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With the economy struggling mightily, CARSTAR has released 10 action steps it’s advising its stores and other collision repair facilities to take to survive and hopefully thrive during tough times.
“Store owners should be making every effort to tighten their belts and reduce overhead, which is absolutely essential considering all the margin squeezes we have,” said CARSTAR President and COO Dan Bailey.
Bailey’s 10 action steps are:
1. Live your company culture. In CARSTAR’s case, it’s living our motto: “Relax, We’ll Take It From Here.” We strive to educate and train our employees on that every day and practice that every day. It’s even more important to do it today with the way the economy is. What does it mean? Greet every customer every time like he or she is your friend. Go the extra mile and show customers that you really care. Sometimes we get sloppy there, but we can’t afford to.
2. Improve your closing ratio. It used to be that a 60 to 65 percent closing ratio was OK, but it’s not OK anymore. It needs to be 80 to 90 percent. You should be closing 20 percent more of the jobs that drive onto your lot. Customers come to your store because they want you to fix their cars, so treat their visits as if they are the interviewers and you are the interviewee. You need to be measuring your close ratio every day to know what it is. And when you increase it, you should celebrate with lunch for everyone or some other incentive. Don’t give the customer any reason to go anywhere else.
3. Maintain and/or intensify your contacts with insurers. We have a program at CARSTAR called Assistance with Continuous Education (ACE), which is an entire platform of online continuing education courses for insurance professionals. But even if you’re not a CARSTAR store, you should be spending time with agents because they still have the ability to refer a good bit of business to your store.
4. Make sure to get paid for all work performed. I audited some estimates from CARSTAR stores and found that they were leaving an average of 200 “non-friction” or indisputable dollars on the table. I think it’s because sometimes the estimators don’t understand the different estimating systems or the P-page logic. I recommend that store owners do their own desk reviews on estimates to make sure they’re getting all that they should be and aren’t leaving off non-included items.
5. Work on DRP relations. Just because you have one or more DRPs doesn’t mean that there’s not more business to be found, especially if you’re performing at a high level. Every store should be measuring KPIs CSI, touch time, etc. and marketing them to DRP partners. Better performing stores will get more work. Some of the KPIs CARSTAR tracks are:
Labor gross profit %
Paint and materials gross profit %
Parts gross profit %
Sublet gross profit %
Overall gross profit %
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
Dollars per sq. ft. of production area (total revenue divided by sq. ft. )
Dollars per tech
Paint and material cost as % of total sales
Overhead as % of sales
The KPIs CARSTAR feels are most important to insurers are: cycle time, touch time, closing ratio and CSI.
6. Internet advertising. If you aren’t doing local Internet marketing, you should be to reach customers who search the Web for shops. You should still be in the Yellow Pages, but you should be spending less there and more online.
7. Ask customers for referrals. Word of mouth from a satisfied customer can be the most powerful tool in marketing. You should follow up delivery of the vehicle with a personal call to gauge the customer’s satisfaction. Ask them if they would refer a friend or family member who gets in an accident.
8. Go after fleet work. It’s discounted but can contribute to your profitability in slow times. Remember, overhead still goes on in those slow times. When you have excess capacity, fleet work can add to the bottom line.
9. Go after corporations. Corporations that are within a few miles of your business are fair game. Sometimes they’re looking to start employee benefit programs, or maybe you want to start VIP programs for them. It’s a good way to increase the number of cars that come to your shop.
10. Get involved in your community. Being involved in your community means a lot more today. Join a community organization or host one open house a year. There are plenty of ways to get involved.
Bailey’s final piece of advice is to not cut spending in marketing or training/education.
“When the going gets tough, these are the areas people normally cut,” he said. “We’re asking our CARSTAR stores to increase spending in these areas because right now, you’ll get more value out of your dollar. Besides, you just can’t afford to cut training and education.”
Headquartered in Overland Park, Kan., CARSTAR is the largest group of independently owned and operated auto body repair stores in North America. The privately-held company currently has more than 280 locations in 27 U.S. states and more than 125 Canadian locations. Since it was founded in 1989, CARSTAR has performed more than 2.5 million repairs with an average customer satisfaction rating of 97 percent. For more information, visit www.carstar.com.