It would be an obvious over-simplification to try to compare cooking a hamburger with performing a collision repair. However, the concepts that made McDonald’s arguably the most successful small business in the world can help propel your collision business to the next level of success. The concept is to transform the "Mom and Pop" shop that’s full of variables into a process-driven, turn-key business. Successfully doing this depends upon the drive of the owner and the unique skills and dedication of select employees. But, when it’s all said and done, the turn-key business is simpler to operate, earns higher profits and operates with less stress and dependency on the owner.
What’s This About Keys?
When we use the term "turn key," some may not understand what it means other than "turning a key." For others, however, the term turn-key is not only familiar, but a quest – a mission for their businesses’ development.
The term turn-key is synonymous with many other concepts and a long list of other names, but in its simplest definition means any process, system, product or business that operates fully with the near simplicity of turning a key. The vehicle is a great example of this when we think of a product: Turn the key, the vehicle starts and it’s ready to take you to your destination. In much the same way, a turn-key business operation is one that has all of the elements in place to operate fully by just following the processes. Put your key in the lock, open the doors and it operates efficiently, turning out the required results and generating the projected profits.
From the days of the industrial revolution, manufacturing businesses have been creating systems and procedures, such as assembly lines, that follow exact timing and set procedures and operate to exact tolerances. This aspect of their businesses could be defined as turn-key.
The foundation of the automotive industry has been built around this very concept. Industrial and process engineers introduce refinements to make the processes more efficient, cost effective and quality consistent.
Looking outside the auto industry, there are also many other great examples – but none better than McDonald’s. By systemizing every aspect – from image, marketing and sales to the building, location and even the manufacturing of the product – McDonald’s has created predictable results that make it – hands down – the most successful small-business operation in the world.
McDonald’s turn-key approach not only made one business a success, but it revolutionized an industry and created several others. Every employee has well-defined job descriptions that follow exact tasks based upon procedures and checklists, and even the equipment and materials used are specified, consistent, meet performance standards and follow standard operating procedures.
A Little Help from Hamburgers
While there’s an obvious difference between a fast-food restaurant and the re-manufacturing of damaged vehicles, the desirability of McDonald’s success is compelling. Consider that an average McDonald’s franchise has a 95 percent or higher success rate within its first five years of operation. And its net profits average higher than 24 percent on more than $1.2 million in gross sales annually – a far cry from the success rate of an average body shop at an average of only 3 to 6 percent pre-tax net.
But what if we could achieve greater success by employing many of McDonald’s basic principles?
While we’re at it, we could also look at other turn-key business operations such as Wal-Mart and Home Depot for other strategies. Consider this: Single-line collision repairers operate by selling only one product that’s occasionally sellable. To make matters worse, the product that’s sold is also an undesirable! People may need the product, but they certainly don’t desire it or wake up in the morning wanting it. On the other hand, Home Depot, Wal-Mart and Target have put small independent retailers out of business in community after community because they operate so much more efficiently than the single operator who hasn’t become turn-key. They offer an assortment of products and services that give a one-stop shop for the consumer, and the diversified product line helps to level out their business peaks and valleys. They can also market more cost effectively.
Benefits of Becoming Turn-Key
Consider the fact that repair businesses are faced with having to do more volume in less time with less gross profit, increased operating costs and an ever-increasing labor shortage. The collision repair industry is evolving from a labor-intensive, hand-crafted job shop into a fast-turning, parts-replacing re-manufacturing business. But it’s not just us; almost all manufacturing businesses, restaurants and retail businesses have recognized these same needs for change and have adopted turn-key business practices to capitalize on them.
Once we let go of the past and set our sights on the future, we can begin to see the advantages of creating turn-key operations. After all, some of the biggest challenges facing a repair business can be overcome by employing turn-key principles.
The negative impact of high labor costs and a shortage of quality labor can be lessened by "dumbing the process," so to speak, by creating and following set policies, procedures, checklists and forms throughout the business. Another benefit: Second shifts become possible when we build in standards and streamline each set of tasks into trainable processes that create consistent results.
Greater gross profits also can be gained when we recognize that with greater volume, we can gain buying power. So, too, can we gain economies of scale with our overhead and administrative costs. This includes training, staffing, the use of technology and even insurance and facility costs.
With better systems, we can control quality, increase productivity, reduce costly defects, and eliminate lags and bottlenecks in the flow. And with a better production process (re-manufacturing), we’re able to turn the repair faster (shorter turn rate or cycle time). The result is greater satisfaction from vehicle owners and insurers – and greater profits for repairers.
There’s more. With quality marketing, we can build brand equity and name recognition – helping to bring more vehicles to our doors – and with process selling and consistent customer handling, we can raise our closing rate – keeping more of the customers who do come to our doors.
And since we’re able to create a work environment that’s consistent and predictable, we’re also better able to train and develop staff and management, and better able to replicate our operations into multiple locations that deliver the same quality, customer satisfaction and profitability.
With a turn-key operation, we’re able to do all of this without being solely dependent upon the will and drive of the owner alone. This makes the business both sellable and worth keeping.
The Elements of Success
For a business to truly be successful – and to be a true turn-key operation – it must have all the various elements working together; no one element stands alone.
Systems by themselves won’t make the business successful, nor will the staff without training, leadership and all the right equipment, tools and materials. The business itself must be driven by profits, as well as by satisfied customers and employees. Quality must be at the foundation of the business, and the relationships, marketing and image must be strong enough to bring the customers to the doors and keep them coming back. It’s when all of these elements are put into place that you have a turn-key operation.
In closing, allow me to modify a saying made famous at the ARMS seminars of the 1980s. The original saying was, "If you always do what you’ve always done, you’ll always get what you always got." And that was true – but it isn’t anymore. Today it should read, "If you always do what you’ve always done, you won’t get what you always got … because someone else will do it faster, cheaper and better!"
Writer Scott Biggs is CEO of the Business Development Group and editor and publisher of BodyShop Video Magazine and Collision Concepts. Biggs came to the industry as general manager and partner of Auto-Tec Computer Management Systems until it was sold in 1988. Since then, He’s built several business ventures around BodyShop Video. The most recent are EOM, the Electronic Operations Manual and bodyshopTV.com