In this special report, AutoSuccess Associate Publisher Scott Ghedine speaks with Michael Esposito, president and CEO of Auto/Mate DMS.
Scott Ghedine: How did you get into the auto business? How did you get into DMS?
Mike Esposito: After 20 years in corporate America, I was offered a sales manager job at a Chevy dealership in Albany, NY. I was unsure if I wanted the job, so for 60 days the owner allowed me to take a role as the IT or “tech guy” and observe to see if it was a job that I was interested in. After the two months were up, I decided to take the sales manager position and became the GM within a year. After a few years of long hours and long work weeks, I was given the opportunity to develop a used car website for the Albany Times Union. This led to an opportunity to join Auto/Mate as an independent agent selling to dealers. I then became a full-time employee in 1999 and president and CEO in 2005.
SG: How many dealerships do you currently have?
ME: In 2005 Auto/Mate had 25 employees and 200 dealers. We now have 227 employees and over 1,600 dealers in 49 states.
SG: OK, I have to ask, which state are you missing?
SG: Who’s the Auto/Mate sales rep for Hawaii?
ME: (With a chuckle) Actually, I am. Even though I’m the boss, I still do some selling. Believe me, it hasn’t gone unnoticed internally. I get razzed a bit by the team, but we will get that 50th state.
SG: Good for you to have a sense of humor about this. Is a sense of humor and culture in general important at Auto/Mate?
ME: Customer satisfaction doesn’t come first. Employee satisfaction comes first. Too many companies prioritize shareholders first, then customers and then employees. We believe it’s the opposite. If we have incredibly happy employees, we know we will have incredibly happy customers. Your customers won’t love you if your employees don’t love you first. If you truly care about people, they will care about you. When you care about them, they will do whatever you ask them to do.
SG: What’s the biggest misconception about Auto/Mate?
ME: The biggest misconception is that Auto/Mate only services small dealers or small dealership groups. Sure, we can handle stores that only sell 100 units per month, but we can also handle the larger dealer groups with dozens of stores that sell thousands of units per month.
SG: Car sales are levelling off. Does this have an effect on your business?
ME: It does. It has a positive effect, believe it or not. When dealers start to make less money, they start to look at ways to reduce costs. You can reduce personnel, but salespeople are on commission, techs get paid on hours, etc., so no real savings there. After that, they look at marketing, floorplan and data processing. You can reduce advertising but that just helps your competition. You can’t stop the manufacturer from sending you cars, but a dealer can control their data processing cost.
SG: So, car sales slowing down could be a good thing for you?
ME: Yes. The financial crisis in 2008-’09 was actually a big growth period for us.
SG: What was the best thing to come out of the failed Auto/Mate acquisition by CDK?
ME: The free publicity. Don’t get me wrong, we spent millions on attorneys’ fees, but the lift we experienced when the deal didn’t go through was amazing. All the trade pubs and media outlets wanted to talk to us, interview us, etc. Our booth at NADA that year had its best traffic ever. We were fairly well known, but instantaneously we were top of mind for many more dealers. Our orders increased dramatically because of all the publicity.
SG: What’s the toughest thing about the DMS business?
ME: OEM integrations, especially when starting out. They don’t have to certify you. Once you are established, the contract terms of incumbents are the toughest things to navigate. Most of these contracts are five years on average. Learning the new systems can be quite challenging as well.
SG: How long is the average Auto/Mate contract then?
ME: We are on a 30-day contract with all of our dealers. It forces us to have to have exceptional customer service. Retention is key, which comes from happy employees creating loyal customers.
SG: What do you get out of exhibiting at NADA?
ME: We hope for two things: leads and brand awareness. We believe you are viewed as a substantial company when you exhibit at NADA.
SG: How do you keep up with all of the change in today’s auto industry?’
ME: We are a DMS. That’s it. We have one application that is customer facing. Sure, the DMS and modules improve, but at the core we keep focus on what we do best.
SG: What’s next for Auto/Mate? What’s the three-year goal?
ME: When the CDK deal didn’t go through, we sat down with the FTC commissioner. She asked where we thought we might get our next investment or suitor from. She was taken aback when we replied we aren’t looking for one and really don’t have an interest in finding one. Everyone thinks owners of software companies pump money into these companies solely to grow it and sell it. We want to grow Auto/Mate profitability 15-20% per year. If we get too big too fast, we won’t be able to properly service our existing customers or deliver to the new customers.