Cars fascinated Chris Carey, so much so that he left his full-time job to start Modern Automotive Performance, a business focused on manufacturing and selling automotive performance products. Initially starting with a physical and service location, Modern Automotive Performance expanded to selling products online and grew to generate over $27 million in annual revenue.
In today’s episode of Shopify Masters, Chris Carey shares how they moved past stagnant sales, which resources changed his way of thinking, and why they closed down their original service business to focus on ecommerce.
Having a knowledgeable person providing exceptional customer experience and the other end of that phone line or on the other end of that email is something that just wasn't prevalent in the automotive aftermarket at that time. So that's really all we did.
Key lessons shared by Chris of Modern Automotive Performance:
- Establishing expertise will pay off in the long run. Chris was dedicated to finding the best parts and products to help cars perform better and shared tips on forums as a hobby. Unintentionally this led to a foundation for his business and when he started to share about Modern Automotive Performance, the forums as a conversion tool for sales.
- It’s okay to let go of your original business model. Modern Automotive Performance was 8 years into their business and generated $10 million in sales but most of it was coming from online. Their physical service location was only making up less than 10% of sales. It was a very hard decision for the team to close down the physical location but it was needed to focus and scale their business.
- Founders from other industries can shed light on your niche. Chris didn’t do much networking during his initial years because he figured that business owners in other industries might not have tips to offer for his niche products. After a news article featured Chris along with some other founders, he got to know them and realized there’s much to learn from each other by swapping war stories.
- Authors that inspired Chris and changed his way of thinking: Stephen Covey and Gino Wickman
- Store: Modern Automotive Performance
- Social Profiles: Facebook, Twitter, Instagram
- Recommendations: Klaviyo, Privy, Shopify Flow
Felix: Today we're joined by Chris Carey from Modern Automotive Performance. Modern Automotive Performance manufacturers and resells automotive performance products for select modern vehicles and was starting in 2006 and based out of Cottage Grove, Minnesota and has recently hit revenues of $27 and a half million and trending towards over $33 million for 2019. Welcome, Chris.
Chris: Thanks for having me.
Felix: So you were fed up with the corporate world, which I think is a story that resonates with a lot of listeners out there, and decided to look for something new, and the new thing you're looking for ways to start your own business. So first of all, tell us about where you began. What were you doing in the... What job were you working at the time?
Chris: The job that I had before starting this was at Verizon Wireless and prior to that I did a lot of consumer electronics things, Circuit City, other wireless retailers, and basically got a background in what the customer experience should be like. And then really it was a silly thing that was the straw that broke the camel's back, I guess with regard to why I decided to start a business because I actually didn't know any other business owners. I don't know exactly what motivated me, but it was this meeting that my management had at my last job at 6:30 in the morning, and it was about a half-hour drive for me, and I am not a morning person. So that was the last thing that I said, this is it. I don't want to work for “the man” anymore, so to speak, and I started to look at different opportunities that I might take in the entrepreneurial world.
Felix: Okay. So let's step into your shoes. And so you were driving to this meeting grumpy, you're like this sucks, I don't want to do this anymore. And you started looking around. What were you doing that day or the day after? How soon after was it before you started pursuing this and did this seriously?
Chris: So there were a couple of instances of that meeting, and it was disciplinary in nature. If we had a good week, we wouldn't have the meeting. If we had a bad week, we would have the meeting, and it just... that's why I would go in at six 30 for this meeting, drive back home, sleep for another couple of hours, and then come back in for like a 12:00 PM to 8:00 PM shift. And it was just very taxing on me on that. It was a Friday, so those Fridays were not enjoyable. And yeah, so at that point, I was going to school at the University of Minnesota in just a general business course. And maybe that had some influence on it as well. But yeah, basically decided that I didn't want to work for the man anymore, and I started to look at what options I might have to start my own business.
Chris: And again, I don't know exactly why that was the course of action that I chose to take, versus looking at maybe another job within the corporate world. But I started to look at what opportunities were there, and I really saw two; one of which would be to start my own third party wireless retailer than that's what I knew at the time. And that proved to be, there were some pretty difficult barriers to entry in regard to I would need to have a retail space and lease, and I would have to have an agreement with certain wireless carriers. So that seems pretty difficult and capital intensive. The other alternative was my hobby and my passion at the time, which was cars and automotive performance. I had a 1995 Mitsubishi eclipse and this was round about the time The Fast and the Furious movie came out.
Chris: And I had actually a good friend of mine had a 1995 Ford Mustang with the 5.0 liter V8 in it. And we were always competing back and forth, who's cars faster. So I was a consumer in this industry, and I was realizing that there were some opportunities with regard to the customer experience, that it was pretty poor at the time. Persistent back orders, products not being shipped, no tracking information is sent, couldn't get ahold of anybody. And I felt if I could take what I had learned in the consumer electronics world and apply that to the automotive aftermarket, that might be a successful venture.
Chris: And the other component of that option was the lower barrier of entry. I actually started this out of my house. I had an acquaintance at the time build me a really bare-bones website on, I don't even know what platform now cause this was over 13 years ago. And bought some inventory with a credit card that I had and actually had it in my closet in my master bedroom in a townhouse that I was living in at the time. So didn't have to worry about the real estate, the retail location, just very low barriers of entry to start a business in the automotive aftermarket. And that was my hobby and my passion at the time. And here we are today.
Felix: Yeah. So you were looking at opportunities that were there, and it sounded like you had a list, maybe not written down, but in your head of criteria for what would make an ideal business for you. And you mentioned that the first option of having an independent, retailer business was capital intensive, it was complicated. Did you have some kind of... What other things would you be looking at now looking back paid off that you filtered your ideas through?
Chris: I think those are really the only two, either the third party wireless retailer. Because again, that was what I was doing and what I knew and then my hobby and my passion, which was vehicles or automotive performance. And that would be obviously an ecommerce venture, something that I could do at my house, something that I could do while retaining my existing job because I wasn't able to just drop everything and start this new venture without knowing that it was going to be successful. So I continued to work full time while starting this website and starting to participate in the community and look for where I might be able to find my first customers. So this was something, I guess it would be 13 years ago, I don't know if side hustle or side gig was something that people talked about, but that was really how it started.
Chris: And then once I got traction... So we actually opened the doors in July of 2006. And so I guess this is kinda contradicted what I said earlier. We did actually rent a space in an industrial park. Maybe I'll back up a little bit. I want to talk about, there's a co-founder of mine that started the business with me and so his name is Kyle. And when I started, came up with this idea to start an ecommerce website, I did start the website. I did have some inventory in my closet at my house and started to look for where I'm going to get my first customers. And that was very slow going. I didn't get a lot of traction at first.
Chris: I had to... I guess the approach that we took was a little different. He was working on cars out of his garage at the time. And so I'm over here with an ecommerce website trying to sell parts to people while he is working on vehicles out of his garage. And these are actually our target market or my target market in terms of who would buy parts for their vehicles. So we kinda just joked around, "Hey how about we open up a performance shop, I'll sell parts, you work on cars, and we'll see how it goes." And I guess from there we decided that it was something worth at least looking into.
Chris: We started to look at commercial spaces in the twin city's area here. And ultimately we found one that would allow us to have automotive lifts and something called a dynamometer to essentially measure the horsepower and torque of a vehicle. They were agreeable to the noise that the machine would make and some other factors. And the next thing I was signing a five-year lease in this industrial park and opening the doors and that was in July of 2006.
Felix: Got it. So you wanted to... I want to take a step back, so you wanted the business that you chose to be manageable with your day job you mentioned a side-hustle or something that you can run on this side. When you did get rolling were there tasks or activities that then started to appear that made you realize like, wow, I can't necessarily just always do this on the side, I'd have to go into this full time. What started popping up that made you realize that you had to take a leap at some point?
Chris: Yeah we opened the doors in July of 2006, started working on vehicles for the local market, which was a very small portion of what would ultimately be our business moving forward and starting to look at how we could start marketing to sell products to people via the ecommerce platform. As that started to gain traction, I was continuing to work full time at my job, and I found myself answering emails, even taking phone calls from customers during the day while I was at my job. And to give them credit, my managers at my full-time job at the time were very accepting and allowing me to do this.
Chris: So that flexibility was awesome. But at a point in time, which was actually February of 2007 the volume became just too great. And at that point, I felt at least some degree of confidence that I would be able to support my own personal expenses, et cetera, through this new business entity. So I made the jump in February of 2007 and came on full time and that's really when things started to pick up, and we really started to see a lot of interest in what we were doing.
Felix: So you weren't even hiding the fact that, from your employer, that you were trying to start your business on the side?
Chris: Correct. Yeah, they were aware of it. And when I ultimately made the leap, I think they were, well sad to see me go, they were happy that it worked out for me. And so it was really... I felt a lot of support from that group of people. So that was really a nice experience.
Felix: Okay, so you mentioned that you had a garage that was a part of the business. What was the benefit of having both of these things combined? Both the garage and also the ecommerce business?
Chris: Yeah, so that's an interesting story as well. To jump significantly further forward, I think it was about eight years after we'd been in business, we actually... Decided to stop working on vehicles. And that was probably one of the biggest decisions that we had to make in the course of our business here because that's what the entire business was started on.
Chris: In July of 2006 to that February of 2007 point in time where I came on a full time, very little revenue is generated from the ecommerce component of the business. Almost all of the revenue is generated from the repair labor or the installation labor that we were doing on the vehicles locally. And then some parts that we were selling to those customers that we were doing the work for. It wasn't until early 2007 when we really started to get traction outside of the local market and into the greater community.
Felix: Right, so almost all of the revenue is from the physical location and a service arm of the business. Did you find that, if you were to go back, did you find that was an important step to take on the journey towards growing the business that you have today?
Chris: I think it was an important step. It enabled us to test the market. We were able to generate some income to be able to make investments in regards to refining the website and starting to participate in the community and solicit customers and do some marketing, et cetera. So I believe that it was, and it really gave me time, to prove the concept that this was going to be successful and there was... We mitigated the risk enough to the point where I was comfortable making that decision to leave my secure full-time job and come on full time in this new venture.
Chris: So I do think it was important. Could I have done it without that component? That's interesting, the fact that we were working on vehicles, and we were installing and using some of the parts that we were trying to sell via ecommerce or those online automotive forums, it certainly helped in regards to our perception of expertise and building rapport within that community. The fact that we were using these items ourselves.
Chris: We also had a personal vehicle that we would drag race. And so some of the achievements that we were able to realize with that particular vehicle were things that we shared with the community. I think that took it even a step further, in terms of building rapport, and as a perception of expertise,
Felix: Right. So the bonus credibility with your market, I think is what you're getting at, was really important for establishing yourself as a brand that people can trust and, and helped when you transition to ecommerce only. And I think, unless I misheard, you said, so you transitioned to ecommerce only after eight years into the business?
Chris: Correct, yep.
Felix: What was that transition like?
Chris: It was really difficult. So yeah, this is something that probably could have taken place years earlier. So we're eight years in business, we're still working on vehicles, and at that point, we're very frustrated for a number of reasons. We had hit a roughly $10 million in sales, which proved to be a ceiling of sorts for us or an inflection point, and we could not get through it. So I think for three consecutive years we basically were stagnant at roughly $10 million in revenue.
Felix: And this $10 million, was that predominantly from the ecommerce side or from the labor side?
Chris: Predominantly from ecommerce. And that was the interesting part is that the labor side of things, at this point in time, was accounting for a single-digit percentage of revenue, and probably 90% of the headaches that we experienced within the organization at that time. So looking back it was one of the better ideas that we ever made was to stop offering repair and installation services. But it was just difficult to let go of because that's what we had always done. And that's what had certainly helped launch the business from the start.
Felix: Yeah, I think an important skill as an entrepreneur to have is to know when to essentially give up on a product line, a service line, something that you've been offering, especially after eight years in, seems like the business, right? A big part of your business to cut out. So what lessons do we have here on how to... well, actually before we get there, how did you recognize that would be the right decision?
Chris: So at the time, I guess we didn't know. There were certainly advantages to having the repair and installation component of the business. Again, with us being able to test products, any of the customers that came in to have repair installation services is we're buying products from our ecommerce store that we were then installing for them. So there was a lot of positive aspects to it. But some negatives, again, what I mentioned is one of my favorite books is Good to Great by Jim Collins, and one of the things he talks about is focusing on what you feel like you can be the best in the world at. And what we realize is that we were pretty good at ecommerce, and also there's a manufacturing component of our business as well that we'll maybe get into a bit later, we were really good at both of those things. What we weren't so great at managing this repair and installation facility.
Chris: And so if you were to look at online reviews at the time or some of the automotive forums in the local market, any negative review that you found about the business at the time was almost certainly going to be related to a lackluster experience with repair installation, so that was what made us aware that there was an issue is just simply the customer sentiment in regard to that component of our business. And yeah, rather than trying to bolster that, or trying to get better at performing the service and installation component of the business, we decided its time to let this go. Let's put all of our focus and efforts into ecommerce and support that ecommerce with our manufacturing arm, which is maybe another topic to discuss. That's how we believe that we're differentiating ourselves and adding value and shielding ourselves from some larger, pure ecommerce players that are out there. For instance, Amazon, et cetera.
Felix: Okay. Now how do you spin down a component of your business? What did it go through and how long did it take to essentially end that part of the business?
Chris: I think the longest part of that process was simply making the decision. It was long and arduous and because there were actually a couple of jobs that were lost in that transition. So we had a service writer and some technicians, et cetera. So by us making the decision that we were going to stop offering these services, that was gonna mean some jobs were going to be lost in that is always a difficult decision, so I think once the decision was made, it was pretty quick. We stopped taking on new work and then simply finished the remaining projects that we had internally and really focused our efforts on ecommerce and manufacturing moving forward.
Felix: Now, when you first were looking at opportunities here, you mentioned that you saw a huge gap in regard to the customer experience with the automotive aftermarket. What did you recognize? What was the gap in? What made you think that you would be able to fill it?
Chris: Naivety? Confidence maybe? It's just, knowing what I had learned in the consumer electronics industry, and the customer experience that they were able to create, I just, knew that things could be better. The experience that I had as a consumer in the market would be to go on a website that was functional, not necessarily perfect, and this was 13 years ago, so my expectations were maybe too high. But the main issue that I would run into is after placing an order, there was one particular vendor that would give you no order confirmation, no indication if the product was in stock, no indication if and when the product had shipped. And so then naturally what you would have to do is reach out to them to ask them these questions, “Hey, what's my tracking number? When should I expect this?” And they were very poor in terms of responding.
Chris: So, you've sent money to these people and you're not able to communicate with them. You have no idea whether the product is going to be shipped to you or when. It was just a really frustrating experience.
Felix: And you said that the way that you were able to get the first ecommerce customers was through marketing or just be involved in the community on these car forums?
Chris: Correct. Yeah, there were a couple of automotive forums that I was on from a consumer perspective, and at that point in time they had relatively low-cost sponsorship opportunities I guess. And it wasn't necessarily like display advertisements or things along those lines, that got us this initial traction. It was simply participating in the conversations that were already taking place. You know, essentially trying to generate a perception of expertise, build rapport, and then ask for the sale.
Chris: So there were already questions on there; what's the best clutch for this application? What exhaust system should I be looking at? Where can I get this air intake from? Those were kind of the conversations that we would participate in. And that's where a lot of our first sales came from. And then from there, I guess I mentioned in early 2007, we really started to see a lot of volumes started to come in. I believe that to be attributed, almost entirely to word-of-mouth. When someone emailed us, we emailed them back. When somebody called, we picked up the phone. When we received an order from someone, we gave them a tracking number. We delivered the product in a timely manner, as best as we could control it. Sometimes having to rely on third-party distributors, but these were things that were not normal in the automotive aftermarket at the time.
Chris: And certainly for the first, I mentioned, eight years earlier for the first several years in business, we didn't pay for any advertising or marketing of any sort. All of our growth, which actually landed us on the Inc. 500 in 2011, I would attribute all of that growth to word-of-mouth based on providing a significantly better customer experience.
Felix: So it was only a year... After you started, before you saw an uptick in sales from word-of-mouth?
Chris: So our first year in business from 2006 - we started in July 2006 - to the end of that year we only did something like $125,000. And that was almost entirely based on repair and installation, labor and then product sales to the local customers. 2007 is where we really started to see traction in regard to ecommerce in general and the greater community within the United States. We did just shy of I think it was $965,000 in 2007, and then that was the start of this huge wave to where we ended up in 2010 doing, I believe, it was $9.6 million. So we did 10 times the sales in three years span and that landed us on the Inc. 500 at number 403 in 2011.
Felix: That's amazing, and you credit this to basically all word-of-mouth from happy customers due to your customer service?
Chris: Yeah, at this point. So this was my first entrepreneurial venture. I didn't have any experience with this before. And so the thing that I was really hanging my hat on was what I had learned about customer service, and the customer experience in the consumer electronics industry, and taking that and applying it to this automotive aftermarket. And so there were no other tools in my toolbox. I guess we did choose to enter the market as a low price leader. And so the combination of those two things, by offering competitive pricing, and significantly better customer experience, I think that was the catalyst to get this rather tight-knit community to then begin referring us to their friends. And it really just kinda took off from there.
Felix: And you mentioned that you got your first sales though before this word-of-mouth kicked off, you got the very first initial customers by spending time in automotive forums. And you generated this perception of expertise by answering questions and then asking for the sale. Can you talk to us a bit about that? Talk us through this, how do you gracefully transition from helping someone now to then asking for the sale?
Chris: Yeah, it's an interesting scenario. We were at that point in time, in order to be able to do that we had to be a paying sponsor on that automotive forum. So you would have an avatar of sorts in a screen name, et cetera, where we could share our web address and it would say something along the lines of “gold sponsor" on the left side. So when in the course of responding to a question about what is the best exhaust system, or what is the best clutch for this application, we would respond and try to add value... here's what I think would be the best product for your particular situation. Here's why. And then at the end of that advice say, "Oh, by the way, here's a link to our website if you're ready to purchase." And it's really as simple as that.
Felix: I'm sure there must have been other competitors there were in there doing the same thing, so how did you differentiate yourself from the other perceived experts in that forum?
Chris: At that point, and even still today, there are people, new people, coming into the automotive aftermarket that is using the same approach. But it really was simply scrappiness; who was the first person to respond, who could add the most value by providing good advice to that particular person to build that rapport and then ultimately are in the sale. So it was just being present as much as possible and being helpful.
Felix: So you're just spending hours every day just in these forums answering questions?
Chris: Yeah. That was the vast majority of my day at that point in time was scouring these forums, waiting for an opportunity, again to add value and then hopefully earn a sale.
Felix: Because this was a new approach back then, and even today it seems like people are still doing it, but back then when it was new, how did that this would pay off?
Chris: I guess I didn't, but at that point I had already made the decision that I was going to come on full time in this business, and there was really no other option other than to make it work, so at that point, this was how we got our first sales was by this active participation in the community, by adding value. And what I did not know was how quickly that via word-of-mouth it would spread and how quickly we would grow. I'll tell you when we opened the doors in July of 2006, I could never have fathomed that we would have done $1 million in sales, let alone $10 million in 2010, or over $30 million this year. This is not something that I had envisioned from day one. It just happened and I feel very fortunate to be here.
Felix: Yeah, you never imagined that it would scale up to the size it is today. What were your goals or expectations back then?
Chris: I think predominantly just freedom. Obviously we talked about what was the catalyst for me to start my own business, and having this disciplinary meeting at 6:30 AM. The freedom was what was really enticing to me to be my own boss and not have to answer to someone else or have them tell me what it is that I need to be doing. I got to choose on my own and as I think I'm sure many other people on this podcast have said before, it resulted in me working 60, 70, 80 hour weeks, but it didn't necessarily feel like work. It wasn't the same as what I was doing in the consumer electronics world previously.
Felix: Yeah, your perspective has been a little different from other typical device entrepreneurs, which is that you need to believe what you are trying to accomplish is possible first before you ever get there. You almost went into this like not having that huge of expectations as what actually happened in reality, I think a lot of people have to believe first and then push super hard to scale to this size. But, what... Did you put in correctly or that went right with what you were doing that let this scale, even though you did not necessarily have that belief that it could get to this size?
Chris: I don't know that I didn't have the belief that it could get to this size. I guess that wasn't necessarily my goal. If you had asked me 13 years ago did I want to be running this $30 million organization with 65 employees and have grown to this size, I don't know what my answer would have been. I guess at that point in my life I wasn't looking that far forward. I had done some analysis, it seemed like it would be a good fit for me to achieve this level of freedom in terms of the work that I was going to do. I felt that I could make a living by doing this. I didn't have any dreams or aspirations necessarily of getting rich at that point in time.
Chris: And also, I mentioned earlier, this was a hobby and a passion of mine at the time was my own personal vehicle and some of the racing that I was doing. This business allowed me to support those endeavors. We had the tools and the infrastructure for us to feel the race car and actually accelerate some of my own personal desires in that regard via the business. So that was, I think, another component of it as well that, that this business enabled me to follow some of my dreams in regards to drag racing and other aspirations along those lines.
Felix: So let's talk about customer service. I think that this was what was key to kicking things off for you. What are some of the key tenants of great customer service that you either learned from your corporate job that you applied or that you've been learning along the way... With your own business?
Chris: Certainly, I think the biggest things, and I mentioned earlier some of the shortcomings in the industry prior to us participating, but it's simply communication. And being able to get ahold of someone and then that person being kind. Not seeming annoyed when they get on the phone with you. Having a knowledgeable person providing exceptional customer experience and the other end of that phone line or on the other end of that email is something that just wasn't prevalent in the automotive aftermarket at that time. So that's really all we did. I mean, it's not anything special by today's standards. We simply, if you emailed us, we emailed you back and we did it in a timely manner. If you called us, we answered the phone. If we didn't and you left a voicemail, we called you back. And when we did call you back, we would either have the answer to your question or if we didn't have the answer to the question, we would go find it and get it for you.
Chris: Beyond that, some of the other more technical aspects, when you place an order when the order shipped we sent you the tracking number. So you were able to know when your shipping was going to arrive, that the product had actually shipped. It's really common sense stuff. I wish there was some special tool or some special strategy or tactic that we took, but it's just things that seem common sense that just simply weren't happening at that time.
Felix: So now that you are on a much larger scale, I'm sure if you have other members of a team interacting with customers and performing customer service, at least the communication aspect, what do you look for in a great employee that will perform amazing customer service? What are the key attributes of someone that will meet your standards of providing great customer service?
Chris: So when we're hiring now, and recruiting has been a challenge for us certainly as we've grown throughout the years. We look to hire for alignment with our core values and our purpose first before we look at the skill set of that individual. Certainly, someone with experience in customer service and other industries is going to have some semblance of what our requirements would be. But we're looking for people that really are passionate about the automotive aftermarket and then embrace some of our core values, one of which is simply to enhance the customer experience. Other ones include work smarter, be driven, embrace the pit crew mentality, which is our term for teamwork, and then do more with less. Those are our five core values that we've established. So looking to see if people in the interview process or the recruiting process can give us examples of where they maybe have aligned with those particular values in previous roles with previous organizations.
Felix: Got it, so I want to talk about how this stage of you reached. You mentioned you reached about a $10 million revenue point and you languished here and $10 million is nothing to sneeze at right there. It's a significant amount of revenue, but then you'd be able to break past that and scale even higher. Talk to us about Dally, what did you do exactly to scale your business pass the $10 million mark?
Chris: Yeah, so that's actually an interesting story and probably one of the things that had the biggest impact on sales and the trajectory of our business from that point moving forward. And essentially what I did is when we landed on the Inc 500 in 20011, there were, I believe, eight total companies from Minnesota that were also on the Inc. 500. And for some reason I actually am still enabled to determine to this day, I decided that I was going to reach out to the other business owners for those companies and just try and get to know them and see if I could begin to network.
Chris: Prior to this time, I had absolutely zero peer networking of any sort. I actually couldn't have told you the names of another business owner at that point in time. So I don't know what it was that motivated me to reach out, but I did send an email to all of the other entrepreneurs on the list and I got one response, and that response was from another ecommerce entrepreneur locally. And we met up and had lunch and just started to share war stories and best practices and things along those lines. And to cut a long story short, I guess one day I knew that he had continued growing past that $10 million mark where we had now been struggling for roughly three years. So I decided to ask him, what do you attribute your success to?
Chris: And he gave me two tools or pieces of advice to which he attributed that success. One is an organization called EO or entrepreneurs organization that was a peer network that he was a part of locally. And the second was a book called Traction by Gino Wickman that outlines something called the Entrepreneurial Operating System® or EOS®, which is simply a set of tools to run and scale a business. And these were concepts that I was completely unfamiliar with. But I figured if they were going to work for him in regards to allow him to keep scaling his ecommerce business, that perhaps they worked for me. So I signed up with an entrepreneurs organization and started to implement the Entrepreneurial Operating System®. And from there we experienced another round of extremely rapid growth.
Felix: Got it, let's talk about the first piece of advice he gave you, which is the entrepreneurs' organization. So what does the organization... What do you... Get out of it?
Chris: The biggest thing is, and I guess the reason that I did not have a peer network prior to this, was that I felt like I was in my own little niche and that no one would be able to help me in the automotive aftermarket because they weren't going to know anything about the automotive aftermarket. Besides maybe my competitors. And I think that perhaps is true, but what I missed at that point in time was the fact that every business shares certain components of it, whether it's hiring people or the people component of it, or finance, or fulfillment and operations, or marketing or sales. All of these things are consistent across any business. And so now I'm in this organization in the Minnesota chapter, there are roughly 80 people locally that I am able to network with on a monthly basis.
Chris: And we have a much smaller group called a forum where there's seven of us now that get together on a monthly basis. And we share from our experience to try and help each other. And like I said, whether that's I need to hire someone, what's the appropriate process to do that, or I'm having a problem with a particular person. How would have you handled these types of situations in the past? I'm looking to do X, Y, or Z in terms of marketing. What is your experience been with that?
Chris: I've learned so much from these other entrepreneurs that are part of this group. And the beauty of it is, is that I'm able to learn from their past experience without having to do it on my own via trial and error. So I think I've accelerated my learning, and thus the growth of the business very rapidly, just simply based on learning from them versus, as I mentioned earlier, having to try something and perhaps fail and then learn from that failure and try another course of action. So it's just being able to tap into these other brilliant minds in this organization, I think has saved me countless failures and thousands, if not tens or hundreds, of thousands, thousand ff dollars that would have been wasted if I had just been trying to do it on my own.
Chris: And because entrepreneurs have limited time, I think that when you get to your scale that it makes obvious sense to build a network of people that have had the experience that is walking on that path that you're going down. But what if you're just starting out? You have nothing to necessarily offer yet to a network. You don't have anything, a business, or anything, but you aspire to become an entrepreneur, start your own business. Is it ever too early to build a network and how would even do that if you don't have anything essentially to bring to the table if that's what you feel.
Chris: So I don't think that there's anybody out there that doesn't have anything to bring to the table. I think there's always something to learn from every person on this earth. And whether their previous experience had been in the corporate world, there's going to be something that they would be able to add value. And you just have to figure out what that is.
Chris: I think, so I was eight years into business before I joined my first peer groups. I don't know that I can speak to this from my personal experience, but there are meetups whether it's meetup.com or there's another. A book I read, there's a forum, it's called the Fast Lane Forum, which is basically shares some of my thoughts on entrepreneurship and as another place for people to interact and learn.
Chris: I think there's a lot of venues out there and I think step one is just simply to show up and express interest and provide value where you can, based on the experience that you have to this point. And really just get to know people and you don't know necessarily what value you're going to be able to provide to them or vice versa. But just starting to build up that network of if you're early on and you want to find the people that have already where you aspire to be and see how you can get close to them and learn from them, I think is a great course of action as far as exactly how to do that. Again, I think it's just going to be scrappiness and just putting yourself out there.
Felix: Got it. I guess maybe the two key points of friction that I see a lot with entrepreneurs on their path towards success, one is not knowing what is the problem that they're trying to solve. And two is implementing the advice that people give you. So for that first one, how do you recognize what is the problem that you are trying to solve and that you want to bring to the table to get advice about?
Chris: So are you referring to the network group? What I would bring to them?
Felix: Yeah to the network group or I guess just in general, how do you identify what is the problem that's in front of you today that is, if you can solve, will have the biggest impact on your business? How do you recognize that?
Chris: Yeah, part of the Entrepreneurial Operating System® that I touched on earlier is a cadence for meetings and then also a tool called the issues list. And so we have internally a list of issues and also opportunities, I want to be clear on that as well. It's not only the problems but also the opportunities for the organization. Actually built into an ever-growing dynamic list. And we use Trello, which is a software platform to house that list, but it's a constant reorganization or prioritization of those issues and opportunities. And I do that with my leadership team. We have a leadership team of five at this point and we vote on what we think to be the biggest opportunity or the biggest issue that needs to be addressed at this point in time within the organization. So I think an individual...
Felix: So how does something get onto that list?
Chris: So those are the things in a day-to-day course of business. If we see, say I'm listening to a podcast or I'm listening to an audiobook or I'm on one of the ecommerce based forums that I participate in now and I see an idea that I think is worth discussing, or could potentially add value, I'll simply add it to that issues list. And then at that point, if either A - members of my leadership team will vote on that to bring it to the top, or I might have to go and champion that cause. I'm going to say, "Hey, I really want to talk about this. Because I think it's a great operative opportunity for our organization." so I can either champion it and bring it to the top of it will happen organically if it's a lucrative enough opportunity or a big enough issue that we need to discuss it.
Felix: Got it. Now with a system like this, can it be too early for someone to implement this system? Cause it sounds like you didn't implement this until later in your journey, but can it also be too early where maybe it's too unwieldy, or like will strip away some of the benefits of being more agile and not having kind of a system in place? Is that true or is that a myth that you don't need a system, or that you don't need a system at first?
Chris: So I think this, the Entrepreneurial Operating System®, certain components of it can and, I don't want to say should, from my experience have been great to implement in our organization for even the smallest of entrepreneurial ventures. And there are some components that at that stage won't apply. So some things that wouldn't apply, there's something called an accountability chart, which is essentially the org chart within the organization. If it's a one-person operation, obviously you're going to be sitting in all of the seats from the president CEO, to marketing, to finance operations, et cetera. As you scale that's where that accountability chart and defining who's accountable for what operations within the organization become more important.
Chris: One of the other things is there is something called the Level 10 Meeting™, which is a weekly cadence for a meeting to go over some other components of the operating system. Maybe as a one-person operation that wouldn't be necessarily relevant either. But some other components, one of the big things is something called a scorecard, which is where we have a list of maybe 15 or 20 different KPIs or key performance indicators in regard to the health of the organization from sales, to margin, to overhead, fulfillment, things along those lines. We track those scorecard metrics on a weekly basis to see if they're trending in the right direction. Or if they're trending in the wrong direction. Then we'll slide it over as an issue and discuss that in that weekly meeting that we have.
Chris: Beyond that, there's another concept called rocks. And this comes from Stephen Covey which is a demonstration he did with rocks, pebbles, sand, and water. I don't know if you've ever seen that video, but it's a good one. These are essentially the biggest priorities for the organization over the next 90 days. So if a new entrepreneur was to come to me with a concept for a business that they were going to launch. Yes, there're some components of the Entrepreneurial Operating System® that wouldn't be relevant, but at least these two, knowing what the biggest opportunities for your organization are over the next 90 days, and then tracking some of your key performance indicators on a weekly basis are two concepts that even the smallest of ventures should be implementing an out of the gates in my opinion.
Felix: Got it. So I want to go back to the other half of the question, which is around now that you identify the problems, how do you actually make sure you implement the solutions or advice that someone gives you? How did you get better at that?
Chris: So within the context of the Entrepreneurial Operating System®, there are two different components there. So we talked about rocks earlier and that's what we defined to be again, the highest priorities for the business over the next 90 days. And each week we check in on those rocks. Is that rock on track or is it off track? And if it's off track, we'll talk about it as a team and determine what we need to do to get it back on track so that we're able to accomplish that goal by the end of that 90 day period. Within that there are smaller components, smaller things that come up and those would be referred to as to do's. So things that would take between one and two weeks to be accomplished but are also important in regards to moving the organization forward. So you have your rocks that are the big projects that are at least a 90 day period of time. And then to do's that are within a one to two-week time frame where they need to be accomplished.
Chris: And again, how do we ensure that they get done? We hold each other accountable with this weekly meeting where we come in and again, either the rocks are on track or off track, and the two do's are either done or not done. And if your rocks off track, we're going to talk about it and we're going to get it back on track and we're going to hold you accountable. That way if there's a to-do that goes past two weeks and it's not done, we're going to talk about it. Why didn't you get this to do done? That we all decided was one of the most important things for you to do over this last two week period. So peer accountability via that weekly meeting is where we've had success.
Felix: Got it. So once you implemented these systems, how quickly did you start seeing the benefits from it?
Chris: Almost immediately. I joined entrepreneurs' organization and we implemented the Entrepreneurial Operating System® in 2013 I believe. And so we basically, as I mentioned earlier, we had plateaued at $10 million, $10 million, $10 million for three years. The following year we went to $11.8 and then we went to $15. And then the following year we went to $21. So after three years of stagnant revenue, we experienced very rapid growth and we actually doubled the business within the following three years.
Felix: And all these systems... Is the goal to boil down, like what is the most impactful thing that every single person should be working on?
Chris: Yeah, that's the concept behind rocks. And obviously you have your day to day things like a sales manager is going to need to ensure that the sales team is answering the phone and helping our customers. But at the same time, we have pretty aggressive growth aspirations for the organization and in order to achieve those, we're going to have to configure the business for that scale. And yeah, there's going to be some different project level initiatives that my team is working on as well.
Felix: Can you give an example of something that maybe you spent a lot of time on before implementing this system before? Like the rocks concept and something that you now prefer to spend your time on that is more impactful?
Chris: So before implementing this system, we never talked about what the priorities were, and it was always what's important right now. We had never outlined what the vision was for the organization and where we were going. Not even a year out, let alone now we have a three-year picture for the organization. We actually have a goal out to 2024, that's our BHAG, our big hairy audacious goal. Which is to get to $100 million in sales.
Chris: So now we have this target that everyone in the organization is aware of where we're heading. And then as we start to break it down from six years out in 2024, to three years out at the end of 2021, we've outlined actually what the business is going to look like at that point in time. And then we get even more granular with our one year plan as far as what some of our objectives are for the next year. And then we break it down a step further into 90-day rocks. What are we doing in the third quarter of 2019 that's going to move us closer to our objectives for the year?
Chris: I'm kind of OCD, so I really liked the way that this works back from 10 years to three years, or it's six years now, sorry, from six years to three years to one year to 90 days. And then it's up to the individual to figure out what they should be doing today or this week to ensure that they're going to achieve their 90-day rock and that's going to help move the organization forward. I think at this point in time we have to have another 65 people in the organization and I don't know the exact number, but I would venture a guess that there are over a hundred rocks within the organization. So there's at any point in time with an organization today, there are over a hundred initiatives that are in process, all with the goal of moving our company closer to those goals that we outlined for one year, three years and six years out.
Felix: Awesome. Now, what would you say is like the biggest lesson that you've learned last year, either yourself or as an organization that you want to apply this year?
Chris: So I think one of the biggest things that we've realized in the past year was actually something that we've been executing on already over the past several years as we've experienced significant growth, and then maybe even all the way back to those days where we are on the automotive forums trying to interact with the community. And that was, basically, we defined what we call our proven process and it's essentially the strategy that we use to enter new vehicle markets, which is the catalyst for growth within our organization.
Chris: And that's something that I said that we're realizing now, much like core values that when you define them aren't aspirational, they're actually already innate within the organization. This process is something that we've been executing on and just had not written it down. We hadn't put pen to paper. And so now we have a more formal document that's outlining what we call the MAP difference. And I think I mentioned it earlier. This is what I believe differentiates us from the Amazons of the world and what allows predominantly an ecommerce venture to be able to compete. Not only compete, but be fairly successful and continue to grow at a pretty rapid rate.
Felix: Awesome. So thank you so much for your time, Chris. So Modern Automotive Performance, which is at MAperformance.com. Again thank you so much for coming on and sharing your experience.
Chris: Yeah, no problem.