Richard Keith Latman - The Blog

So What's Wrong with DealerSocket and how can you fix it?

**UPDATE**

When I originally posted this piece I never dreamed that other competitors like VINSolutions would use it to slam DealerSocket. I hate smoke but I hate fakers even more: If you are not considering iMagicLab the only other real CRM in our industry that comes close is DealerSocket (mind you I don't think they come close to us). They have a real company with real vision and although I don't believe in their current plans I would buy them anyday before I thought about VINSolutions. VIN is really the only CRM in our space that delivers nearly nothing to the marketplace. Just my opinion but I'd love to face off against them to prove it :)

**Original Post**

It's funny that today I write about a competitor on this BLOG because normally all I do is bash the Obama Administration. Since Barak is getting his teleprompters fixed today, I figured I had time to talk about the curse of the venture capitalist and how it affects businesses like DealerSocket (or Dealer Socket, I am never really sure if there is supposed to be a space between the words).

For those of you who don't follow the CRM business and more specifically the CRM business targeting car dealers, the players move and disappear as fast as a Hollywood starlet with a hit song. Seems every year or two some big money comes into a company like DealerSocket or BZ Results, they con a lot of dealers into buying old stale technology before selling the company to the highest bidder. Then, true to form, the new owner see's the smoke and mirrors and lets it wither on the vine until the revenue can be transferred to the next acquisition. This cycle has hit every CRM company in our space and even the good firms like AVV and Autobase have not been spared: Sold to "professional investors" and ruined.

Enter DealerSocket, or Dealer Socket, who's ample "investor" money is today buying every salesperson and advertisement they can lay their checkbook on. Nevermind that they haven't made a significant technology improvement since Clinton was President, their Microsoft-based product has signed more dealers to the program in the past 6 months than they can handle (according to a well placed spy I have in their management team) and is fast moving to surpass the big guys on promises unfulfilled and dissatisfied customers.

Here's where the rub is: Explosive sales targets and the mentality to sell at "any cost" does not come from technology founders, it's the profiteers or the venture capitalists that push for this. I've been there and I'm sure Jonathan Ord and the other founders of DealerSocket heard lines like "You need to ramp up sales and act like a billion dollar company" or "The Board feels that you should take any deal the locks a competitor out regardless of profit". It's not the way you build a business, not the way you built a solid reputation and in the end I promise the only people that will be happy will be the "professional" investors. Did we not learn anything from the Wall Street fiasco? It's sad that dealers will have to change their CRM again because some VC needed a new Ferrari.

So, why am I writing about this? Am I looking for a competitive slam here? No, I think it's imperative that where possible we blow the smoke away and see the truth (besides they'll be sold soon). DealerSocket just hired the ENTIRE sales team from the last failed CRM company in our space, HigherGear, and have begun to use the same tired lies and dishonesty that Higher Gear made famous during their short time fleecing dealers. When will dealers learn? When will they pick the best technology over the best dinner and party at NADA?

Keith

P.S. The headline asks how we can fix DealerSocket and the answer is clear: Reduce spending on salespeople and kick the VC's out. Then, after terminating all the liars-for-hire on their payroll they can focus on building the best software they can and making dealers happy. Not rocket science really but for those who only care about the money made when a CRM company changes hands it's an unnecessary distraction.

Need an Economic Revival? Simple: Stop Taxing Small Business

What has impacted my decision on whether or not to start a business is the amount of paperwork involved and the local, state and employer taxes involved. Its complicated and expensive to start even the smallest business in the real world. The real world of course is different than the Internet world. The state of business, and in particular, entrepreneurship in the US has devolved into two worlds, the Internet and the real world.

In the Internet world, all you have to do is setup an account with an ad network, put it on your website, generate some traffic and they send you a check. . No licenses, no tax id, no announcements in the newspaper. It took me minutes. Its exactly what millions of people do as well and its created an entire Internet economy that lives off of Google, Yahoo, MIcroSoft, AOL, Ebay and others. Its the entrepreneurs path of least resistance, which is exactly why most take this route.

Compare that with setting up a real world business. This is from the State of Texas: (Which I have to say makes it far easier than most states to start a business).

Step 1:Legal Structure and Registrations
Step 2:Business Tax Responsibilities
Step 3:Licenses Permits and Registrations (Note to State of TX, this link was broken, I had to find the destination page )
Step 4:Business Employer Requirements

As an entrepreneur , I can tell you that working through the requirements of these four steps is scary and intimidating. Why ? Because to merely start your business, you have to deal with lawyers and accountants, which not only costs a lot of money, but more importantly, requires you to trust those lawyers and accountants to make decisions that could have make or break consequences on your business. You may have the best idea with the ability to execute on that idea, but one little snafu by these professionals and your business is down the tubes.

Even worse, if you mess up on any of this, you could get in legal trouble. You could get sued, or find yourself in the middle of some legal nightmare (I should know).

Then of course, there is the financial reality of having to pay all of the business and employer taxes and ever increasing insurance premiums.

Which brings us back to How to Jump Start the Economy.

If you want to see an immediate re invigoration of the economy, open the door back up for individual entrepreneurs to enter the real world without fear and without an immediate financial burden that pre empts their ability to be successful.

If we really want to stimulate job creation in this country, take the same approach to small business with 25 or fewer employees that we take to Internet taxes. Outlaw them.

No taxes or license fees of any kind on small businesses with 25 or fewer employees. No employer payroll tax. No state or local taxes. No taxes on earnings. No Payroll taxes. Nada. Use the money from the proposed taxes on the trade of public shares to fund not only this, but healthcare insurance premiums as well. The business owners and their employees will pay income taxes on their personal income , but not corporate earnings

The only taxes they would collect and remit are sales taxes and of course they would still file personal income taxes on their individual earnings.

Make this available exclusively to owner operated companies and only allow the operator to own and operate a single company (to prevent gaming the system).

The impact on the economy would be amazing and immediate. Those without jobs would be able to work for themselves. They would be able to join together and start companies. They would be able to take risks with far less capital and far less fear of failure. Sweat Equity would be all it takes to start a business. In addition, we would see many cash only propreiters go legit.

Not only would we see hundreds of thousands of new businesses started seemingly overnight, with millions of new hires, but from those new businesses would come new ideas that hopefully would give us our next engine for economic growth that super cedes today’s ideas.

For Congress, the challenge will be to keep the process simple. A simple no cost, online registration for the businesses, with information about the who, what, where and ownership of the companies so that they can track and help fund them. Which in turn would create the information base from which to fund the state and local revenue that would be lost. Easy ? No. But a far greater reward in job creation and growth for the country than the Government creating Job Funds and public works efforts.

In this economy we should open the door to our country’s Intellectual capital and the entrepreneurial energy that separates us from the rest of the world. Make it easy for entrepreneurs to do what entrepreneurs do, and great things happen. Voters and politicians alike seem to have forgotten what has made this country an economic powerhouse. We need to focus on creating a friction free environment for small businesses. That is exactly what will create jobs