Growing Beyond One Location
Greg Bunch has been through it all: He opened his first shop in his home garage in 2001, with just a $5,000-limit Discover credit card as his operating capital. Fifteen years later, Aspen Auto Clinic is a six-location, nearly $10-million-per-year business in central Colorado with additional locations planned in the Denver and Colorado Springs area.
Along the way, Bunch says he’s faced every up and down imaginable, but through it all, he’s developed a systematic approach to expanding that has helped make the process as smooth as possible. Increasing your footprint is not to be taken lightly, he says, and shop owners should have not only a rock-solid existing shop, but also a thoughtful plan before adding another facility.
Bunch, who is also in the process of creating a 20 Group for aspiring and existing multi-shop owners, details a step-by-step guide to increasing your footprint beyond one location.
1) Make sure your shop is ready to grow.
The first step to growing, Bunch says, is making sure you’re actually ready to grow. First, consider if your facility is maxed out. Are you making money, running at capacity, maximizing throughput and do you have healthy cash flow? From there, Bunch says to ask yourself the following specific questions:
- Have you paid loans off from your first store?
- Are you postponing buying equipment you need at that facility?
- Have you embraced training and do you really understand the business side of running a shop?
- Is your accounting in order and organized?
- Could you be gone for three months and not miss a beat in your business?
- How much do you have in reserve capital saved up? If you don’t have significant reserve capital, what kind of line of credit do you have? Bunch recommends $50,000 for a small three-bay shop with low overhead and up to $200,000–$300,000 for a larger, high-end facility.
- What does your recruiting program look like? How do you train your employees?
Most importantly, however, Bunch says you need to ask yourself if you’re truly able to let go.
“As a perfectionist, which a lot of shop owners are, you have to be able to relinquish that control,” he says. “You’re putting all your efforts into the new store, you’re dealing with contractors and equipment and this and that. If you’re worried about what’s going on back at your [original] store, forget it; you’re in trouble.”
2) Consider Your Financing.
Bunch strives to have enough capital to pay the rent and overhead for the first six months of opening a new store, but this is often easier said than done. First, he says it’s important to be realistic when estimating sales. You don’t want to be under capitalized, he says, so go with a conservative estimate versus your best-case number. Bunch also recommends figuring upfront marketing costs into that figure.
While he has financed his shops in a number of ways, Bunch says that the most beneficial type of financing has been a 504 Small Business Administration (SBA) loan. The loan also includes operating capital, which can be used for the location, equipment, marketing or staffing. Applying for SBA loans requires providing significant documentation, he says.
3) Find the best market.
The next step, Bunch says, is site selection. You need to be strategic with the location of your next shop, and in general, he says he tries to find similar markets. To determine that, he looked at his average repair order, and the makes and ages of the vehicles his shop works on. In general, he looks to expand in up-and-coming neighborhoods that are underserved, high income and high density (30,000 homes in a 2.5-to-3-mile radius). He also considers his current locations and tries to maintain a distance of 6–7 miles between stores. This allows for cross marketing but isn’t so close that one location is taking away business from another. In a more rural area, he says this distance should be 8–10 miles.
Demographics are most important, he says, even more so than visibility, which can be remedied with marketing. However, nearby competition, neighborhood and traffic patterns also need to be considered heavily.
4) Narrow in on a facility.
After identifying a market, the next step is finding the actual facility. Bunch says it may be out of your league to purchase property, so he advises leasing property, which allows you to put very little down and start generating cash more quickly, is advisable. Bunch notes that he is in the process of purchasing property that includes another onsite tenant, which will help generate cash flow right away.
In general, Bunch looks for buildings that contain a minimum of eight lifts, which allows him to recreate many of the processes that have successfully worked in the past. He also notes not to be afraid of buildings that may need some remodeling. One of his locations was an abandoned transmission shop in a shopping center looking for an anchor tenant. The landlord was willing to put $50,000 into a remodel, and Bunch says it has been one of his most successful locations since day one.
Another option is acquiring an existing shop, which Bunch is also in the process of doing. He says when acquiring a shop, look for one that’s well-established and profitable with a rock-solid reputation in the community. The difference in acquiring a shop, he says, is that you may have to make changes more slowly, so as not to confuse clientele and scare them off.
5) Pick a corporate structure.
Bunch started his business as an S-corporation, and as he’s grown, he’s incorporated each new facility into the S-corp versus classifying each as its own LLC (which requires filing individual tax returns). There are different schools of thought regarding this, he says, and it’s important to consult with your accountant and a lawyer.
6) Determine staffing needs.
You need the manpower to run the new location long before opening, Bunch says, and there are two strategies for staffing the new shop: Relocating existing employees or starting with an all-new staff. If your locations are nearby, he says relocating some staff does work, as long as it doesn’t come to the detriment of the first shop.
Regardless of the strategy, he says, you always need to be recruiting and selling the vision of the company. Bunch usually starts with two technicians, a service writer and a manager at a new shop, but will quickly staff up with more technicians, if needed.
When hiring managers, he has them work as service advisors in one of his existing shops for six months before a new location opens. It not only shows their competency, but also trains them in the systems and processes. He will start service advisors three months out and technicians one week in advance, wherein they go through an onboarding training program that Bunch has developed.
As he’s grown, he’s added additional managers, such as a district manager, that takes on the majority of the day-to-day tasks and allows Bunch to focus on the bigger picture items and expansions.
7) Implement initial marketing.
Bunch uses direct mail as his initial marketing push and says it’s been an extremely successful way to create buzz and let the neighborhoods know you’re there.
He has also subtly rebranded some of his shops to appeal to the customer demographics in that market. For example, one of his Denver stores works primarily on European vehicles, and even though they aren’t an import shop, Bunch hired a European technician, purchased European scan tools and started a direct mail campaign to European vehicle owners in the area.