Maintaining the kind of growth required to get on the Business Journal’s list of L.A.’s Fastest Growing Private Companies for four years in a row is impressive in itself.
But staying on the list for those four years even amid the “near-death experience” of legal warnings and an industry boycott – well, that’s unprecedented.
And that’s the story of TrueCar Inc. in Santa Monica. It’s making its fourth appearance on this year’s list, at No. 43, with two-year revenue growth of 116 percent.
Revenue for 2012, when the company was under siege, was $82.4 million, compared with $76.3 million in 2011 and $38.1 million in 2010.
Chief Executive Scott Painter credits the company’s growth to its business model. The website helps consumers find a fair price for a new or used car in their area, and for each completed car purchase, a dealer pays TrueCar a referral fee of about $300.
Founded in 2006, the company analyzes vehicle sales data and allows consumers to see the average price paid for a particular model in their area, which they can leverage in negotiations with dealers.
TrueCar has a staff of 320 with two other offices in California; one in Boston; and another in Jacksonville, Fla.
Trouble arose last year when dealers across the country complained that the car pricing website caused them to cut prices. TrueCar’s business model at the time required dealers to bid each other down to the lowest price. Regulators in several states also stepped in saying the structure of its dealer referral fees was illegal.
“We were boycotted,” Painter said. “That was an expensive process for us to go through. It certainly was a near-death experience.”
It resulted in a change to the company’s business model in some states. Dealers now no longer bid against each other; consumers see average prices paid for each model. TrueCar also tweaked its marketing message: Now, it offers to help buyers avoid overpaying, instead of promising them the lowest price.
The number of dealers that work with TrueCar has climbed from a low of 3,200 last year to 6,700. TrueCar now works with nearly all the top 50 dealer groups, including AutoNation Inc. in Fort Lauderdale, Fla., and Penske Automotive Group in Bloomfield Hills, Mich. Before the controversy, it worked with about two-thirds of dealer groups.
TrueCar only has slightly more than 2 percent market share of new-car buyers in the United States, so growth is likely to continue at a breakneck pace, Painter said.
“From day one, we’ve had a discipline around revenue,” he said. “This is not about go big or go home. This is about building a responsible, profitable business.”
– Subrina Hudson
