected server, or compromised bank account can be as much of a disaster as a flood or fire. As more dealerships rely on digital customer interactions and transactions, the benefits of protecting your dealership, your data, and your finances from fraudulent activity have never been greater. Don’t Let Cybercriminals Steal Your Business Talk to your relationship manager or treasury consultant to discuss your business plans and your dealership’s fraud defenses, including ways to mitigate damages through McGriff Automotive insurance policies. Keep up with the digital buying transformation. Talk to your Truist Dealer Services Officer about how Truist can help you build out your digital buying journey. Go to www.Truist.com for more details. 3 Sources 1 “2021 AFP Payments Fraud and Control Survey Report”, Association for Financial Professionals (AFP), 2021. 2 “Fraud in the Wake of COVID-19: Benchmarking report”, Association for Certified Fraud Examiners, 2020. 3 “Cost of a Data Breach Report 2021”, IBM/Ponemon Institute. 4 “Datto’s Global State of the Channel Ransomware Report”, 2020. 5 “Ransomware Demands continue to rise as Data Exfiltration becomes common, and Maze subdues”, Coveware, accessed 12/15/2020. 6 “2019 Consumer Survey: Trust and Accountability in the era of Data Misuse”, Ping Identity. 21
One of the significant challenges of running any automotive dealership is moderating expenses. General managers and dealer principals are responsible for controlling many costs, including payroll, vehicle inventory, floorplan, and parts inventory. Monthly bills add up, and there is less revenue to put toward necessary resources. A major opportunity for expense control may be the dealership’s software stack. According to the 2022 DMS Market Report by the Dealer Tech Nerd, the average franchise dealership spends $30,000 a month on software. With a mindset shift and careful evaluation, those costs can be reduced. A Breakdown of Dealership Software Costs Dealership software can be broken down into 29 categories. Here is an outline of the most expensive and necessary solutions for a typical franchise dealership: • The Dealer Management System or DMS is the core hub that connects all dealership data between departments and even multiple stores within a dealership group. The average monthly cost is $6,300. • Many areas of a business use Customer Relationship Management (CRM) tools to execute, track and analyze communications with customers and prospects, and maintain a historical profile of these interactions to help grow relationships. This software costs $2,000 per month. • Equity Mining software helps a dealer use customer information from a CRM and evaluate the revenue potential of a customer, considering trade-ins, future potential services, and more. This tool costs $2,000 per month. • Vehicle Inventory Management software holds the details for each vehicle on the lot, including owner history, the going market value, photos, and more. This software averages $1,700 per month. Amounts vary by category, but all tools contribute to this significant monthly cost. Knowing the value of each tool will allow you to evaluate your needs and consider how you might reduce costs. How to Evaluate Your Software Integrations Take stock of the software vendors you use. Gather your contracts, invoices, and any other information. The tools are likely integrated with your DMS. Here are some suggestions on how to evaluate them: • Take Note of Redundant Services As tools evolve and update, the features between some of them can become similar. After several enhancements, the CRM you originally purchased to manage communications with your contacts may now be able to manage your website. This may no longer be necessary if you are also paying for a website maintenance tool. to Controlling Dealership Expenses The Secret By Sharon Kitzman, VUE DMS 22
Do not immediately cut out every duplicative resource. Make sure any tool you decide to remove from your stack can be sufficiently replaced. Consider how much longer you have on individual product contracts. It may be financially beneficial to wait before ending your relationship with one or more of them. • Tie The Value of Each Vendor to Historical Revenue Some software in your dealership may play a significant role in the success of your business, and others may have less of an impact. If you find some tools fall into the latter category, you may want to consider eliminating them. Beyond expense control at your dealership, consider why a particular tool is not benefitting your business. Is it not doing its intended job, or has your business changed in ways that make the tool no longer a good fit? This is a great opportunity to involve your staff by discussing their usage of the software and how well they like it. If the general purpose of the software is valuable, but the current product does not provide a good experience for your staff, consider replacing the software with another vendor rather than removing it altogether. Replacing a key tool that the staff does not value with a better one could increase your revenue. • Consider How Efficiently the Software Works Together Dealership software should be integrated in a way that can share data efficiently. Data typically flows through the DMS, so consider this during your evaluation. If your tools are not communicating with each other, that means some of your staff may need to log into different interfaces and move data manually. It could also mean you are not getting the complete picture of what is happening in your dealership. Your staff may be spending more time dealing with the tools and less time bringing in revenue. Putting a focus on the integration of your software with your DMS can increase the efficiency of your dealership and offset costs. • Reduce Your Software Costs but Not the Value Now that you have evaluated your software stack, chosen what software can be removed, and have a better picture of how your tools tie to overall revenue, it is time to take action. Talk to selected software vendors about finishing but not renewing contracts. Make sure your chosen tools integrate well with your DMS. This should not only reduce costs but make the combination of your chosen tools more valuable to the dealership. Consider what you can do with these savings to benefit your dealership even further. Can you upgrade any software that would increase productivity? Perhaps somewhere else in the dealership needs an increase in budget. Can these savings go towards increasing customer satisfaction? These are all possibilities that may not have been an option before. Good luck reducing your costs and increasing your profits! 3 Beyond expense control at your dealership, consider why a particular tool is not benefitting your business. Is it not doing its intended job, or has your business changed in ways that make the tool no longer a good fit? 23
Succession Planning for Dealers in an Evolving Business Environment By Bank of America Corporation While there are many considerations in running a thriving dealership, one of the most important — and often overlooked — is developing and maintaining a succession plan. A strategy that allows for the transfer of ownership to the next round of leaders — whether family members, a trusted partner or an outside buyer — will position you and your business for future success. Why Now? Having a succession plan is important for many reasons; however, in today’s environment, there are three crucial reasons that rise above the rest: 1. There’s a lot of buy/sell activity in the industry and accelerated consolidation. If your long-term plan is to exit the industry, you should consider the current market valuations and buyer interest. 2. The U.S. is on the verge of material changes in tax laws that could affect your finances and the value of your business if passed on to future generations. The estate and gift tax exemption, currently at a historic high of $12.06 million per person or $24.12 million per married couple, will drop by half in 2026 when the current tax law lapses. It could drop even faster if Congress passes a new law before 2026. 3. The market, labor costs, supply chains and other factors influencing dealerships continue to fluctuate. As the pandemic brought home to us, every business needs a plan in place in case top leadership can’t run day-to-day operations. Consider Your Priorities To begin the succession planning process, you need to identify your goals. Perhaps you’d like to sell — to family, management or a third party — to generate liquidity. You may also want to maintain some level of control of the business, particularly during a transition, if you’re gifting or selling the business to family members or selling to trusted employees. Or, you may want to step away completely and allow a third party to take over. In addition to identifying your goals, it’s important to consider how your decision will affect employees and the community to assess whether your actions align with your goals. Finally, you’ll want to consider the financial implications of your decision, whether it’s reducing the amount of taxes you pay or generating liquidity for future needs. Identify Key Players One of the most critical succession planning decisions is determining the organization’s future leadership. While it can be difficult and emotional to talk with family and key managers about the future, it’s an essential piece of the process. An honest talk about your goals and theirs will help clarify your options and develop a more realistic succession plan. 24
An honest talk about your goals and theirs will help clarify your options and develop a more realistic succession plan. Facilitating the process will be two crucial teams: internal and external. Your internal team will consist of key family members, senior dealership managers, your banker, lawyer and accountant. Your external team will consist of advisors who think broadly and are strategic and defensive, like a transition attorney, estate lawyer, investment bank and appraiser or auditor. Maximize the Value of Your Dealership Once your team is in place, you’ll want to get your documents in order. These include: 1. Financial and business information: You should pull out your business’s financial statements and consider conducting an audit if you plan to sell the dealership. An audited statement is a more powerful statement to share with a prospective buyer. 2. Updated appraisal: An appraisal will compare your business to other dealerships, their gross margins and growth rate. Key metrics are important, whether you’re selling or benchmarking the success of your business for future managers. 3. Strategic plan: It’s an excellent time to create or update the strategic plan for your dealership. It will help you look at your dealership in the context of how the industry is changing and evolving. Opportune times to update your strategic plan include any time you experience changes in your family situation or senior management team. Initiating a succession plan can be emotional, and the process will take time. However, once you get started, you’ll find relief in clarifying your goals, understanding the intent of your family and senior managers and creating strategies that maximize the value of your business and legacy. 3 © 2022 Bank of America Corporation A WHOLE NEW WAY TO WHOLESALE Introducing Dealer Exchange, a FREE service by KSL Cars • Move inventory easily and locally • Avoid costly auction fees • Buy and sell wholesale right on KSL Cars • Quickly move listings from retail to wholesale https://cars.ksl.com/dealer-exchange Hit your target market Get more exposure • Increase revenue To advertise in this magazine, contact us today. 801.676.9722 | 855.747.4003 thenewslinkgroup.org sales@thenewslinkgroup.com 25
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