10 Mistakes To Avoid When Selling Your Business
Raving Fans
Web University, Part 3
January/February 2013
Larry’s AutoWorks Dynamic, Evolving Business Strategy Ensures Success
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January/February 2013
Shop Profiles
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22 Larry’s AutoWorks, Mountainview, CA 46 Francis Automotive, West Chester, PA Web University, Part 3
Features 6
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Shop Profile: Larry’s AutoWorks
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Web University, Part 3: -Your Web Questions Get Answered
18 Sales/Marketing: -Turning Customers Into ‘Raving Fans’ 30 -10 Mistakes To Avoid When Selling Your Business Turning Customers Into Raving Fans
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Shop Profile: Francis Automotive
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Departments Shop Owner Staff
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Executive Interview: Dan Moody, MAHLE Clevite, Inc.
Insurance: Protecting Your Business With The Right Insurance
Leadership: Accountability
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|Web|University
Part 3
And here we are again. With all the Google changes, small businesses are scrambling to avoid being relegated to the Internet’s junk bin. Let’s stay on top of it. Whether it’s Google Search, social media or what to do with Google+, you’ll find answers to the most challenging questions, in both a “Go Deep” and “Quick Bites” format. Questions submitted by shop owners at www.ShopOwnerMag.com will be answered by Uwe Kleinschmidt, CEO of AutoVitals, a leading supplier of web-based marketing and service advisor productivity tools.
Go Deep Q: What is the difference between a Mobile Website and a Mobile Application? A: Mobile websites are websites optimized for mobile viewing and interaction. They help visitors navigate more conveniently and quickly within the constraints of a small screen size. See image at right. Imagine spending your time zooming in and out of a desktop website minimized on your mobile device. Unless it’s a 10inch tablet, you can almost wear out your finger getting around and navigating the highly dense website. Mobile websites not only make the navigation easier, but they also offer shortcuts to important calls to action on a website. For exam-
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ple, “tapping” a phone number is calling that number, and “tapping” an address opens Google Maps centered on the concrete location, so it becomes easy getting oriented or finding the correct directions. Mobile websites are first and
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You need a mobile website for prospective customers and a mobile application to retain your existing customers.
foremost important as targets Visit of mobile searches. Or, in other words, if your web www.ShopOwnerMag.com presence relies on a desktop to Submit Your Questions website only, then you willingly give up approximately for Web University 25% of website visitors on a mobile device to become your customer. And that numand allow for highly convenient naviber is increasing every month. gation, mobile applications outscore Mobile applications, on the other mobile websites. You might ask: hand, provide an even richer user ”How do I make my customers experience, since they run as a native launch the mobile application?” application on your smartphone or Smartphones offer a feature called tablet and make use of all the user push notification, which allows you to interaction elements the operating sysreach your customers with a teasing tem (iOS for iPhone/iPad, Android, text, like a service reminder, even if etc.) has to offer. Imagine if your custhe app is not active. Pressing the tomers could see their vehicle image, “launch” button then takes them direpair recommendations from you and rectly to the application to explore the the ability to take advantage of a prooffering and make the appointment. motion when scheduling an appointSee push notification image below. ment, and all this with just three or In summary, mobile websites are four taps on the mobile application. the target of mobile searches and moSee mobile app image below. bile applications offer rich, personalIn other words, in cases when you ized user experiences. You could also want to offer a highly personalized look at this comparison: you need a experience using lots of information
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mobile website for prospective customers and a mobile application to retain your existing customers.
Quick Bites Q: How important is it to respond quickly to an appointment request through my website? A: Very important. Most appointment requests are made during off hours and on Sunday night. You do not need to call back immediately; just a confirmation that you have received the request and that you will reach out at the earliest possible time from your shop is good enough. Otherwise, you run the risk of giving up the opportunity to welcome a new customer. Q: What should the appointment request form on my website ask for? A: As little information as possible. Do not create a big hurdle for the visitor having to spend endless time in front of your website. Think of it as Part 1 of a conversation you will continue later. We do not advise forcing the visitor to enter an e-mail address and phone number. Internet users like convenience and control over what information they want to offer. Q: Do tracking phone numbers hurt my Google ranking? A: That depends on where you place them on your website and how the phone number is made visible. Tracking numbers are a great tool to determine the success of an AdWords
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or print campaign. On the other end, Google compares the phone number on your website with the one in your Google Places listing and in trusted business directories. If they are different, its “data unity” is violated, which can negatively impact your ranking. Contact us at www.autovitals.com to determine the best way of utilizing tracking phone numbers. Q: Can YouTube videos on my website help my Google ranking? A: Videos in general are a great way of making the visitor of your website aware of your specialties, quality work and your experienced staff. I would not recommend leveraging YouTube videos to “game” the Google SEO algorithm. The number of views are important, and the placement of your videos on your website’s About Us page is as important as the content, which should be refreshing, interesting and relevant. In no time, you will be able to see your videos appear on Google Search. SO Uwe Kleinschmidt is the CEO and founder of AutoVitals in Santa Barbara, CA. The company’s Web-based services focus on the independent automotive repair industry. AutoVitals’ products facilitate highly effective Concierge Auto Repair services, covering all aspects of the service advisor’s interaction with prospective and existing customers. Highly effective and optimized websites, workflow support in the shop, as well as customer retention and social media services are just a few ingredients. He can be reached by visiting www.autovitals.com or calling 1-866-949-2848.
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Corporate|Spotlight|
Raybestos Chassis Parts Reduce Contamination and Endplay Raybestos chassis part designs are driven by the technology of the vehicle and match the applied science of today’s import and domestic carmakers to help restore original ride quality and steering performance. The design that goes into every Raybestos chassis part is driven by the proven technological needs of the vehicle it serves and is validated to ensure the best part for that application. Each global manufacturing facility analyzes, measures and tests each part to ensure proper alignment tolerance and maximum durability. That commitment to quality is reinforced with extensive R&D at the facility in Oklahoma City. CNC machining ensures each part is dimensionally perfect and matches the specific technology of the vehicle. Ball and socket designs match each application for built-in strength and durability; patented designs are checked physically and electronically to maintain precise alignment tolerances. High strength steel forgings and cold-formed, heat-treated studs ensure stability. Precision machined, polished full ball studs ensure full contact, which reduces wear and endplay. One-piece metal bearing designs deliver high load capacity and zero side-to-side endplay.
Permanently attached polyurethane dust boots are purgeable for consistent, longlasting performance. Protective coatings prevent corrosion for the longest possible service life. The synthetic componentry is resistant to gasoline, oil, brake fluid, battery acid and road level ozone. By being First-to-Market, and by offering extensive coverage for the broadest range of cars, light trucks and SUVs, you have full access to the Aftermarket’s broadest selection of chassis parts. World-class training and dedicated technical support mean you always have access to the industry’s latest technical information. Easy to use catalogs, an informative web site and regular tech service bulletins round out the full range of customer support to help you remain the leading chassis expert in your community. Raybestos chassis parts are also the choice of Joe Gibbs Racing, which are used in competition on every JGR racecar. With the industry’s best parts and labor guarantee… you can install the choice in chassis with 100% confidence. Visit www.RaybestosChassis.com or call 800-323-3022.
Raybestos Chassis www.RaybestosChassis.com
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Executive|Interview|
Dan Moody General Manager, MAHLE Aftermarket Business, North America During his career with MAHLE, Dan Moody has served as Project Leader of several acquisition projects, including the Dana Engine Parts business and most recently, RTI Technologies. Moody began his career at Sealed Power Corporation (now SPX Corporation). He later served as President for the Dana Sealed Power/Perfect Circle group, and became Group Vice President of the Dana Engine Products Group before joining the MAHLE Group in 2006. Moody’s extensive experience strengthens MAHLE Clevite Inc. as the premier supplier of engine system components in North America and a leading supplier of filters to the Import aftermarket. MAHLE Clevite recently announced the acquisition of RTI Technologies, which specializes in automotive maintenance equipment including air conditioning service, fluid exchange and nitrogen tire inflation systems. What prompted this acquisition? MAHLE has a long history of identifying growth markets and opportunities that align with our long-term corporate direction. RTI fit this criteria in every facet. It serves the same customer base across all channels in both the OE Service and
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Aftermarket worldwide — and it coincides with the MAHLE global aftermarket initiative to expand into the workshop equipment sector. Combine this with the stake MAHLE owns in Behr; and RTI is a very logical addition to the growing MAHLE product offering. How will this benefit the MAHLE Clevite product offering? MAHLE Clevite is most recognized for offering a complete program of engine components and systems, as well as for the legendary brands we supply to the Aftermarket: MAHLE Original, Clevite, and Victor Reinz. These brands have given us strong market coverage as they are continuously maintained and expanded; however, now the time has come when
MAHLE needs to be known for more than that. The acquisition of RTI allows us to expand our business into the repair shop equipment sector of the Aftermarket and broaden our product and service range, ultimately diversifying our offering to include more traditional products. MAHLE Clevite Inc. prides itself on providing a well-rounded product offering and quality customer service. How will products from MAHLE Clevite Inc., RTI Division be available to shop owners? RTI primarily serves the do-it-for-me service outlets like OE Dealerships, national and regional service chains, and independent repair garages. In most cases, relationships with key customers exceed 10 years due in large part because of their strong brand recognition and reputation for quality products, exceptional support, and superior after-sales service.
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Combine this with RTI’s superior technical know-how and high quality reputation best illustrated by the ability to fulfill the exacting requirements of their channel partners is a strategic fit for the MAHLE Clevite business model. The end result is that RTI products will go to market the same way they always have. RTI has a very strong management team led by Jeff Murphy. Jeff and his staff will continue to lead RTI with a virtually seamless transition into the MAHLE Clevite family. They have worked hard to bring this organization to a leadership position in a competitive market, and we will rely on them to leverage the resources of MAHLE Clevite to help take RTI to an even higher level. What other news can you share that is product focused? Not only are we venturing into new territory with the acquisition of RTI,
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How does this benefit the shop owner? This presents a great opportunity for the shop owner. General repair shops need to be able to cater to this growing category and source OE quality filters from their traditional chains of
supply, and oil change specialists need a line of filters that meet the quality demands of the car owner. This is where MAHLE Original filters come into play. MAHLE filters delivered to OE manufacturers are examined very closely to ensure that they meet the very highest levels of quality and function. These OE filters are the same filters that we sell to the Aftermarket under the MAHLE Original brand. An extremely active role is taken in the design and function of our filtration products. Our strength lies in our heritage, in our legendary brands and in our reputation as being one of the top 30 automotive suppliers and globally leading manufacturer of components for the internal combustion engine. We’ll never abandon our roots, and will continue to expand the product line that has given us notoriety in the automotive Aftermarket. But at the same time, we will expand into additional business ventures to provide the most comprehensive product offering. SO
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but we’re also growing our MAHLE Original® filtration product offering. Our full line of filters — oil, fuel, air and cabin air — deliver the same uncompromised quality, excellence and innovation and superior technology that has made MAHLE a leading supplier of filters to the major European automotive manufacturers. Extensive research has proved that European import vehicles are one of the fastest-growing segments of the automotive Aftermarket. As recently as 1999, there were only a little more than eight million European import cars on the road in the United States. Today, European imports account for ten to eleven percent of cars on the road — almost 14 million vehicles.
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Sales|Marketing|
by Bob Cooper, president, Elite Worldwide, Inc.
Marketing Budgets For Building World-Class Auto Repair Shops In the world of auto repair and service, one thing is certain: You are going to lose customers. They will move, no longer have a need for their vehicle, turn to one of your competitors, or buy a new vehicle and then take it to the dealer for service.
Accordingly, you need a consistent stream of new customers, and since you more than likely have competition in your community, you need to help those potential customers see that your shop is the right shop. The way that you accomplish this goal is by identifying who your targeted customer is, and then investing in your marketing and advertising programs, along with your customer retention programs. The question is: how much money should you be investing in those programs? Well, here are the guidelines that we share with the top shops across the country. If you have a general repair shop, a good
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place to start is at 4-5% of your annual sales. If you have a transmission shop, you may find that you need to increase your budget to 6-8%. Bear in mind that your budget needs to be a percentage of your “targeted” sales, not your current sales. For example, if you are currently generating $800,000 in annual sales, but your target is $1 million in sales, then your marketing budget would need to be 4-5% of $1 million, not $800,000. The second thing you should do is something that very few shops do, which is invest at least 50% of your budget into what we at Elite Worldwide refer to as “non-traditional” advertising programs. Whereas traditional programs include media like direct mail, TV, radio and websites, non-traditional pro-
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grams are comprised of media such as fund raisers, social media, car care events held at your shop, and any other advertising programs that are outside of the mainstream marketing channels typically used in your community.
Targeting ‘Gen Y’ Customers Now here is one of our best kept secrets at Elite. We have long recognized the Y Generation (those born in 1980-1990) as the emerging market. These people are not only your customers of tomorrow, but since this generation was brought up using search and social media on their smartphones, they are often turned to by older generations who are looking for a good auto repair shop. Accordingly, we encourage all of our coaching clients to invest 50% of their nontraditional advertising budgets into programs that are specifically directed toward the Gen Y prospects in their communities. We have to remember that the first businesses to reach this emerging market will benefit the most, so why shouldn’t it be yours? In order to get the best return on your advertising investments, there are a number of things you should do. First of all, we encourage you to explore every opportunity to use the strength of other respected brands. For example, using names such as Valvoline, Jasper Engines & Transmissions and AAA can enable you to build even more customer confidence in your brand. You will also need to monitor and measure the results of your advertising programs. Here’s how… With all first-time customers, even if they are holding your coupon, you should ask, “By the way, may I ask
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who referred you to us?” When I was still operating my shops, I discovered that this question would send a strong message that we received a lot of referrals, which is a very good thing. In addition, we discovered that many of those customers (even those with a coupon) would respond by saying something like, “I see your ads on TV all of the time.” Since brand awareness media like TV and radio is so hard to monitor, this question would often help us obtain the answers we were looking for. We also discovered that more often than not, customers would tell us that they were referred by a friend, which indicated that the media (coupons, ads, etc.) served as the “calls to action” that prompted them to contact us. But, the customers were actually sold on us due to recommendations from their friends. We would then call our customers who gave us the referrals, and thank them for their trust in us. In conclusion, if you want to build a base of satisfied customers, you need to know who your ideal customers are, make the right investments in the right media, monitor and measure the results, and then do an amazing job of turning those customers…into raving fans. SO Since 1990, Bob Cooper has been the president of Elite Worldwide Inc. (www.Elite WorldwideStore.com), an ethics-based company that helps both struggling and successful shop owners take their businesses to new levels through one-on-one coaching from the industry’s top experts. The company also offers shop owners sales, marketing and management seminars, along with service advisor training. You can contact Bob at contact@eliteworldwidestore.com, or at 800-204-3548.
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“What I’ve realized is that I have to constantly understand that things are going to change and that I have to change. If I don’t constantly try to improve something all the time and learn a little more, before long I’m going to be standing there wondering what happened to the business.” -Larry Moore, owner, pictured here with wife Laurie
Shop|Profile|
by Debbie Briggs, contributing writer
Larry’s AutoWorks Shop Owner’s Success Linked to Accepting and Adapting To Change Most people don’t become automotive repair shop owners overnight; they may start out as a technician who agrees to slowly take over a retiring owner’s business, or open their own shop and steadily build a customer base. When the first option fell into Larry Moore’s lap, he jumped at the chance — with some mixed results in the beginning.
“It was by accident,” says Moore, who owns Larry’s AutoWorks in Mountain View, CA, along with his wife, Laurie, and daughter, Tiffany Carter, of his start in the industry. “I was actually working my way through college building Volkswagen engines, because I was a cash-poor student who kept blowing up my VW engines. At that time, nobody really knew anything about Volkswagens, but I found this little shop in the middle of nowhere with this old guy who knew how to build Volkswagen motors. I learned from him and then he paid me to start building motors. “He started a big operation down in LA to compete with a major engine remanufacturer, and they had a little problem with one piece of equipment, and they realized they were going to get back all 1,000 engines they had sold,” Moore explains. “So he called me one
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day and I was finishing up school, and he said ‘how would you like to buy the shop?’ I said, ‘Gosh, I don’t have any money.’ He said, ‘I’ll make it really cheap.’ So, I scraped together money overnight from friends, family and acquaintances, and I met him at the airport the next day and bought the shop. He was leaving town, and was heading up to Alaska. Now what I found out later was that he had hocked the shop to the hilt, so a lot of the stuff I had thought I bought, other people thought they owned. But it worked out in the long run.”
The Need for Networking But, Moore says, it also wasn’t before making many mistakes along the way — including hiring a guy with a heavy German accent thinking he would know how to work on German cars. It wasn’t the case. When Moore
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got his start in the business 40 years ago though, the coaches and trainers there are today didn’t exist. “There were absolutely zero coaching companies that I could find for mechanical repair,” he says. “There were one or two for body shops, so I attended those, but they really didn’t tell me what I needed to know about running a mechanical shop. So, most of the information I got in the early days really came from meeting other shop owners and having them be willing to talk to me about what they were and were not doing. “I was also very lucky early on in that I was involved with Michael Gerber who wrote the E-Myth, a wonderful book that every business owner should read. I was lucky enough that
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he was local, and I was one of his students for several years. So I learned about business there, and I learned about the auto business from other shop owners.” Moore also was lucky enough to be involved in one of the first training groups on the scene in his area, Educational Seminars Institute, which was started by another shop owner who realized that people didn’t know how
“More than 60% of our customers are female, and I think they are a more discerning buyer. They look at how the place looks and use that as an indicator of whether or not it’s a place they want to bring their car.” -Larry Moore, owner to properly run their shops. He also joined the Automotive Service Councils of California (ASCCA) 28 years ago, and he credits that organization with helping him develop into the businessman he is today. He’s even a past state president. “I literally would not be in business if I had not joined ASCCA and gotten to know other automotive business owners,” he says. “Their input over the years has allowed me to adjust my business and stay profitable. Being a member of local business groups has
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helped me stay on top of what is going on locally and also make adjustments. Business is constantly changing, so it’s important to stay in touch with others in the same boat. Some of my most effective business practices have come from discussions with other business owners.”
Change is Constant To be an effective shop owner today, Moore continues, you have to be willing to change. From cars that are becoming more complex, to advertising moving to the web, to customers
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Technicians, from left: Bob Dickerson; Yann Spalanzani; Bailey Tai; and Rhys Worth.
becoming even more discerning, change in the automotive industry is the only constant. “The cars are changing so fast, and they’re so complex,” he says. “When I got into the business, I learned some of it just because we were doing it. It was mechanical, and if you broke something taking it apart, you realized, I can’t take it apart that way next time. You figured out how it worked and next time you fixed it right. With electronics, you can’t do that, especially on a customer’s car. So, really, the only way to learn — and to make money at it — is that you have to be able to diagnose it, repair it and return it to the customer in a timely fashion. Training is the key to that.” Moore says all of his technicians attend technical training, oftentimes put on by a local parts house, and sometimes by a national training company.
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Larry’s AutoWorks is a certified Bosch Car Care Center, so his staff also takes advantage of that training. Also critical to that formula for success is shop appearance, both of the facility and staff.
First Impressions “I learned early on that the simple difference in what I wore at the front counter made a difference in how people responded to me,” he advises. “My original customers were Volkswagen customers, and they all had long hair, beards and were hippies, and therefore I was a hippie. They trusted me because I was like them.” As Moore’s demographic began to shift, he realized that he had been working for a bunch of people with little money, and that the people he wanted to work for had more money to fix their cars. So he changed his appear-
ance and immediately saw an improvement in his success. “We started changing the appearance of the shop, and with the input from my wife and daughter, and some of our employees and customers, we began to make the shop nicer and nicer to the point where we feel very proud about how the place looks. We get comments all the time that this doesn’t look like a shop, it doesn’t smell like a shop and every-
few years, because any time I wanted to increase business, I knew which key to turn. But about five years ago, I realized I got left in the dust.” To remedy that, Moore turned to a trusted partner, AutoVitals, to help develop and run what is now a successful on-line marketing campaign, which comes in handy in the techheavy area of the country in which the shop is located. With companies like Google and LinkedIn just down the street, Moore says he had to become more tech-savvy to meet the needs of his mobile customer base. “What I’ve realized is that I have to constantly understand that things are going to change and that I have to change,” he explains. “I used to think I’ve been in the business for 30 years, I’ve got this nailed. Customer Service Team, from left: Louie Martinez, shop manager; What I’m realizing is Melissa Ng, advisor; Phil Hayes, parts manager; Steve Knisley, that because things are driver; and Larry Moore, owner. changing so quickly, if thing is well lit. More than 60% of our I don’t constantly try to improve customers are female, and I think they something all the time and learn a litare a more discerning buyer. They look tle more, before long I’m going to be at how the place looks and use that as standing there wondering what an indicator of whether or not it’s a happened to the business. place they want to bring their car.” “That’s why the techs have to go to Moore also acquiesces that while school, it’s why I have to go to classes, he has a degree in marketing, the and it’s why I meet with other shop rapid shift to the Internet in recent owners as a part of 20 Groups. I’m part years had him baffled at first. of different things that allow me to keep “At one time, you advertised in the my finger on the pulse of the industry.” local newspaper,” he says, “but now Add to that the use of QuickTrac most people get their news from their software to attain a real-time view of iPhone or their Droid. That part of the key business indicators, and it’s easy to business has changed more than anysee how Larry’s AutoWorks will conthing else. I was a little cocky for a tinue successfully into the future. SO
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Buying & Selling|An Aftermarket Business
by Art Blumenthal, MBA CBI
10 Mistakes to Avoid When Selling Your Business An Insider’s Guide, Part 1 The majority of challenges and frustrations experienced by sellers can be avoided with solid information about the pitfalls of selling a business in today’s market. While there are dozens of challenges to overcome, here are the first five of 10 of the most common mistakes that can have drastic repercussions and cause both stress and loss of value on a business sale.
There comes a time for every business when ownership changes, whether through a transition to the next generation or an outright sale to a first time or an experienced buyer. This insider’s guide will provide insight for navigating the complexities of a successful selling transaction. Follow these tips to maximize the success of your sale and preserve your peace of mind. You probably don’t expect the exit from your business to be easy, but without step-by-step guidance, most sellers are surprised by how difficult and frustrating it can be to sell their company for a good price in a reasonable timeframe, especially in the current economic environment.
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Mistake 1 … Failure to Prepare and Properly Package Your Business
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If you were selling your house, you would obviously spruce it up before hanging a “For Sale” sign in the front yard. Selling a business with confidentiality means you can’t advertise it by name or put up a sign, so it’s even more important to address several key aspects of your business before it is marketed. Selling a business with confidentiality also means it is wise to consider utilizing the services of a qualified business broker who possesses the
experience and training to maintain that confidentiality. Yes, sprucing up your physical facility will give a prospective buyer a good impression when touring your building; however, the financial condition of your business and the state of your records and documentation is most important in accurately presenting your business in the best possible light to attract qualified buyer prospects. Before your business can be marketed, a comprehensive Confidential
Item
Consideration
Federal Income Tax Returns and Profit and Loss Statements for the most recent three years
A broker will “recast” your financials to reflect the maximum cash flow that is available to a buyer to 1) pay themselves a reasonable salary, 2) make debt payments, and 3) provide a return on the buyer’s cash investment.
Interim Year-to-Date Financials
Monthly or quarterly updates to sales and profits will be requested by buyers to evaluate trends in the current year.
List of Assets
A complete list of shop equipment & tools, computers/software, waiting room furnishings, and other furniture and fixtures must be provided. In most asset sales involving automotive businesses, other balance sheet items such as accounts receivable, accounts payable and existing loans are not part of the transaction. Any equipment leases or other encumbered assets will need to be disclosed.
Lease, including amendments
Buyers (and their bank) will generally want a term or options of at least 10 years.
Franchise Agreement
If your business is a franchise, or if you are a licensee of a brand, you will have to provide information regarding the term, approval process, renewal or transfer fees, etc.
Contracts
Any other contracts, including employment contracts, union agreements and other agreements that would be assumed by a buyer must be disclosed.
Employee Benefits
Benefits, pay plans, length of service, etc. are important to buyers who are looking for continuity of the business.
Inventory
Buyers will wish to purchase only current products in salable condition. Try to return any obsolete or slow-moving inventory to your suppliers for credit, or exchange it for fast-moving inventory well in advance.
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Business Review (CBR) is prepared to educate prospective buyers on your business and the industry. A professionally prepared CBR will include information from the sources in the chart at left, so you will want to have this information readily available to provide to your broker. A word about financials and tax returns... Most business owners, and their accountants, do their best to minimize taxes, not maximize profits. Remember that buyers are buying your cash flow more than anything else. While there are a variety of sophisticated methods of valuing a business, the bottom line is that the sales price of the business will likely translate to a multiple of the cash flow — so everything that can be done to present your business with the highest cash flow will directly result in a higher sale price. One of the biggest mistakes that a seller can make is leaving dollars on the table through an improper “recasting” of the financials that does not maximize the cash flow. A broker who has industry-specific experience will have seen dozens of financial statements for automotive businesses and, therefore, will know exactly which expenses to question as higher than industry norms.
Art Blumenthal Sales Tip The bottom line is that the sales price of the business will translate to a multiple of the cash flow. www.ShopOwnerMag.com
Mistake 2 … Failure to Properly Price the Business Wouldn’t you rather reap the rewards of selling your automotive business for the highest cash price, than leave money on the table? Overpricing or underpricing a business is a common mistake. It’s fine to be confident that you can successfully sell your business at a good price, but far too many business owners go into the selling process thinking that they will get top dollar simply because they believe that’s what it’s worth. True value is based on quantifiable criteria, not the seller’s emotional appraisal. One way to gauge your perspective on reality is to ask yourself if you would purchase another dealer’s business with the same sales and profits at that valuation. Conversely, it’s also a mistake to state a price before knowing the full potential value of your business. Don’t sell yourself short by setting a price too quickly, even if you are burned out and highly motivated to retire, downsize or pursue other business interests. Remember, you can always come down, but it’s more difficult to raise your price once the marketing process begins. If you are willing to consider seller financing, then one strategy to consider is a dual-pricing option, where you advertise both an “asking price” based on seller financing and a lower price for an all-cash deal. Once you and your broker have carefully analyzed your financials and identified an appropriate asking price for your business, you will have learned a valuable lesson in how buyers will evaluate your business and calculate their own price to offer you. You will know that for every dollar
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The time to sell is: • When business is good; • When you don’t have to sell; or • Before the emergency happens.
Art Blumenthal Sales Tip The best way to maximize your sales price is to run your business like you plan to keep it! of cash flow increase that you can generate, you may get $2 to $3 more in a sales price. It typically takes 4-12 months of marketing to sell a business, so use this time to brainstorm how to raise sales levels or focus on expense levels that are above industry norms.
time to find a qualified buyer. If you can muster the energy to breathe new life and profits into your business, retrain your people, increase your advertising and improve your customer service, then waiting to put your business on the market may be the path to maximizing your sale price.
Art Blumenthal Sales Tip Every business has an opportune time to sell for maximum valuation.
Mistake 3 … Failure to Sell Your Business Before You Need to Sell Your Business
Mistake 4 … Failure to Leverage the Right Professionals
Few business owners are lucky enough to sell their business at the perfect time. Too many owners wait until the last minute to decide to sell their business. They wait until business is down, or they are completely burned out, or their partnership has soured, or they have an unfortunate health issue, or perhaps their franchise or lease is close to expiration. The time to sell is: • When business is good; • When you don’t have to sell; or • Before the emergency happens. The best time to sell is not necessarily now either. If your business has had a couple of down years and you have not yet turned the corner to positive sales and profit increases, then you can expect to see a decline in the value of your business and a longer
You are an expert at running your business. Are you an expert at selling it? If an accountant, attorney, financial planner or business broker needed an air conditioning compressor in their car, would it be wise for them to try to install it themselves if they are not ASE-certified and properly trained? There may be cases where the DIY approach works, but for most business owners, relying on your accountant and attorney, and hiring a business broker, will not only help your peace of mind, but will likely result in a higher sales price, than not relying on professional expertise. As the old saying goes, “The attorney who represents himself has a fool for a client.” Select your team carefully. An attorney who specializes in business transactions is likely to be more cost-effec-
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tive in preparing closing documents and reaching agreement with Art Blumenthal Sales Tip the buyer’s Create a winning team of counsel. A professionals to work on broker your behalf. with industry experience and a realistic approach to valuation is more likely to be successful in engaging buyers and getting them excited about your business. Tax planning with your accountant is also important in reducing the impact of capital gains tax. By properly apportioning the price between assets such as goodwill, equipment and non-compete provisions, it’s possible to make the purchase price more attractive to your purchaser through immediate tax allowances, or less onerous to you through tax liability.
Mistake 5 … Failure to Maintain Confidentiality During the Sales Process
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some staff members may become fearful of change and start looking for another job — or they may demonstrate less enthusiasm and lose focus on customer service, productivity and shop appearance. Suppliers may hold back on deals or change credit terms. Competitors may use the information as a selling tool against you. All buyer prospects should be signing a Confidentiality Agreement prior to being given the name and location of the business, or a copy of the
Art Blumenthal Sales Tip “Loose lips sink ships!” Confidential Business Review document that contains your financials. Look for Part 2 of this article in the March/April 2013 issue of Shop Owner where Mistakes 6 through 10 to Avoid When Selling Your Business will be provided. Or, if you just can’t wait, visit www.artblumenthal.com to request a copy of the entire article. SO
Confidentiality is important and needs to be continuously managed. If word gets out that your business is for sale, it could adversely affect sales and your relationship with your employees and stakeholders. An experienced broker knows how to simultaneously market your business and maintain strict confidentiality. Buyers are willing to pay more for an operational business than a start-up because of its customer base, track record of sales and profits, and trained staff. The vast majority of buyers will want your employees to stay, but
Leveraging more than 30 years of experience as both an aftermarket business owner and aftermarket technology executive, Art Blumenthal LLC provides business intermediary and advisory services to both buyers and sellers of industry businesses of all sizes. Art is a member of IBBA (International Business Brokers Association, Inc.). For more information, or to initiate a no-obligation confidential consultation, visit www.art-blumenthal.com.
|Shop Owner|January|February 2013
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|Insurance|
by Richard Lipton, Richard L. Lipton CPA & Associates LLC, www.liptoncpa.com
Protecting Your Business With The Right Insurance
Running a business is expensive and the capital that you’ve poured into your company can disappear in an instant if a major weather event damages your offices, or if someone in your shop gets injured while on the job.
Having the right kind of insurance is critical to your business and multiple insurance policies should be in place before you open your doors for business
each day. And, they should be reviewed every year or when a business change occurs such as stocking new products or moving to a new location. • Commercial Business Insurance: Commercial Property Insurance policies are either all-inclusive or risk-specific and protect your shop and its contents from damage caused by natural disasters, fires or vandalism. • Product Liability Insurance is necessary if you manufacture or sell products, and safeguards you if a product defect causes injury to someone. • For protection against lawsuits related to negligence claims, you need to consider both General
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Liability Insurance and Professional Liability Insurance, as well. Other types of insurance your business might need include: • Coverage that protects Directors and Managers from personal liability;
Unemployment Insurance (under certain conditions) are mandatory in the U.S. Some states require employers to provide other types of insurance. For example, if any of your employees are located in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island, you will be required to provide disability insurance. Disability insurance is a benefit provided to employees who are unable to work because of illness or injury. Employers are not required to provide life, medical and dental insurance for employees.
Some Insurance Tips • Don’t under-insure, but don’t over-insure either. • Assess your liability risk honestly and thoroughly. • Ask your lawyer for advice.
• Key Person Life Insurance; • Business Interruption (covers lost profits and expenses); • Commercial Vehicle Insurance; and • Website Insurance (protects you from legal claims).
Employer-Related Insurance Workers’ Compensation Insurance (administered by individual states) and
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• Get quotes from several companies. • Talk to your insurer about how you can minimize risk and premiums. Your insurance company will be your ally if you encounter legal problems because of an accident or injury that happens to someone on your property, to an employee working for you, or if a service you provide causes harm to someone. SO
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|Leadership|
by Frank Scandura, owner, Frank’s European Service
Accountability Raises the Performance Bar And Helps Achieve Goals and Objectives Accountable: Subject to the obligation to report, explain or justify something; responsible; answerable.
Accountability is a big word. We see examples every day around us where we can safely surmise that “that person” is not being held accountable for their actions. We are surrounded by people every day — customers, employees, family members and
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even strangers in the stores and restaurants we frequent — doing or saying something that causes pause. Then I thought about myself. As a shop owner, there was a time not that long ago when I had a hard time with employees “doing” what I thought
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should be done. I was not able to hold them accountable. Over the years, I learned the reason I could not hold them accountable is that I wasn’t holding myself accountable. And, if I wasn’t holding myself accountable, then how could I possibly expect the employees to rise to the occasion? I had no procedures; there were no systems in place. I just assumed if I knew it, you knew it. Boy was I wrong. To fix this problem, I started making lists of what needed to be done, and I found myself picking the easy stuff and ignoring the hard items. I thought, it’s no problem, I’ll just move these items onto a new list for the next day. Guess what? Nothing changed. I was still not being accountable to myself, my employees or, yes, my family. Now, the next step I took to be accountable to myself was that I started to do the items I dreaded the most, first. It was very hard because if I wanted to tackle those tasks in the first place, they would already be done. What I learned was that it was really no big deal to tackle these tasks, one by one, and the rest of my day was less stressful. I started to make real progress. Then it started to become easier to write procedures and to begin implementing systems in the company. It became easier to set goals, but they were mostly sales goals. I recently read How to Run Your Business So You Can Leave It in Style by John Brown, and what made the largest impact on me was the fact that we’ll all leave the business some day. Will it be by death? Will it be disability or illness? Or, will it be with a well-executed plan? Have you set your long- and short-term goals
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I see a need to set standards and specific written goals in everything we do. Citing an article I received from Dave Ramsey’s Entreleadership Advisor newsletter: “Most people and organizations fail from a lack of clear goals and focus. They are that important. And not just for your business — you need to set goals for all areas of your life, including:
• • • • • •
Financial Spiritual Physical Intellectual Family and Social.”
Let’s stop making excuses for not setting goals and stop accepting excuses from others when they fall short.
to account for these scenarios? Until now, I never even thought about planning now for my future exit. But, I’m now working on a plan for the exit so I can leave my business in style. To start the process, I’ve started to set higher standards for myself. I’ve decided I will stop accepting mediocrity as “business as usual,” and start to hold the people around me accountable for the work they do and help them see the effect they are having on the rest of the team. When an employee says they’re trying, it is not enough. We must give them the tools to succeed. I use a lot of the business books I read as a starting point for employees. If they don’t read them, I’ll know. If they are too busy to learn a better way to do their job, we’ll need to take a close, hard look at their skill set and give them the chance to
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improve, or move on. If I set up a new system, say for work order and shop flow, I’ll invite suggestions to implement it and make it work. If there are no suggestions, I expect it to be implemented and followed. If there’s a problem, we’ll work it out and not ignore it. And under no circumstances can any procedure or system just stop being used. Can you imagine where McDonalds or Olive Garden would be if the employees decided what they are going to do, when they’ll do it and how they’ll do it? It’s no different for us. We need to set the systems in place for our employees, so that everyone knows what to do, when to do it and how to do it. I know we all hate change, but change is the only constant in life. We all need to be committed to give our customers the best possible
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serve and our customers won’t get what they deserve. Systems, organization and leadership are what our employees expect of us. We need to step up our program and then we can encourage our employees to step up theirs. We need minimum and expected goals, and if we don’t meet those expectations, we can devise an appropriate plan of action. Let’s all step it up — no excuses! SO
experience when they visit our shop. We all must commit to going beyond the customer’s expectations by taking that brief moment to say, “I noticed a light bulb out and took care of it for you,” or “I noticed the door hinge was a little noisy and lubed it up for you,” or whatever little task you can do to show that you care. Do you have an employee working for you who doesn’t want to do that? Why is that acceptable? We have to stop allowing ourselves and others from making excuses for coming up short. We have to stop allowing ourselves the “right” to make excuses why “it won’t work” or “why we can’t do that.” Then, we’ll stop accepting the same excuses others will use on us. If we expect exceptional quality in others and don’t hold them accountable to deliver, we will get what we de-
Frank Scandura is owner of Frank’s European Service with locations in Las Vegas and Henderson, NV. The 33-year industry veteran boasts the shop’s Golden Wrench Service Commitment – providing customers with the safest and most reliable auto maintenance and repair services possible. His shop specializes in M-B, BMW, Jaguar, Audi MINI Cooper and VW, with an emphasis on driveability.
|Shop Owner|January|February 2013
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“If you take care of people and if you treat them like they’re the most important part of the business, they’ll stay with you. Money is not the number one draw. People don’t change jobs for money; they want to be appreciated.” -John Francis Jr., owner
Shop|Profile|
by Debbie Briggs, contributing writer
Francis Automotive Unique Marketing Efforts Help Build Shop Brand While some shop owners may rely on traditional forms of marketing — direct mail, print and on-line advertising, and word of mouth — to bring customers through the doors, John Francis Jr. says his marketing efforts are unique, but also quite successful.
“Most of the money we spend, I’d say 80%, is done with nontraditional marketing, getting involved with the community,” says the owner of Francis Automotive in West Chester, PA. “We sponsor a Golf Ball Drop every year, where golf balls are dropped out of a helicopter, people buy chances and the closest ball to the hole wins $1,500. That prize comes from us, but it’s worthwhile because when you buy a chance, you get a voucher from Francis Automotive to get your car safety and emissions inspected, which is worth $85. We get a lot of customers that way.”
Building Your Brand Francis, who runs the shop along with his son, John Francis III, has also sought to brand his business through another unique avenue: child safety. In addition to free child safety ID kits available at the shop, customers can also take advantage of free, state-approved car seat
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installation. “We’ve been installing car seats for five years now,” Francis says. “My son went to school and had to do 32 hours of training, and he has to be recertified every year in the installation of car seats. He’s now on the board of the Southeastern Pennsylvania Pediatric Association, which was a big wheel behind the child seat initiatives. “People will go to a child birthing class at the local hospital, and they’re told that they can’t leave the hospital unless the child car seat has been certified. Then the parents ask how they do that, and the National Safety website has a list of certified shops — we’re on that list.” Francis says they install three to five seats week — more than 500 total since starting the program five years ago. Francis Automotive is also the only certified shop within 200 miles, and when you consider that each successive level of car seat has to be certified as well,
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John Francis III, vice president and technician
it’s easy to see how a repeat customer relationship can result. “It’s kind of our brand, because they talk about branding your shop with something other than fixing cars,” he says, adding that they also attend other community events that are centered on child safety put on by the local YMCA and the schools. “That brings us way more customers than does advertising in the papers.” Francis opened his own shop in 1979 after working for a car dealership from the age of 18 into his early 30s. In 1983, he built a facility eight miles down the road, where the shop is still located today, and now employs two techs and a service manager. And despite its age, the shop still looks as great as the day it opened.
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“That’s our standout,” he says. “It’s a building that was built 30 years ago, but we keep it very clean. There are tile floors, a TV and a coffee machine in the waiting area, windows into our shop, and our floors are mopped every day. Customers comment on that all the time.”
Taking Care of Your Employees and Your Customers Francis invests in training for his employees throughout the year, with everyone attending Tech Train each March, an event put on by the Alliance of Automotive Service Providers (AASP). Francis and his son also alternate in attending national events such as CARS, and both have
their Accredited Automotive Manager degrees. “I’ve had a business coach through Service Writers for about six years now,” he adds. “I had my service manager go through its Mastery Program because it’s so important
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today to talk to people the correct way, answer the phone the correct way and give outstanding customer service.” It’s that kind of investment that helps employees feel appreciated, Francis says. “If you take care of people and if you treat them like they’re the most important part of the business, they’ll stay with you. Money is not the number one draw. People don’t change jobs for money; they want to be appreciated.” While techs at Francis Automotive work on all makes and models, including diesels when they were prevalent with GM vehicles, the majority of vehicles serviced at the shop are imports. Relationships with body shops in the area have proven to be fruitful as well. “We do a lot of late-model troubleshooting for body shops,” Francis adds. “That’s been really good for us.
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Patrick Verdeur, ASE-certified technician
Whether it’s a 2012 Mercedes-Benz or another model, we have the scanners that turn off the lights, and we can do the wheel alignment. It takes a little investment to keep your software up to date, but the car we’re working on may have four or five different system lights that need to be reset.”
Web Presence Francis also caters to a customer base that is becoming more and more mobile. The Francis Automotive website was recently updated with new copy and photos, and there’s also a mobile website that will automatically come up for smartphone
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users. Customers can also make appointments on the website via DemandForce, a pro-
“I get phone calls from friends who say they’re slow, and they ask how I’m doing. You have to stay proactive in your marketing, and you have to rethink it almost on a daily basis.” -John Francis, owner
gram that also ensures timely followup communication. “That evening after you pick up your car,” Francis says, “you’ll have an e-mail thanking you and asking you to rate our service. We have at least 100 Google comments, and that positive feedback is very important.” As a part of the Bosch Service network, the shop also offers customers six months same as cash when they are approved for a Bosch credit card, something that also helps bring customers in the door. Knowing key business indicators, such as how many new customers are coming in, and how many repairs are being completed, is critical to running a successful shop today, Francis says.
By The Numbers “I keep track of numbers, very closely, very carefully and every day,” he says. “I have at least 12 key indicators that I look at every day. And if something’s
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off from yesterday, I have to find out why. We have certain benchmarks we have to hit to be able to keep the doors open. There are so many guys who are in trouble, and it’s because they don’t know the numbers. They just know what’s in the checkbook.” Francis also relies on a business coach to keep his business on track, having recently completed his marketing plans for 2013 as dictated by that coach. “I’m paying someone to yell at me,” he says with a laugh, “but he’s doing his job.” Automotive repair shop owners, Francis concludes, can’t run their business like they did 20 or 30 years ago and expect to stay successful. “I get phone calls from friends who say they’re slow, and they ask how I’m doing,” he says. “You have to stay proactive in your marketing, and you have to rethink it almost on a daily basis.” SO
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