It’s scary to open a new shop. No matter how successful your first shop is and how long you’ve owned it, there is always a risk, and you may have a bunch of questions.
How long before I become profitable?
Will the new team replicate the culture and ethos of the first shop?
Will our Google Ratings take a hit with this new location?
Those questions may even be keeping you up at night. To help put those concerns to bed, we turn to two experts on shop expansion.
Luke Walker owns Luke’s Auto in Colombus, Ohio, and operates three busy locations. His original shop is one of the most successful in the country, bringing in $10 million in revenue annually, and has 32 bays.
Dwayne Myers of Dynamic Automotive recently expanded to his sixth location in the Frederick, Maryland, area, near the Beltway of Washington, D.C., and Baltimore, Maryland. His first shop grew from two bays, and then he added an outdoor lift, and eight additional bays across the street, bringing its annual revenue total to $3 million.
Both shop owners have a combined 54 years of experience. They share their knowledge and wisdom to guide you if you are considering it.
Here are five key considerations independent shop owners and managers should assess before expanding their operations.
1. Clarify Your Motivations for Expansion
Before diving into the logistics of opening a new location, it’s essential to understand why you want to expand. Myers emphasizes the importance of having a clear and compelling reason beyond just increasing revenue. “If your answer is money, focus on what you have,” says Myers.
He says a more sustainable reason for expansion is to offer growth opportunities to your team, which can help with recruitment and retention. Providing career paths through new locations for your technicians and other staff members can create a more motivated and loyal workforce.
Walker, who opened his second shop after 14 years, echoes this sentiment. Walker’s primary motivation was that he was running out of space at his original location and creating new growth opportunities to retain his high-caliber team was a top priority.
“Your first shop must be dialed in and highly efficient before starting a second shop,” advises Walker. He says it’s critical to ensure your existing operations are running smoothly and profitably before taking on the complexities of a new location.
2. Do Market and Personal Research
Choosing the right location for your new shop is vital. Both Myers and Walker stress the importance of detailed market research. Myers recommends driving through potential communities, talking to local vendors, and engaging with the local chamber of commerce.
“Is the community business-friendly?” “What is the median household income?” are some of the questions you should ask, according to Myers. He learned this the hard way with his third shop, which others told him was in an area touted for growth but was populated by data farms with minimal local employees. He says to do your research and verify rather than unquestioningly trust others.
Walker also conducted extensive market research, focusing on demographics, high traffic counts, population density, and competition. He even used his marketing company, which did direct mail for him, to provide data and insights.
Additionally, he checked the Google ratings of nearby competitors to gauge the market’s competitive landscape. For example, his third location is across from a Firestone store, which struggles with low Google ratings. Walker wants to be an easy, accessible choice when frustrated customers search for an alternative.
Finally, Walker did extensive research through professional coaching and talking to other shop owners who underwent expansion. He believes in the Proverb, “Without counsel, plans fail. With many advisors, they succeed.”
3. Plan Your Finances and Resources
Expanding a shop requires significant financial investment and resource planning. Myers advises evaluating your business’s economic health and determining how you will finance the expansion. “Before expansion, purchase the building and evaluate how you will finance it. Who will lead the new shop?” he suggests. The financial and logistical aspects of opening a new shop can be overwhelming, from securing permits to managing contractors.
Walker describes himself as risk-averse and emphasizes the importance of being financially prepared. His second shop became profitable within 2-3 months, while his third was profitable from the first month. This success was due in part to meticulous financial planning and having a robust team in place. He had $150K saved up in case the shop took a while to become profitable. “Savings, leadership, and good staff are crucial,” he notes.
4. Develop and Implement Standard Operating Procedures (SOPs)
Having clear SOPs is vital for maintaining consistent service quality across multiple locations. Myers points out that SOPs help you get off the ground quicker and ensure that each shop operates at the same standard. “SOPs describe exactly how things are done, from coding a return to issuing a credit. They prevent the new shop from constantly calling you with questions,” says Myers.
Walker agrees, adding that SOPs help mitigate decision fatigue and streamline operations. He recommends creating a checklist of shop equipment and maintaining detailed lists, including links to purchase necessary items on Amazon for a new shop. “Our refined list made it so much easier. Decision fatigue is real – delegate, delegate, delegate,” advises Walker.
Both owners mentioned using a Google Doc on a shared Google Drive to share SOPs. Shared access allows teams at all locations to review and update the document regularly.
5. Ensure Strong Leadership and Team Dynamics
Successful expansion hinges on having the right people in leadership roles and staff from the original shop to replicate and foster culture. Myers stresses the importance of identifying who will run the new shop and whether additional team members are necessary. He shares that Todd, a 17-year team member, held the position of New Store Start Up and Acquisition rep. Like Walker, Myers feels putting long-term team members in new stores is critical to maintaining the culture.
Walker believes that planting key personnel from the original shop and moving them into the new location to maintain the company culture and operational standards helped him become more profitable more quickly. However, he cautions against expanding too rapidly, sharing his experience of launching two shops within a year, which he doesn’t recommend due to the stress and strain it placed on him.
Fulfilling your goals of shop expansion can become a reality as seen by the success of Dynamic Automotive and Luke’s Auto. By clarifying your motivations, conducting thorough research, planning your finances, developing SOPs, and ensuring strong leadership, you can set your new location up for solid and profitable success.
