VINCE BERRETTA - FULL EPISODE
Sun, 6/27 9:59AM • 50:56
SUMMARY KEYWORDS
hyundai, people, car, dealer, pay, negative equity, deal, business, beretta, jeff, insurance, work, job, selling, product, vince, general motors, buy, return, policy
SPEAKERS
Jeff Sterns
00:00
I was selling General Motors car so I was selling shabads citations omegas siara, the Chevy celebrity Camaros. Of course, yeah. And then of course Beretta and the berlinetta. I had this idea years ago. And I said, I just looked at him, I said, I said to him nice execution, we might as well take responsibility for my for my first child that night, I thought about my wife wearing your leather pants. I don't know how many children I'm responsible for. We were pitching OEMs on the proposition of her selling your vehicles with the ability for the consumer to buy them the ability to return it if something were to happen during their ownership. And, you know, we're getting nowhere, the Lehman Brothers bank failure and, you know, the global financial crisis and markets were just like, nose diving and markets were tanking and Hyundai came, they said, We're interested and they had purchased all of General Motors is adspace the NFL playoffs so which was the wild card game of top 15 or top 10 Google searches Hyundai dealers had no communication before this, okay, they they saw commercial on it go like holy shit. What idiot is underwriting that? They almost felt guilty about how successful the program was hire slow. And fire fast. You don't mind if I drink wine during our show? Right?
Jeff Sterns 01:30
Like it's so hot. Well, you're Canadian. So that probably started around 11 this morning. I understand. No, that's, that's that's that's cannabis here. Jeff Sterns connected through cars. If they're bigwigs, we'll have him on the show. And yes, we'll talk about cars and everything else. Here he is now, Jeff Sterns, Jeff Sterns connected through cars here with my good friend, Vincent Beretta. And I'm excited for more reasons than just the cool name Beretta. First of all, let's be clear that his family was begun. Because of a dinner that I threw, we'll leave it at that we'll see if he wants to address that or if he wants to edit it out. But now I'm going to read from some notes. Vince is an entrepreneur who started his business out of a rented apartment in Toronto 22 years ago, and grew his business achieving Now listen, are you ready for this? And I just asked Vince, before this recording, we haven't converted the money to US dollars, but 900 million in retail sales. And I think even in Canadian dollars, that's still money. I think it still is. And not only that, it's still money, okay. But his idea was the backbone of the most successful automotive incentive program. I mean, I'm not kidding, of all time. And forgive me, I keep looking at my notes here. And nothing will ever come close, really, and nothing has ever touched it since. So we'll talk about the Hyundai assurance program. I mean, that's going to be the story. And also I'm interested in But fincen doesn't really seem to think it's as interesting. He also has a program called walkaway that if he would touch on it a little, I think that if you're a car buyer watching this, you should always ask your dealer for this by name. And I'm not kidding. It's a fabulous product. So Vince, fill us in a little bit.
03:33
Well, 22 years ago, I was an insurance Rep. For creditor insurance companies in Canada, I became a little disgruntled with what I was doing, I thought there was a better approach. One day after having dinner with a client and a friend who mentioned he was had to take back a couple of cars from some really good clients who couldn't afford to make payments anymore on their car. And they certainly couldn't afford to get out of their car lease and loan because they had negative equity. And I hope everyone who's listening might know what negative equity is. But we can maybe talk about that in a second. And this fella helped him out with a cart with their cars, took back the cars. And he said, Look, I'm in the business of selling cars, not taking them back. But I can see that this is going to be a big problem. And as as negative equity grew, and for those that don't know, negative equity is the difference between what you owe for your car and what your car is worth. And that amount is negative equity. And that amount negative equity has grown in the car business since the early 90s. And now in Canada, the average negative equity is about
Jeff Sterns 04:47
I think about $9,000 on any given car, loan or lease at the time someone has one and Vince if you don't mind because not everyone's in the car business watching this. So would you say and I don't know if it's an opinion Do you have evidence to back it up? Do you think or know that the negative equity has grown over time because of the length of time that people have been given to pay and or bringing in the negative equity from their trading in the bank adding that on to the new one?
05:14
Yeah. The the practices that we've gotten from, you know, what used to be way back when I when I started selling cars in in 1982. Jeff, I was 19. I was selling General Motors car, so I was selling Chavez citations, or Megas. siara, the Chevy celebrity? Yeah, come arrows, of course. Yeah. And then of course Beretta, the Beretta and the berlinetta. So there was actually a car a car named after after, you know, Beretta and a gun. So same spelling. Yeah. So, as car loans got longer and longer and longer, and banks loaned more and more money against a car, people found themselves, you know, zero down 0%. And people were financing extras, whether that be a warranty, or all the additional that they would add to a car. And cars depreciated faster than people paid them down. So that created that created a negative equity gap. And that's how gap insurance became popular and basically walk away is gap for humans, that's human gap. So doesn't have to, you know, it's doesn't have to happen to your car, it happens to you personally, whether you lose your job, you get transferred out of the country, you lose your driver's license, we packaged seven to 11 different reasons to use the product and made it no charge to the consumer. And we made car dealers, manufacturers or financial institutions pay for the first 12 months of coverage. And consumers have the option to buy extended versions or extended and enhanced versions of the walkaway product. But the first proposition is a 12 month complimentary policy that's provided by your dealer, your financial institution, or in some cases such as Hyundai, the, the OEM or the manufacturer. So that's that's that's basically the proposition that we did so people can return the car and walk away with little or no cost. And that's, that's, that's walk away and we'll walk away in a nutshell.
Jeff Sterns 07:21
Okay, so you said gap for humans. Let me just clarify what gap is. So when someone takes delivery of a new car or new lease, especially in leasing, I believe the manufacturers or the lease companies include gap insurance. Now, it used to be a policy that you always needed to buy. But I would always have gap insurance. If I'm either rolling a lot of negative equity or not making a good downpayment, onto a used car and 100% of the time on a new car, you should have gap insurance. And what this means is, is if you leave the dealership Five minutes later, five weeks later, five months later, the car is totaled, meaning wrecked, unrepairable or stolen, unrecoverable. That's what we call a total, they want to pay only what it's worth, which might be 5000 less than you or might be 15,000 less than you owe, if you financed in tax tag title, maybe a little bit of negative equity from your last car, there's a very good chance. So now, you have nothing you have no car and you owe money to pay off the car that's totaled. This is what gap insurance protects you against. Did I word that right?
08:25
Absolutely. That's That's 100 100%. And, you know, that's a big hole in the insurance world. You buy insurance to replace the value of the car at the time, it's it'd be it's deemed a total loss. So that's exactly right, Jeff, it's it's a total, it's a total loss scenario. And we simply do that the car doesn't have to experience a total loss, something has happened to you, the individual who's driving and paying for that car, and you've lost your job. And you can no longer afford to make payments, the best thing for you to be able to do is save your credit rating, return your car. And you know, there's there's in Canada, it's about $1,000 of net dollars to the family income. When you return your car. It's not only the car payment, but it's the insurance and all the other ancillary things that are attached to your car and your car payment. That is about $1,000 of net to to a consumer and I would imagine the number is about the same in the US. So having an extra 750 to $1,000 in your cash monthly cash flow can do a lot for a family who are in need, right?
Jeff Sterns 09:32
Oh, well, Vince, I mean, selling cars my whole life. And I already know I'm not as good of a Salesman as you because I never had to sell Chevette Cavalier you know, etc, etc. So I mean, like, you're a real salesperson, so you built value in one of those suckers. But I've had in my 27 years in retail and my nine years not in dealerships, but friends still knowing that I'm from the business, people coming to me with an issue in their life or like I would just like to be able to give my car back. And they think that, you know, maybe I give the dealer 1000 or two, it'll get me back out of it. And it really takes 5000 or really takes $10,000 to get them out of the thing. I couldn't imagine it being I'm trying to make this into a commercial. I just couldn't imagine it not being a relief, if something came up unexpected, to be able to give it back to unless you have anything else to add. You're the founder, you're the creator of this program. And it's it's actually hard to believe that it wasn't thought of already, to be honest.
10:29
Well, thank you. And I've heard that before, like, you know, like, I had one guy had one guy come up to me and an na da and where we had a we had a big booth of the na da in 2005, I think with our American licensee out of Dallas, Texas enterprise Financial Group, or EF g companies who are still a partner of ours. And so we had a big display there and some guy came up to me and he said, I had this idea years ago. And I said I just looked at him. I said to him nice execution.
Jeff Sterns 11:03
Poor guy. Probably. He was on the news standing out on the ledge on the 27th floor that night. Good for you. Yeah, so
11:12
speaking of nada if you want to get this covered off now, Jeff, we might as well take responsibility for my for my first child. Here we go. Ladies and gentlemen, Jeff Sterns
Jeff Sterns 11:26
I, I bought Vince and his gorgeous, tall Finn wife Miranda. So we know he's a good salesman, because he sold events. And we know he's a good salesman, because he who he married not that he's not a handsome bastard and well dressed passer. But he did have dinner and drinks with me. And I don't know if we know factually. But I think in the range, we created a child that night or close. Is that right?
11:51
Yeah, in Las Vegas, and her name is Nevada. And you know, Jeff, I just thought about, you know, that night I thought about my wife wearing your leather pants.
Jeff Sterns 12:01
That did it. I don't know how many children I'm responsible for from people seeing me in that advertisement. Now. This is the whole idea of this podcast. We are connected by cars. But we're we're friends to that's well, the whole idea of this podcast, is we do have some familiarity. This is not some interview show where Oh, God, I need some content, or Oh, God, I I need to be known. This is not you know, some dry production deal, for example, like Jason Harris. Okay. We'll leave that alone. So lucky. Mick Jagger doesn't open for anybody we already talked about. So I'm glad that you were able to open with Jason Harris. But you know, now you're in Carnegie Hall. So please talk to us about something that probably everybody who ever sits down with you at a dinner or a party wants to hear about and that's this Hyundai. And folks, if you're tuning out, you're like these guys are just grabbing as lean in right now to hear the story of the Hyundai assurance plan.
13:02
So Hyundai was Hyundai was presented with walkaway though the proposition of walkaway in March of 2008. And it didn't go anywhere. We had been knocking on doors, you know, I mean, Jeff, we have presented to Chrysler in in downtown Detroit, we we pitch General Motors in downtown Detroit. We had a you know, we spoke to Ford, we were pitching OEMs on the proposition of selling a car, or selling your vehicles with the ability for the consumers to buy them the ability to return it if something were to happen during their ownership. And, you know, we're getting nowhere. So all of a sudden, we all know what happened in 2000 in September of oh eight with the Lehman Brothers bank failure and, you know, the global financial crisis. And so September happened in October happened and markets were just like, nose diving. And the news was all bad. The markets were tanking, no one was doing anything. And Hyundai came to EF g who was our US partner who had presented walkaway to them. And they said, We're interested. We didn't really know how interested but after the first week, in November, we found out how interested they were going to market and they had purchased all of General Motors is adspace for the Super Bowl for brock obama's inauguration Academy Awards, the NFL playoffs, so which was the wild card game on January 2 of 2009. And they were talking to us basically at the end of November. So they had a ton of motivation. They I don't know what they paid for the ad space, maybe 2025 30 cents on the dollar for junk from General Motors at the time. They had no plan B. We were their plan. And they were going to market. We signed the deal New Year's Eve at 5pm. local time, Eastern Standard Time. And the ads ran January 2 from from the day they said go for the day the ad launch was 35 days. That's
Jeff Sterns 15:21
not even to be believed.
15:23
That's like, it is insane. Okay, like, Can you imagine dealing with a, you know, a global manufacturer, and they have this program and boom, like, this is what we're going with Hyundai assurance, we saw the first ads, and they were voiced over by Jeffrey Jeff Bridges. And you can go on YouTube and look at Hyundai assurance commercials, you know, 2009 and whatever. And the Jeff Bridges voice was, you know, just so synonymous with Hyundai at the time, Hyundai assurance,
15:57
now finance or lease any new Hyundai. And if you lose your income in the next year, return it to us with no impact on your credit.
16:07
They just knock the cover off the ball. People had the aha moment. You know that they said like they stopped the CEP. I remember hearing that out for the you know, when I couldn't believe it. And they were just floored. And the blogosphere went crazy. Hyundai assurance I think was in the top 15 or top 10 Google searches. For the first three weeks of January. It was he was crazy. And it just made such an impact. national media picked it up. Every news story picked it up. It was it was unbelievable how much press Hyundai got for that deal.
Jeff Sterns 16:46
For it fitting, though, for it fitting Hyundai, though. Vinson you can pick back up, but where Hyundai was at they weren't as hot as they are now. Right? No, no, no, no. I mean, they had some stigma at that moment.
17:03
They overcame that stigma very quickly. And people were saying like, why, you know, why isn't this being promoted by, you know, an American motor American maker or American OEM? Like, where's Ford? Where's GM? Where's Chrysler? And people were, you know, this is at a time when people were super insecure. And just to tell you how effective it was, and when and as you open up the most effective automotive incentive in history, and you say, it's probably never going to be, you know, beaten or duplicated. And that's probably true, because, you know, you have to have the timing that Hyundai had as it relates to, you know, the timing of introducing assurance when you're buying a car, I still think it's totally applicable to everyone's life today. Nothing's guaranteed and being able to return your car. And being able to return a purchase is is the cornerstone of retail, right? Being able to return something is the way in which we should all be able to work especially if I bought and paid and taken that time balance loan to buy the product you sold me being able to return it when my when I come on hard times and I'm still paying for the vehicle that I bought from you is a pretty attractive proposition especially if I didn't pay for the policy you gave it to me. And I can use it so just just tonight just to think Hyundai beat the market by 30%. Okay, in 2009
Jeff Sterns 18:26
explain what that means. If we don't know what beat the market by 30 per market
18:30
and phone nine, tanked okay. They it dropped 22% in 2009. Hyundai beat the market or beat their year over year sales by 9%. So, they are 8% sorry. So, they the market was down 22 they were up eight,
Jeff Sterns 18:50
there you go. So 30% ahead of market got it makes sense.
18:53
So no incentive it's ever had that effect since since and probably never will. Because, you know, the timing of the global financial crisis. Of course, the lack of consumer confidence was was rife. People still had to buy a car. But if you're going to buy a car during the global financial crisis, and you can give it a you know, everyone was afraid of losing their job, say, hey, it's risky. It's relatively risk free if I'm worried about my job. And Hyundai went to market with this and they won. They won at ages campaign of the year. Joel he Winnick was director of marketing for Hyundai at the time and when all sorts of awards, their brand equity went from, you know, their brand recognition went from, you know, somewhere in the 40s to you know, you know, top 15 it was it was it was a stalwart moment for Hyundai in the US market for absolute for sure. Now,
Jeff Sterns 19:52
can we back up a little Do you mind? Yeah, sure. So, I'm fascinated by the story. I mean, it's I just love hearing About a product and how it happened. And I mean, I love the story behind the story. But for you personally, so here you are, I mean, you've already got success with walkaway, but you've been working on Hyundai to try to get them to take it as a manufacturer's program. Not exactly sure where you're at not nowhere near sure how hot they were on at that they're gonna hang like their whole company on it. So I'm assuming that it was like a big exciting deal for you like you weren't worried about where your next meal was coming from. But this is a deal that you are really interested in like, man, I'd love to close that. Where were you emotionally? when it went from the normal meeting after meeting after meeting to all of a sudden you got five minutes to execute this thing?
20:45
Well, you have to understand that this is this was through our, you know, a licensee relationship with BFG companies. We were somewhat in the background, the original call to Hyundai was made by EF g in March of 2008. The call was made in November to kind of say, Hey, you guys, you know, like what's happening. And let's you know, so we got second, we got secondhand information. But it was once the deal started to move. It was all hands on deck, we already had invested in portal, a transactional web based system to transact these insurance policies, we were able to customize a Hyundai assurance portal for 800 of their dealers. And while all dealers in the united states i think was 780. dealers that we launched, like literally overnight, we had to we created a Hyundai assurance web page, which was basically all of our doing that we provided today with all of that all of that material commercials were cut, and created and cut the whole, the whole thing was just and we were we were working pretty much, you know, day and night on that deal. You know, the size of the deal. Like the deal paperwork was massive. We had we added I think it was 11 pages of intellectual property protection to that particular deal to make sure that, you know, we weren't giving away the farm as it relates to Hyundai's ability to knock us off. Not that they would do that. But I mean, it's a pretty common thing for people to replicate insurance products. But being that this was such a unique proposition. And for the listeners that are watching this, an insurance policy that has no age limitations, it has no pre existing health exclusions, it has seven different reasons to use it and allows the customer to return a vehicle. You know, we pioneered this whole concept and we we trademark the word walk away. And we copyright her policy language, so that we could keep our intellectual property hours and monetize it over time and having Hyundai have the faith and trust in what we did was pretty spectacular. And Hyundai Hyundai realized great gains, of course, we realized as the DFG excellent opportunity there. And you know, we can't be more thankful of the trust that Hyundai put in us at the time. And it certainly paid off both for both parties and the consumers that used the policy. So but I do have an interesting story as it relates to released Monday, this is kind of funny. So January 2, the first commercials launched, Hyundai dealers had no communication before this, okay, they they saw commercial on it go like holy shit. What's that? You know, so I mean, there was no communication done at all, they didn't have time, like boom, and you know, to start selling cars, and we had to basically launch dealers train them, and it was all done digitally and electronically over our, over our portal. And, you know, 2009 that's still, you know, it's still relatively relatively new technology for some dealers in the in, you know, in the car business, right. A little so doing a portal. A little clunky, yeah. When I started in 1991 2000, Jeff, some car dealers didn't agree. And that's we issued every policy from the day we started over the internet. And we were like, literally, we were the first I'm sure the first insurance portal in the in the automotive business to issue policies over the Internet, and people didn't could, we couldn't sign up do some dealers because they didn't have the ability to go online. Like, seriously. And, and people were using dot matrix printers, like, you know, the f&i office was still, you know, using dot matrix printers with some self duplicating copies and a laser printer in the business office was like, Huh, like, so. Anyway, back back to the Hyundai deal. So we launched January 2, and our underwriter at that at that time was great American. Okay, out of Cincinnati. And yeah, it was fantastic. Story fantastic success story of you know, Carl lidner Jr. and, and his two sons. But I think I think it was Carl Jr. and his son is Carl the third Carl lidner. The third and there's a Craig Lindner. I think it was still, Carl lidner Jr. At 90 years of age was watching the NFL playoffs, the wild card game on January 2. And he saw the first time the insurance ad and he said, What idiot is underwriting that? I think on Monday morning, you found that it was him. And they canceled the program. They withdrew their underwriting, like they gave us 30 days notice and that was in the agreement. They gave us 30 days notice.
Jeff Sterns 25:49
So now you're shopping the underwriting.
25:51
Oh my god, are you kidding me? That like and this has happened to me twice and twice in my career, right? Where where we've had this app's like canceler of an underwriter during a national program. And I'll tell you the other one later, but so Carl lidner goes, you know, like for what idiots underwriting that finds out it was himself, he pulls the plug. And this isn't really my problem. It is but it's not. But more so EF g enterprise Financial Group out of Dallas, right BFG companies, by the way, great f&i company can't can't speak highly enough about them. Anyway. So john Papp, anestis, is the CEO of of E fg. And he's got a scramble to find an underwriter to, you know, keep this deal going. And he does. He scrambles, scrambles and gets done. And, you know, unfortunately, for a great American, it ended up being a very profitable program. It's unfortunate that, you know, a knee jerk like that. But a lot of people thought the same thing when I first started, they thought, Oh, you're, you're gonna get killed in your underwriting. I just had, I just knew all the I knew all the stats, I was the guy that did all the research for the product. From day one. I knew I knew I knew my I think I knew my numbers pretty well. And it borrowed correctly. I did one half course of actuarial science in university and one half course in stats. And if it wasn't for Tom, he helped me on a couple of exams by looking over your shoulder.
Jeff Sterns 27:30
But the thought you're okay with the reasons that people return cars, even with the current economic climate, you thought that you would sell one more dollar with a premium than you'd have to pay back out or however you do your math?
27:42
Yeah, well, the whole math in underwriting is, is frequency and severity. So how frequent you got a claim and how severe the claims are, and you've, you know, had to put those two numbers together. And that's your, that's your, that's your base cost. And, and then you've got to figure out how much it costs to administer policies, pay claims, do all that sort of stuff. And nevertheless, Hyundai assurance was an success, it was probably the most cost effective, and not probably it was the most cost effective incentive ever for a manufacturer like there is a story that says that they almost felt guilty about how successful the program was versus how much they had to pay for it.
Jeff Sterns 28:24
So when you talk about that to the non car industry person, we might talk about the cost of acquisition or the cost of getting a body into the showroom or the cost of a sold car. And that might come down to just pure ad expense, it might come down to does a rebate, $1,000 rebate, move the needle or $1,000 rebate, if you own one of our products, or we're going to conquest another brand or us how much 0.9% APR costs them? And then how many more car deals it gives them? If it gives them any? Am I on track?
28:55
Yeah, and at the end, you know, at the time, like 0%, cash on the hood, cash on the hood, all that sort of thing. Hyundai knew it didn't matter how much money they put on the hood, people didn't have the confidence to buy it, they weren't buying. So Hyundai said that themselves, doesn't matter how much money we're putting down. Like if you don't have competence to be able to pay for this car. Doesn't matter.
Jeff Sterns 29:15
So this cost maybe you can't say the number but this might have cost the manufacturer a few 100 bucks a car deal to give them their first year of coverage free or something like that. Less than less. Okay, so it's freaking free to, to to increase your sales 8% when the market is down. 2022 that's the Delta the Delta was 30% against market. Yeah, I got it. That's that is massive. And we don't need to get into the whole whiteboard lesson about what one point of the automotive market is worth. I mean, you know, like 100
29:50
increase their market share their mark their market share. Okay? They already 42%
Jeff Sterns 29:57
Yeah, that's I mean, folks, for whoever listening to this to encrypt, forget about having 42% market share. But you know, to increase your market share 42%. So this means you currently have 2% of the market or 10% of the market. And that's between all the General Motors makes sense. Ford, Chevy, Toyota, Honda, you know, everything.
30:19
I understand if you had, right, if you had 2% of market, and you went to three or 2.8, that's 42%.
Jeff Sterns 30:27
Right. But in but one point of market, if I'm not mistaken, I was talking to a retired general motors, senior executive, I think one point of market share equals like a plant. Yeah. Or at least a shift at a plant. I mean, it's not insignificant. Yeah. So amazing, amazing. I'll never wash these ears again, being able to talk to Vince Beretta, about the,
30:51
it's still I still pinch myself sometimes, like, Did I really do that? Am I really responsible? You still have that imposter? You know, kind of complex? Like, is that really me? Like, did
Jeff Sterns 31:03
I really do that? A lot of CEOs have that, by the way, like, when am I going to get found out that I'm not really whatever one thinks,
31:10
yeah, well, I mean, it really did happen. I really, we, you know, I really did work being a girl, I really did almost go broke, thank God, my business partner was a car dealer who held the paper on my leased car, because I wasn't making payments. And I thank my landlord, landlords at the time for allowing me to, you know, be late on rent, when I when I was, you know, I couldn't pay parking ticket, uh, you know, I drove my car to my office, and I parked and I stay there, well, past the parking permit, you know, you know, allowable and I would get parking tickets, I couldn't pay my parking fines, I couldn't pay my, I couldn't get my license sticker renewed because I couldn't afford to pay the parking tickets, I've withdrawn all my RSP like, like, like, my personal savings, and my, my, what we call in Canada, our RSP, which is kind of our retired registered Savings Plan, which were incented. To do, I literally was on fumes, and deal with the passion of providing people who bought cars with meaningful coverage, to, you know, save them, when their life went off the rails, you know, 22 years later, it's it to look back. And Spitz it's just goes to show you that it's not about profits, it's about people, and it's about creating value. And if you create value, the value will find you. And it's just, it's been a, it's been such a great ride. For you know, not only me, but all the people that have come along the way for that ride. And we've got a great body, great, great staff, today, and we all do good work today. And we continue to do so. So it's it's been a it's it's been an absolute pleasure to, you know, have worked in this way this long. And the only way in which I've been able to do that is making it about people first. And when you do that profits fall.
Jeff Sterns 33:17
Well, Vince, I this is what I love. This is what I love about doing this show, because a lot of people when they see someone in a successful position, they think that it just went from this easy thing to this easy thing to this easy thing. What I love to hear about is the dealer was a friend of mine, he let me be late or not pay my lease payments, my landlord was giving me a little bit of a break late, I couldn't pay my parking tickets. I mean, you took it right to the edge, you had a lot of faith. You were not hanging on, but you believed in what you were doing. And were able to get it across the finish line. And you of course, knew or thought that you had something, but you had no idea where you're going. And I love the story behind the story that we don't always know where something's leading. So we kind of just have to when we believe in something, we just have to keep pursuing it. And we never know what the universe will present. Have you learned any business lessons that you can talk about?
34:14
Yeah, hire slow. And fire fast. When you know you've made a mistake with a with someone you've hired. Well not know, but your gut will tell you. And a lot of times you'll convince yourself otherwise. I think that you have to listen to that so hot. First of all, first and foremost, hire slow. Don't be in a rush to hire someone and just put a bomb in a seat. Take your time, find the right person, right people. But when you have made a mistake, you'll know it and you'll know it and act fast because culture will always Speech strategy, you cannot execute strategy without a good culture. And it's about people, our product walkaways, about people and companies about people, your strongest asset does not appear on your balance sheet, and it's your people. So number one, that would be my first number two culture, I
Jeff Sterns 35:18
love it, culture will be eroded down culture will beat strategy. And you know, that doesn't sound cold to me. At first I thought hire slow. Well, that makes sense. Don't make a rash decision, make sure you get the right person in the position, make sure that they're adding not just Can they do the job, but adding properly to the spirit of the culture, etc. But at first I thought, Well, God that could be interpreted as a little cold, rip the band aid off fast if you don't, if you're not feeling it with the person. But it reminds me when I was a new sales manager of a salesperson in my dealership that I really liked a lot. And he was not performing. So eventually, probably four or five months beyond when I should have really done something, I sat him down and I said, we just have to depart. I'm really sorry. I love you. He goes, I've been waiting for this for three or four months. You know, I don't know what took you so on. But I actually subscribe to the fire fast because what I learned was, he went off and started a industrial, commercial, forgive me commercial cleaning business, going into businesses and cleaning them at night. As a matter of fact, he got our dealership, as a client, he ended up probably five or six axing his income. He was on the golf course four or five days a week because he didn't work till nighttime, I bumped into him on that golf course. And he thanked me not facetiously because we liked each other. He thanked me for letting him go, because he would have never made the move on his own. And what I realize is keeping someone in a position, forget about your own reasonable profit motives. Because if there's not profit, you can't help more people, you can't hire more people, you can't help more clients. So profits are important. But when you keep somebody in a position where they're not successful, you're really not doing anything for their psyche, because this fellow had to be feeling terrible every day when he got up and feeling a little bit like a failure. And in short order. He's on the golf course all the time making fabulous money and giving his wife and family what he you know, to feel more like a man he should give up, etc. So it's not doing anyone a favor hanging on to them, if they're not doing it for themselves for their own feeling of success. Yeah,
37:31
you know, a lot of people who hire especially in a startup business, you know, I'm the guy or it's a fairly tight knit, and you you make hiring decisions, you don't want to say to yourself, you're wrong, you know, oh, I was wrong on that, like, so you try to you make excuses for people. As soon as you start making excuses for people, that's time to let them let them go. Like, and, you know, for entrepreneurs that are out there that are, you know, building a team, you know, you're gonna make a mistake, and don't beat yourself up about it. Like, as soon as you start making excuses. And, you know, in Canada, we've got, you know, a lot different severance laws and, and whatnot. And you just, you learn, you write the check, you pay them out and away you go, like and move on, you're, you're you're way better your organization is way better. You know, by doing that than it is hanging on to, you know, a poor fit, or someone who's you know, who's not who's not doing the job. And Yep, you made a mistake, it's your fault, take the lumps and move on. So that's number one, hire slow fire fest. Again, this is a lessons lessons as an entrepreneur, you have to be as an entrepreneur, you have to be good with someone doing the job differently than you would have done it and you have to be open to the way in which they're doing it is better than the way in which you would have done it. If you're not open to those two things, you might as well not not start because you can't scale your business without people, and they're going to be doing something different. And if you want them to do it the way that you wanted to do it, then you better fucking do it. And if you're going to do it and micromanage them, then you know what, they're not going to stick around. So you have to be okay with someone doing the job poor that you are than you would have done it, you have to be okay with that. Because they're not going to have the same passion and motivation and everything that you bring to the table as an entrepreneur and the person that created it. So if you if you're not open to that, then you're not going to be able to attract talent, you're not going to be able to give them autonomy. And if you are the ubiquitous control freak, entrepreneur, which there are too many of but if you're that person that's going to be tough. So be open to people doing the job differently than you would have done it but also be open to the way in which they do and to be better than what you how you sought to do it. Right. So that's number two. Number three, replaced myself. I said to a contractor one day, I said, as a good contractor, you should work yourself out of a job. If you are a contractor and you create reliance, if I have to rely on you permanently, you're not the right person for the job. And that holds true for CEO, and entrepreneur, your number, your last job, your first job, and your last job is to replace myself. It is highly irregular, for the entrepreneur, to be able to go all the way through, you know, the 22, or, you know, the 22 years that we've been a business without replacing yourself. And, you know, I've replaced myself a couple of times, you know, I have a partner, Robert Varga, who is now president and CEO of our operations company, insurance insight Incorporated, which is registered Insurance Brokerage here in here in the Toronto region. And Roberts created, you know, massive gains in the company as a relates to culture, you know, team, and those types of things. I'm not that guy. And Rob is, and I had to replace myself with Rob, and I have to be able to put my trust in that. So those are the three I think those were the three big lessons that I've learned and looking back, and I think that they apply for anyone and everyone who starts their own business. And I think that, you know, that wouldn't apply to jack welch or anyone else of being CEO. If a company can't run without you, then you've not done your
Jeff Sterns 41:42
job. jack welch from Alec Baldwin's idol in 30. Rock,
41:48
there you go. Cheers to the you don't like you don't mind if I drink wine during our show? Right?
Jeff Sterns 41:54
Like it's so hot. Well, you're Canadian. So that probably started around 11 this morning. I understand. No, that's, that's, that's that's cannabis here. only kidding. Finally, and I'm really sorry to keep you past your 15 minute podcast limit, you sold 900 million in premium with your walkaway product. How much have you given back? Or what kind of debt? Have you gotten people out of related to that?
42:23
Oh, my God, we've probably protected $125 billion with a car loans in the world, oh, my God, we've distributed in Australia, we've been in the US for many years now I'll be we have a challenge in the US. Oddly enough, our product doesn't get I don't know if it's line four, line five of the line for approval to be financed, you know, the premium financed on so line for approval, we've never received line for approval in United States. So our program is largely, you know, regional promotional, you know, times here and there where a dealer will go on for promotional period. So it's very spotty. We've sold $330 million for the premium in Puerto Rico. Oddly enough, you know, we've protected $125 billion with our auto loans and leases worldwide.
Jeff Sterns 43:23
So let me just clarify just when you say line for approval, does this mean that the bank gives the dealer an approval on that customer will in 42,500 on that customer against that car not to exceed 110% of loan value, etc. But then addition will let them buy other products on top of that approval. Okay, got it. All right,
43:44
you got it and the walkaway premium. So understand, walk away, walk away starts as a complimentary 12 months paid for by the dealer, the OEM financial institution, and then you can then in Canada and other parts of the world, you can enter the business office and the business manager says, Hey, Jeff, did your sales rep share with you our 12 month vehicle return program? You know, our walkaway program? Oh, yeah, they did. That was great. You know, but let me let me share with you. Let me share with you how that works. And you'd go through the proposition of how that works. And if you you know, you've been in the in the retailing industry before and you know, now I'm just sharing with you something that we give you. I can build value in that product without you feeling like there's a sales conversation going on and I can share with you Hey, well, if you lose your job, Jeff, in the first 12 months of your ownership, you can bring the car back and walk away with little or no cost, lose your driver's license, do this do that then the hero features and how it works. say would you like to extend that to the full term of your loan? Jeff 72 months or 60 months and for anything happened in the first five, you know, five years you can return the card anytime if that you know blah blah. Oh yeah, sure. That'd be great. The premium for that is X dollars, but in it The US financial institutions will not finance that
Jeff Sterns 45:03
will not lay put it in the loan. Now that the 120 5 billion that you're covering, that means that for the 900 million premium, if every single person on day one, because obviously, halfway into the loan, they only owe about half as much or you know, give or take. So if every single person returned their car within a week, because they lost their job, you'd be on the hook for 125 billion,
45:32
or underwriters work, but not that's, that's 100. That's the total value of the loans, just not the not the negative equity associated to those loans.
Jeff Sterns 45:41
I see. They might owe 40 grand, but you're covering 10, because that's how much negative equity they have. Okay,
45:46
right. And, you know, I mean, car dealers love the fact that the customer returns to the car dealership, they love the fact that they're getting a good use unit that they that they sold, they, they the customers come back at a tough time. And you know, as soon as they get their job, or whatever happened, precipitated they're returning the car, you know, you've got that customers customer for life, once you do that, right. And so, oh, they'll come back. Yeah, they'll come back. But in terms of claims, I will only share one statistic with you, we in Canada alone. And remember, Canada's teeny tiny as it relates to us, it's worth 10%, the size of the population in the US, we have relieved consumers of over $130 million worth of automotive debt. That's unbelievable.
Jeff Sterns 46:35
That's unbeliev. Now I actually
46:37
saw it, you'd have to times that by 10. And that's what we do here. I mean, we're 10% of us, you times that by 10. If we were in the US, and the story was a you was a US story, it'd be a you know, from 130,000,002 times time times a
Jeff Sterns 46:56
factor of 10. Got it. So this actually has me curious now when you talk about the dealer, getting the car back, so here's how the coverage goes, customer takes delivery of a car, six months later, they lose their job, they want to take advantage and walk away from the car, give it back, they have $10,000 negative equity because they still owe 35 on their loan, and the dealer says the car's worth 25 and the insurance pays 10. How do we determine that the dealer made an acceptable offer, which obviously impacts the amount of negative equity you're covering? How do you end up agreeing that they're offering the right amount for the car to keep it
47:37
is in their dealer agreement that we have a wholesale formula, and it's in the insurance policies so that the insured knows how the vehicle is being formulated, or the vehicle value. And we want to do we want to do that because the customer knows. So that, for example, let's say the negative equity is 10,000, then the dealer is evaluating the vehicle. And, and and it's 11,000 is the is the insured loss. But we'd say hey, dealer, you know, that's outside of our formula. So we produce a formula that uses known wholesale guides, and the dealer sits in between that sits inside of that formula, and in a way they go on, you know, and that's how we, that's how we bring the product to market. And that's one of the unique feature.
Jeff Sterns 48:24
But if the car has been smoked in, and you can't get the smoke smell out, and it's got three bald tires, and it's been hit and painted twice, and it's obviously not good paintwork, and it's it doesn't stay inside of that formula, is the idea that the dealer will end up getting so many back that a win on some lose on some. So he just agrees as part of this package that he'll take them all at that number.
48:46
Well, I mean, it's the, you know, we work with franchise dealerships, you know, for the most part, it's new and used. And it's, you know, it's it's retail, new, we're not working with wholesale or as is vehicles. So there are some limitations as to where the product and how the products available. But I mean, three ball tires, and it's been repainted. Like, yeah, we've dealt with some, we've dealt with some very challenging situations. But that's, it's, it's, it's, it's kind of like such a small percentage of the business that relates to that. So you have to look at the overall program and how that hangs together. There are there's always a little bit of hairball when it comes to insurance and insurance claims. But for the most part, we've eliminated most of most of all that in the 22 years we've been doing this and you know, our policy is matured, and we've learned things that we couldn't have anticipated that we had to basically absorb ourselves like we had to pay, you know, for the you know, dealers had situations that we couldn't have anticipated. So we just took it on the chin and had to pony up and write a check and and that's what you do when you have a product that's new in the business and that's why we try to protect the intellectual property of what we've done to Is because we've we've taken it on the chin and and there are situations like catch up. But if if the amount of negative equity is more than the policy value and we have with policies that cover up to $25,000 with a negative equity in Canada, but if the policy doesn't cover the total amount, the customer has to come up with the difference and we don't think that's an unfair ask. So if you have if you've got $11,000 with the negative equity and we're covering $10,000 that's pretty good deal. Don't you think?
Jeff Sterns 50:32
Vince Beretta thank you so much for your time and stories, folks. I hope you enjoy.
50:37
Hey, thanks, Jeff. I was it was a pleasure speaking with you and I look forward to the next time we can get together and see when leather pants
Jeff Sterns 50:46
This has been Jeff Sterns connected through cars.
