News | June 2, 2008

RSPA connect: Legally Speaking

Source: RSPA

Receiving calls on the RSPA Legal Hotline is an education in and of itself. Most often a member contacts me prior to taking an action or reaching a decision, but sometimes the call comes after the fact. By acting, and then asking, many have made unfortunate mistakes. Let me share with you some of those errors in the hope that history will not repeat itself.

Ready Fire. More than once a member has returned to the office and found an employee or employees engaged in or not engaged in a specific activity. Perhaps the sales team was standing around when clearly they could be calling prospects. This was not the first time that the sales team had ignored its responsibilities, but this time the owner was having a bad day. As a result, he fired, on the spot, the individual he had been most dissatisfied with for the last two months. The employee sued for wrongful termination and was successful because his personnel file failed to contain a single negative statement. Emotions have their place, but seldom in reaching a business decision. Before terminating an employee, make certain the action is fully justified and can be supported if necessary. Yes, most employees are employed "at will," but many are also in a protected class of employees. Fire in haste, and it may cost you dearly.

Ignoring Your Financial Statements. The very essence of an RSPA member is independence. But doing it your way often is not the right way. Unfortunately, Dealer independence may result in taking a business in a direction that is not encouraged by experts. Having attended RSPA programs, I learned certain truths that were dictated by one's financial statements. These "sacred cows" are business areas that others have found to be essential to profitability and success. Ignoring these truths or attempting success by other means is risky and perhaps unproven. The Dealer invariably asks why he was so independent. Do not ignore the collective industry knowledge available to you in seminars, publications, and at industry events. Whether it is product, budgets, or marketing the chances are the collective knowledge may be better than yours and is certainly worth considering.

Not In My Foot Steps. Many members followed in their fathers' footsteps and joined the family business. It would be extremely rewarding to have your children do the same. The first thing to acknowledge is that your child's career is his or her decision and not yours. To express your displeasure if a child does not chose the "Family Business" is going to adversely affect your relationship. If your child does elect to pursue the "Family Business," then send him or her elsewhere to gain experience. There will be plenty of time to learn at your side after he or she has gained the basics elsewhere. If there are family members in the business, create a Family Council to discuss issues on a monthly basis. Separate family and business, and they will both develop successfully.

Sharing End-User Information. The most valuable component of a dealership is its customer base. Every time you share that information with another you are giving away a portion of your business. When a business is sold, one of the components in determining the value is the installed base. Whether it is a supplier, finance company, or any third party, you want to obtain a confidentiality agreement prior to providing end-user information. The confidentiality agreement must establish the purpose for which the information is being provided and that under no circumstances can the information be used for marketing or sales purposes. Failure to do so diminishes the value of your business without any compensation to you. Many members have regretted the decision not to protect the very valuable information they have developed both from third parties and employees.

My Sales Team, My Comp Plan. Maintaining control of your sales team is essential for success. Allowing suppliers to offer spiffs directly to your sales team eliminates a degree of control. Independent Dealers determine the products they wish to sell and the emphasis they wish to place on those products. Direct payment to salespeople is also another method for a manufacturer to obtain end-user information. Take control of your sales team and prohibit suppliers from making payments directly to your employees.

RSPA stands ready to assist members in every phase of their businesses. Concentrating on education focusing on sales, service, and management skills, one can learn from experts and strengthen their business. Educate yourself through RSPA, and you will not wish you could make the decision again.