Winning Over a New Staff
It was Dec. 31, 2014, when Tyler Jensen made his way through the small mountain resort town of Durango, Colo., and up the once-paved, now-dirt driveway of Durango Small Car. He navigated past the potholes in the parking lot, weaved through the maze of clutter on the shop floor and gathered his team of two technicians and one service writer together in the cramped front lobby.
It was six months into Jensen’s foray as the new shop owner of Durango Small Car, a European import car repair shop established in the 1970s, and the 24-year-old had spent those first few months coming to terms with what he had purchased. He spread every financial report conceivable out on the front counter, looked up at the staff—some of whom had been with the shop for 30 years—and began to explain the reality those documents outlined.
He explained that while the previous owner had given the impression that everything was perfect, the shop was in a five-year slump and that sales had been decreasing an average of $50,000 per year, now sitting at $500,000 annually. And he explained that if things didn’t change, the business would last another two years—at best.
But Jensen also had a plan, one that he was confident would take the shop from barely getting by to firmly profitable and thriving in only two years. The problem, he says, is that a plan is worthless without successful execution—and his staff seemed determined not to embrace the changes proposed by a recent college graduate.
“The animosity of a 24-year-old kid taking over the shop was huge,” he says. “There were a lot of fights. These guys were on board but it was a lot of work to get them to trust what I had to say.”
Cars have always been a part of Jensen’s life and after injuries sidelined his former motocross racing career, he went back to school in Durango and obtained a bachelor’s in marketing, with the intention of eventually running his own repair business. During that time, he also purchased an Audi S4, which led him to Durango Small Car for a repair. Over the next two years, Jensen worked as an independent contractor, which he says taught him the ability to talk to Durango residents.
However, Jensen says he could never get Durango Small Car out of his mind.
“It was pretty much everything that I enjoyed,” he says. “It was import cars, it was Formula 1 racing. I could see there was a heritage to it, that there was a certain nostalgia.”
In addition, the location, reputation as the only import repair shop in the area and expertise of the technicians convinced him that it was worth the investment. Jensen purchased the company for $240,000 with a three-year lease agreement on the building and closed at the end of June 2014, just shy of his 24th birthday.
Upon assuming ownership, Jensen says the problems were overwhelming. The former owner never invested in new equipment, the staff was still using tools from the early 1990s, and there was a parts inventory of $260,000, which all amassed a mess covering the entire shop floor.
Thanks to his background in marketing, business and construction, Jensen says he felt confident in his ability to implement marketing campaigns, bring in more business, update the facility and create more efficiency in the shop processes. What he wasn’t as confident in, however, was his ability to lead a staff easily 20 years his senior.
“It was a group of guys who had fallen into a very deep rut of doing the exact same thing every day and not changing anything,” he says.
Jensen considered letting the staff go and starting fresh, but ultimately, he says that the overriding factor was that the customers wanted the technicians he had.
“A lot of them know us on a personal level. It means a lot to Durango Small Car to have the guys we have,” he says. “I knew what I needed to do to have a comfortable living and I knew these guys could do it. I knew it was going to be hard and there were going to be fights but I knew they had what it took to be great. They’re fantastic technicians.”
Jensen spent the first six months taking a “stand-back approach” and assuming the former owner’s role, in an effort to blend in and get a feel for the company’s culture and operations.
During that time, he also worked on the image of the company. He cleaned out the cluttered shop floor, depleted the excessive inventory, had a logo and website designed, implemented marketing campaigns and spent $50,000 expanding and renovating the front lobby, which he largely did himself with the help of a couple carpenter friends and the shop’s team.
After that startling New Year’s Eve day conversation with the staff, Jensen says it opened the door to more conversations and over the course of 2015, he worked with them to implement his desired changes while still creating a positive shop culture. That started with investing in new technology and new shop uniforms. He also raised his hourly rate by $10 an hour and incorporated a parts matrix.
The biggest change, and the most difficult to navigate with his staff, was making adjustments to the flat rate pay plan and decreasing the technicians’ payout percentage. The reason, he says, is that the shop’s low 40 percent gross profit on labor was largely due to the 50 percent payout for both technicians. And while raising the hourly labor rate meant that the technicians would actually make more money per hour, the technicians didn’t view it that way.
Jensen says to avoid the fight, he sat down with the technicians and sold them on the change: “If you guys like working here, this is what has to happen,” he told them. “I can show you in every measurable way you are going to make more money, it’s just that your percentage is going to change.”
The numbers don’t lie, and at Durango Small Car, 2015 was a banner year: Annual sales increased to $700,000, car count rose from 140 to 180 cars per month, gross profit on labor rose to 60 percent, gross profit on parts grew to 55 percent, the shop gets a new customer review every day and everybody in the shop had their best year, financially, in 10 years. One technician even made $10,000 more than he made the year before with the new pay plan.
In 2016, both first and second quarters are up 30 percent, and Jensen says he expects to hit $1 million in sales, an average repair order of $600 and a net profit of 10-15 percent this year. What’s more, he also expects to see a return on his initial investment before the close of 2016.
More than that, however, Jensen, now 26, says that the culture in the shop is night and day different. They’re excited, more attentive and personable, Jensen says. The addition of a parts person and Jensen’s wife as the accountant have also contributed both to smoother business and a more positive atmosphere.
Jensen says that ultimately, he had to follow his gut and do what he thought was best—even if his staff wasn’t immediately on board. He says that having that seamless integration period at the beginning where he merely assumed the former owner’s role and observed was key in truly understanding the business and the changes that needed to happen.
However, he also says it was equally important for him to have a plan in place for transitioning into the true role of an owner, which he has now.
Importance of Mentors
As a first-time shop owner—and at the ripe age of 24, no less—Jensen embraced mentors from the start. He struck up a friendship with Brian Sump, owner of Avalon Motorsports in Denver, who he called quarterly for advice.
“I couldn’t have done it without my first couple conversations with Brian,” he says. “I wouldn’t be where I am today without his advice.”
He also solicited advice from business people he knew—from local hoteliers and Porsche club members to his uncle, a successful businessman. In recent months, he’s also joined a 20 Group through WORLDPAC and began working with Cecil Bullard of the Institute for Automotive Business Excellence. It’s a strategy that Jensen says is imperative for every shop owner to embrace.
“With everybody around me, all I do is listen. I don’t give a lot of input, I just sit and listen to them. That has been the No. 1 thing for me: Hearing what people had to say,” he says. “I think that’s important for a lot of shop guys. They’ll have a conversation and they won’t hear what people have to say. You have to, even if you don’t like the person.”
One of the benefits of studying marketing in college, Jensen says, is understanding how to brand a business based on what customers want.
“When I was in college studying marketing, one thing I focused on was consumer behavior. I was always fascinated by what the casinos in Las Vegas could do to trap you,” he says. “I took a lot of their methods to trap our customers.”
When it came time to renovate the lobby, Jensen put those practices in play: He gave the lobby a rustic Colorado feel with wood flooring, a wall made out of wood palettes with a mounted TV, warm light fixtures and black leather couches. He also offers free fiber-optic WiFi, coffee from Durango Joe’s (a local favorite over Starbucks) and installed calming lavender-scented air fresheners.
“Most people don’t wait [for their vehicles]. I didn’t intend for them to wait. I just wanted them to have a first perception of, ‘Wow, this place is super nice,’” he says. “It helps me sell to every type of person who comes in here.”
Timeline of Ownership
After purchasing Durango Small Car at the end of June 2014, Tyler Jensen created a series of strategic six-month steps for taking over the shop:
- July 2014-December 2014: Integration, cleaning, remodeling, observe the company and its people
- January 2015-June 2015: Raise the hourly rate, implement parts matrix, change the pay plan, deplete inventory
- July 2015-December 2015: Hire a parts person, ramp up advertising, marketing and social media
- January 2016-June 2016: Implement new technology and equipment, incorporate Mitchell 1 shop management software, purchase factory scan tools
- July 2016-December 2016: Run efficient, smooth business