From The Ground Up with Leo Kelly

Join us for a chat with Joe Jankowski from Armatus Dealer Uplift. He shares a compelling story about owning a thriving auto dealership and then reshaping warranty reimbursement for dealers nationwide. 

Joe emphasizes the power of innovative thinking and unwavering perseverance. Hear how he went from running a successful, profitable dealership to the gut-wrenching moment of closing its doors overnight: A story of resilience.

Hello everybody, welcome to From the Ground Up. My name is Leo Kelly. I am the CEO of Verdence Capital Advisors, and from the Ground Up is a conversation we have with business owners and entrepreneurs to talk about their success, what's made them successful in their business, their journey along that path, their successes, their struggles and how they built the business that they have today. I'm really excited about today's guest. Joe Jankowski from Armatus is with us. This is going to kind of be like a Marvel movie. We're going to have the hero who built their business up and then went through the great downturn and the fight and brought themselves back up to really create an amazing business in the end. Joe, really happy that you're here with us. I was really looking forward to today's conversation. Welcome.

Thank you, leo, thanks for having me Absolutely.

So, before we get started, a little bit about Joe, and I'm going to ask you about your business a little bit. But Joe is technically the managing member we like to call that the guy in charge of Armatus who specializes in a very unique business retail warranty reimbursement and uplift which Joe's going to talk about uplift today. One of the best parts about our work here at Verdence Capital Advisors is we spend a lot of time with entrepreneurs and business owners throughout their cycle, from during their business through their exits, if they have those, and then beyond, and so one of the best parts of the job is how each business is unique, how wealth is built, how entrepreneurs develop these businesses and these niches, and today is going to be a really unique story with Joe Not only his history and how he got here, but the business that he's developed. Essentially, what Joe's doing is creating better outcomes for auto dealers all over the country, with over 7,000 clients and 15,000 submissions. Joe's going to explain submissions to us today, but obviously that's a pretty big number. He has been endorsed by 20 state auto dealer associations. He works with seven of the top 10 dealer groups in the country. He's personally involved in consulting on 17 retail warranty statutes and is widely recognized as subject matter expert. Before that, joe spent 20 years in the car business, owning operating an auto dealership, and that's going to be part of the big story.

So, joe, just thrilled to have you here today and thanks for coming, and I appreciate you spending the time. Joe and I do know each other. We actually are in the same building. We see each other coming and going every day. Joe's usually here when I get here and he's still here when I leave, so he's still working pretty darn hard. So, Joe, welcome. Thank you, Leo. Thanks for having me. so uplift submissions. Tell us about your business.

We're in a very narrow vertical in the retail automotive space and, essentially, state laws have been established to ensure the dealers get fair and reasonable reimbursement from the manufacturers for their warranty work that they do on behalf of the manufacturers, and so what we do is we create a submission to the manufacturer that establishes, through formulas, a retail rate that the manufacturer must pay the dealer for both parts and for labor.

So what would it be like for a dealer without a harmonious Right.

So in the old days, and including up to the current times, dealers sign what they call a dealer agreement, which is a personal services contract that the dealer signs with the manufacturer and in that there's stipulated reimbursement for warranty, and it's typically very low, well below market, usually about half of market rate for parts and a very low rate for the labor reimbursement, and so the dealer really had no leverage until these statutory provisions were put into the franchise laws in the various states.

Your business has been around for how long now?

This is our 14th year in business 14th year in business.

I mean you're now the dominant player in the industry. We are, yes. What was it like then, Did you

Well, yes. When we came out of the retail automotive industry, we decided to start a consultancy. We had become virtual experts in centralizing administrative operations for dealerships and we were then going to take that to the market. And lo and behold, I had a couple of my ex-tech employees come to me with an idea, warning me that it may be the exclusive business that we're in at some point in time. And lo and behold, that's what happened. And so in the early days and I'm talking about 2011, 2012, there were only a few laws in the country. Ultimately, we helped draft 17 of the most recently passed statutes and today you can get retail reimbursement in 49 states.

Wow, that's fantastic, okay, and so this is making a big difference in the bottom line. Your enhancing profitability, your making businesses stronger. Pretty pivotal partner in these auto dealerships.

Yes, in fact, typically in the parts arena we'll go in and we'll double the dealer's parts gross profit and in the labor arena we get increases upwards of $20 per hour for their labor per year, which is extraordinary compared to what they used to get, which is a pittance from the manufacturer, typically a CPI increase, I mean this is and obviously you and I have talked about this business the PIS.

This is an extraordinary business because you're walking in every day. You have a competitive edge and be able to go into a dealer, create the uplift and increase profitability. What is that edge? What's that niche that makes your business different?

We decided early on that we were going to maximize technology, and so our first dollars of investment are in ourselves. So first we built optimization software which guaranteed scientifically the dealer would get the best result. And then, as we started to scale the company, we had that realization that, oh my goodness, how are we going to deal with all this volume. And we built a workflow platform and, quite frankly, it's the only type of technology in the industry that serves those needs.

So what we try to do on this conversation that we have is for budding entrepreneurs, for existing businesses. There are moments in the business cycle that no-transcript, that wake you up, that maybe change your direction. I call it breaking plateaus. You're stuck in a place and you have to make that change. You've got to break through that kind of glass wall or glass ceiling and go to the next level. And what we try to do in each one of these is give that that moment, give that tip, so that when those entrepreneurs get to that moment they can draw from this conversation. And it sounds like tip number one from you is recognize an opportunity and don't be afraid to throw everything you have at it, even if it doesn't exist.

There's no doubt. And you know, look, sometimes you've got to build castles in the sky before you build them on the ground. And you know, quite frankly, I didn't think big enough in the beginning, I didn't have this vision, and so, you know, as a blocker and tackler by nature, I just plowed ahead with my head down and at some point said, oh my goodness, look what the rest of the industry is doing. These are law firms, cpa firms with practice specialties in this area, two or three competitors. And I realized if we bring technology to this, we're going to break through. And in fact we did. Now it's not just technology.

From a marketing perspective, we chose a channel marketing strategy very early on and that was to affiliate with the auto dealer associations. And that channel for us has been solid gold. We have penetrations in our top 10 states in excess of 60% of the dealers in those given states. We have over half the states in the country at over 40%. And so you know, choosing that proper marketing strategy and look, I'll be the first to admit, there's a lot of luck involved right, doing the right thing at the right time, and that really worked for us. And then we also had other channels, like, for example, we went to CPA groups. There are affiliate groups of CPAs where they've got maybe 20 CPA firms from across the country in non-competitive areas and they get together for think tanks and conferences and we went to those and of course the CPA is the trusted advisor to the dealer and they recommend it. So it was more organic than it was conceived in the beginning but as we got into it the picture became crystal clear.

Well, we're only a few minutes in, but there it is. Michele, Mark it down.

I just marked it. We talk about luck in building a business so much and it's interesting the role that that plays, or the perceived role that that plays. So this is great.

Yeah, so luck is a theme here. Right, it's a hidden theme, and you said luck, and so we're always touching on that, right? Because for the folks listening to this, what is luck? Luck is the recognition of an opportunity. It's which most opportunities just pass right by people's eyes. They just go right by. People don't even understand. And then it's understanding what that opportunity potential is and having the courage to chase it. So many people see it, they may recognize it, they may start to understand it, but will you chase it? Will you throw everything at it and then will you work hard to get it.

And what I'm always fascinated by is these immensely successful entrepreneurs like yourself and that word is common, right, we had a lot of luck, and I think you did have luck, if you define luck correctly, right, it didn't just fall in. And you said something else which I think is absolutely fantastic the great businesses that we have the pleasure of associating with I don't know of a single one that ever built a business plan that they stuck to throughout the life of the business. Right, and that's the difference between the successful entrepreneur and the business that starts off okay and doesn't really grow. It's seeing the change in the environment. It's seeing what you didn't see in your initial business plan, reacting to it, seeing the opportunity, recognizing it as an opportunity, putting everything behind it and then working hard to execute it. It sounds like that's what you did. You made this shift to technology.

We did. And, in fact, when you think about how we actually started the business, which was a consultancy and we were going to help dealers centralize their administrative operations, the idea comes and we said, wow, look at the marketplace, everybody's doing this wrong. And, by the way, it wasn't a scaled industry when we got into it and that was one of the things that we did. We educated dealers, dealers educated the dealer, associations brought us in, we helped draft the laws, which were quite self-serving, obviously, because it allowed us to do our work, and it just continued to build and we scaled on a very maybe a hockey stick in the beginning, but now it's a very steady growth.

Well, what I also love about this business model that you've created is you understood what your strength is. You understood what your expertise is. You knew your marketplace. So often what we see, where businesses have that pause and growth, it's trying to be too many things to too many people. You were clear, you knew your market, you stuck to your market and you just kept making your outcomes better. Right, has that always been the focus?

Well, if I take you back a little bit further in time, I was a CFO, coo, ceo and ultimately a partner in one of the largest dealer groups in Maryland when we lost 10 of our 14 franchises during the 2009 downturn. Those franchises were very profitable but yet were terminated by the manufacturers and it's unfortunate that that happened. But that created an opportunity to move forward. And as you sit there and you do your soul searching, you try to decide where do I go? Do I stay in this industry? Do I get into a new industry? And you hit the nail right on the head. I said after a lot of consultation with a lot of business owners and a lot of people I really respected, I decided to stay in the automotive space and use all the tools that I'd gathered over the last 22 years. And, quite frankly, when this came along, the light bulb went off. We saw the opportunity out. That's great.

And we just entered into the marvel side of the story, michelle. I mean, this is probably the one aspect of your story which I find fascinating. So you're in the corner office at an immensely successful car dealership in Maryland, you're profitable, you're doing wonderful. The O9 crisis hits and, arbitrarily, the government comes in and says I'm going to shut down some of these car dealerships and it's not necessarily based on the fact that you're not profitable because you were. And so you wake up one day and you're the CEO of a remarkably successful chain of auto dealerships and then the next day you're not. So talk to me about that moment. I mean, that is a gut-wrenching moment. And again, what I marvel out about successful entrepreneurs is not how they handle success, it's how they handle that moment. That moment is an incredible moment for you.

You know, I like to say that we never find out who we really are until we have a crisis in our life. That could be a personal crisis, that could be a professional crisis, and at that stage I was 55 years old. I lost my career, I lost my income, I lost my business, I lost my ego, everything, and it was quite a devastating moment. And you have a choice to make. You can curl up on the floor in a fetal position or you can go kick some butt and just got the energy level up, boots strapped. This company didn't take a paycheck for four years, had one thing in mind keep my key people with me and afford to make payroll. And that's all I did for four years. And as we grew the business and we continued to plow the profits back into the business and build out that technology, and lo and behold, we were on the other side of the rainbow and it was all worth it. I look back and quite frankly questioned how in the hell did we do it?

And then he held his hand up and said I am. Iron man, you can't have this success. Tell me how you lifted yourself out of that. Who did that? Who helped you with that? Who were the people that pulled you up and got you back on track to say no, I damn it, I'm an?

entrepreneur. I could do this. I literally talked to every businessman that I knew in my network and just ask their opinions and ask them about what their lives were like and what their businesses were like and what it was like getting started and how they deal with their failures and successes. And really that's what helped me formulate my thoughts and, you know, it leads me to something that's been a core philosophy of mine for many, many years, which is self-efficacy, and that's that ability to just never say die right, you're just going to keep on going. And when you're facing failure, when you're facing that kind of catastrophic loss, it's amazing what kind of energy level that can help you generate.

I tell the story often. So when I came to Maryland to start my practice down here in Maryland, my wife and I were living in Jersey and we both grow up pretty modestly and we were finally making money. She was a pharmacist, I was working at Maryland, kind of this fast track management thing and I came home one day I said hey, I'm going to Maryland to start my practice. We got to take a three quarter pay cut. We don't know anybody in Maryland. And then we got to move into, out of our home, into an apartment, let's go. And and God bless her she said let's do it. You know, whatever you think, I mean your support mechanism, your family. What role did they play during this whole?

What's interesting, because you know, when the people that are closest to you believe in you, it has quit a dramatic effect and and, and that's where I was I. Just everybody around me encouraged me, supported me. In fact, I think they saw things of me that I didn't see in myself, and that's the there's the value, right.

There's the value and your son's in the business now.

Yes, the beauty of successorship. My son was successful in another business. He was actually selling software for a very large company. He was owned by a private equity company and he decided that they couldn't deliver on what they were asking him to sell. And I told both of my sons raise your hand when you're ready, but understand what you're in for. And he took a rather substantial pay cut and came to work at the bottom, because I said, we're reverse nepotist here, we're toughest on those that we love. And so he came in. He rose to the top of the audit team very, very quickly. We had a situation where we had a director of operations that just wasn't going to make it in our in our business, and so my son, jordan, took his place, and today he literally runs the entire operation for us. That's fantastic.

That's, that's rewarding. So how was it early, though? I mean, did you guys butt heads a little bit at any point? Was there? Was there any testing? That's good, that's a blessing.

No, in fact, you know he's such a respectful person and he's just a nice guy. Yeah, I did and so and I wanted him to succeed, but I didn't cut him any slack and and I think he took the constructive criticism in the way you should take it, which is turn that into positive energy he's actually a wonderful young executive and it's exciting to see his development, but something tells me that it's not the first time you treated him that way.

It's not, and that's why you've, that's why you've raised such a strong young man who can, who can do this. So, joe, how do you think about value? As, as you know, as a business owner, when I think about building verdants and what we're trying to accomplish, there's there's different metrics. What do you think about when you think about building the value of your firm? How do you, how do you value your growth and what you're trying to accomplish?

Well, one thing that I do quantifiably is that I have the company valued every couple of years. Well, yes, so equity, so enterprise value, and, and, and I also look at market value. So I work with several PE consultants who help advise me on what the product, the, the company's worth. Now, if you would ask me in the very beginning what I think about value, it would have been a pure financial answer. But I have to say that when you get to where I am in business, that it's no longer financially driven, my incentives are quite different, and I would have to say one of the most important things to me now is mentoring and culture, and we're bringing along some young executives who are just so dynamic and so hardworking and so outside of the stereotype of what you would expect for millennials. That that's my greatest reward, and so I'm building this human capital. At the same time, we're building the financial value of the company.

So one question we like to ask is and is what would you say to the young Joe Jankowski, but then maybe it's to Jordan, or maybe it's to one of these millennials we do a whole podcast on managed millennials but what advice would you give now, looking back to them, and what would you tell them about what they should be thinking about, looking forward?

Well, there's two questions there. What would I tell them, because they're coming into a platform that's already successful, versus what would I tell myself? I'll take both answers. You'll take both answers. What I would tell them is that the wins are in the details.

Mark that one down, that's, that's the takeaway, and I told my son, jordan, early on, he who has the details wins. And he just became such a absorber if there's such a word of details, I'll take it and. And he mastered the business. And so if you look at my bio, it says that I'm known as an industry expert, right, subject matter expert in fact, and I would say that he has now passed me in that role, which is one of the most gratifying things that could ever happen to a father, yeah, and to a business owner. Sure, right, we have to somehow make ourselves less relevant and others more relevant, and that is an intellectual challenge that we have to debate inside our own heads all the time.

Sure.

Right, sure, but it's necessary for the health of the longevity of the business. What I would tell myself is think big earlier, great one, I really. I was just such a plower, you know, I was in the field just plowing all day long Right and, and I never like stepped back to say what could this really be early on? Because that would have helped guide, sure, some of the decisions that I made, and instead I just plowed, and plowed, and plowed and then eventually the light bulb went on and the rest is history.

Yeah, the old saying right, sometimes you have someone who's you know they're looking at the ground, they don't want to step in a hole and they can walk into a tree, yeah. And then there's people are just looking at the trees, so so they're looking out so intently they can walk in a hole, yeah, right, it's that balance of looking, you know, seeing the future and taking care of the details. I love that. The winners in the details. That's just a great comment. That's a great comment and great take away, all right. So personal question For those who don't know it Joe is a former competitive dancer, ballroom dancing, top level, the kind of stuff you see on TV. You did it for a long time. You obviously loved it. Are you going to start doing it again? One and two the real question is what is it about that that you took in the business? What is the kind? What is that? That correlation between a great dancer and an entrepreneur?

Tell me that so I would put competitive dancing, professional dancing, in the same category of sports Right? Sure, absolutely. And so when I was competing, I was relatively new to the business and I was competing against people that had been dancing. Their parents were dancers, they started when they were young children, and but I wanted to grow quickly and so I really committed myself and we were going to perform at something called the star ball in Los Angeles, and my partner and I practiced 700 hours for a two minute and 30 second routine. I love that, and I got to tell you that that kind of work at work ethic is something, first of all, I had in my entire life, since I was a young kid but took that lesson into business. To say, if you want to be the best, there's a price to pay, and it's great being on this side of the equation, but I have to tell you there are prices to pay along the way, and that's a commitment to a work ethic as an entrepreneur that most people will never experience.

Sure, that's great and that's why, for the folks that are listening as you listen to this just incredible story, right, it's somebody who grew up and put themselves in the position of being a top leader in an industry, only to see it, not through any fault of your own, disappear and come back. You started dancing again. Yes, right, because you just started dancing again. You worked hard, you put in the effort, you put in the practice again and here you are, you're successful. You're in the big LA dance show.

Congratulations. Well, it's not anymore, but it's quite different these days, because you could never be what you were when you were a young athlete. I'm sure you played sports when you were young and, as you well know, you can't have the same skillsets available to you today.

But you can get better and better. As an entrepreneur, you can.

Yes, and you can get better and better as a dancer too, even as an older guy.

Last point I just want to wrap up with is tell me about a day in the life of Joe, because you really live and breathe this and so talk to me about that.

Well, I would not be the right guy to talk to about work-life balance, because you love what you're doing. I love what I do, and this started as a 12-year-old kid, cutting lawns, shoveling snow, and it never changed all these years, and so I work extraordinarily hard. I do have my son literally as my chief operating officer running my business, but we're growing the business. We're going into new product lines. We've already got a SaaS product that we've just launched and we're now looking at yet another product to bring into the company. So we're looking down the road and significantly down the road to make sure this is a healthy business. But it still takes a lot of time and a lot of energy, and I would say that a day in the life might start with meditation, a workout, hit the ground in the building by eight o'clock and work till I'm done and rinse, wash and repeat.

Well, there, it is no surprise of why we have a successful entrepreneur in the room. I think it's an amazing story. I think you've built an amazing business. I've been blessed to be a part of it and be with you in this location. Joe and I are partners in the building that we're in. I've watched you build this and your culture and the team grow and the business grow, and your son. I mean just, it's an incredible story. I'm really excited about seeing it every day, and thanks for coming in and having this conversation with us.

Thank you.

Leo, appreciate it, appreciate it. Thank you very much for everybody who's listening again, and thanks to Joe and for telling his story and being open and honest about all the different aspects of his life. Once again, this is from the ground up. This has been a wonderful conversation and I would remiss if I did not say Michele.

I thought you were going to forget. I really did. Every time I think you're going to forget, but I don't remember to like, follow and subscribe for more exciting interviews with other entrepreneurs. And thanks, joe, this was a pleasure.

Thank you, Michele, Appreciate that On YouTube.

Spotify.

Apple podcasts.

Podcasts.

And on our website.

And on our website.

And hopefully on Joe's website and Joe's social media, dealerupliftcom. So make sure you check Joe's story out as well, and his team.

Okay, everybody. Thank you for listening.