Expansion and Customer Retention

What if your shop acquired 4,500 new customers overnight?

That’s exactly the position Patrick Howard found himself in when the shop he managed, HB Auto & AC in Huntington Beach, Calif., acquired the database of a local shop going out of business in the summer of 2017.

“How much do we pay to expand our customer base, $100 per customer?” Howard says. “Well, we had just purchased several thousand people who are active, who know the business, who trust the business, who spend money for the business. So, it was a great opportunity to expand our base.”

In just one week, Howard and the shop’s owner, Chris Ramirez, successfully negotiated to buy the business and customer base of H. Heaven Auto Repair, and began working to integrate it into his own shop. But with that opportunity came a formidable challenge: converting all those skeptical customers into loyal fans of an entirely different business.

The Backstory

As the general manager of California-based HB Auto & AC since 2016, Howard was constantly looking for ways to grow his customer base, and started looking around for shops that might be for sale.

A local tool manufacturer mentioned that H. Heaven, a shop down the street, was planning to go out of business and its customer base may be available to purchase. Howard contacted H. Heaven’s owner, and the wheels soon went into motion.

Howard says he initially wanted to buy H. Heaven’s building, but learned the property was already sold and in escrow. What was still available was H. Heaven’s active business, which had between 1,000–1,500 active customers, and a list of customers throughout its history, which was close to 4,500.

Over an accelerated three-day period in June 2017, Howard and Ramirez negotiated a deal to take over H. Heaven’s customer base for $65,000. Ramirez took out a loan for the purchase, but the two were leery of how it would pan out. Nevertheless, they thought it could fit well with the shop’s current advertising budget, which amounted to roughly $65,000 per year.

The Problem

HB Auto had changed its process from price-focused to value-focused over the last year, which drove revenue up but decreased the shop’s car count. He observed the business model put into place by H Heaven, and found remarkable similarities to his newly value-focused shop. If executed correctly, Howard knew the acquisition could be a great way to expand HB Auto’s customer base, and bring up both his car count and revenue.

Howard now had a list of nearly 4,500 former customers of H. Heaven who were out of a longtime shop, and he needed to figure out how to market to them.

H. Heaven, which had garnered great reviews and solid reputation in its 38 years of operation, was located just a few blocks away, but there were five other shops between both locations. The loyal regulars at H Heaven had plenty of other options in the nearby Huntington Beach area, and Howard needed to find a way to build relationships with this base, convert the customers, and get a return on HB Auto’s large investment.

The Solution

Faced with the massive database, Howard went through the overwhelming process of figuring out a way to get the former customers into his shop. This included an advertising process consisting of the following:

Boosting online presence:

HB Auto worked with its marketing company, G3 Creative, to integrate the online presence of both companies. Howard says H. Heaven already had a strong online presence and was ranked high on Google, but G3’s efforts combined the online search rankings of the two companies.

Soon after HB Auto took possession of H Heaven’s intellectual property, the H. Heaven website and any other links to it on review sites and business pages were redirected to the website for HB Auto. Any Google search for the H. Heaven business now brought the searcher to HB Auto’s page, which Howard says was a big boost for its presence on organic searches.

“It was huge for us, it really made us a dominant figure locally for online searches,” Howard says.

Direct messaging the customer base:

When starting out his direct marketing efforts, Howard had some help from the business’s former owner, Steve McNamara. He sent emails to the customer base explaining the acquisition and introducing longtime customers to HB Auto. H Heaven’s social media accounts let customers know that the business was moving down the street, and told users they would still be able to expect a high level of customer service.

Additionally, Howard started a lost customer letter campaign for the database the shop acquired. This involved sending a coupon for a free oil change to anyone willing to give HB Auto a try. The shop is still early in these efforts, but Howard says his operation already has a few positive responses.

“We’re hoping if we can get a handful of people out of all that, it’s worth it,” Howard says. “The price of acquiring a new customer is several hundred dollars.”

Adding a familiar face:

Josh McNamara, son of former H. Heaven owner, Steve, had become the face of the company as he moved up in leadership roles over eight years. Howard and Ramirez got to know McNamara in the moveout process, and were impressed with his sales abilities and the relationships he had built with H. Heaven’s core customers. After the negotiation process, Howard and Ramirez soon offered him a position as a service advisor at HB Auto.

McNamara was a bit uneasy about taking the position, as his main concern was that his customers would be taken care of in the transition.

“He had built relationships with all these people,” Howard says. “I assured him that our business model was very similar to the business model they ran.”

McNamara says he appreciated HB Auto’s renewed focus on customer experience, and decided to join the team after he agreed that his customers would be taken care of at HB Auto.

“I realized things had changed from the past to what I know now. It just seemed like it was a good fit,” McNamara says.

Howard’s staff worked to ease McNamara into the shop’s atmosphere, and mix him in with the rest of the customers. Howard made sure to have McNamara up in the front of the shop so H Heaven regulars would be able to see a familiar face as they walked in, and longtime customers would get to know the new member of the team.

The Aftermath

The acquisition’s impact was felt immediately at HB Auto. In July 2017, one month after the acquisition was finalized, monthly revenue eclipsed $100,000 for the first time in company history, and its car count increased to 168. In August, the numbers were even better, with $131,000 in sales, and a 197 car count. Even with the added staff member, net profit increased 2.7 percent in July, and 21.1 percent in August.

Howard says that H. Heaven and its converted customer base have provided $140,000 in revenue with 260 new cars in the six-month period since the acquisition. Before the acquisition, HB Auto tracked a new car rate of 18 percent with its advertising efforts, which has increased to about 30 percent with the acquisition of H. Heaven.

The stature it’s given them online has been another great boost, as Howard says they now have a dominant online and social presence in the Huntington Beach community.

“We basically paid one year’s worth of advertising up front to acquire these customers, and it’s given us almost exactly what our paid advertising month over month has given us,” Howard says.

The Takeaway

HB Auto wasn’t able to convert every core customer of H. Heaven, as Howard says the shop had some customers who weren’t on board with the new business and decided to take their cars elsewhere. With the acquisition, however, Howard says HB Auto has been able to double the amount of new customers it typically receives from its extensive advertising efforts.

“We were able to basically acquire a large number of customers who were already familiar with the name, H. Heaven, and the face, Josh,” Howard says.

H Heaven’s customer base generated roughly $500,000 each year in revenue, and Howard expects his newly gained customers to provide numbers close to that, year over year.