Had Things Played Out Differently, Dealer Would Be Working for Mary Kay

Buddy Espinosa joined the U.S. Marine Corps at age 17 and served in Kuwait during Desert Storm. When he left the Marines in 1991, at age 21, he returned to New Mexico and found a job washing cars at Sauter Toyota in Santa Fe, the automaker’s first point in the state.

Espinosa climbed the dealership ladder, advancing from the wash rack to certified technician to general sales manager. Today, at age 44, the newly minted National Automobile Dealers Assn.’s Dealer Academy graduate is general manager of the store, renamed Beaver Toyota in 2002.

Except for the Marines, the dealership is the only place Espinosa has ever worked. He credits his military service with teaching him valuable management lessons, like not allowing good people to be held back from advancement.

“It’s that kind of thinking that hurts an organization,” he says.   

Espinosa is “a remarkable young man, a natural leader,” says dealer principal Mike Beaver. “There’s no B.S. for me, his customers or for Toyota. He calls it like he sees it with no regard for consequences or reward. That’s how I like to look at any situation in the dealership. Let’s get the customer out of the loop as soon as possible.”

While getting customers out of the loop sounds dismissive, Beaver says the concept stems from a Harvard University study on customer satisfaction. It found 56% of shoppers who have a positive experience are likely to return to the place of purchase, while only 16% of those “jacked around,” in Beaver’s terms, will come back. However, if a complaint is handled in a fast and friendly manner, that customer can be expected to return 85% of the time.

Beaver applies this wisdom by empowering all employees, starting with the switchboard operator, to make decisions that result in happy customers who don’t get caught up in a web of bureaucracy.

Beaver Toyota ranks No.138 on the WardsAuto Dealer 500, with 2013 sales of 3,560 new and used units and $109.5 million in total revenue.

Beaver recently purchased 19 acres (7.6 ha) near his current store and plans to invest $10 million in a Toyota Image USA II facility that meets the automaker’s environmental initiatives under Leadership in Energy and Environmental Design. The $650,000 LEED investment will pay for itself in less than 10 years, he says.

Career Choice: Cosmetic or Cars

Fresh out of North Texas University in 1976 with a degree in biochemistry, Mike Beaver had a job offer from Mary Kay Cosmetics in Dallas. He instead opted to follow in the footsteps of his father, George Beaver, a used-car dealer in West Texas who opened the first wholesale auto auctions in Lubbock, TX, and Albuquerque, NM.

“Mary Kay offered me $800 a month, but I’d been making twice that wholesaling cars in college,” Beaver says.

He sold new cars at Pete Gants Pontiac in Dallas in 1976 and also ran several used-car businesses, but his big break as a franchised dealer came in 1986 when he struck a deal with Motors Holding to open Beaver Chevrolet in Denison, TX. 

Beaver says his used-car experience convinced him that segment can be a vital revenue source.

“We demand one-to-one used-to-new retail, because the margins and gross profits on new vehicles have eroded to nothing over the past 10 years,” he says.

Another business principle he adheres to: “I also forbid (employee) turnover.” That prohibition may seem unrealistic, especially in the high-turnover world of auto retailing.

But Beaver says his strength in used cars and appeal to salespeople’s self-interests attracts and retains highly professional employees who excel in all departments.

“When we go into a community and open up a store, we put most of our efforts into our used-vehicle volume and the gross profits that that volume produces,” Beaver says. “All the salespeople around town hear about this real quickly, so we attract the best in the community.

“We sell a lot of new cars as well, because these are professionals who have product knowledge and know the principles of customer satisfaction. I tell my salespeople, ‘I will let you sell used for you, but you must sell new for me.’”

While used cars are profitable, Espinosa says a potential higher cost of doing business stems from a new state regulation: If a dealership fails to disclose prior body or mechanical repairs it could be liable for three times the value of the vehicle plus attorney fees if the amount of that damage exceeds 6% of the vehicle’s retail selling price.

“We had to put things in place to take care of that, because we are still held accountable as the experts and (are expected) to reasonably know whether a vehicle has had any damage,” he says.

“Our reconditioning checks are very thorough and we use paint meters. If there are any red flags, more people get involved and, if necessary, we send it to a body shop because we want to have full disclosure.”

Dealerships’ jobs are made more difficult because they do not have access to certain insurance records that could help identify prior damage. “We only have access to Carfax and AutoCheck,” Espinosa says, citing two vehicle-history reporting services that aren’t fully comprehensive.

The New Mexico Automotive Dealers Assn. and several dealers have filed two lawsuits asking the state’s First and Seventh Judicial District Courts to invalidate the rule. 

When Beaver’s company decided to expand into Florida, it faced a daunting public- relations dilemma.

Expanding to Florida

While searching for potential acquisitions, he received a tip that the former Lighthouse Toyota (later known as St. Augustine Toyota-Scion) had filed for bankruptcy. Beaver bid on the property. In 2013, a bankruptcy court approved the sale for $18.7 million. After navigating that complex process, the problem became overcoming the old owner’s poor business reputation.

“It was an uphill battle due to years and years of neglect by the prior owner, and the community had abandoned doing business here,” says Matt Calavan, Mike Beaver’s brother-in-law and former general manager of the Santa Fe dealership. He now runs the St. Augustine store.

“We jumped in with both feet because we know that that’s how we’re going to grow the business, by winning the hearts of the people in our community,” says Calavan. “We’re engaged in a lot of grassroots marketing. Any kind of festival or event, we were there.”

The cornerstone of the dealership’s community outreach was a $100,000 donation last September to the St. Johns County School District.

The gift supports an after-school camp for “at-risk” children, an elementary school accelerated-reader program, and professional development opportunities for teachers. In February, Beaver’s dealership awarded a ’14 Camry SE to the St Johns County Teacher of the Year.

The dealership had been averaging about 100 new and used sales per month before the ownership change. Beaver’s team, which includes eight employees who relocated from Santa Fe, has doubled that.

Calavan intends to beat the $50 million revenue the new store generated in the last eight months of 2013. “Our goal is to sell 3,000 new and used cars per year, even 4,000,” he says, noting the dealership is in Florida’s fastest-growing county. “There are lots of opportunities.”

ally-dealer-banner.jpg