Servicing a ‘commercial island’
Santa Cruz, Calif.—The wheel hub of Specialized Auto keeps spinning with a knack for propelling it forward amidst market shifts and changes. Its spokes are expanded services, a second location, economies of scale, and savvy marketing in a transient region.
From what once began as one shop with a specialty in Volvos, has evolved into two locations — one focusing on European brands and a second facility in Freedom, Calif., that concentrates on general repair and fleet maintenance. They’ve found where the rubber hits the road, collectively garnering nearly $6.7 million in annual revenues.
“We’ve opened our scope as much as we can,” says co-owner Larry Richman, who is the general manager of the Santa Cruz facility. “It’s difficult to be a single-line business today, particularly for Volvo. Sales just haven’t been its strong suit since the recession.”
Santa Cruz County is on a “commercial island” with a population of more than 275,000 and a fewer-than-expected number of repair shops servicing it.
“San Jose isn’t far, as the crow flies, but that road trip can be dangerous, quite frankly, so we benefit from that because people don’t travel too far for work. We don’t have to compete with shops 35 miles away on a day-to-day basis.”
However, it’s become a transient market, as home costs have risen 200 percent over the past 15 years — median cost for a house is $775,000 — so that many established owners sell to capitalize on property values, replaced by younger-generation buyers.
“There’s substantial education employment here, and mid-career professionals, such as assistant professors, for example, are always looking to grow, so they arrive and then move on again,” Richman said.
While many shops often rely on word of mouth to generate new business, Specialized Auto is more aggressive in marketing its services in a region that’s experiencing population flux.
“If we solely depended on word of mouth, we would only hit half of the community.”
Advertising costs benefit from economies of scale, as Richman uses digital advertising, Google Adwords and, occasionally, local print media, to market through one campaign or more for both shops. It’s important to be visible, and if a shop doesn’t have a digital, online presence then potential customers won’t find it, he said.
Load-shifting work is another benefit of having two locations in relative close proximity, though the need is rare.
“We’ve been extremely fortunate in the past 10 years in that we have enough work for both shops regularly, but we’re always ready for more,” he said.
Parts quality and diagnostics
Despite rising up to the challenges of his market, Richman laments that diminishing parts quality is beyond his control. Regardless of any OE-quality vendor, he says the integrity of parts has fallen over the years, Richman said.
“It’s become more hit and miss. Products direct from OE dealers have warranty rates that are much higher than they used to be, especially with electronics.”
Richman used to calculate a .75-1.25 percent comeback for OE-quality parts. He now estimates that figure to be 3-4 percent. “It’s not terrible, but it can be extremely frustrating when an entire vehicle requires re-testing because the first diagnosis may have been in error, when it wasn’t.”
Proper tooling can help expedite that process.
Specialized Auto is equipped with all of the factory scan tools, he said, though they can often be cumbersome and, as a result, are rarely the first tool of choice. Preferred tools include Ross-Tech, “which is awesome,” for VW/Audi; an Autel “that talks to just about anything”; and an Autologic, which has “varying degrees” of communication among models.
“The Ross-Tech is fast and it gets you ‘there,’ and it has tips built into it. The difference between using Ross-Tech and the ODIS is night and day. If I had to use ODIS on every VW or Audi, we probably wouldn’t service them. Apparently, the dealerships think so, too, because they all use the Ross-Tech.”
As a Bosch Service Center, Specialized Auto receives its technical resources, which Richman said he also values in the repair process, as well as continual training, the majority of which is from in-class WORLDPAC and SSF instruction.
“Whatever training anybody wants, I’ll pay for,” Richman said. “I encourage them to grow and develop their skills.”
In addition to training, WORLDPAC, which has a DC in Santa Cruz, is, by far, the shop’s primary parts vendor and will make deliveries six times a day, followed by SSF, which he said visits twice daily.
After having implemented shop management software system AutoVitals SmartFlow in 2014, Richman said it’s had a positive impact on shop operations.
“While it hasn’t made us more productive per se, it’s become much easier for me to stay on top of the productivity. I love being able to sit in front of my computer and see how many hours each tech has billed at any given moment and what they’re working on. It’s very visual.”
There is, however, some work required to maintain SmartFlow that Richman said he didn’t have before, but its utility of being able to see and track what’s happening outweighs it. AutoVitals digital inspections are also beneficial, he added.
“We just want to fix cars — as best we can and as many as we can.”
By the numbers
• Monthly car counts for the Santa Cruz and Freedom locations are approximately 560 and 450, respectively.
• Similarly, average ROs are $525 and $675, and annual revenues are $3.5 million and $2.9 million.
• Labor rates are $108, once oil changes and alignments are taken into account, though it’s $128, otherwise.
• Santa Cruz features 12 bays, while Freedom has eight, though it has more open space to service buses, RVs and large fleets.
• Santa Cruz staffs three advisors, nine techs and a full-time parts person; Freedom employees two advisors, eight techs and a parts person.