Reprinted from Smart Business Magazine. See the original article here.
Being a newshound isn’t just a hobby for Mike Thompson, it’s his way of keeping Montrose Auto Group at the forefront of success.
Mike Thompson, president and CEO, Montrose Auto Group
“People were panicking around the country,” he says. “Nobody in our government leadership was really out there with confidence, reassuring the people that we were going to get through this thing — that we were going to survive.”
So Thompson did the next best thing. He took his years of experience with the business cycle and decided to be the take-charge guy who would inspire confidence among his employees.
“You have to believe that you can knock the walls down and get through it,” he says. “We were one of the fortunate ones who never had to lay anybody off, never had any need for anybody to take pay cuts. Sometimes we didn’t replace people when they left and we spread out the workload, but we kept on going.”
Pundits are quick to remind everyone of the cyclical nature of business, and while that may provide some consolation, someone who appears in control can strengthen its effect.
“I believe that for every down cycle, there is an up cycle,” Thompson says. “You’ve just got to be able to ride it out. And that was my message to our people. You’ve got to hang tough, because if you leave me and go somewhere else, you’ll be just as nervous.”
Thompson made it a point to communicate regularly with the managers who ran his operations.
“I explained to them how to talk to their people, and how to keep the people from panicking,” he says. “They had to keep them calm; financially, we were going to get through this thing. None of us had ever gone there before.”
While calm and reassuring words from management helped the situation, Thompson, president and CEO, didn’t stop there. His successful years in business — growing Montrose Auto Group into 12 auto dealerships, garnering more than $400 million in annual revenue — meant he had a few tricks up his sleeve. Here’s how he combines his principles of business with lessons learned to steer Montrose Auto Group through choppy waters.
Crunch your information
Business critics use many indicators to try to predict where the economy is going, and Thompson has found that a leading indicator such as sales of new automobiles carries a lot of weight.
“Usually, we are the precursor of six to eight months as to when a recession is going to start,” he says. “All of a sudden, even before people are aware, showroom traffic starts to do what I call turning — visitors go from excited, happy buyers to all of a sudden buyers who just have to buy cars. When that happens, you can always expect a slowdown coming sometime in the near term in the car business.”
Once Thompson saw a pattern there, he also looked for the reverse to support his belief.
“It is just the opposite when all of a sudden you start seeing people with smiling faces going out to buy new cars just because they want a new car and they can buy one,” he says. “That means we are looking at some good times coming up.”
While the nature and number of prospective buyers alone can give some important insight to economic trends, you would do well to support that indicator with research.
Thompson finds that rather than relying on reports from analysts, he does his investigating first-hand.
“I watch all the television programs that are important to business,” he says. “That’s the first thing I do in the morning. You try to stay ahead of the curve and you’ve got to go by your instincts. After so many years in business, your gut kind of tells you certain things are going to happen.”
Thompson finds that the often-overlooked signals are important.
“I read The Wall Street Journal; I look at little articles that a lot of people don’t even bother to waste time looking at,” he says. “You see how the ‘stars and the moon’ line up when you take all these little bits and pieces and pull them altogether.”
For instance, Thompson examines how many dealerships are for sale in the Automotive News. If there are only a small number listed — instead of several pages — things are good in the car business.
“Look at currencies, whether the dollar is getting weaker or getting stronger, whether the yen is weaker or stronger, what’s going on with the deutsche mark — those are little hints; what is going on in the bond market, what is going on with LIBOR — all those things give you clues.
“It’s just assimilating that information and tying it all together and saying, ‘Wow! Times are going to be good.’”
Saving for a rainy day is vital
Developing a sixth sense to predict the ups and downs of the business cycle gives you a powerful tool to employ. Of course, as economists are prone to say, leading and lagging indicators are not always accurate. So it is a good business practice to save for a rainy day.
Thompson learned as a young auto dealer with his first Chrysler store how tough it was to not only make money but to borrow money. Once he understood that, and depending upon how much the company made, he set aside an amount for a reserve fund.
“We put somewhere between 20 and 35 percent of whatever we earned that year into the rainy day fund,” Thompson says. “Then so much went to pay taxes, and then the rest, if I needed to leave it in the business, I did. If I could declare a dividend for myself, I did. Or we took that money, reinvested it and bought more stores.
“There were a couple of years when we didn’t put any away because we wanted to make sure we didn’t breach any covenants with the bank.”
Another advantage of having a cushion was apparent in the most recent recession, when as Thompson says, it was difficult to borrow a nickel, unless you really didn’t need any money.
“We were able to borrow money and invest in other stores because we had put away the cash cushion for a rainy day,” he says. “When they saw me investing in other companies, our people relaxed because I was one of the few in that first year and a half of the collapse who was out there buying stores.”
Along with the skills and experience of analyzing market conditions, it can take having a gut feeling for when change is imminent to ready your next move.
“I threw my money into the market when the Dow Jones dropped to 7300,” Thompson says. “I knew I didn’t have the bottom; it went down to 6600. But still, I said it is time. If it doesn’t turn around, the money is worthless anyway. So we got back into the stock market, and it worked out.”
Realize your reputation is king
It can take years to assemble a strong staff to run your operations well. If you have your pulse on the market, and realize that the cycle will run its course and bounce back, you need to be ready for that rebound. You will be ahead of the game if you are able to keep your experienced, senior staff rather than paring back and then hoping to obtain new talent when the market turns around.
“Even in the down cycle, never once did I think about letting senior level people go because it took me all these years to gather the people that I had who were really the strength of the Montrose Auto Group,” Thompson says. “I can give them all the tools, I can give them guidance, I give them money to run the businesses; without them, my businesses wouldn’t run the way they do now.”
In short, your company’s reputation, which you have carefully built over the years, could suffer a critical blow if you don’t ensure the continuation of your standing. Thompson knew how he had vowed in 1967 as a new salesman that if he were ever fortunate enough to buy his own dealership, he would never allow customers to be treated with less than the highest quality service. And he was going to keep that vow.
“You have nothing if you don’t have a quality reputation today,” he says. “That is why all the manufacturers today have to build quality cars. They had looked so bad, especially the domestics, in the late ’60s to early ’90s. They had no options to do otherwise; they had to start building better products. I give them a nine out of 10. They are just that good now.” ●
- Develop your information crunching methods.
- Saving for a rainy day is key.
- Realize your reputation is king.
The Thompson File
Name: Mike Thompson
Title: President and CEO
Company: Montrose Auto Group
Born: I was born in Cleveland. I’m a local boy.
Education: Besides the school of hard knocks, I went to Wickliffe High School, and I was the oldest of eight kids. I had to leave home in the middle of my senior year because there was no room for me at the house. My dad gave me my options: ‘Army, Air Force, Navy, Marines? We are bringing grandma here and there is no room for you.’ I went into the Army. I got my high school GED and took college accounting courses in the Army. I served in Vietnam in 1967 with the 9th Infantry Division.
What was your first job? As a boy, I mowed lawns, had paper routes, washed cars, waxed cars, shoveled snow by hand — anything to make a few pennies. I came home from Vietnam, and my dad told me there was an opening where he worked at Dowd Oldsmobile for a used car salesman. I went in and saw Healy Dowd who my dad had worked for 33 years at that point. And he said, ‘Mike, I’m going to do you a favor. I’m not going to hire you, because you will never make it in the car business.’ And I said, ‘Well, gee, thank you Healy.’ You know, that’s the biggest favor he did. Seven years later, I bought my first store, Trotter Ford in Euclid.
Who do you admire in business? In the car business, Alan Mulally, the president and CEO of Ford Motor Co., is the guy I admire most. And prior to him, it was Lee Iacocca. I liked both of those gentlemen … Iacocca was a tough guy. He pulled Chrysler out of trouble and turned it around. Mulally earned all my respect when he refused to take the handout from the government; he rolled up both sleeves and went to work just like Iacocca did and said we are going to fix this thing and he did.
What was the best business advice you ever received? This is a little bit of a joke. My dad said, ‘Son, you don’t want to go into business. Get a job and get a paycheck, you know you can count on it.’ That was the best business advice I ever got. My dad had an eighth grade education. On the other hand, the best advice I give to people, relative to business is, ‘Follow your money.’ A lot of people will take their money and invest it, and they expect other people to make it grow. Well, the way it’s really going to grow is if you keep watering it yourself. You worked hard to get that money, so, keep watering it. It pays off eventually.
How to reach: Montrose Auto Group, (330) 666-0711 or www.gomontrose.com