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Estimates: Waste of Time or Path to Profit?

The insurer is going to write what they want, so why bother writing your own sheet, right? But writing your own estimates increases profits due to decreased cycle time.

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Author Patrick Yurek is the owner and president of Collision Consulting LLC (focusing primarily on DV appraisals – www.CollisionConsulting.com) and also owner of Arizona Collision Center in Tempe, Ariz. He has 35 years of industry experience and has held every position from sweeper to owner. Among his credits are several PPG certifications and GM technical certificates. He’s past president of the GM Service and Parts Managers Organization of Western New York and a court-certified expert witness. He can be reached at [email protected] or (480) 984-0800.

BodyShop BusinessEstimates are as much a part of the collision repair industry as golf balls are to a golf tournament – there’s simply no way to do without them.

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There’s at least one estimate for every job that comes through the shop, and it provides technicians with a guide for what they’re supposed to do. Also, the estimate defines how much is charged or paid for the job.

But the question is, is it really necessary for the shop to write an estimate?

Why Bother?

Before the days of DRPs – back when blueprinting was something used exclusively by the building trades and “lean process” was what technicians did when they didn’t have work – shops wrote their own estimates. Today, I know of a great number of shops that think writing an estimate is a waste of time. After all, the insurance company is going to write whatever they want anyway, so why should they waste their time writing a sheet?

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Let’s start with insurance company generosity. If anyone reading this thinks insurance appraisers are out to “give away the farm” or offer “free money,” please call me – I have some oceanfront property in Arizona that you can buy really cheap.

The fact of the matter is that responsible appraisers look out for their company and insureds, making sure neither is taken advantage of by less-than-honest shops – while some of the more aggressive appraisers try to beat shops into submission. Either way, I’ve yet to meet an insurance appraiser who has any interest in a shop’s profitability and bottom line.

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If you want to get paid fairly, you need to write your own sheet.

“But Patrick, can’t we just write a supplement for the insurer’s estimate?”

Sure you can…if you want to lose money.

Far be it from me to say anything about an appraiser’s pay or bonuses being tied to “severity,” but it (almost?) appears that most appraisers want to write as little as possible. I’m not sure if it’s too hot out for them (here in Arizona, the A/C in the company car beats getting outside in the 105-degree heat and actually looking at the damage), too cold (back in Buffalo, the heat in the company car is better than getting out in the cold to look at the damage), too wet (in Charlotte, it rained a lot and the company car was dry, which was better than getting out in the rain and looking at the damage), or if the majority of appraisers I dealt with were simply lazy. All I know is that I saw a great deal of “short” sheets, along with hearing, “If you need anything else, give me a call.” I call them driver’s seat estimates.

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Combine these factors with company guidelines of, “If you can’t see it, don’t write it,” and you can see why insurance estimates are often less than complete. So you write a supplement…but how enthusiastic is an appraiser when it comes to supplements? (It means they have to do extra work).

Once the insurer’s sheet is written, it seems (at least to me) that the appraiser is often offended when you need something more – they’re put off that you couldn’t just fix it for what they wrote. (Thankfully, the days of, “I’ll make it up on the next one,” are long gone).

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Most insurance appraisers have absolutely zero hands-on experience. So when they write four hours on a quarter panel, in their mind, they think it’s fair. When you call for a supplement asking for eight hours, they think you’re hijacking them because they simply don’t know. But because they don’t know, and because in their mind four hours is fair, you might get lucky and get an additional two hours. You (and the tech) just got shorted.

Why not get it right the first time? If you hand them a sheet that shows eight hours, there’s a better chance that they’ll at least start at six. And then when you explain why it’s eight, you’ve got a far better chance of getting what you need.

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If you want to get paid fairly, you need to write your own sheet.

Ask vs. Give

Long ago, I learned that no appraiser is going to volunteer payment for the “extras.” It would be unusual for an insurance appraiser to write for a fender apron replacement and include all of the additional procedures necessary to complete the operation. Most commonly, the insurance estimate will say something minimal like “replace fender apron.” In some cases, the insurer’s sheet will list a couple of the more obvious add-ons: R&I overflow tank, R&I windshield washer fluid reservoir, etc. But what about 1) lay back wiring harnesses 2) R&I brake system components 3) R&I relays 4) R&I hoses and 5) R&I horn? These five operations are at least an hour’s worth of labor (more like two hours, by my book). They need to be done, and the technician is going to do them…but for free?

The point here is that if you don’t ask for it, you most likely won’t get it. Plain and simple.

Note that as someone who started on the floor, worked up to management and then on to ownership, I’ve always been against giving work away at the expense of the technician. If management wants to give away labor, let it be at the company’s expense and not borne on the back of the guy or gal actually doing the work. If management/owners want to give labor away for free, let it come off the bottom line – pay the tech for what he/she did and simply reduce the shop’s profit on the job. (This would end the practice of free labor soon, I promise).

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Another thing to consider is that if the insurer writes the initial estimate and the shop writes the supplement, the shop wrote the sheet in the long run anyway – why not simply write it first, catch all of the damage and list all of the parts in the first place?

Downstream

There are straightforward profitability reasons for writing your own estimate, but there are also valid “downstream” reasons as well.

Parts. A properly written estimate provides a wealth of information. The parts list is the first factor.

If you haven’t noticed, the first part to go on is in the deepest – and if that part is missing, you can’t put any other parts on until you get that inner part. At face value, it’s kind of not really your concern – the only transparent impact is that the insurer has to pay for a couple extra days of rental. But in reality, it bogs down the entire process of the shop – you’ve tied up a stall in a technician’s bay, you’ve disrupted the flow of the paint shop and you’ve automatically back-logged the next jobs coming in.

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By knowing what parts are necessary based on an accurate estimate, you can more accurately blueprint the job. Then, everything will flow more smoothly. Be sure to look at the part diagrams, too – you’ll often find brackets and braces that are hidden from view but are absolutely necessary to do the job.

As I write this, I have a 2014 Ford Fusion Titanium at the shop. It’s an $11,672 job – but we can’t deliver it because nobody ordered an $11 shield that goes under the rear bumper. There’s not many things as frustrating as not depositing $11,000 because of an $11 part.

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Let’s say a longtime customer has their car towed in. It’s not a huge hit, something you can turn around in five days. The insurance company involved isn’t one you have a relationship with, so you can’t just get started on it the way you could if it was one you’re a DRP for. Three days after arriving on the lot, the insurance appraiser comes out and writes $4,750. The next day, you order the parts off the insurance estimate and get it inside to disassemble it. (Please don’t say teardown – it sounds horrible to consumers. Their car is already torn up, and now you want to tear it down, too?)

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Upon disassembly, you find an additional $2,750, so you call the appraiser to get him back out for a supplement. Two days later, he shows up and agrees with your findings, so you go ahead and order the rest of the parts.

Two days after that, the parts arrive and the car makes its way through the shop. It’s a nice $7,500 job and, at 40 percent gross profit, the shop earns $3,000. However, had you written an accurate estimate in the first place, you could have gotten that $3,000 three days sooner by avoiding the supplement delay. In those three days, you could have been 60 percent of the way through the next job.

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Shops make money when techs are working on vehicles – there’s no profit when a car is sitting idle.

Hours. There are still a great number of stupid (yes, I called you stupid) shops out there that schedule jobs “in on Monday” and “out on Friday.” Those shops are stupid because they have no idea how much money this practice is costing them.

If a job with 20 hours on it is scheduled out on Wednesday, then that job needs to be replaced with another 20-hour job – on Wednesday, not Monday.

Maybe we need to back up.

If your shop’s carrying capacity is 250 hours, you need to have at least that many hours in your shop at all times to remain productive and profitable.

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If you have four body techs capable of producing 160 percent efficiency based on “book” hours, you need to have 256 body hours in your shop at all times (four techs x 40 hours per week x 160 percent efficiency = 256 hours). Anything less and your body techs are going to be idle. Too much more than that and they’ll be buried, and if they’re buried for too long, quality (not to mention morale) is going to suffer. It’s a fairly delicate balance, and it can’t be managed by car count.

This flows through to the paint shop as well. If the vehicles aren’t leaving the metal shop, they’re not getting into the paint booth. If this poor planning (poor estimating) results in multiple simultaneous delays, the eventual result will be a flood of jobs in the paint shop. And if the vehicles are in the paint shop, they’re not in reassembly, leaving metal techs empty-handed while the paint shop is swamped.

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Big jobs. Train wrecks present a special problem in that there are a ton of hours and usually all sorts of delays, no matter how accurate the estimate. Bigger jobs equal bigger problems – that’s the nature of the business. But once your shop is dialed in, you can adjust accordingly, allowing for additional parts delays due to availability and whatever else you normally experience. The secret to minimizing these delays is having the proper blueprint from the very beginning and identifying as much of the damage as possible.

Appraiser disagreements. It’s not uncommon for an appraiser to disagree with judgment times, and sometimes an insurance appraiser will want to use alternative parts, but it’s pretty rare for an appraiser to outright deny replacement of a part. Some parts are obviously OE only – and for some reason, it seems that these parts are the smaller pieces that hold up a job. Getting them ordered as soon as possible can accelerate the repair.

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If you write a thorough sheet that’s honest, you’re actually doing the appraiser a favor and making his job easier. I’m sure just about every shop knows of at least one appraiser who takes their sheet out to the car and copies it into their system. That’s what you should strive for on every job.

I’m equally sure that almost every shop knows at least one appraiser who’s tightfisted. The tougher adjusters – those who consider some of the additional operations necessary to properly do the job as more of a “wish list” – can usually be swayed with logic and reason. A lot of times, the penny pinchers are that way because they’ve had to deal with shops who padded the bill on everything. Be honest, be fair, but by all means be firm.

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I once had an appraiser in the shop who wrote to cover the interior of a vehicle, but he said the labor was included. The labor is included in what, the material cost? That was the only other thing on that line – $5 or something like that for material, the labor column said “inc.” I walked over to the plastic dispenser, pulled about 10 feet out, cut it off and dropped it on the floor. I then whistled and snapped my fingers as if I were ordering a dog to jump up…nothing happened. Then I asked the painter’s helper to show me a picture of his nine-month-old son, and when I showed the photo to the appraiser, I told him that the kid goes through a lot of diapers and that by not paying the labor, it was impacting the kid. He looked at me, smiled and added the labor.

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If you identify that little bracket that goes up inside there, right behind the panel, the insurance appraiser will include it 90 percent of the time. In order to identify that little hidden bracket, the job needs to be disassembled. My shop has two customer authorizations forms: one allowing us to disassemble to identify the damage, and the other to authorize the repair.

We take tons of pictures, then disassemble to the extent necessary to identify all of the damage. The estimator then writes the sheet. That way, when the insurance company arrives, we can hand them everything they need to write a good sheet. We also provide them with the pre-disassembly photos, and if they need it, we can slap the vehicle back together enough so they can take their own pictures, although that’s rare. The vast majority of appraisers we deal with know we’re honest.

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If it’s a new vehicle, the parts have already been ordered. If it’s an older vehicle, we’ve already sourced used parts. The repairs are in motion even before the insurer comes out.

BodyShop BusinessSupplements

Even with the most efficient system of blueprinting and the most accurate estimating possible, there will still be a supplement here and there. Making sure supplements are handled quickly can make the difference between a job going smoothly and getting delivered on time and having an $11,000 repair sit while you wait for one last little plastic part.

Have you ever gone from the office back to the paint department to check on something with the painter and had a body man stop you and tell you he needs a radiator bracket for a job? While you’re in the paint shop, the painter’s helper asks you about your weekend camping trip, you talk to the painter and when you get back to the office the phone is ringing. By the time the day is over, you’ve forgotten about the bracket.

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I’ve seen “hats” that flash different colors that can be put on top of vehicles to signify specific stages of repair or technician needs. However, a very simple yet highly effective means of non-verbal communication is bright, neon-yellow paper.

The technician can write the RO number and the reason for the supplement on it and tape it to the windshield. As the estimator or manager walks through the shop, the papers are almost impossible to miss. Once the estimator goes over what’s needed, he also has a tangible item to take with him. That’s a great way to ensure that the bracket isn’t forgotten.

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Simple Business

Instead of treating shop-written estimates as a dreaded “necessary evil” – or worse, a waste of time – shops that write their own estimates understand that a properly written, thorough estimate is essential to ensuring consistently smooth shop flow and maintaining profits. Shops that don’t are throwing profits away in the form of delayed repairs. And delayed repairs equal delayed deposits.

It’s simple business, really – the sooner a job gets delivered, the sooner you get paid. And the sooner it gets delivered, the sooner you have room for another job. Eliminating delays for supplements, parts, etc., is the easiest way to accomplish this goal. Start writing your own accurate estimates and watch monthly profits increase due to decreased turnaround (cycle) time.

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What’s In an Estimate?

  • Sub-model: The VIN decoder in the estimating system does the basic tasks – year, make and model, but I’ve seen estimates that listed the wrong sub-model (such as LT when it was actually an LS). This can lead to ordering the wrong part, which can end up with a vehicle tying up a stall and stalling production.
  • Options: While the data providers do a semi-decent job of identifying the standard options installed on most vehicles, I don’t believe any of them can identify if the vehicle has an add-on option for a rearview camera.

Let’s say you’ve got a minivan that was hit in the rear. You take your basic notes and open a new estimate, decode the VIN and start with the rear bumper cover. The system wants to know if it’s got parking sensors – get it wrong and you’ll order the wrong part and end up waiting for the right part to come in, tying up a stall and stalling production. So you go back out, look at the cover and sure enough, it’s got parking sensors. Back to the office. Replace the cover (with sensors), replace the reinforcement, replace the liftgate…oops! With or without camera? Darn, back out to the lot to see if it’s got a camera. Yep, it does. Back to the office. Now the computer wants to know if it’s got a power liftgate…darn! Back out to the lot. You get what I’m saying.

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Take plenty of notes, list all the options on the vehicle and then write the estimate for all damage. Do not rely on the estimating system to identify the options installed. Actually, I have a checklist I use when inspecting a car that has all the common options as well as extra lines so I can list anything that’s unusual.

  • Color: How many parts are ordered by color? There are enough that entering the color code is well worth the additional 10 seconds it takes to list it.
  • Production date: Now the computer shows two different parts – through 3/2013 or after 3/2013. Hmm. Back out to the vehicle on the lot. How many times are you going to go back and forth?
  • Mileage in: When I was managing a Pontiac dealer body shop in Buffalo, we had a guy come in and accuse us of driving his car some 300 miles and burning up a tank of gas. At that time, I was a lazy estimator – I didn’t bother getting the odometer reading, and it cost me a tank full of gas. Immediately following that incident, I began taking pictures of the fuel gauge reading as well as the odometer on every job that came into the shop.
  • Mileage out: By taking a photograph of the odometer when the vehicle is ready to be delivered, you can show you didn’t – or did – drive the vehicle. I know that a lot of shops don’t test drive vehicles before returning them to the customer. Not only is this a recipe for disaster, you’re sending profits down the road as well.

As a consumer, I wouldn’t want to be the one to road test my vehicle after a hard hit – I would want the repairer to do that for me. And if there’s something still wrong, I want it fixed before I get my vehicle back. Customers really don’t want to be on the interstate going 60 miles an hour and suddenly feel a hard vibration. Road testing hard hits can avoid a bad image by correcting unseen damage before the customer gets their vehicle. Plus, you can charge for the road test. There really isn’t one good reason not to do it. Documenting the mileage out (by photographing it as well as entering it on the final bill) justifies the road test fee.

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