Autolab takes its business model to Mexico2022-05-05 | Salvador Zepeda
In 2021 Autolab expanded its operations to Mexico to continue to lead the disruption of the auto repair industry in Latin America.
This expansion comes out of an iteration and pivoting process that started before the pandemic and resulted in fundamental improvements both in the business model and its operation.
Mexico is the first country that Autolab expands into, after consolidating a strong model and operation with a presence in 13 cities in Colombia and more than 100 auto repair shops in their network.
To unveil all the secrets and learnings about this journey of growth and expansion, we talked to Salvador Zepeda (Chava), Co-Founder and CEO of Autolab.
Chava shared some key insights on growing and scaling a business to another country in LatAm, and the major challenges Autolab has found in its journey.
Let us begin by sharing Autolabs' purpose and the basic idea of how they disrupt a traditional industry to better serve Latin America's middle class.
Autolab is a digital platform that connects repair shops with car owners offering people affordable and reliable repairs while helping shops grow.
That is why its purpose is based on solving a fundamental problem for each of these demographics.
For the shop owners, Autolab provides a reliable acquisition channel while helping them with tools for managing the shop more efficiently as well as support in customer service.
For the car owners, Autolab offers great consumer service (which is hard to find in this industry) through technology and customer service at an affordable price.
How did we get to this point?
Like any other of our ventures, Autolab is the result of a constant iteration throughout our Company Building Methodology.
This means that it started with a problem we identified in a specific industry that then led to a variety of business concepts to be tested and validated.
The first approach of Autolab was to launch its own network of repair shops in order to have control over the quality of the repair process. This approach worked out for a while but soon they realized it was hard to scale. This, combined with smartphone adoption by the mechanics led to the idea of building a platform.
Before the pandemic arrived, the team started to work towards a pivot that would allow them to transform Autolab into a platform to connect current shop owners with potential customers.
This approach was not only more effective but also more profitable, not to say that it had a greater impact on the sector by integrating more businesses into a single platform that standardizes some of the major pain points of this industry such as customer service, service tracking, service evidence, warranty, and price transparency.
Of course, the pivot forced Autolab's team to quickly iterate their model to focus on automation and refinding their technology so it could integrate more and more repair shops.
"A pivot is full of unseen opportunities. That is why the most important part of the pivot is to change the team´s mindset so they seize all those opportunities". Chava.
The new model, technology, and vision for the company allowed Autolab to grow its shop visits and revenue by 4X in only a year while increasing the number of repair shops in the network by 7X.
Once the team validated that the new approach was working they were ready to scale and raise a funding round of 6.5M USD led by Bullpen Capital, allowing them to start thinking about their next step expanding to Mexico.
But before going into what happened next, let's recap some of Chava's main learnings from this pivoting and growing process.
Here you have 3+ lessons that Autolab's team shared about their process of finding product-market fit and then starting to accelerate the company.
1. Bringing clients is a piece of the growth challenge, but it is far from being all of it or even the most important one.
A lot of attention is given to how to bring new clients and make clients return, but little attention is given to building the systems to serve them properly. One often overlooked is to think about the people that you need to serve those additional customers because it is not only about having the right number of people but also at the skill and attitude level that you need them. You need to consider their learning curves and hire them before they are needed or your customers will suffer the consequences.
"We now know that the learning curve for the majority of our operational positions is around 30 days, this allows us to hire a new team members and train them so they can be ready to achieve their top performance at the time we need them to do it". Chava
2. Building an exponential growth curve feels like investment portfolio management
One can easily assume that a growth curve is a result of a few channels that are just getting more money injected to bring more customers. However, a growth curve often represents a combination of channels with different maturity and growth rates. You are constantly making decisions around which channels to invest in, not only money but also people. Channels look a lot like investments.
There are the channels that always work, the ones that have not worked, but you feel you can still try new things and the ones you have not tried. And you need to make your bet on them. Each channel is like an S-curve and you are building channels on top. And, as some channels lose their ability to bring growth at that speed, you need to be ready with the next channel to keep driving the growth at that pace.
"When accelerating a business if you concentrate on a single channel because it was the one that was already working, you will not only saturate it, but you will also lose important opportunities to diversify the strategy as you grow". Chava.
3. Growing exponentially implies breaking things and finding effective ways to put them back together. It's important to be ready to see things that worked perfectly become less useful as the company grows.
The systems will break, that's a fact. What we did before in a Google Sheets now needs to be automated and developed from scratch. Chava
4. BONUS: Last but not least. Culture is at the core of every change. We'll leave Chava to explain this as the most important part of the pivot.
"One of the most important transformations that are made when evolving is changing people's mindset. Getting everyone to move at the same pace is one of the biggest challenges in a pivot. Step number 1 is to pivot the way people think, the rest follows". Chava
Mexico: A land of opportunities.
The reasons behind Autolab's expansion to Mexico go beyond cultural similarities. Although they are foundational to the growth strategy, there are also huge industry insights in play.
For starters the number of vehicles circulating in the country. Mexico has around 297 vehicles per 1.000 inhabitants, which doubles Colombia's 126.
Additionally, this is an industry that has showcased continuous growth in the last couple of decades. According to Statista, the number of circulating vehicles in Mexico increased by 26% from 2015 to 2020, as shown in the following graphic.
There are of course important cultural traits that connect Colombia and Mexico, such as the high rate of informality and lack of trust in auto repair services.
All that, combined with an impressive growing market of about 20 million people only in Mexico City, has positioned the country as the heart of Spanish-speaking Latin America, allowing hundreds of businesses to reach potential customers connecting the region with transformative and technology-based companies.
"Mexico is an ideal destination for Colombian startups to expand due to the similarities and size. Up until now, we have 14 repair shops in our network in Mexico City and we are expecting this number to grow exponentially during 2022.
This is only the first step, we are learning as much as we can for now, but we do see ourselves expanding our operations to other countries in the region like Peru or Chile". Chava.
To finalize, let's explore the biggest learnings of opening Autolab's operations in Mexico.
1. Do not underestimate the degree to that people need to understand the model, philosophy, and culture of the company. It is very important because they will be facing new situations often and most things are not in the playbook.
"One of the hardest things to standardize is the criteria to be applied to new situations. Large deviations can be generated by slight differences in judgment" Chava.
2. A person with company-wide influence needs to lead or accompany the launch. The new country will have needs that you have not anticipated and the easiest way to solve it is often with the team of the other country. That happens when a person that knows the old team, systems and has a high level of influence is there.
Accelerating with a methodological approach
Expansion and acceleration processes are highly uncertain, everything happens so fast it's hard to be prepared for unforeseen situations. BUT counting on a clear methodology and a group of experienced advisors can be key to a successful growth strategy.
That's exactly what we do with our ventures as they grow. We support them, operationally and strategically, so they can thrive.
Here are some of Chava's words about working alongside Polymath's team:
- Working with Polymath is like being an entrepreneur with insurance. Being an entrepreneur with a certain safety net.
- It is in difficult times when we realize that we are not alone and that we always have people who will help us navigate complexity.
- We have a network of connections and people who have been established as board members and investors. Most of them have become excellent mentors that I greatly appreciate and investors that are very well-intentioned to advise and share their experience at all times.
- The services offered within Polymath itself are foundational: Legal, talent, marketing, finances...Now we have the infrastructure to operate ourselves, working together only on strategic issues, but in the early stages, they were crucial to building what we are now.