Following the Golden Rule
Chris Cloutier had put in the late nights, studying the books, poring over the deposits and crunching the numbers.
He was looking for a clear-cut answer: Should he take a chance on purchasing a struggling shop, one that was faring even more poorly than he anticipated?
As he sat across from his brother, Patrick—both a master technician and future business partner—at the local diner, he remembered a word of advice his business advisor, Tim Halter, a very successful entrepreneur, had told him:
“He basically said, ‘I’m going to tell you something: Most business people are going to tell you to look at the numbers. You’ve already done that,’” says Cloutier. “‘The last thing you have to do is go by your gut instinct. What’s your gut telling you?’”
So when Patrick said he was game if Cloutier thought it was a good idea, Cloutier realized, “My gut was telling me to pull the trigger. Let’s do it.”
The task before them was no easy feat: The shop, located in Rowlett, Texas, was doing only $280,000 in gross sales; the owner claimed to be pulling $100,000 out of it, numbers which Cloutier says simply didn’t add up; the reputation was poor, at best; and the only online presence the shop had was a couple posts from unhappy customers on a site called “Ripoff Report.”
So how did Cloutier turn a shop that would have most shop owners running for the hills into a $1.2-million-a-year, five-star rated, culture-focused, modern business in only four years? With a keen eye for education, processes, customer service and culture, all of which follow a rule established by the name of the shop: Golden Rule Auto Care.
Cloutier says his path to the auto repair industry is one best summed up by late Apple founder Steve Jobs: “You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future.”
Cloutier started his varied career as a musician in a rock band that toured the South. Cloutier took the opportunity to run the tour like a business. He purchased cheap one-minute overnight ad spaces on radio and cable TV to advertise their music and website. He created generic flyers that could be distributed anywhere the band went. He tracked alcohol sales, headcount and audience data so he could tell club owners exactly what kind of audience they could expect and how much money they would make.
After the band broke up, he worked as a software developer for Southwest Airlines and Wyndham Worldwide, where he saw firsthand the marriage of software and customer service. After leaving Wyndham, he worked for a veteran radio DJ in the Dallas area who was known for being an early technology adopter and a fan of frequent feedback and training, despite having a top-rated show that was syndicated in more than 80 markets.
All that is to say: After being exposed to exemplary companies on top of their games, Cloutier wanted to run his own business and put the years of experience and business lessons he had gathered into action.
Cloutier says the opportunity to purchase Golden Rule Auto Care practically fell into his lap: He was on Craigslist one day when he saw the shop for sale. He had the cash, the location was convenient for Patrick and he had a willing business partner in Patrick, who was a Master technician with 20 years of experience working in independent shops, dealerships and franchises.
Cloutier and Patrick knew the business was struggling. The shop was bleeding and only doing $280,000 in sales, which the previous owner could only show through bank statements and a couple poorly put-together profit and loss statements. The equipment was outdated and the shop staff was gruff and not particularly customer friendly. But there was one incident that Cloutier says sums up just how poorly the previous owner ran his business.
“He told us that he informed the staff what was happening. We get ownership and the very first day, Patrick and I get there and one of the techs who was working there said, ‘Who are you guys?’” he says. “We said, ‘We’re the new owners.’ He got this look on his face like, what just happened? The old owner didn’t tell them.”
Although Cloutier knew he wanted to start over from scratch with the staff and build the right culture, part of his business plan was to keep the name and retain whatever good customers the shop already had.
“It was a big albatross to overcome,” he says. “Even if it’s dying, he still makes money with customers he has. I figured there are probably good customers in that database.”
Turning around the shop would entail a top-to-bottom transformation covering every aspect of the business. Patrick and Cloutier started by conducting a gap analysis to determine where the business needed the most work. They then divided ownership duties: Patrick was in charge of fixing cars, training technicians and making sure the vehicles were fixed properly. Cloutier, meanwhile, was in charge of marketing, building the culture, handling the finances and turning around the shop’s reputation.
Of the many changes he implemented, Cloutier focused on a few key areas that were instrumental to the shop’s growth:
• Finding the right team. Cloutier let go of almost the entire original staff and hired people with great personality and attitude whom he could train into the industry. He hired staffers from various outside industries, including a service writer who came from the finance industry, the drummer of his band and an assistant manager for Papa John’s Pizza. The commonality between the staff? They all possess a positive attitude, love of customer service and strong work ethic.
• Prioritizing training. Because Cloutier was new to the industry, the first thing he did upon purchasing the business was join a 20 Group, which he says has been huge to helping connect him with other peers in the industry. He is also part of a local business networking group, Toastmasters, and frequently attends training nationwide. He has also invested just as heavily in training for his green staff. Besides sending technicians to training, he brings trainers into the shop, has sent three of his staffers to management training, and recently held a three-day training for his service advisors on selling and phone skills.
• Investing in technology. Cloutier helped the shop go completely paperless; adopted digital inspection, check-in and quality control forms; gave each technician a tablet with access to Identifix, ALLDATA and iATN; implemented the cloud-based management system Omnique; completely redid the shop’s website and social media presence; and has begun the process of testing out telematic devices through CAARMO.
• Implementing innovative customer service strategies. As a repair shop customer himself, Cloutier knows the frustration of dropping your car off at a shop and not receiving any updates about the status of the vehicle or when it would be ready.
Cloutier used his software engineering background to engineer and build a visual workflow and text messaging tool that has automated his shop’s communication by allowing them to keep customers informed of their vehicle repairs with text message updates and helps shops keep up with customer vehicles. The tool also functions as a visual workflow management system to keep all shop personnel up to speed on where each vehicle stands in the repair process.
In the same vein, he also built a customer recognition tool that allows the shop to track customer-to-customer referrals and reward customers who frequently refer others or have been advocates for the shop.
“Our reward systems are often backward,” Cloutier says. “Shouldn’t we be tracking how great the customer is? People don’t refer a repair shop based on a reward. They refer because they love this place and want to others to have a great experience.”
• Standardizing processes. Besides an inspection and check-in process, Cloutier also implemented a quality-control process to ensure little mistakes get caught before the car is returned to the customer. The 15-item checklist must be filled out by a service writer after a technician has done the work and includes going over the repair order line by line, doing a visual inspection and looking for details like grease on the steering wheel.
In the four years since Cloutier and Patrick took over ownership, the shop has become nearly unrecognizable from its previous self: It was profitable in its first year under new ownership, is on track to do $1.2 million in 2015 and has garnered 24 Google reviews, 18 unfiltered Yelp reviews and dozens of Facebook reviews. The verdict? Glowing, across the board.
Cloutier’s vehicle text message update tool gained so much interest that he decided to sell the product and created autotext.me, which now has over 100 clients, including a growing number of locations from the national franchise Christian Brothers Automotive.
Besides the customer service processes, the shop’s quality-control process has also become key to the business. Cloutier says that within two days of implementing the process, the shop found that 80 percent of the cars that were going out had some sort of small issue.
And not only have the processes worked, but the shop has also found a staff that buys into those processes and changes.
“Your people have to be great,” Cloutier says. “You have to bring them into the fold because it’s ultimately their choice to make those decisions.”
Cloutier says that you can’t be afraid to make changes in the shop or think outside the box. It’s why he’s such a big advocate of training and utilizing the education available. The way he sees it, it’s imperative to continued growth and success.
“If you look at a professional athlete, he trains approximately 97 percent of his lifetime and he plays 30 percent of the game, if that,” Cloutier says. “If you look at all the training they do for the amount of play, it’s ridiculous. Now think about what we do in our lives. We work 99 percent of the time and then we train 1 percent. We’re constantly on the job but we’re often not getting the outside perspective necessary to become great.”
Purchasing a shop can be a huge endeavor and at times, somewhat of a gamble. There are several considerations that should be taken before purchasing a shop. Marc Gudema, principal at BayState Business Brokers, has an extensive background buying and selling small businesses (including mechanical and body shops). He outlines the top considerations.
There are a few top considerations when looking to buy a shop. As a new buyer, the money ought to be on the books. People get taken sometimes by sellers that say, “You know how things are, we do things off the books,” and it’s not there. It should be shown.
That said, it’s common that people will write off things through the business, called “add backs.” You want to look at what the actual cash flow of the business is. That’s also what a lender will look at too. They will do those add backs using a tax return. The second thing I would say is look at the tax return, not the internal statement of the business.
You also want to look at the equipment, nearby competition, and the lease. A lender will not give you a loan that is longer than your lease.
You need a lawyer when you get into the final documents. It’s typical to have two documents: a letter of intent, which outlines the deal with the contingencies, which would be due diligence, financing, getting a lease on the property; and a purchase of sale agreement. You need a competent attorney who does business sales transactions.
When it comes to purchasing a struggling business like Chris did, I think it depends on the person. If the person is very competent at managing and can see what needs to be changed in the business, it could be a good purchase.