Business Risks

Business Risks

Business risk management might not be the first thing on your mind as a business owner, but it could be the difference between success and catastrophe. In this episode, we're diving deep into the world of risk mitigation with expert Tom Kline, a consultant, published author, and seasoned dealership owner with decades of experience in helping businesses navigate the complex world of risk and compliance. Tom shares actionable insights on how to identify, manage, and avoid risks that could threaten your business—whether you're running a dealership, a startup, or any other enterprise. Tune in for a conversation that could change how you view risk in your business!

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How To Manage Business Risks

Risk Management And Mitigation In Busines

We've got a very exciting episode about a business threat, which is risk management and mitigation. We have an expert on the line. His name is Tom Kline, and Tom has been a Risk Mitigation Expert and Compliance Consultant. He's a Published Author of Tuck the Octopus: A Better Vantage Point for Dealership Risk and Compliance, a Dealership Owner for many years, an Expert Witness, a Speaker, and a Trainer. He talks to car dealers all over the country to help them limit their risks, keep their employees happy, and keep their customers happy.

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Tom, welcome to the show. We're going to talk about your expertise in risk management. More specifically, I want to hear more about your book, Tuck the Octopus: A Better Vantage Point for Dealership Risk and Compliance, and how you've dealt with dealerships and how you've helped businesses that way. A lot of our audience are business people and just everyday life. I try to reach out to business people to talk about the risks that businesses are dealing with and all the issues that they're dealing with. My first question is, tell me how you got involved with all this. What brought you to this kind of business, and how are you doing what you're doing now?

First of all, thank you for having me, John. I appreciate being on. I'm a former dealership owner. My family has been in the car business for 100 years, and I'm a third-generation car guy. At our dealership, whenever there was a problem, it would land on my desk. I got tired of the same problems happening over and over. I had to figure out solutions to stop those problems from happening before they got to me. Otherwise, it was just beating me up every day. That's how it all started.

What kind of dealership was it?

Over the years, we had many different franchises, but in the end, it was a Chevrolet and Subaru. In the meantime, we had Toyota, Volvo, Daihatsu, Alfa Romeo, Lotus, Kawasaki, Vespa, and Buick. We had a lot of different ones.

I bet you got some good backroom stories about that kind of stuff in the car sales business. I don't even have this on my list, but I just thought about it. What do you think of this e-car mandate getting dropped?

We'll see what happens because the mandate that he dropped was not a law. It was former President Biden who had set a goal, I think, for 2035 to have 50% of the cars on the road be EVs. Unofficially, President Trump took that off the plate. It wasn't a law or a rule. It was more of a goal that was set, is my understanding.

As a dealer, do you think the guys at the ground level were getting pushed from the manufacturers, selling harder on e-cars and stuff?

Yes, no question. The manufacturers are certainly pushing dealers into selling more battery-operated vehicles, or BEVs, battery electric vehicles.

Tell us what kind of risk you would have to wrestle to the ground to fix it so the dealership ran better.

Customer And Employee Problems As Major Sources Of Business Risk

Any business, not just a dealership, 70% or 80% are either customer problems or employee problems. If you're managing those, then you're going to only have about 20% that remains. When you're a business-to-customer, B2C, business, consumers, with the advent of the internet 25 or 30 years ago, have more power than they ever have because they're able to write reviews. They're able to go and file complaints with regulatory bodies, whether that's the state attorney general, or they may have a friend who's a politician, or they can go to the Federal Trade Commission or the Consumer Financial Protection Bureau. There are all these different agencies that will receive consumer complaints.

70% or 80% of business issues are either customer problems or employee problems. If you're managing those, then only about 20% will remain.

If they get enough complaints, they'll investigate them. If you're fixing your customer problems and your employee problems, and that's where I'd say 60% or 70% come from customer problems, and another 10% from employees, if you're keeping your employees happy, paying them properly, treating them right, not micromanaging them, because nobody likes to be micromanaged, then if your employees aren't happy, your customers are definitely not going to be happy.

Part of your job, then, is consulting with them on how to make that work, right?

Correct. Once we sold the dealerships back in 2019, that's when I opened my consulting business. I help dealerships, startups, tech companies, and businesses with their risk mitigation.

Other than working on these employees and working on the customers and trying to understand that, because I'm a business guy, and I understand when I was in college that a lot of times, when employees weren't happy, most of the time it wasn't because of the money. It was because of how they were honored or how they were treated or whatever. If they weren't getting paid enough, that's one thing. We're in a different world now than we were when I was younger with employment. Every guy I know who owns a business says it's a hard time getting people to go to work. Have you experienced any of that in this business?

Steps For Implementing Risk Management And Insurance Awareness

Sure. All the time. The employees are, as I said, a small percentage of the problems. One of the questions you asked a few minutes ago was, what's a business owner to do? If you're a business owner, how do you manage your risk? My answer is pretty simple. It's a two-part thing. Number one is you have to look around and say, "What can possibly happen that could be catastrophic for my business?" Is that a lawsuit? Is that a regulator?

In other words, what would each business owner define as catastrophic? That's different in every business. In some businesses, like software as a solution, a cyber event might be that particular downfall. For other businesses, it might be a lawsuit. For other businesses, it might be a regulatory issue. What the business owner can do is write down all of those potential problems that they can think of.

Step number two is, do you have insurance that would cover those catastrophes? Do you have enough insurance? Oftentimes, business owners don't have enough insurance to cover the value of the enterprise. In other words, if you have a business that's worth $5 million, just round numbers, and you only have a million dollars of umbrella coverage over your automobiles, and you were to get into a severe accident, then you don't have enough automobile coverage to cover the value of the enterprise. Does that make sense, John?

The Motivation Behind The Book

Yeah. That's a lot of common-sense stuff. What led you into writing this book? Is that kind of the guide to these guys to help them? Is that what was on your heart? What got you there?

Yes. The book, as you mentioned, is called Tuck the Octopus: A Better Vantage Point for Dealership Risk and Compliance. The analogy that I use is that running a business is like trying to tuck an octopus into bed, but the tentacles keep flopping all over the place. As business owners, our job is to tuck those tentacles in and make sure that everything runs smoothly. The idea behind the book, it's written from the perspective of people who are dealers. Equipment dealers, boat dealers, car dealers, truck dealers, bus dealers, and any kind of dealership are needed because the dealership business is pretty complicated. The lessons in the book are apropos for any business owner because they talk about what the risks are and whether you've looked at your insurance.

You mentioned employees. Do you have insurance for employee problems? A lot of small businesses don't because it's expensive. A lot of small businesses don't have that because they never knew to ask the question. It's kind of a primer on running a business. You asked what was in my heart. My heart just wanted to help. I have many years of experience, and I've seen a lot of things. I wanted to put the information out there so that somebody could buy the book and have an A, B, C, 1, 2, 3 guide to try to run their business and mitigate the risk.

What it sounds like to me is it's not just about dealerships because what you're talking about is any business that's got a bunch of tentacles or whatever out there that you've got to deal with. One thing that went through my mind when you were talking about this, how to eat an elephant?

One bite at a time.

You're doing that. I think this information is good for more businesses than just dealers. To me, when we look at this, this whole show is all about showing somebody a threat or people a threat, showing them a solution, and then trying to give them some peace in their lives as they're dealing with it. That's why we even did this, to help people learn from an expert. What do I do with this? What do I do?

They might not even know what you're talking about. They might not even know that they need to have that insurance for the employees. They might not know if they only have $1 million of umbrella insurance. Are they out of business if they have a fire, or what's the deal? Sometimes it's just common-sense stuff.

What I like to do with people, like you say, is, "We know here's the problem. The problem is, if you can't pay your payroll, your building burned down, or whatever it is, how are you going to be?" We've learned, I've learned, a term in the last 3 or 4 months called situational awareness. It's a situational awareness situation even in this business. A lot of business people just go into it because their heart is to do something. They'd love to do it, like you're doing. You came out of business, and you're doing it to help people.

We have a running list. That list could be hundreds of items that we're tracking and working on all at the same time because business is complex. There's a lot of different people. There are a lot of different departments. There's a lot of different things going on. We might have one manager working on one problem, another manager working on another problem. My job is to track all those and to continue to move forward in terms of continual improvement activity.

Risk Management And Situational Awareness

Risk management is about continual improvement of your operations, of your policies, of your procedures. How are you handling your insurance renewals? There was a study done years ago. In that study, if I recall correctly, it said 62% of business owners don't know what's in their insurance policy. For anybody who's watching, I would just say to you, next time you have your insurance renewal, make your agent explain to you what's covered and what's not covered, so that you have some understanding of where your soft underbelly is. If you've got things that are not covered, how can you cover them?

Risk management is about the continual improvement of your operations, policies, and procedures.

Are there other insurance policies, or should you put a procedure in place to make sure that if that thing happens, you know about it immediately and can deal with it a little more rapidly so that you can bring those problems to conclusion? The one thing I can tell you is that problems are like rotten fish. They don't smell better as time goes on, they smell worse. The quicker that you can handle those problems and get them managed, the better off you're going to be in your profitability.

Tell me a few steps. If you sat down with a guy and you start to introduce this, what would you do to just introduce him to the idea and make it simple instead of complex? What do you do first, second, third, and fourth? Maybe a little bit of that.

Dealing With Unforeseen Business Problems

When I get a phone call, it's usually because they're concerned about a particular peril, a particular problem, a lawsuit that they have, or something's happened that's making them anxious and nervous. Business owners, when they put their feet on the floor in the morning, they're a little bit of a nervous sort, and rightfully so.

I'm the same way, by the way. We're worried about what's going to happen in our business. In my case, what's going to happen in my clients' businesses? What have I not thought about? What do you do if certain things happen? I had a client on Sunday call me and wanted to know what to do, as there was a deceased man found at his front door.

Not something we'd ever talked about, but after the police had been called and they'd done their thing, we talked about the potential problems, and we notified the insurance company and talked through the various issues. You just don't know what's going to come up as a business owner, and things change, and things evolve, and the risks change, too. This is never a static thing. You're never able to rest on your laurels and say, "I'm good now," because things are always changing.

I've been in business for many years. I feel like that's true and that it's not for everybody, right?

That's right. It is not for everybody.

You've got to be prepared for the trials that come with it. I'm going to point people to this action guide in your book, and I think we're crossing borders with this in terms of other businesses because all of us are dealing with the same thing. If you're trying to do this and bring some economy to the country, or even your local area, and hire some people, it is not for the weak at heart. I appreciate you taking the time to come and see us and be with us. We'll follow up with you later and try to keep track of you.

My pleasure. Thank you.

You know how that goes. Thank you for coming on board, Tom, and we appreciate you.

Thanks for having me, John. Appreciate being on.