Q: It has become more difficult each year to stay ahead of the rising costs of owning a collision repair shop, and I fear if I don’t do something soon, I’ll be out of business. I’ve tried everything, but now I’m at a loss. What can I do?
A: Rick, contrary to what you may have been told in the past, you’re NOT the “only one!”
I’ve had many clients contact me with the same concerns and desperation you express. Some actually broke down in tears while on that initial call with me, and it breaks my heart to see repairers feel like this, as it’s simply not necessary. If they stick to some basic business philosophies, effectively manage their customers’ expectations and do a good job, repairers today can thrive…rather than merely survive.
Divide and Conquer
For decades, the auto body repair industry has been comprised of fiercely independent body shop owners who have little actual business knowledge, experience or business education. Truth be told, insurers have taught shop owners most of what they know about the auto body repair business. I was once one of those shop owners.
When I was young, I was good at body repair and painting and dealing with customers. However, I was dismally unprepared to run my body shop like a business. In decades past, the auto body business was extremely profitable, and most any body man with a body shop who provided good work could make a decent living even with little to no business knowledge. That was until business people working for insurers figured this out and more or less took over the collision repair industry and began dictating how the repair was to be performed and how much they would pay.
The insurers became involved in collision industry associations and began sponsoring collision industry seminars and meetings on how repairers could and should do more for less, do it faster and make it up in volume, all under the idea that all body shops were alike regarding quality, service and warranty – which we of course know is not accurate.
Insurers developed direct repair/referral programs (DRPs) and encouraged and fostered consolidators/MSOs to gather up participants in specific markets willing to give discounts and concessions in exchange for the referrals and steering of consumers to their shops. This further divided an already fragmented and highly competitive industry – one in which each repairer had previously been left to run their shop as they saw fit. This allowed the well-educated businessmen and women in the auto insurance industry to step in and take control.
While having a business degree would surely help in being successful in the collision repair industry, it isn’t required. To be quite honest, if a well-educated business major researched the collision repair industry today, they would likely choose to go into a much more profitable profession with far less third-party interference, such as insurance.
Today’s repairers can generally be broken down into several categories including;
- The independent, non-DRP mom-and-pop shops
- The DRP participants (MSOs, consolidators, etc.)
- The high-volume/low-value service providers (who I often refer to as the “Shake-N-Bakes”)
- The low-volume/high-value niche/boutique type shops (specialty/custom shops)
There are those who provide pricing discounts in exchange for insurer referrals, and then there are those who assess full and accurate pricing and use a portion of their profits for marketing and in getting their message of quality and service to their community. And then there are those who merely rely upon their reputation and word-of-mouth referrals.
Victor or Victim
Some have read or heard me state, “As long as you do as you have always done…you’ll continue to get what you have always gotten.” Others have said the definition of insanity is doing the same thing repeatedly while anticipating different results. I find this a recurring theme in our interactions, mainly with independent repairers across the country. They simply don’t think outside the box that, over the years, has been built around them, and they don’t know what to do or where to turn for beneficial change.
Some whine and complain, hoping someone will step in to fix it. Others are looking to get out of the industry or hoping that an MSO will come in and buy them out. And then there are those such as you who are fed up and know that there has to be a better way and have set out to find it.
Winner or Whiner?
I can’t help those who merely complain and hope for a quick fix…because there is none. I can only help those who understand and acknowledge they have a problem and are willing to step out of the box to find and implement the solution that will work for them. The second step is to “cowboy up” and find a credible source to help one do it successfully.
So where does one go to find help? Ask yourself, where do successful companies go to find a fix for their issues or to improve themselves? I would say law firms, auto dealers, bankers and yes…even insurers seek assistance through industry consultants. They look outside their own organizations to seek and acquire the knowledge they need to take their company to the next level and increase profitability through various areas.
Some may recall a couple decades ago when the insurance industry underwent a significant (and detrimental) change when Allstate hired the consulting firm McKinsey & Co. I recall the dramatic change in Allstate’s and other insurers’ behavior, which is clearly discussed in the book “From Good Hands to Boxing Gloves: The Dark Side of Insurance” by David Berardinelli. Many insurers went from having a reputation of being a good neighbor to those described in the book, “Delay, Deny and Defend: Why Insurance Companies Don’t Pay and What You Can Do About It,” by Jay Freidman.
However, many repairers have not sought outside information other than classes often developed and sponsored by insurers and supported by some vendors, which I jokingly refer to as classes on, “How to Do it Below Cost and Make it Up in Volume.”
Getting By to Get Along
So my answer to you and others who find themselves “trying to get by to get along” is if it’s no longer working, profits are down, you’re losing employees and things are getting more difficult, it’s time to step out of the box and seek some changes in how things should be done.
Liabilities in the collision repair industry are very real, as illustrated in the recent John Eagle Collision case (and the $31.5 million jury award/judgment against the repairer). Is it worth it? Are you and others earning the profits or job enjoyment you seek by just getting by and incurring such liabilities? Is it worth it? Do you believe staying with your current business model is viable? Do you think it’s time to see what options may be available to you, just as other successful repairers have done across the country?
I suggest you begin to research industry consultants who specifically serve collision repairers (not mechanical service) and find one that best fits your needs and desired business model while keeping an open mind.
There are many collision industry consultants today, and it seems there are more every day. Like collision repairers, not all of them are alike and each offers various levels of experience, knowledge and results. To learn more on selecting a consultant, read my “Ask the Expert” column from the December 2016 issue of BodyShop Business.
I can assure you that having a good consultant is an investment that should pay through increased profits…not merely cost!
The sooner you and others take the necessary steps to improve your current method of operation, the sooner you’ll begin seeing improved profits and the greater enjoyment and pride that initially drew you into the profession in the first place.