Pete Bonner began working with Don and Jon Campbell in the mid-1990s on Stoneage.com, one of the first Internet classified sites for automobiles. About that time, Pete also began dating Don’s daughter (and Jon’s sister) Becky, which eventually led to marriage. It wasn’t long after that the trio launched a second automotive Internet start-up called Car.com. After selling that enterprise, they founded what is now Detroit Trading Company, a rising star on the local start-up scene. Serial entrepreneurship rooted in Internet automotive firms has become the family’s stock and trade.
Detroit Trading Company, based in Southfield, gathers, analyzes, and organizes Internet sales leads for car dealers. It started out selling them on an open exchange until the financial meltdown forced the company to change up its business model. Today it sells its best leads with the best credit scores to dealer groups who sign on with the service. This has allowed the 6-year-old firm to grow to 13 employees, with plans to hire more. And Bonner and his in-laws are here to stay, preferring Metro Detroit to Silicon Valley’s start-up kingdom.
The trio, all born and raised here, first decided to build their Internet company in Metro Detroit because no one else was doing it in the mid-90s. This gave them nearly unfettered access to a great lake of automotive greenbacks from the Big 3 and nearly every dealership group. Metro Detroit proved central to everything they needed to do business, providing them with the high quality of life they desired, along with an eager customer base.
“If we would have started in Silicon Valley, we would have had to have opened an office here at one point or another,” says Bonner, senior vice president of Detroit Trading Company.
Bonner agreed to answer a number of questions about starting, growing, and selling a business in Metro Detroit and the general business climate here.
Your company’s business model is pretty innovative, very much in sync with southeast Michigan’s new economy goals. It’s something people would expect to find in downtown Ann Arbor or Royal Oak. How did you end up in a Southfield office tower?
We founded the Detroit Trading Company in April of 2004, and in an effort to keep our overhead low while starting out, we began renting modest quarters in a Royal Oak, Michigan office building. By early 2007, we were outgrowing our space and began searching for a larger office. It turned out that our current location in Southfield’s 2000 Town Center allowed us to really establish our brand and connect with many high profile companies.
The local auto industry is going through a painful evolution right now. The old models are being revised and even thrown out. How do you think things will look in, say, 10 years? How will your company have to accommodate that change?
We can’t really say for sure what things will look like in 10 years for the automotive industry. The business is constantly changing and adapting, and so are we. Right now, more and more consumers are turning to the Internet to conduct research and make decisions about their next vehicle purchase. As a result, companies are continually creating new spaces online which accommodate these actions. It is therefore necessary that we also keep up with these changes and determine where and how these individuals are looking for information – so we can provide our buyers with these leads. In the future, the way in which individuals acquire the information they are looking for may change, but the need for this information will not.
We recently went through a change that speaks to our ability to adapt. We began our company based on a business model that minimized account receivable risk by charging a fee for putting a buyer and seller together. This model led to the development of a lead exchange, called the Detroit Trading Exchange (DTX). By the middle of 2009, we had sufficient capital to actually buy leads and take on this account receivable risk. This step helped us provide better services as circumstances and finances allowed us to do so. Another one of our fundamental, unchanging objectives is to have a strong balance sheet with enough capital to fund our operations without any debt.
Entrepreneurs must also effectively sell themselves to investors by showing investors that they are hardworking and have the determination to make the business grow. Don Campbell, our president, was the founder of Campbell Services, Inc., a calendar software company. The success of this company was due largely in part to the creation of a compelling software product called OnTime. Sales increased from $1 million in 1990, the year OnTime was introduced, to over $10 million in 1996, when the company was sold for $15 million. This particular company successfully raised capital based on a belief in Don’s ideas, persistence, and determination.
Detroit Trading Company tweaked its business model when the recession hit. Can you explain what those changes were and how you made your decisions?
We certainly cut expenses wherever we could, but that was not enough. We went from being a facilitator of lead trading to an entity that actually bought and sold leads. Most importantly, we developed innovative techniques for buying high quality leads and sought out new buyers who could largely benefit from these pre-screened leads, including dealerships and manufacturers. Sales in 2009 were essentially flat, but our growth in 2010 has been the best in our company’s history.
As the credit market improves, could your business go back to its original model or is a return to normalcy in the market too far down the road to consider this option?
Our new business model is working very well for us, but we will always look for opportunities to exploit previously developed technology.
What’s one bad habit you would like to see Metro Detroit’s business community break?
Manufacturers in Detroit for a long, long time, in regards to Internet and interactive [technologies], were very close minded. They thought they had all the answers. They came around.
What’s one good habit you would like to see Metro Detroit’s business community take on or what is one that it already has but isn’t generally recognized?
Good, old-fashioned hard work.
You’re a father of three children. What would you like to see done to help attract and convince them and their peers that Metro Detroit is a place where they should sink their roots?
By my own example, I will attempt to show them that their father was successful at business here.
Jon Zemke is the News Editor for Metromode. He conducted and condensed this interview over email and the phone. His last story was “The Art Of Business: A Q&A with Jesse Cory”.