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Busting at the Seams

Growth isn’t as important as retaining quality and, most importantly, profitability.

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"We have a small shop that’s always busy and we’re wondering, when should we grow?"
– Kevin Slifer, owner, Brothers Autobody, Cromwell, Conn.

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When I agreed to write this article, I thought it might be interesting to get the opinions of several industry people from across the United States, plus one in Australia. Their advice is the best answer possible, and it may open some eyes in this industry. I’ll tell you what my opinion is later. For now, read my friends’ advice to the small shop owner:

A Wise Man Once Said …

  • Mark Cobb, owner, Cobb’s Collision Center, Maine:
  • "Remember that growth isn’t as important as retaining quality and, most importantly, profitability. I find it ironic that shops in my area that are five times larger than mine don’t earn for their owner two-thirds of what I earn. Being bigger or the biggest isn’t always the best."

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  • Loren "Paul" Miller, director of operations, Single Source, Inc., Ga.:
  • "From my national viewpoint as a vendor, I see small shops, big shops, dealers and now the large consolidators – and I’ve been privy to the financials of many of them. The best bang for the buck is a small, clean, efficient shop that specializes in some way and is almost fanatical about customer service.

    "No matter how big you get, there will always be someone bigger, especially in larger urban areas. Grow with them and live with the operational nightmare that comes if you don’t have your management act together. More management means more costs. But don’t get me wrong, a 2 percent net is OK when it’s on $30 million.

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    "Grow only after proper financial review. The niche marketer has an opportunity, a manageable opportunity."

  • Jim Graley, owner, Graley Autobody, Huntington, W.V.:
  • "As a shop owner who went through three major expansions in my Ohio shop and then moved the whole operation to West Virginia, more than doubling the floor space, I have a pretty good idea of the effect of expansion on a business. Each expansion resulted in a business increase. People like to do business with expanding businesses. It’s the stand-in-line principle.

    "However, I’ll never build again until my present operation is running 24 hours a day. If you don’t have enough business to have three shifts, you don’t need to build more buildings. It’s easier and more cost effective to utilize the existing structures than it is to try to make payments on a new structure."


  • Bob Brown, manager, Boch Bodyshop, Norwood, Mass.:
  • "Take it from someone who’s experiencing the growing pains of expansion. Here in the Northeast, the No. 1 problem we have is lack of help. People just don’t want to work. [The dealership] is currently moving and doubling its space, and I’m expected to continue the pace and increase the business.

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    "I’ve seen bodymen who tell me they need one more hour to do some work, and when I review the worksheet with them, I point out 16 more hours of work to be done on the job. Getting bigger can be good sometimes, but you find yourself becoming more of a babysitter in the process. A lack of good help is the No. 1 problem here and in other parts of the country."

  • Dean Brahim, owner, Beachmere Body Works, Queensland, Australia:
  • "The size of the premises and staff aren’t as important as being able to produce a quality finished product.

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    "There seems to be only a certain amount of profit that can be earned, even with the right staff and equipment. And profit levels can fluctuate from job to job. An increase in staff doesn’t always mean more profit, but it definitely requires a heavier workload, which isn’t always sustainable. Increased staff also means more holidays, more sick leave, increased payroll taxes and increased expenses for workmen’s compensation, medical insurance, etc. Controlling quality also becomes harder because there are more people you have to manage.

    "Expanding can be a gamble – one that should be thoroughly researched before execution. … I’d never discourage anyone trying to grow, but I’d tell them to expand with caution."

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  • Clark Plucinski, v.p. sales and marketing, True2Form, national consolidator:
  • "Many years ago, my next-door neighbor owned a small deli-grocery store just outside Washington, D.C. He was getting ready to retire and had sold his store. He lived a very comfortable life with his wife and two daughters. He told me to remember one thing: ‘Stay small!’ And knowing what I know today, this is damned good advice!

    "However, everyone’s appetite for risk and change is different. If you’re indeed a change agent – if you really like the excitement centered on new stores, new people and new things – then you need to follow your gut instinct, your dream, your desires. Go for it! But be careful to plan in detail and keep your balance in life. …

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    "I’ll never regret what I’ve done; I needed to fulfill my dream. I could’ve done it with a little less – but sometimes you can’t pick and choose. You just have to go for it!"

  • Bob Richards, owner/industry vendor, Collision Services, Iowa:
  • "I get this question all the time. The definitive answer is the examination of the market size.

    "I got a call last month from a guy in a small town in Minnesota. He has 4,500 square feet of all cut-up space, and he’s doing $50,000 a month. He went to the SBA and they turned him down on a $850,000 deal to put up a new place. Later, I found out his town had 2,500 people and there are about 50,000 in his market area. His shop was out in the boonies, and he thought putting it on a main drag would double his business. When I asked him if there was anyone in his immediate market who didn’t know where he was located, he said no. His desire to expand was based on a whim, not fact.

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    "I’ll always tell anyone wanting to expand to go for it, but be sure you know the total number of vehicles in your market, the competition and the percentage of work you currently have vs. the total. That way you’ll see how much you’ll have to take away from other shops. Then, make the decision if the numbers line up."

  • Paul Tatman, retired, former owner of multiple shops, Ill.:
  • "Before I’d start to grow, there are several questions I’d need to answer: Why do I want to grow? Will the market allow me to grow to my expectations? What is the competition? Is there an ample supply of employees to sustain the growth? … Am I now at the max of my shop capacity? Is the demand for my services that great? Is my bottom line where it should be on my current sales? If I’m at capacity, is it because my workmanship and quality are that good or because I’m working too cheaply? Do I want to grow for my own fulfillment or just to try and run the competition out? Is this something that will benefit me and my family, or is it just to satisfy my ego?

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    "If you’re satisfied with your answers to those questions, then study your market and competition. Know as much about your competition as they do.

    "Check the 20-year plan for growth at your city hall, as this will help you decide how much to grow. Never overbuild for your area. Figure out if you’ll be able to out-market and out-smart your competition. The sharper your competition, the harder it’ll be to gain market share.

    "There’s also a nationwide shortage of technicians. Where will you get technicians to produce your goals? Will you have entry-level training or will you just steal techs from the competition?

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    "I spent 39 years in the business, and I had unbelievable growth every year. At the end of my career, I had five locations and more than 100 of the best employees in the business. Every time we grew, I went through the above questions, whether it was for an expansion or a new shop. I knew my market to the penny. I knew my competition and their businesses better than they did. I had an entry-level training program and the best employees.

    "When should you grow? Look at all the facts and figures, then ask yourself if it feels right for you, your family and everyone involved.

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    "My motto has always been this: If I can conceive it in my mind and believe it in my heart, I can achieve it with my hands."

  • Dick Strom, owner, Modern Collision Rebuild, Wash:
  • "It seems to me, with few exceptions, if a shop desires to be big – really big – it will cost that shop a lot of concessions, DRP relationships, etc.

    "In my market, we’re a small island, and that doesn’t allow for much expansion or mistakes. There were once four shops on this island; now there are two. Years ago, I let a lot of money slip through our hands on jobs, but now that my wife, Bobbi, works with me, we collect what we’re due and try to earn profits on every job. It does no good to turn $3 million at little or no profit. I’m not that big, and I have less headaches and problems.

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    "My advice: Stay smaller and enjoy your job and your life."

  • Mark Pierson, owner, Princeton Auto Body, Ill.:
  • "Smaller, well-run (I stress well) collision businesses are much more profitable and enjoyable to operate and work in.

    "Some years back, I had the option to purchase a larger building or use the money in our existing 6,000-square-foot shop. I decided to stay put and install a central vacuum system, electrostatic air scrubbers and air conditioning, as well as increase my employees’ wages. I chose not to take on additional debt, and now we produce a lot of profit per square foot, more than most other shops.

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    "Two of my best friends own and operate small – one- or two-man – shops. They have excellent reputations, beautiful homes, new vehicles and zero debt. I wish my friends who want to be bigger good luck with their dreams. As long as my wife, Pam, and I can make a good living with the luxury of a trip now and then, my dream has been fulfilled."

    A Few Thoughts of My Own
    I told you in the beginning that I’d offer my advice sometime later.

    Well … it’s later.
    I started my shop with just two people – my wife, Judi, and myself. We’ve since grown to 15 employees and almost 13,000 square feet. I overbuilt my shop, and I’m lucky to have survived the ups and downs over the years while I was learning everything the hard way.

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    After reading my own article, I think a shop should grow. The friends who contributed and helped me have many years of experience, and they’ve told you what you need to know before you grow. Never be afraid to ask for advice from successful shop owners; many will take the time and help you if you ask. Educate yourself and your employees, and get your house in very good order before you grow. Understand financial statements, job costing, market studies and your local market. Also consider the quality of life in all your plans – family and faith first, business second, everything else third.

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    I think part of success is being able to spend your time doing what you like to do. If you can get up later, come to work later, get the job done and have everything you and your family need, then you’re successful. Remember, this business is what we do so we can enjoy the other things we like, nothing more, nothing less. And never make business decisions based on ego.

    If you want to be the biggest and best, do it. But do it from wisdom and knowledge, and make very sure it’s what you want to do. If you want to stay small, do that and enjoy every day to the maximum. Life is difficult, and it always will be. Don’t let your business decisions contribute to the problems.

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    Writer Bobby Johnson and his wife, Judi, own B&J Collision, Inc. in Jefferson, Texas. A contributing editor to BodyShop Business, Bobby has been involved in many areas of this industry for more than 26 years and was BodyShop Business’ 1989 Collision Repair Shop Executive of the Year.

    Are You Ready to Grow?
    Before you should even consider growing your business or opening another facility, you need to be sure your current shop is running at maximum capacity – that your operations and employees are living up to their potential. How do you do this? By using benchmarks. Below are some figures industry experts use to gauge a shop’s performance and where it needs improvement.

    Comparison Analysis

    Your Shop

    Industry Standard

    1. Annual sales per square foot. Divide square feet into annual sales. Square footage includes working space only.

    $

    $150

    2. Sales per tech. Divide number of techs into
    annual sales (production personnel only).

    $

    $180,000

    3. Estimate per work-order ratio. Divide work ordersinto total estimates written. Multiply answer by 100 for percentage.

    %

    70%

    4. Average sales per vehicle. Divide total vehicles repaired into total sales produced by those vehicles.

    $

    $1,850

    5. Company growth. Divide ‘98 into ‘99 sales. Multiply by 100 for percentage.

    %

    0% to 5%

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