For other installments in this 12-part series, click on the corresponding number: 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12.
Direct repair programs can be described in many ways. Since most days I consider myself a lady, I’ll leave the more colorful descriptions to your imaginations. Whether you sing DRP praises, curse their existence or settle somewhere in between, one label is undisputed: They are expensive.
Participating in DRPs comes at a substantial cost to shop owners. Even I know that, and I don’t have a single memory of the Golden Age — the days when a hardworking tech with a good work ethic could open up a shop, put his nose to the grindstone and eventually taste the good life. A time when owners wrote their own tickets, and dare I say, the collision repair experts were in charge of their own industry.
Unfortunately, for those of us starting in the industry in the last five years, this is the stuff of myth and legend. The battle was fought and forfeited before we raised a united front. The reality is, I can only fantasize about the utopia of the ’80s and ’90s. Today, the pot of gold doesn’t exist — and if it does, it’s well-guarded by the insurance companies who had the forethought to seize it.
The price tag for a trip over the rainbow is more than the obvious labor rate and part concessions; there are also the upfront expenses for equipment and administration necessary to meet minimum requirements.
As long as the work flows in, money continues to churn. But once financially dependent on the DRP volume, no concession can be refused and the ultimate price is paid — losing control of your business.
With the current state of the industy, we have to make our own happy endings. We also have to face the reality that insurance companies are a major force. Right now, we’re in preparation mode, making plans to go the DRP route. So for us, the best strategy is to play the cards we’ve been dealt without folding or carelessly going all in.
CollisionWorks was built exclusively from seed money. Whatever the shop needed came out-of-pocket. Besides being uncomfortable with debt of any kind, we didn’t want to be beholden to anyone. But considering the cost of DRPs, we’ve started to apply some of the business lessons we learned in other industries — namely, though cash is king, there’s power in other people’s money.
Since we didn’t open with borrowed capital, we’re able to start from scratch, debt free, with the advantage of a proven track record. However, just because we can acquire the loans doesn’t make every purchase in our best interest. For example, upgrading our paint booth is feasible since we can afford the monthly payments with our current volume. But not if it won’t significantly increase our cycle time.
To avoid becoming over-extended, we ask ourselves two questions before making any DRP purchases:
1. Can we justify the cost to our business?
2. Can the business support the cost given our current financial picture?
Some of the requirements are a no-brainer. As I mentioned in the previous article, a production management system creates organization and helps track our bottom line. A commitment to I-CAR training and certification for our employees also makes good business sense. We win as a team and we lose as a team.
We’ve had a craftsman who never had a comeback and who has never stepped foot in a classroom. And, we’ve had a painter with all the credentials who couldn’t paint his way out of a box. Still, we believe our people can only improve through further training. In both cases, the upgrades are affordable benefits worth the expense.
As far as state-of-the-art equipment, it’s nice if we can get it. I see the faces of our techs light up at the sight of the latest resistance spot welder. But, when I see the equipment in the more established shops, I remind myself that in many cases, they were in business before I was born.
When you see a beautiful new computerized measuring system side by side with a well-used mechanical system, you’ve gotta figure they’ve gone through a few expansions. So it would be foolish for us to drown in overhead trying to keep up with the Joneses.
DRPs may be expensive, but they’ve forced us to make critical decisions and clearly map out our destination. By keeping the goal of DRP in perspective as just a portion of our expansion plans, we hope to avoid costly mistakes along the way. Sometimes it’s not the destination, but the journey. Here’s to a profitable pursuit.
Writer Monica Dorsey is a partner at Classic CollisionWorks in Philadelphia, Pa. You can reach her by e-mail at [email protected].