: New Facility Helps as Company Continues Its Growth
Gerald Benowitz says auto dealers are slowly catching on, realizing what good customer relations can do for their bottom lines.
That, in turn, is helping the bottom line of the company he heads up, San Diego’s Newgen Results Corp.
Newgen, which provides customer retention and marketing services to some 5,500 auto dealers nationwide, is growing so rapidly it is moving into a new complex next year.
It recently announced a deal to break ground for a 103,000-square-foot building in Sorrento Mesa next month.
The new facility will consolidate Newgen’s current operations at two locations, in Del Mar and Sorrento Valley, and give the company plenty of room to expand , something it has been doing handily in recent years, Benowitz said.
“Our growth rate (in revenues) has averaged about 60 percent annually in the past several years,” he said. “We believe that the new facility will help us attract more talent, and shows our continued commitment to the San Diego area.”
Newgen added more than 150 employees to its work force in the past year, bringing the total to about 600 full- and part-time workers, Benowitz said.
Newgen’s business is alerting customers of auto dealers that it’s time to bring their vehicles in for servicing or that the dealer is offering the same or similar models at a good price.
The servicing business has become the major contributor to dealers’ profit margins. But beyond that, improving customer contact makes sense since satisfied customers are more likely to think of buying a new car from a dealer they know and already rely on, Benowitz said.
Lengthy Customer List
Newgen’s 8 million customers receive reminder letters, thank-you letters, and follow-up phone calls on behalf of dealers where they purchased the vehicle.
Dealers pay Newgen an average of about $20,000 annually for the service, Benowitz said.
“They’re absolutely essential to my business,” said Ed Witt, owner of the San Diego Auto Collection Lincoln-Mercury dealership in Mission Valley and Escondido. “They keep me in contact with my owner base on a consistent basis. They do all the follow-up that we need, and they’re a cost effective tool. They’re always open.”
Witt, who has used Newgen’s services while working at a Milwaukee dealership before purchasing his current lots, estimates Newgen has increased his servicing business by 40 percent since he’s used it.
Rather than assigning the customer alerting and retention task to full-time employees, dealers are finding it more efficient and cheaper to contract the service out to specialists, Benowitz said.
Earlier this year, Newgen launched a Web site designed to allow auto dealers to tailor advertising pitches more effectively.
With an extensive database on so many customers, dealers can select the exact criteria of the customers they wish to reach. So, the mailers could go out to Volkswagen owners whose vehicles are hitting 40,000 miles, or to owners of Ford Explorers, alerting them to the latest sale on such vehicles.
The site, called Carabunga.com, is already up and running and has six employees. Yet another Newgen division provides management expertise to operate a dealer’s entire services department.
Last year Newgen took a big step in its development when it acquired Computer Care, a division of the dealer services group of ADP, for $11.2 million and additional cash, based on the retention rate of customers.
One analyst estimates Newgen will end up paying between $14 million and $16 million on the sale which added 4,000 car dealers to its customer base.
Attractive Business Plan
Newgen was launched in 1994 after Benowitz and a partner acquired the licensing rights to a defunct Toronto software company. Newgen’s business plan was good enough to attract some $15 million in venture capital. Last year, the company did an IPO for about $40 million, providing it with the capital it needed to expand.
While the stock was recently trading at $10.50, below its IPO price of $13, Benowitz attributed that to the general battering the entire Nasdaq has taken, and because the stock is thinly traded.
“We’re quite convinced that ultimately, our stock price will follow our earnings growth,” he said.
Based on several analysts tracking the company, Benowitz’s hopes aren’t far off.
James Pettit of Hambrecht & Quist in San Francisco estimated Newgen’s net profit will be more than $7 million on revenues of about $79 million for this year, up from last year’s $2.9 million in profit and $55 million in revenues.
Pettit projected the stock would rise to $25 by the end of the year.
Last week Newgen Results was named to dbusiness.com’s “50 to Watch” list for the second quarter in San Diego. The national Internet news service said the list is made up of dynamic small- and medium-sized companies positioned for tremendous growth over the next three months in their markets.