MAINSTAY MEDIA

Jan 26, 2022

An Interview with Chris Truglio, Co-Founder and COO at Stress-Free Auto Care

Chris Truglio Podcast

We sat down with Chris Truglio to learn more about the process of buying, owning, and operating auto repair shops. We discussed everything from how to perform effective due diligence to the intangible indicators of successful shops.

Will: Very excited to hear a bit more about Stress-Free. But before we even dive into that, I'd love to hear a bit more about your background, both what led you to Stress-Free and what you were doing before.

Chris: Absolutely. I majored in finance and accounting from Boston College. From there, I took a more typical career path in Consulting with Deloitte. It was truly a great foundation, learning big company processes and operations, and how they all really come together. 

From there, living in the San Francisco/Silicon Valley area, I joined Foundation Capital, a Venture Capital firm, to work on their Finance team. Everyone there and on my team was awesome to work with and while I was there, I actually met my Co-Founder at Stress-Free, Yinon Weiss.

He had been working on a company called CarDash. They were being incubated upstairs in the VC firm where I was working and they were looking for beta-test customers. We got an email blast saying, “Hey, we’ve got this new company. They'll help take care of your car.” and I thought “Awesome! Taking care of my car is such an inconvenience.” I was happy to see what they had to offer and from there, I stayed in constant touch with Yinon, giving him feedback on various aspects of the business. 

Eventually I joined CarDash as their first business hire – I left my apartment in San Francisco and moved down to the company house in Menlo Park. It was an incredible experience living on-site with the team, and really understanding just how broken the auto repair industry is, in terms of being able to make improvements for both our customers and stakeholders. 

Unfortunately we saw the customer experience wasn't where we wanted it to be, and that was across 10,000 shops nationwide that my team added to our network. Once the customer was on-site for their service, we no longer had control of their experience. That's when we decided to address the root of the industry's problem and we’d do that by building our own shops.

Combining our own software and professional management, we're able to have a lot more control in that regard. We can have a more positive impact, not just for the customers, but for the employees as well – really giving them a place where they're proud to work and have upward mobility.

Will: And in terms of building out the network of shops that these customers can go to, I know right now, most of the footprint is in California. Are you opening your own shops? Acquiring existing ones? Curious to hear how you build out your network of shops.

Chris: It's a combination of both. At the end of the day, we don't want a location that's not going to survive. We want to make sure that if we're making an investment and hiring a team locally, we're really integrating ourselves as a valuable member of the community, providing services to all of our neighbors. We want to make sure a new location isn’t a revolving door and that we're there for the long-term. We really take to heart that every location can be a landmark location of each city that we're serving. 

Will: So given our focus on the M&A space, I'd love to learn a little bit more about your acquisition strategy for existing shops. Obviously, we'd love to hear high-level how you think about what factors you're looking for in the shop, as well as some things that may not necessarily show up in the numbers when you're evaluating a shop.

Chris: We have a very, I’d say, detailed and explicit search criteria. When we meet with shop owners, we tell them that 95 to 99% of shops out there aren't going to be a good fit for us. And with that, we understand that there's a story behind the numbers and a shop is more than just a number. It's the history; it's the customer base; it's the team that's around them. There are so many of those factors, and that's where we really take a very hands-on approach to understand the value creation made by the business over years, or even decades. We want to be able to take that – in addition to the numbers – and create a full picture of what the inherent value of that business is.

Will: Right. And how do you think about shops that may not be at a strong point in their trajectory? You have some who may have lost a few employees, they may have negative net income – the turnaround story that you hear about where a younger buyer may be interested in coming in. Are those shops that Stress-Free would be interested in chatting with or are you looking for businesses that are pretty profitable and everything's running smoothly?

Chris: The number one thing we look for is reputation. A non-starter for us are shady shop owners. Because if they're already displaying shady business practices, then how can we trust their numbers? If we try to come into a location that was previously run dishonestly, customers coming in are going to say, “Oh… you just painted the walls purple, but they're still running a shady business.” If a shop is highly profitable, or not profitable, that all factors into the valuation price we're able to offer. For us in terms of turnarounds, we don’t want to willingly turn around a location with a really bad reputation. It's hard to take what the owner is saying at face value about their business if their business practices don't even reflect that.

Will: Sure. So Stress-Free’s internal thought process is “Hey, look, with our management team, there are a lot of things we can fix and overcome at the right price. Reputation isn't one of them.”

Chris: Reputation precedes any kind of shop location, even long after changing owners.

Will: So given that a lot of owners are looking for certainty of Close, in addition to one of the benefits that your team provides is speed of execution, curious to hear how the process looks for an owner looking to sell to Stress-Free.

Chris: For an owner, preparing to sell should be an ongoing process. Your business should always be managed and run effectively so that, if a buyer comes in, it's ready to sell. Pieces of that include having a turnkey management and employee base, making sure that everything is documented and recorded, and having clean books – having a P&L and balance sheet readily available. What we see in terms of the more high performing shops (when it comes to the sale) is that they're always getting their business ready for sale. They have everything in line two to four years in advance. 

Will: Got it. And so let's say you've reached out and you've gotten the NDA in place and they've sent you some of the financial statements you're looking for (hopefully electronically). How long between that period of time until you make an offer?

Chris: For us, ideally, we want to make an offer as quickly as possible. But when I say as quickly as possible, that means as long as it takes to get the documents that we requested in order to make an offer. And that’s typically more dependent on the seller being able to get the documents together. Once again, we understand that for most of them, they're in the shop 10, 12, or 14 hours a day working on their business. We understand if things can take a little bit longer, and we want to respect their time and privacy. 

Will: Sure. Outside of maximizing the value of your business before you go into a sales process, I imagine there are also things that people do and they kick themselves over it. It may blow up the deal, it may add a lot of friction. What are some of the things that you've seen in the sell process that may have killed past deals?

Chris: Unexpected last minute changes. For us, we try to be transparent and open throughout our entire process and our methodology. Everything I'm telling you now is exactly what I'll share directly with the owners. I want them to feel comfortable with what's going on. 

So if we're working towards some number or deal structure, and everything's looking great… Then the owner talks to their brother, and now they want three times what we've been talking about; or they want it in nine months – not 60 days. We’re already planning internally based on the existing discussions that we're having, and then one day everything changes. We don't like surprises because to us, if something this drastic is happening this late in the process… what's next? What else can we reasonably expect? Drastic late-stage changes make us highly uncertain that the deal will ever go through.

And there is one other point in terms of the overall sale process that can kill a deal – what we've seen as the number one risk to potentially killing a deal is your landlord situation. 

Making sure that the buyer can come in and get a reasonable lease and making sure that it’s hashed out as early in the process as possible. Because the landlord isn't involved in any of those buyer/seller negotiations – they're a third party and a complete wildcard. If you can't get a lease, there's no business to buy. 

Will: I'm sure. On the other side of the table, for some of these retail buyers who are looking to buy a shop for the first time, they've heard a number of different pieces of advice from you in terms of what to look for in a shop: what should affect price, start building rapport with the owner, get the NDA in place so they're comfortable sharing information. Any other piece of advice for an entrepreneur looking to buy an auto shop?

Chris: There's a really great book called the E-Myth Revisited. It covers all the reasons why most technicians want to own their shop, but owning a business is a lot of work in a lot of different areas.

There's so much on the ground learning – fundamentally understanding what's coming up. For example, you have to pay taxes – you have to pay sales tax, you have to pay income tax, and you have to pay payroll tax. You personally don't have to understand how to do that if you hire an accountant, but you have to know that the obligation is there. Making sure that all these “things” that, especially if you haven't owned a business before, just kind of got done. Now you're on the hook for those.

When it comes to owning your first business, the first 90 days are the hardest. Everything you're seeing is for the first time. You're gonna mess up, and just know that it's okay. But make sure you’re really learning from that. And making sure that what you're doing on a daily business is helping to further the business. There are so many great ideas of how you can improve the business – otherwise you wouldn’t have bought or started your own. Make sure you're balancing those potential improvements out with what the business needs are today…Making sure that there is still a business open for you to make those improvements.

Will: Sure. It's like eat your vegetables, get the business stable, keep the processes as they are for the first little bit. And then once you've gotten out of that 90 day window, you can start doing some of the exciting improvement ideas you may have.

Well, thanks so much for your time. It was great to hear about how you all think about both the auto shop space as well as acquiring small businesses in your growth strategy.

Chris: Thanks again for having me on, Will. Ultimately you're going to find not serious buyers, not serious sellers, and anything that you can do to ensure that mutual understanding and interest are there in a deal is worth it. Prep your business, read up on the industry resources, but also be realistic with yourself. If your business can't sell for a price that you're willing to sell for, then it doesn't make sense to try to sell it today. Instead, go ahead, go work on your business, grow it up to what you need to get that valuation you’re looking for. Be honest about what your situation is and what you’re looking for, and that will ultimately make the process a lot better and smoother for both the Buyer and Seller.

William Fry

Founder/CEO

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