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To compete against those kinds of players requires, among other things, good management. Dunkel says that growth in Hamlin's market niche will help the company attract skilled managers. "When people become more familiar with the concept, we will be able to attract quality people," he says. "They will be less hesitant to join us."

But growth could be constrained by supply. As demand for good used cars expands, prices will rise and margins narrow. "We have good connections," counters Dunkel. "If it gets tough, we'll still get our fair share." Besides, Dunkel doubts that most franchise dealers will ever make a strong commitment to used cars. He argues that their new-car sales will always demand their best talent.

Next March, Hamlin plans to open a second location, on the west side of town, where much of the city's population growth is and where there are no car dealers. He expects to invest $5 million in land, building, and inventory. The new location will carry more high-end cars and more imports, and the service area will be larger -- 14 bays. "We'll have a big window into the service area," he says, "so people can see what's going on." Among the amenities Hamlin expects to provide is a shuttle service customers can take to the local mall while their cars are being worked on. He also foresees $1 million in sales from the service department at this new location in 1996.

In October 1996 Hamlin hopes to open a third store, in Champaign, Ill. By then, he believes, he will have proved the concept well enough to attract serious financial backing. Maybe he can take the company public. Says Hamlin: "There are specialty chains selling just about everything, but you don't find them in the car business. If I had the capital, this could be the Wal-Mart of the car business."

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EXECUTIVE SUMMARY

Company: HPR Automotive Superstore

Concept: Sell late-model used cars and provide a level of service more typical of a new-car, or franchise, dealership

Competitive advantage: HPR Automotive Superstore deals exclusively in used cars, which generate higher profit margins than new cars do while offering consumers substantial savings. Because it isn't tied to a particular new-car manufacturer, HPR Automotive Superstore can tailor its inventory to stock only the most popular models.

Projections: Current-year revenues of $9.9 million and pretax profits of $600,000. In 1996 HPR will open two additional locations and expects sales of $19.6 million and pretax profits of $1.2 million.

Hurdles: Increased competition from companies with much deeper pockets. Finding good managers. High capital requirements for growth.

THE FOUNDER
William K. Hamlin, 34, President and CEO

Family: Wife, Kelly

Personal funds invested: $250,000 invested in capital improvements, $300,000 pledged as collateral to establish $2-million credit line for purchase of inventory

Equity held: 89% of parent company, Hamlin, Power & Reaves Ltd.

Salary: $200,000 (drawn from parent company)

Entrepreneurial roots: Father owns a restaurant and motel, where Hamlin worked growing up. Arrived in Springfield with $190 in his pocket -- and no car.

Last job held: Real estate salesman

Other companies started: HPR Automotive Marketing, which offers direct-mail and sales-training services to auto dealers

On entrepreneurship: "I love competition. Most of the dealers in this town have grown complacent. I feel like the underdog in a prizefight. No one expects me to win."

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HOW BILL HAMLIN EXPECTS TO MAKE MONEY

The Industry at a Glance
Bill Hamlin saw an opportunity in the big spread created by the price of a new car and the corrosive effects of depreciation.

Average cost of a new car at retail: $19,925

Average value of a new car after one year of depreciation: $14,345

Average gross margin on a new car: 6.7%

Average gross margin on a used car: 12%

Source: The National Automobile Dealers Association statistics, March 1995.

Best of Both Worlds
HPR Automotive Superstore is a hybrid. It attempts to combine the competitive advantages of both new-car and used-car dealerships while minimizing the disadvantages of each. Here's how Hamlin sees his business as compared with his competitors' businesses.

Ability to Ability to Ability to

Credibility Finance Multiple Stock Focus on

with Large Profit Gross Popular High-Margin Range of

Customers Inventory Centers Margins Models Business Services

HPR Automotive Superstore Fair Yes Yes High High High Wide

New-Car Dealers Fair Yes Yes Low Fair Low Wide

New-Car Dealers' Used-Car Departments Low Yes Yes Fair Fair Low Slim

Independent Used-Car Dealers Low No No Fair Fair Fair Slim

The Competitive Edge
Hamlin figured he could enhance profitability by offering the array of high-margin services typically associated with a new-car dealer.

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