Finding the Profit to Support Your Shop's Future
Randy Pickering always had a dream of owning multiple locations of his family’s 41-year-old business. But the reason for that dream wasn’t because he wanted to be the owner of a multi-shop operation. Instead, it was because he wanted to provide a secure future for his three children and their families.
While a profitable business, Pickering’s Auto Service in Lakewood, Colo., was relatively small: Five technicians generated $1.9 million in annual revenue. That meant that the profit simply wasn’t there to add an additional three salaries for his children later down the line.
Creating a successful succession plan would require finding a sustainable solution that would not only ensure the longevity of the business, but also guarantee that the business could sustain its successors.
Pickering’s Auto Service opened in 1976 as a two-bay tire center doing some auto repair. After many years of business and a couple relocations later, the now 16-bay Lakewood location boasts 10,500 square feet and a monthly car count of 300.
As Pickering’s time in the industry progressed, he began thinking about the future of his business and what his succession plan could possibly look like, especially after his three children—Trent (manager at the Lakewood location), Brandon (operations manager for both locations) and Taylor (marketing director for both locations)—decided they wanted to be part of the family business.
Despite spending roughly 10 percent of his business’s gross profit on marketing (that includes an updated website and strong social media presence), Pickering found that the Lakewood shop wasn’t growing at the rate or capacity required in order to boost his net profit. Pickering’s Lakewood location was only producing 5 percent net profit (before taxes)—not enough to retire and pull three salaries for his kids.
He knew he needed to do something to expand not only the Pickering brand, but also bring in additional income.
Although Pickering wasn’t actively looking for a second location, he began evaluating his finances in case the opportunity presented itself, which it did. In 2009, a local shop owner in Arvada (located 10 miles from Lakewood) was ready to close shop and explore a different career path after his sales plummeted.
Pickering saw potential in the shop, which was a NAPA AutoCare Center and AAA approved (just like Pickering’s Auto Service). Although it was dated, it had good equipment and a good customer base, he says. He negotiated a deal that was mutually beneficial: The owner was able to clear up a lot of his debt, while Pickering acquired the shop he needed for the future.
“I just felt like this is a real possibility,” Pickering says. “I felt like there was some real potential to turn that around.”
Pickering says it took him about three years to really get the shop back on its feet. With marketing efforts such as postcard mailers, he was able to add to the existing customer base.
It helped that in that particular location, there wasn’t much competition, Pickering says. The market was underserved when it came to automotive repair and with the rebuild of a popular shopping center eight blocks away, there was going to be a revitalization of the area.
At the time of purchase, Pickering couldn’t buy the property, but in December 2015, he did just that and spent all of 2016 renovating the shop. The renovation, which was a $200,000 investment, included selling two older lifts and purchasing four heavy-duty lifts that can each withstand 10,000 pounds; a new tire mounter and balancer; and moving the lifts to create a better flow in the shop. Other upgrades included adding infrared heating and air conditioning, LED lighting, replacing the garage doors with insulated aluminum double-paned glass doors, and finally, a new parking lot.
“Our curb appeal improved exponentially,” he says. “You find those diamonds in the rough and you’re able to take them and bring those back to life into a really good, viable business.”
The combination of the ongoing marketing, repair work and renovation took the shop from a yearly car count of 1,439 in 2011 to 2,462 in 2016. That year also marked the Arvada shop’s first year to hit $1 million in annual revenue with only three techs.
Both shops now bring in a combined 10 percent net profit, which he is confident will suffice when his children take over.
Pickering also continues to work on his succession plan. He is currently working with an accounting company on valuing his business and a retirement company regarding transferring assets. He is still working on the specifics of his plan, as far as the roles for his children and their take-home pay, but he has a good idea of how he would like it to play out:
Brandon is seen as succeeding Pickering’s role. Brandon will remain the operations manager, but will oversee everything.
Trent will remain the manager at Lakewood.
Taylor will continue to manage sales and marketing, as well as customer follow-up.
While each of the kids have a small stake in the company, Pickering says that his ideal plan involves having each of the kids havingownership in the company and take-home salaries, along with bonuses.
Pickering plans to retire in December 2020 and hopes to have a third location by the time he retires—but only if the opportunity presents itself.
For Pickering, the acquisition of his second shop allowed him to create a viable brand for his successors and still fulfill his dream of owning multiple locations.
He also learned that you never know when the right opportunities will come along. Even though Pickering was looking and prepared, he didn’t know when he was going to find the right fit until it was presented to him.
“When growing your business, cash is still king,” he says, stressing that you need to have proper capital ready for when the right opportunity strikes.
SHOP STATS: PICKERING'S AUTO SERVICE Location: LAKEWOOD AND ARVADA, COLO. Operator: Randy Pickering Average Monthly Car Count: 300 (Lakewood), 205 (Arvada) Staff Size: 8 (not including owner and kids) Shop Size: 10,500 sq ft (Lakewood); 5,220 sq ft (Arvada); Annual Revenue: $1.9 Million (Lakewood); $1.1 Million (Arvada)