Diversification is more than a buzzword to Coraopolis, Pa.-based tire dealer Rich Swartz (in photo). It's a way of life -- and the key to his 50-year-old company's profitability.
In addition to selling tires and fixing cars at his single-store location, Swartz operates a full-service body shop, an auto detail shop, a muffler shop that caters to the tuner market, and a fully stocked auto parts store. He also wholesales tires to more than 150 customers, runs a fleet of 11 road service trucks and operates a towing service. And he still finds time to pursue outside business ventures such as real estate!
Swartz's dad, John Swartz, founded Ace Tire & Parts as a gas station that also did some retreading. In 1959, he started retailing passenger and light truck tires. Six years later, he added commercial tires to the menu. While profitable, "he realized that to stay in the business, we'd have to diversify," Rich says. So in 1974, after moving into the dealership's present-day building, John opened Ace's auto parts store and began a concentrated effort to cultivate the company's auto repair business. "Service and auto parts have become our bigger ticket," Rich says, "while tires have become more of a commodity item."
Ace's 25,000-square-foot auto parts store, which operates on a "Pep Boys-type system," now offers up to 4,800 different SKUs from brake pads to windshield wipers and virtually everything in between.
Also in 1974, John and Rich, who by then was working part-time at the dealership, opened a muffler shop within the facility as an extension of their auto parts business. The division, which cost between $30,000 and $35,000 to set up, now pulls in $1 million a year. Rich stocks 800 to 900 top-line units that are installed at $150 to $350 a pop.
In 1982, Rich, who had become the company's president, added a full-service body shop with an initial investment of $150,000. Six auto body techs now service an average of 250 vehicles a year -- from compact cars to two-ton pickup trucks -- to the tune of $500,000 to $750,000 in annual revenue.
The shop costs between $150,000 and $200,000 a year to operate, Rich says -- and it isn't getting any cheaper. "You need to meet all the Environmental Protection Agency standards. It's $600 just to have a 55-gallon drum of lacquer thinner hauled away."
The enterprising dealer markets auto body services by actively pursuing commercial accounts. "We also tow in accidents and try to get business from those customers."
While a stand-alone facility, Rich considers his detail shop -- also added in 1982 -- to be part of the body work process. "Everything that comes out of the body shop goes through the detail shop." However, more walk-in customers are using the service, Rich says. "A lot of people just don't have the time to wash or detail their cars anymore." He charges $125 for a complete detail job.
All of the above "side projects" combined with tire operations equal $4 million in annual sales.
So what's next? "Nothing at the moment," Rich says. "We have a full plate right now." But that doesn't mean he isn't looking. Rich is thinking about expanding his wholesale operation by opening several satellite warehouses, and that's just one of many ideas.
"You're always apprehensive when you start something. But my philosophy is stay with what you know and understand."
His advice to fellow tire dealers who want to diversify? "Crawl before you walk and walk before you run. That's the best advice I can give." Ace Tire & Parts has been at the running stage for quite some time in all areas, Rich proudly admits. "We're going full bore."
