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Business Observer Thursday, Oct. 29, 2009 11 years ago

Mission Re-Ignition

The car business was drowning in 2008 and so was George Manian's high-end dealership. Manian found an airway through a massive company overhaul.
by: Mark Gordon Managing Editor

The car business was drowning in 2008 and so was George Manian's high-end dealership. Manian found an airway through a massive company overhaul.

George Manian, Jr. decided to name his high-end used car dealership Encore in 2000, with the idea that customers should want to keep coming back for more, be it to buy a Ferrari or a Ford.

But in the last six months of 2008, few people were coming back in for anything, especially to buy cars. Not many people buy expensive cars to be used as toys in a recession, Manian found out.

On both the way up and down, the sales figures are jarring: In 2005, the Sarasota-based dealership was selling 50 cars a month. That number climbed to 65 a month in 2006, 74 a month in 2007 and 80 a month in the first half of 2008. The dealership, which Manian co-owns with business partner Dave Ferguson, was well on its way to meeting its goal of 100 sales a month.

But by the summer of 2008, monthly sales had been nearly sliced in half. The dealership went several consecutive months barley hitting 50 on the sales register. “We were still surviving, but it was ugly,” Manian says. “We were staffed to sell 80 cars but all of a sudden we couldn't even sell 60.”

And by October 2008, the dealership, which occupies a 14,000-square-foot showroom and maintenance facility on U.S. 41 in Sarasota, was at a crisis point. Gas prices were pushing the $4-per-gallon mark and the credit crunch was looming over potential customers. Manian wondered if the car business would literally collapse by Christmas.

In the fall of 2008, however, the Encore Motorcars story took a sharp U-turn. Manian looked at his company's inner workings and decided that even though the industry was hurting, there “was something wrong with our business plan.”

Adds Manian: “We just had to completely readjust.”

So by combining cost cutting with consolidating some jobs and hiring new people for other key leadership roles, Manian, 43, led an entire company transformation at Encore. The makeover includes a new emphasis on marketing, making up for past mistakes and finding other revenue streams besides car sales.

The turnaround results have been slow but encouraging: Encore sold 66 cars in August and about the same in September. Manian is projecting to be in the 70s per month in sales by early next year and maybe, if everything comes together both internally and with the economy, be back to 80 a month by the end of 2010.

Annual revenues, on the other hand, are not coming back as quickly, as Encore has had to lower its prices to meet customers' expectations in what Manian calls a value-driven, not toy-driven marketplace. The company is projecting $32 million in 2009 revenues — 15% lower than the $38 million last year and even $1 million less than what it reported in 2006.

Still, Manian has one positive sign that Encore's resurrection is working: This year will be one of the company's most profitable years since he and Ferguson founded it eight years ago.

“We're not ignorant that the economy isn't what it used to be,” says Manian. “But dwelling on it isn't going to make it better.”

Less toys
Manian and Ferguson met each other in the 1990s, while both were in the wholesale car business in the region, buying and selling cars from dealer to dealer. They decided to go into the retail side of the auto business together in 1999.

Now Encore's turnaround strategy can serve as a case study in how to combat a recession for just about any business owner or executive.

First off, there are the obvious steps, beginning with cutting expenses in any place possible. “We took a hard look at all our costs,” says Ferguson, “down to the paper towels.”

The cost cutting continued by going to vendors and negotiating for lower prices, not unlike what many Gulf Coast homebuilders have done to survive the recession. Encore then looked into getting new software for sales and record keeping, saving more money.

Manian also reshaped the company's inventory, a complicated task for a business that deals in the hyper-niche industry of luxury pre-owned cars. Gone, for the most part, were vehicles like a 2004 Ferrari 360 with 7,000 miles or a fully restored 1957 Chevrolet Bel Air convertible — both of which Encore sold during the boom.

Says Manian: “Now we have a larger portion of practical, expensive cars than ever before.”

That translates to cars such as a 2008 Mercedes E320 with 12,000 miles or a 2004 BMW 325i with 39,000 miles. “We still have toys,” says Manian, “but we sell a lot less than before.”

While the changes on the cost and inventory side were important, they weren't as significant as the changes Encore made in the employee side of the business.

For that, Manian and Ferguson realized they could consolidate tasks in every department and have one person take on more roles. Looking back, says Manian, it was a mistake to not focus on that side of Encore's operation when the economy was booming.

“You start to look at the work for what it is, not the personal side of it,” says Manian. “Some [employees] care and try hard, but are they really producing?”

For about one-third of Encore's 45-person workforce, the answer was no, Manian and Ferguson learned. So in 2008, the company let go of 17 employees. It has since worked its way back to 38 employees.

Encore simultaneously shifted other employee's workloads. For example, it turned a three-person back office staff to 1.5 by having a receptionist process paperwork in her downtime and eliminating work that others were duplicating.

In July, Encore also hired new directors for the service and the sales departments, replacing past managers that were underperforming — evaluating and monitoring its major department heads was another aspect of the business
Manian and Ferguson say they overlooked during boom times.

Neglecting the service side of the dealership was a key lesson for Manian. While many new-car dealerships look at the maintenance side of the business as a profit center, Manian and Ferguson really didn't look at it at all.

“Service has always been a great thing,” Manian says, “but our minds didn't focus on that.”
The changes in the service department, much like in sales, have been profound. Manian says service-based revenues at Encore are up 20% in 2009 compared to last year.

Encore spirit
Manian says there wasn't an epiphany that led to the Encore transformation. The impetus was simply that last fall sales had fallen so sharply that he thought the company would be dead without a major overhaul.

The toughest part at first, says Manian, was the logistics of finding the time to run a business while reshaping it. So he and Ferguson held meetings before work sometimes with key personnel, going from 6 a.m. to 9 a.m. Other meetings ran from 7 p.m. to 10 p.m.

Another key step was an informal panel of business advisors Encore leaned on. A few were former customers, the type of clients that retired from business careers and could afford expensive cars. Others were local people in the industry Manian and Ferguson had gotten to know.

“We brought them in and said 'look, our business as we know it doesn't work anymore,'” Manian says. “We need to change this.”

Encore developed its job-consolidation strategy primarily through those meetings.

Manian and Ferguson also continued working with a business consultant they had been using for a few years, to see what else they could do to turn around the company. But in true Encore 2009 spirit, Manian asked the consultant to lower his fee, which he did.

Another aspect of the company turnaround has been its emphasis on marketing. The company brought in its first full-time employee for that task last year in Manian's wife, Kimberly Manooshian.

That side of the business includes hosting community events at the dealership's glossy facility, venturing into the world of online and social media and sending out a client newsletter. “We never really did any marketing before,” says Manooshian.

Manian, looking at the entire Encore transformation, is satisfied with the progress, but not yet ready to declare victory.

“The demand for good pre-owned cars is great, compared to supply,” he says. “We don't want to miss any opportunity to sell a car.”

Toys and more

The roster of sold and for sale cars and motorcycles at Encore Motorcars of Sarasota is eclectic.

On the for sale side, as of early October, the list includes:

A 2005 Bentley Continental GT with 27,168 miles, listed for $87,990;

A 2007 Hyundai Santa Fe SE with 35,680 miles, listed for $19,990;

A 2005 Chevrolet Cavalier Base with 33,995 miles, listed for $8,990.
Recently sold cars include:

A 2007 Bentley Arnage R Mulliner with 3,869 miles. It sold for $159,990;

A 2007 Ford Mustang GT Roush Drag Pack with 8,656 miles. It sold for $36,990;

A 2006 Mercury Grand Marquis LS Premium with 6,801 miles. It sold for $16,990.

Be patient and hire right

George Manian's best advice for any business owner or executive seeking a new manager for a key division: Don't rush.

Indeed, Manian, owner of a $32-million high-end used car dealership in Sarasota, spent months interviewing and researching Ron Frederick, the person he hired as sales director for Encore Motorcars in July.

“We were so thorough when we brought him in,” says Manian. “We wanted proof that he could do what we needed him to do.”

The process included speaking with Frederick at least five times before making him an offer.

Some chats were by phone and others were in person. Frederick was working for a dealership in Alabama when Manian heard about him through a business acquaintance.

In addition to those interviews, Manian and his business partner, Dave Ferguson, spoke with seven people who knew Frederick. They grilled those references, too.

Manian's favorite question to ask a potential hire's references: What did he promise you before he started and what did he deliver on?

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