Have you thought about expanding your business beyond one shop?
It’s a topic Greg Bunch, Owner of Aspen Auto Clinic and President and CEO of Transformers Institute, rarely hears discussed at conferences and trade shows. But for ambitious shop owners, a massive opportunity awaits in this area.
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Bunch hosted a recent AutoLeap webinar to discuss the topic of multi-store expansion. He covered:
- What US vehicle sale trends mean for auto repair shops
- Why EVs shouldn’t limit shop expansion plans
- History of M&A activity in the auto repair space
- How to adopt a business mentality for your shop
- Next steps to seek opportunities for multi-store expansion
What US vehicle sales trends mean for auto repair shops
Trends for U.S. vehicle sales have fluctuated over the past 15 years.
Some key developments include:
- In 2008, sales experience a decline
- In 2010, car counts begin climbing again
- In 2015 and 2016, more cars were sold than ever before in US history
- In 2022, the U.S. car market experiences record sales again
With this context in mind, Bunch notes 2022 as another “sweet spot” for auto repair shops.
“We’ve got a lot of cars out of warranty trying to get in our shops. We’ve got the same trend in 2008 that people aren’t buying new cars. We are in another bubble per se of a great time within our business, but have the advantage that more cars are on the road than ever before,” says Bunch.
The market sets up well for ambitious shops thinking about adding stores. People now hold onto their cars longer, cars last longer, and many drivers invest in routine service for older vehicles.
“More cars are on the road than ever in US history. And they all will need service,” says Bunch.
It’s time to grow the vision for your shop with this ideal scenario in mind. But what about the emergence of electric vehicles (EVs)?
Why EVs shouldn’t limit shop expansion plans
The emerging EV market scares many shop owners. But don’t overstate the immediate impact on your business.
Humans make electric vehicles. For this reason, they will need maintenance and repairs. As EVs become more prevalent, your shop will still have an active role to play with them.
That brings us to the next point in shops’ favor. IHS Markit data projects that 86% of cars in 2031 will have internal combustion engines (ICE).
There are still a lot of unknowns with the EV marketplace. But most cars on dealer lots will feature engines your shop works on 10+ years from now.
Shops still have a long runway to work on ICE engines, fix what’s on the road and grow into multi-store businesses.
“I’m excited for the future,” says Bunch.
M&A headlines, market growth and the role of private equity
Here are some recent 2021 headlines from around the industry:
- Big BrandTire and Service acquires American Tire Depot
- FullSpeed Automotive acquires six shops
- Sun Auto Tire and Service acquires eight locations
- Urban Autocare acquires fourth location
Notice a theme? Industry acquisitions are already underway, and private equity firms play a big role in these transactions.
In 2011, 135 total aftermarket industry transactions took place. Ten years later in 2021, that transaction number grew to 177.
Growth will average over 4% in 2023 and 2024, bringing the market to $372 billion. Going back to 2019, the five-year compound annual growth rate through 2024 will be 3.8%.
“Ladies and gentlemen, we are a massive, massive part of American GDP,” says Bunch.
With impressive industry growth comes significant opportunities for shop expansion.
“We talk about exit strategies and ‘what is my business worth?’ The more stores you have – with some caveats like needing to be profitable, have pretty good locations and more that goes into it – the people that have those are getting approached and getting some pretty good multipliers.”
Do you grasp the opportunity?
Through the pandemic, Bunch says 100% of members at Transformers Institute increased their shop revenue. Many even broke their all-time sales records.
He brings this up to relay the point: despite industry challenges like the pandemic, aging out ownership, strict zoning and the tech shortage, massive opportunities still exist!
» Want some strategies to address the technician shortage? Check out this free eBook.
These factors will unfortunately drive some shops out of business. But as made clear from the data above, upside exists for shops willing to take calculated risks.
But first, you need to adopt a business mentality for your shop.
How to adopt a business mentality for your shop
Before running businesses, Bunch worked as an ASE-certified technician. He took pride in his ability to solve tech problems, fix things and help people.
These qualities are great! But as a shop owner, Greg soon learned this mentality could also create barriers to growth.
Here’s a simple truth if you want to pursue multi-store growth: You must transition from being an automotive person in business to a business person in automotive.
“This has been an evolution of who I am as a person, going away from being a technician to a business person. You have to be willing to commit to that journey and get out of your comfort zone,” says Bunch.
The role of a CEO
Greg identifies three primary functions of a CEO that shop owners must adopt. These include:
1. Setting a strategic vision for the compan.
You can’t grind out day-to-day shop work with no vision for the future. “You have to know ‘this is where I’m going.” Employees prefer to work for someone with a long-term vision.
2. Attract, hire, train and retain the best talent available.
“What kind of culture do we have to have? What kind of vision do we have to have? This is still a challenge for even the most world-class shops we work with,” says Bunch.
3. Keep up on core business’s future opportunities and threats.
Your shop should take proactive steps to continue improving its services and preparing for what lies ahead. Launch a detailed apprentice program. Use available resources to address your technician shortage. Think big with every decision.
Multi-store growth isn’t for everybody
We discussed the massive opportunity available to ambitious shop owners. But multi-store expansion may not suit every shop owner.
This quote relays Bunch’s main point: Most single store owners keep their shop at approximately 10 employees because they are often the best at each position (the best sales person, top manager, most productive technician, etc.).
If you aren’t willing to hire for a job that you are currently the best at, then a multi-store expansion should probably stay off the table. This move will require big-picture thinking.
How to pursue a multi-store expansion
There is never a perfect time to pursue a multi-store expansion for your shop. But fortune favors the prepared.
Here are some tips to prepare your shop for these opportunities:
- Have seasoned cash available
- Don’t go about the journey alone
- Build relationships with other shop owners (who may soon consider retirement)
- Make your interest in acquisitions known
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Closing thoughts
Not every opportunity will be worth pursuing. But as the auto repair industry continues to age out, multi-store opportunities will present themselves. Be ready to capitalize.
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