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[Podcast] Multi Shop Operations – Acquisition – Selling [THA 171]

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Greg Bunch is the owner of Aspen Auto Clinic, a five-location automotive and service business in Colorado. Greg started his passion for cars at 15 when he began rebuilding a 1966 Volkswagen Bug. Greg has moved from a Volkswagen mechanic to ASE Master Technician, to Management, to starting his shop 18 years ago in his garage, to an award-winning multi-location business.

Greg is currently a board member for the STEM-based charter school call “Automotive Institute of Science & Technology” and on the Advisory board of Ratchet and Wrench Magazine. Greg is also a board member of the Autocare organization and a certified instructor for the Worldpac Training Institute and Carquest Technical Institute. Greg’s unwavering passion for the industry has also led him to form a company called Transformers Institute, a coaching and training company dedicated to transforming the automotive industry.

Listen to Greg’s previous episodes HERE. Transformers Institute HERE.

Dwayne Myers is a partner in Dynamic Automotive in the greater Maryland area. Dwayne invests time in the industry with the Auto Care Association and serves on the education committee with CCPN (Car Care Professional Network). Dwayne was recently honored as one of only 17 outstanding individuals that qualified for the prestigious 2017 World Class Technician Award presented by The Auto Care Association and ASE. He is very passionate about hiring and sustaining a strong and engaged team. Listen to Dwayne’s previous episodes HERE.

Doug Grills from AutoStream Car Care Center is a chain of FIVE family-owned, automotive service facilities that deliver honest and professional automotive repair and maintenance services to customers in the Greater Baltimore/Washington, DC area. Doug along with his partner Rick Levitan has been around the service station business for over 25 years and have built their reputation by offering best-in-class service to their customers.

All AutoStrem Car Care technicians are ASE Certified and the shops are AAA approved. Listen to Doug’s previous episodes HERE.

Key Talking Points:

  • Don’t fall in love with an opportunityA magazine survey a few years ago: 56% of shop owners wanted to be out of business by 2020. They are shopping their business
  • Disciplines to haveLocation, Location, LocationDo your research, internet search on demographics, traffic count
  • Cash is King
  • Team, People
  • If you don’t have strong systems and processes don’t even consider growing to another location
  • Standard Operating Procedures (SOP) are required to scaleWritten and documentedWriting it down forces you to understand it and know how it works.
  • Perpetually tweaked
  • Each operation should engage with the customer the same way and operate the same way
  • Watch the movie ‘The Founder’ all about Ray Kroc from McDonald’s
  • Watch the TV show ‘The Profit’ all about People, Process and Product
  • A diamond in the rough could entice youLong time business
  • You feel strongly you can turn it around. The Potential with new energy and perspective
  • Strong location and business that is not keeping up
  • You know your strategy, systems, processes and people will work in the marketplace
  • If the owner is the reason for the business and he/she leaves this could impact your diamond
  • Everyone wants $1,000,000 for their business but the numbers must substantiate it. It is an emotional life work valueThe seller needs to show you how they came up with $1MAn emotional issue
  • What is your cash flow
  • Strenght in the fundamentals of the business
  • Come to common ground
  • Understand the multiple or blue sky value (premium above cash flow)
  • You must have good financial statements
  • Make sure your business can function without you and be profitableNo vacation for years
  • Consider a broker to help you legitimize your valueThere are pros and cons to hire a broker
  • There are fees and the process may be longer
  • Show no emotion to the seller over the asking price
  • A Business Broker will be able to help make the numbers real
  • Your banker will not let you over-invest
  • The final number will constituteWill the owner carry paper
  • Do they want one check
  • Do they want a monthly check to support their income once retired/sell
  • Cash is King and so is your BankerYou need a good cash position, well-capitalized
  • A banking relationship is key. Highly suggest community banks versus the large nationals
  • Practice Profit First to put cash in places that you can not spend it.War chest monies for tough times and growth
  • Lines of credit are important when you need them. Pandemic is perfect example of a huge need
  • Determine a strong or smart multiplierA multiplier is the monies paid for a business over and above the EBITDA (earnings before interest, taxes, depreciation, and amortization) depending on the value of the business in the marketplace and to the buyer. For example, the business makes an average of $200K for the last three years. Because of the marketplace, location and many other factors the multiplier could be 3.5 times, therefore $200K x 3.5 would be $700K to offer for the business
  • Multipliers vary but can be stable within a market or at a premium for a top-flight business. Multip shop operators will get a higher multiple.
  • Pandemic has put some holds on private equity invests however there will be opportunities to grow because some shop owners are going to want to call it quits and there will be some great locations to choose from
  • To research a demographic profile on a location you can get from Google and there is also traffic count available.Income levels, cars per household, etc. are necessary to help evaluate the location
  • Ask around from businesses in the area and town
  • Look at Google reviews
  • Permits for buildings and growth in the town
  • Is the area alive are dead
  • You can pay for this information
  • A gut check is to ask yourself if you would want the business if there wasn’t an auto shop in it?
  • The location and demographics It needs to fit your business model
  • Performing a strong due diligence review is a must and will provide you information to help you make a smart decision
  • You get paid on what you are doing and the buyer find the synergies to help him afford the deal. The better your business runs and the more profit it has will get you a premium price or multiple.

 

Resources:

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Mobile Listening APP's HERE

Join the Ecosystem - Subscribe to the INSIDER NEWSLETTER HERE.

Buy Carm a Cup of Coffee 

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Click to go to the Podcast on Remarkable Results Radio

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      The Technician Shortage Is Our Fault, And It's Time We Own It
      By Joe Marconi in Joe's Blog
         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.

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