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How family-owned Delgarth Motor Company handled rapid expansion

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Growth can dilute the culture of any business, but when a family-run business expands, the owner must learn fast that they cannot be everywhere at once.    

Delgarth Motor Company has managed the transition from single site to strongly rooted regional group by effective delegation, a focus on solid business principles and people management and perhaps by borrowing an idea or two from much bigger players.

As it has grown geographically and in brand representation – Delgarth has five sites across three brands – managing director Steve Turney, who took over from his father, Dave, as managing director five years ago, proudly reports that his group’s financial performance has shown consistent improvement.

Delgarth timeline

1981 Dave Turney founds Delgarth in Milton Keynes with the Reliant and Lada brands, and later Proton.

1986 Delgarth buys a second dealership in Milton Keynes, starting a partnership with Hyundai.

1989 Turney’s son, Steve, joins the business and works his way up to managing director in 2010.

1996 Kia franchise added.

2008 Delgarth invests £1.5 million in modernising the Old Stratford Hyundai showroom.

2009 The group buys a new Kia site, with a 10-car showroom and display for 100 used vehicles.

2014 Bletchley Kia and Hyundai opened.

2015 Delgarth opens Mitsubishi dealership in Wolverton.

Today Delgarth is a collective name for two companies: Milton Keynes Autorama trades as Milton Keynes Hyundai in Old Stratford. Milton Keynes Kia and Mitsubishi and Bletchley Hyundai and Kia trade as part of the Delgarth company. For accounts purposes they will be separate for the foreseeable future, said Steve Turney.

Turnover in 2014 was £41 million, up from £29m in 2011. The group sold 2,900 cars in 2014 and was on target to sell 3,800 in 2015 in retail and fleet and not including trade cars.

Turney attributes his financial awareness to his father, who he said never lived excessively or outside his means and for whom reinvestment of profits was key.

Part of that care has worked its way into Turney’s daily routine – his first job every day is to “check the bank” or see what money has been banked and run through the numbers with his father – now the chairman – when necessary. Turney Snr retired in 2010, but still comes into the office two or three mornings a week.

Turney Jnr is supported by Alan Hunter, the operations manager for Milton Keynes Hyundai and Milton Keynes Kia and Mitsubishi. He’s also general manager for the Hyundai site in Old Stratford. Hunter left Delgarth to work as a sales manager for Marshalls at its Land Rover Peterborough dealership for just under two years before returning 18 months ago.

As well as Hunter, there is Marc Walker, general manager of Bletchley Kia and Bletchley Hyundai, who has been with the company for 20 years. Finance director David Tearl, who has been with Delgarth for seven years, completes the senior management team.

Below them are five sales managers and the same number of service managers, one each at the group’s sites.

Delgarth has also recently appointed three business managers as a consequence of Hunter’s experience at Marshalls.

“As a family-run business, without the experience of working elsewhere, it was difficult to see how they would fit. But Alan has shown us the benefits of ensuring we have a standardised sales and compliance process on our finance offers,” said Turney.

Hunter has also brought with him the larger company/plc focus on planning and forecasting.

Turney said: “We hadn’t really been doing this as well as we should have – it was a more an ‘I know what’s going on’ mindset for me, rather than sharing my views with the sales managers, making everyone responsible for their own department.

“Now we have five sites, I can’t run the business alone and need people to deliver on the goals.”

The company’s first franchise was Reliant, which Dave Turney established in 1981 in Milton Keynes. Within 12 months, he had added Lada. Delgarth became one of the biggest dealers for the Russian brand in the UK, selling 603 cars at its peak in 1989. As both brands encountered economic challenges and faded in popularity, Delgarth took on the Proton franchise.

However, it was in 1986 that the company started its longest-standing partnership, gaining the Hyundai franchise at the dealer’s second Milton Keynes site.

Ten years later, it opened a Kia dealership in the town. In the late 1990s it invested heavily in new dealerships for the two Korean brands. Last year, the company opened Bletchley Kia and Hyundai, taking over a former Wayside Group Audi showroom, giving the brands representation to the north-west and south-east of Milton Keynes.

Finally, in terms of the franchise portfolio, Mitsubishi was added with the opening of a showroom in Wolverton last year.

Turney explained that he chose the Japanese brand after he had attended a conference in Amsterdam and was struck by the number of electric and hybrid cars in use and the obvious growing appetite for such vehicles.

Shortly afterwards, Mitsubishi came calling and conveniently its products include alternatively fuelled cars and don’t compete head-to-head with Kia or Hyundai.

 

Picking the right partners

With a growing business, Turney believes the right brand partnerships are key to success.

He said the relationship with Hyundai has been a cornerstone to his dealer group’s success since 1986.

“Hyundai approached us and we appeared a good fit and as we’ve both sought to grow, have had a brilliant relationship with them from day one,” he said.

In 2008, the dealer group spent £1.5m redeveloping the Old Stratford site and Delgarth has bought land behind it for expansion. The new centre was opened a month before the 2009 Government scrappage scheme, introduced to boost new car sales during the recession. Turney said the effect was dramatic: “Business exploded, basically. In our first year with Hyundai we sold 38 new cars. In 2009, it was about 1,000.”

 

Steve Turney, Delgarth“We’re doing our best not to pre-register cars – only a handful each month – and instead focus our efforts on good business” Steve Turney, managing director, Delgarth

 

Kia became established with Delgarth in 2002, with an original site in Stony Stratford. While the brand is now represented elsewhere, Delgarth now uses this site as a trade centre.

The sale of Wayside to Jardine Motors Group presented an important growth opportunity. Wayside’s holding company Fevore Ltd owned the Bletchley site – then an Audi centre - and Delgarth bought it.

With a dealership already performing well for Delgarth and Kia to the north-west of Milton Keynes, Turney said the Wayside site provided an opportunity for market expansion to the south-east.

“Bletchley residents didn’t seem to come past the centre of Milton Keynes, so we weren’t attracting them to the existing business. By establishing Kia at Bletchley, we can attract those people, plus more from Leighton Buzzard further south. Another 23,000 homes are also going to be built on this side of the town.”

Turney acknowledges concerns that the Bletchley site would take sales from Wolverton and Old Stratford. He said there has been some dilution, but the net result has been a boost in vehicle sales for the group. While the customer database for the northern Hyundai site has about 5,500 names and Kia 4,000, Turney said the Bletchley sites did not have access to these, but started from scratch.

“There will be a natural migration for people that live nearer Bletchley, but we wanted the new businesses to stand on their own from the beginning,” he said.

Through a combination of traditional media – radio and newspaper advertising – and leaflet drops, the Bletchley site began to establish itself. However, Turney recognised that marketing in this way alone would not make the gains required.

“Manufacturer targets continue to get more challenging, but having both ends of Milton Keynes covered has helped us with capacity and we’re doing very well in our region. We’re doing our best not to pre-register cars – only a handful each month – and instead focus our efforts on good business.”

 

Getting sales and service working together

Turney emphasises the importance of sales and service departments working “as one”.

“For example, the last thing I want to hear is, ‘no you can’t borrow a sales demonstrator for a service customer,” he said.

“It is so difficult to know where to advertise to win customers, so I take the view that customers are won in our service department.”

Technicians speak directly to customers about problems, rather than going through the service receptionists and Turney is looking at introducing video in the service department in a partnership with Hyundai to win customer trust in the next three to six months.

Red work conversion is now at at least 70%. Conversion on amber work is less of a priority via video with effort going towards ensuring consistent follow-up on work that has been identified during a service.

Not surprisingly, service plan business is key and Delgarth’s penetration is at about 80%.

“With the manufacturer offers currently so strong – priced at £299 or £99 on special offer – it’s pretty much a given a customer will take one,” said Turney.

 

Steve Turney, Delgarth“Service activity brings the customers in, then the sales department looks after them” Steve Turney, managing director, Delgarth

 

Delgarth’s ‘right first time’ percentage for service work, is “well into the 90s”, he added. Service managers work closely with sales managers to identify sales opportunities from service bookings. The service diary is checked every day and the latest demonstrators are available for test drive in the service department as well as sales.   

Turney tells of one customer, who visited a Delgarth site after receiving one of 800 letters mailed warning about spare wheel theft. She came in to buy an anti-theft lock, saw a new car and bought it.

“Service activity brings the customers in, then the sales department looks after them,” he said.

Turney also believes the importance of the test drive cannot be overstated: “Every new car customer has a test drive where possible. Because if they don’t, you won’t sell a car. And it is not about going around a couple of roundabouts and returning to the dealership.

“For example, if a customer is potentially coming out of a Volvo XC90 into a £40,000 Kia Sorento, the test drive needs to be 20 miles. A proper test drive is essential as we’re seeing more premium-brand drivers show an interest in our products.”

Overnight test drives can be arranged and Turney is adamant customers should be able to test whether their potential new car fits in their garage, or will take the luggage they need it to, for example.

“I don’t see the point in being awkward, in saying no to a customer’s genuine concerns.”

Giving another anecdote, Turney tells of a customer of 20 years who moved to Wales from Silverstone and still buys cars from Delgarth, most recently exchanging a Kia Picanto and Rio for a Venga and a Mitsubishi Mirage.

Staff turnover and recruitment is not an issue, with Turney able to name members of the team that have been with the company for 26, 20, and more than 10 years.

“As a family company we can be more flexible with staff, we can talk to the team and if there is an issue we can try and help.” And while Turney visits every site every day if he can, he says his philosophy of looking after people is shared by his managers.

He doesn’t pay a high basic salary compared with other dealers, but there is an end-of-year bonus based on the company’s profits, with staff getting a percentage based on seniority and length of service. If there is a bonus for the business attached to a sales target, sales people can get a percentage of this if it is achieved.

Despite Milton Keynes being a base for numerous manufacturers and their dealers, Turney recruits sales people from outside the sector, typically from restaurants and catering industries.

This approach began through chance: “We employed a couple of people with this background – one from Harvester, another from Frankie and Bennys – and they know how to look after customers. Plus they were used to working late in the evenings throughout the week so working on a Sunday is not an issue.”

Will the company’s growth endanger the level of customer care the business expects?

“Hopefully not. We’ve a good team of managers that have been in place for years. It’s very rare I get a complaint letter.”

 

What does the future hold for Delgarth?

Delgarth’s net assets are more than £7m. Just over half of this is in cash, which Turney plans to fund expansion “when we find the right opportunity”.

“We’re looking for opportunities within a 40-mile radius,” Turney said. “So, an hour’s travelling time.” And ideally with Kia or Hyundai, although Suzuki would also be a potential fit.

There is no rush to purchase, however.

“We’ve got the cash to allow us to act should the opportunity to buy arise,” said Turney.

The company has highlighted Northampton and Bedford as possible growth areas. Bicester, a 40-minute drive to the south-west of Milton Keynes, is also attractive. “We think it’s going to grow, with 13,000 houses planned there, so a good fit for our business,” said Turney.

Turney believes Delgarth is ready to meet the challenges set by his manufacturer brands’ ambitious sales targets. Kia and Hyundai, for example, have aspirations to achieve 100,00 new units in a year by 2020. By the end of November 2015, Kia’s registrations stood at 75,023, Hyundai’s at 82,846.

“As we’ve invested early in the brands and have got a large and expanding town catered for by our expanded network, we are in a strong position to exploit the opportunities provided by a growing service parc and customer base – supported by product ranges that continue to be updated and improved,” Turney said.

 

The Volkswagen issue

Delgarth shares a home with Volkswagen, which has its UK base in Milton Keynes.

Turney said the German company’s ongoing issues with the emissions scandal have not led to customers seeking reassurance about the environmental friendliness of Kia or Hyundai vehicles.

“I’ve had letters from both manufacturers stating their emission testing is carried out to the letter of the law and there is no cause for concern about their engines. But customers haven’t been enquiring about it as a result of the Volkswagen case,” he said.

He said he had been frustrated by the issue: “We’ve lost quite a few fleet deals over the years to Volkswagen. Customers have turned away from us because they believed, for example, the Cee’d was not as good as the Golf on emissions.”

Turney does believe the amount of time it will take VW to recover customer trust will provide brands such as Kia and Hyundai an opportunity to win market share.

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