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Transitioning Away from Fleet

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If you break it down to the absolute, most simplified version, says Brian Rex, the basic necessity of every business is to bring in more money than it spends.

He poured over sales records, traced the workflow, and stressed about the accounts receivable ledger. And Rex knew it wasn’t going to add up. Just a handful of months into ownership of Fleet Service Auto & Truck Repair in Everett, Wash., something had to give.

“Cash flow is the most important thing about running fleet,” he says. “And we didn’t have any.”

The shop was a mainstay in the area, a business with a solid reputation and two decades worth of customer relationships that had built it into a $900,000 business. But the months leading up to Rex’s purchase of the shop were a struggle; sales had slowed and money was tight.

Rex, a first-time owner who used all his personal savings on the purchase, didn’t have extra cash on hand. And most of the shop’s commercial accounts ran on 30-, 60- or 90-day payment plans—not a great recipe for a quick turnaround.

“The shop was sort of going month to month,” he says. “And I just knew that it wasn’t a way that I could survive running this thing. We weren’t going to have the cash flow to ever feel comfortable. We had the sales, but we were always going to be waiting for the payments to come in, sweating out the end of each month.”

Rex decided he needed to completely overhaul the business model: He was going to take a shop doing 80 percent fleet work—mostly consisting of heavy vehicles—and give it a predominantly retail focus.

The Backstory

Rex had worked at Fleet Service for more than 20 years, working all the while under the shop’s original owner—someone with whom he had a professional, if icy, relationship.

“I ran the shop for years and years, and we basically worked under a handshake agreement that, when it was his time to get out, he’d sell it to me,” Rex says. “Then, he’s getting ready to sell it and comes to me and says, ‘I’m selling to the highest bidder, and I’ll tell you right now, it’s not going to be you.’

“I quit that day.”

That was early 2003, and Rex stormed out of Fleet Service and began working at another shop almost immediately, leaving the owner scrambling to run daily operations.

“He hadn’t been in charge for years and he struggled,” Rex says, “Sales went down, they struggled getting payments, and after a few months of this, he calls me up and says, ‘OK, let’s get something worked out.’”

With no hard feelings, Rex quickly agreed to a purchase agreement.

Having run day-to-day operations of the shop for years, Rex knew the ins and outs of every one of the shop’s accounts. He understood the strengths in having such large, high-ticket heavy-vehicle clients. He also felt his shop was trapped under the pressures of focusing so squarely on fleet work.

“This was before companies using credit cards became more the norm,” he says.

Rex had known the business’s overall situation of sweating out payments to pay bills, despite its high sales volume. It had never been his personal problem, though. Now as owner, he was faced with that reality—and he wanted to quickly change it.

“My focus from the get-go was to transition away,” he says. “We just simply didn’t have the cash to ever be comfortable working that way.”

And Rex had a plan.

The Transition

In the books, one fleet account goes down as one customer. But, as Rex explains, when that client has 300 vehicles with 300 drivers, there is the potential for much, much more work—if retail jobs become a focus.

“The drivers are the ones bringing in those trucks or vans or whatever it would be, and they’d sit in the shop and they’d ask us where to bring their own vehicle, where to bring their friends’ vehicles,” Rex says. “We never had the space, time or desire, really, to take in that work. We’d refer it down the street.”

Rex’s plan was simple: stop referring away work his shop could tackle.

These customers already trusted his shop, Rex says, as the business rarely did any marketing and new clients were nearly 100 percent based on referrals. The retail work could come the same way.

He started telling drivers that they’d take on their personal vehicles as well, and many jumped at the opportunity. Soon, Rex had a backlog  of retail work and started sliding it into his shop’s daily schedule.

“The goal was to get to a more manageable mix of fleet work,” he says. “I wanted 40 percent or so of our work to come from that, and to expand our retail significantly.

“Our shop is decent size—nine bays, about 4,600 square feet—but if we have a big truck in there, it’s taking up a lot of room. We could fit more vehicles in if we focused lighter, and we had the staff (10 employees) that could handle multiple vehicles.”

The simplest way to ease the transition was to completely shift away from heavy-duty vehicles. But Rex wanted to do it slowly. As commercial agreements were set to expire, he simply let them. When equipment needed to be replaced in the shop, or his software subscriptions came up for renewal, he simply swapped them for the ones he would need for light vehicles and trucks. When staff members moved on, as is common with all shops, he would replace his heavy-vehicle technicians with those trained on light vehicles and trucks.

The overall goal, Rex says was to have his business fully transitioned in four years.

By 2007, the shop pumped out $1.9 million in sales with roughly 43 percent of that work coming from fleet.

Then, the economy sunk.

The Rebound

Rex had carefully chosen which fleet accounts he’d stick with. Most were high-volume companies that he kept on short pay periods; many had begun using credit cards.

When the economy crashed in 2008, Rex says his fleet business collapsed. That 43 percent work mix dropped to just above 3 percent.

“We lost about $400,000 in fleet sales that year,” he says. “We had a client that used to have 300 vehicles. They had layoffs and were suddenly down to 30. This happened across the board. We were still getting their work, but all of a sudden they had way less vehicles.”

Rex had to cut overhead. He adjusted his staff’s hours: Every employee worked four shifts a week, instead of five. It allowed them to keep their benefits, Rex says, while also allowing him to not lay anyone off.

With his retail business still growing, Rex began putting all his efforts into marketing the shop to consumers. He had the website redesigned. He began mining his customer database, doing email campaigns and direct mail. He gave deals for customer referrals.

Fleet Service became a true consumer-focused business, Rex says, and it saved everyone’s jobs.

The Aftermath

Fleet work remained stagnant for much of 2009 and 2010, but the retail portion of the business was expanding rapidly, Rex says.

Sales progressively inched their way back up to prerecession numbers. And when the economy turned around in 2011, he took back some of his fleet accounts—although, rather selectively.

“We don’t do any heavy work any more,” he says, and the shop focused on credit-card pay jobs, ones that provide the business with instant payment.

In 2013, the shop did $2.2 million in sales, just 18 percent of that coming from fleet. No employee lost his or her job due to the three-year slump, Rex says, and today, he feels the business is as prepared as ever to grow in the years to come.

With nine bays and 390 cars per month, Rex says he’s fairly close to maxing out his facility. He’s now working with a financial planner to help set up a succession plan for his two service advisors to take over the business in five to 10 years.

The Takeaways

Rex has a simple motto: improvise and overcome.

His business has changed drastically over the last 10 years. Aside from the name (which was kept during the transition due to its recognition in the area), Rex runs a completely different shop than he bought in 2003.

“For me, you have to adapt to your market, roll with changes and adjust pretty quickly to stay successful in this industry,” he says. “You need your finger on the pulse of your business and be involved with the business and your customers to really understand what’s going on.

“I think the biggest thing for us, if we hadn’t made the change when we did, we wouldn’t still be here. The bottom would’ve fallen out completely. But we’re still here and we’re pushing forward.”  

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