Know How to Grow
The goal of most businesses is to grow. Not every business can (or wants to) do it in the same way, though.
Whether it’s through expansion to a second location, an addition onto an existing facility, or through internal, organic growth, there are many ways to increase the scale of a businesses.
Ratchet+Wrench spoke with three shop owners who each grew in different ways. They shared their secrets for building business, and how your shop can know when it’s time to expand.
Creating a Plan
It made him cringe every time he heard a customer say it.
Brian Bates bought Eagle Automotive in Littleton, Colo., from a shop owner on his way out of the industry. The business had decreased in sales by more than $300,000 over a three-year period before Bates purchased it in 2004.
“And he had a pricing strategy to where every former customer would come in and say, ‘We drive from 30 miles because he was the cheapest anywhere in the area,’” Bates says. “That wasn’t me. I didn’t want to be known as the cheap guy. I wanted to be the guy who does it the best at a fair price.”
All along, Bates has been methodical in his approach to bringing Eagle Automotive out of its funk. He slowly transitioned the pricing system, did away with cheap-deal coupons and promotions, and went about creating procedures that would allow the shop to get the most from its 2,500 square feet.
By 2010, Eagle Automotive had doubled its revenue, topping $1 million in annual sales.
“At the time, I had the decision of whether I’d be happy to sit on the business as it was and make a steady pay check for, well, who knows how long,” he says, “or I could push to make it something bigger.”
The Right Criteria
Bates didn’t have the space at his original facility to add on, so his only true option for growth at this point was adding a location.
He sought guidance from wherever he could get it. He worked with Dan Gilley at RLO Training, and he spoke frequently with industry veteran and longtime multiple-shop owner Greg Sands.
“The one thing they kept saying is that running two shops is the hardest thing you can do,” he says. “You don’t have the means to hire people that oversee both, so you’re basically running two, independent shops. Where you start to see the benefit is when you go beyond two, to three or four or five shops.”
So, Bates began putting together a plan for multiple-shop growth, focusing on exactly what he was looking for in a new facility:
Customer demographics. Bates’ original location worked primarily with middle to upper-middle income vehicle owners. He needed an area that would have these types of people with vehicles made between, roughly, 1992 and 2005.
Size. The shop needed to have between six and 12 bays, a nice office area, easy street access, and plenty of paved parking.
Location. The shop needed to have easy access to a reasonably busy street, and it needed to be easily seen by passersby.
Competition. Bates says he doesn’t mind having competition in the area, but it can’t be an area “saturated” with other shops. He wants a good balance between the potential business of the area and the amount of other facilities.
After more than a year of searching, Bates finally found his new location in an old Goodyear facility on the other side of Littleton.
Between staffing, remodeling and equipment purchases, Bates didn’t feel like the second shop was fully operational until some point in 2012. Now, though, it’s starting to pick up steam.
“It’s about having the right people with the right systems in place to run it,” Bates says. “It’s a risk to do it, but if you have everything planned out efficiently, and you have a good vision for what you’re doing and good people to do it, then it takes a lot of that [risk] out of it.”
Bates is now looking for a third location—using those same rigid guidelines.
Sometimes, you need a little push to make change in your business. And that’s what Kit Johnson got in the form of some rumors swirling around the Helena, Mont., area four years ago.
J4 Automotive had enjoyed steady growth since Johnson and his wife, Viola, opened up shop in 1993, gaining substantial market share in a region that only has roughly 75,000 people within reasonable driving distance to the facility.
But in 2009, Johnson heard AAA was thinking of opening its own facility near J4 Automotive. The threat of a new competitor with the AAA backing moving into his area had Johnson quickly scrambling to come up with a game plan.
From 2004 to that time, his shop had grown steadily at a 7 percent clip each year. At just south of $800,000 in sales in 2008, Johnson’s business was more than healthy—but he also knew he could be doing more.
The shop was regularly booked solid, and, often, potential jobs were forced to reschedule at a later date or were simply turned away.
“With the thought of another competitor coming in, we knew we couldn’t be losing any of those customers,” he says. “So, it was either we had to look at getting a second location or adding on to our own.”
Pushing Back, Building Out
Because Helena isn’t a very large area, J4 Automotive only has a few key competitors, all of which are actually in Helena. Johnson’s location is eight miles east of the city.
“We were drawing the majority of our customers from Helena, so it wound up not making sense to have a second location that could take away from the first,” he says. “What we needed to do was expand on our building and make sure we give people a reason to drive the eight miles out to us.”
In 2010, the Johnsons began the expansion, adding another 2,000 square feet of shop space and paving what had been a gravel parking lot. The project in all cost roughly $200,000, most of which was financed through a Small Business Association loan.
“We were nervous about it,” Johnson says. “But, at the same time, it was a little bit of an adrenaline rush, something to push you to work harder.”
The AAA shop never materialized, which only made Johnson’s expansion that much more of a success.
The shop worked hard to up its marketing to ensure customers were aware of their business changes. They did a TV commercial highlighting the construction, and Johnson is heavily involved community organizations such as the Helena Chamber of Commerce. They also continued to promote their family atmosphere and Johnson’s credibility as a repairer (aside from regional awards, he was named the NAPA National Technician of the Year in 2007).
The additional space, meanwhile, improved workflow significantly.
“We always had strong efficiency, but it wasn’t as consistent as I wanted it,” Johnson says. “With the extra elbow room, we’ve stayed between 130 and 140 percent efficient since we made the change.”
In 2013, Johnson says the shop is on pace to do $950,000 in sales.
Dave Dupont doesn’t like to wait, and, really, he doesn’t see any reason a customer should have to.
“Well, I think of how I like to be treated when I go into a store,” he says. “I walk into AT&T—and I have a lot of phones on my plan for over $500 a month—and they tell me I have to wait 30 minutes to talk to anyone. Really? For $500 a month? I walk over to Starbucks right after that, and they’re all over me for a $4 cup of coffee. They get it, and all of us in our industry need to get it, too.”
Image is increasingly important in today’s repair industry, Dupont says, and you can’t ignore how customers perceive their experience in your shop.
This is the foundation on which Dupont built his business, Dupont Service Center Inc., from a $600,000-a-year shop into an efficient, customer-centric operation that now does more than $2 million in sales each year.
And he did it without adding on shop space or staff.
Dupont has grown his shop from within, focusing on efficiency, marketing and customer service.
Dupont’s family owned several gas stations while he was growing up, one of which housed a small, three-bay service center. Although he sold out of the gasoline business when he opened his current business in 2001, there were plenty lessons he took with him.
“We used to have to do work on an outside lift in the winter, and park cars across the street in a church parking lot,” he says. “It really taught you how valuable time is.”
Dupont says to think of it like a doctor’s office: A physician’s most valuable asset is her time, and that’s what shops should focus on. It’s one of the reasons that Dupont designated his lead technician as shop foreman to have an extra set of eyes on each day’s scheduling.
Dupont’s shop generates $2 million in annual sales while open only five days per week in a town of 30,000 people. Needless to say, he knows how to gain market share.
“We focus heavily on our marketing,” he says, “and we don’t just keep it in one facet.”
His shop uses Demandforce for its Internet and email marketing, and Customer Link to provide direct mail services. It also has an enhanced website with strong search engine optimization, and a mobile format that allows those with smartphones to call the shop instantly with a single tap of the number. Dupont also sends out service, maintenance and yearly inspection reminders to past customers on a regular basis.
No one comes to your shop to buy an auto part, Dupont says. It’s about the value that part provides in their vehicle. The goal should be to offer options and help customers make informed decisions to reach their goals—rather than just selling parts and service.
Dupont also provides a shuttle service, courtesy cars with toll passes, and regular car clinics for customers. It’s a reason his customer service index scores are always between 99 and 99.5, and why his shop was named the 2010 AAA Shop of the Year.
“We want to be advocates for the customer,” he says. “We need to provide value for them that keeps them coming back here. That’s what all these things do, and that’s what has helped us grow.”
Know When to Grow
1. Have a Vision. It’s pretty simple, Dupont says: If you don’t have a grand vision for your company, then you’ll never know how close you are to reaching your goals. Before considering any sort of growth plans, Dupont says to create a company vision statement to detail your shop’s end goals.
2. Staff Productivity. Is your staff overworked? Are you understaffed, or even overstaffed? Most suggest a ratio of 1.5 techs to one service advisor, Johnson says. If your numbers don’t line up with that, you might have staffing issues. Also, pay close attention to efficiency and productivity numbers; they’ll tell you a lot about what your shop structure allows and doesn’t.
3. Local Business Climate. Johnson put a lot of effort into understanding his area before going forward with the addition. Can your area support another shop? Can your business attract enough customers if it expands? Is the problem your shop, or is it the area around you?
4. Credit Status. If you’re going to expand, you’ll either need a good amount of cash reserves or significant financing. Never look to expand without having a healthy credit status, Johnson says.
5. Additions to the Addition. Shop space isn’t the only thing you need when adding on to your business. There are equipment expenses to consider, and you need to have a plan in place for hiring the right people to fill those new roles. Bates says you need to fully understand where the gaps in your business will be, and how (or if) you will be able to fill them.