The pace of today’s collision repair business is frantic, and the tempo continues to quicken. Trying to stay on the cutting edge of trends and technology is a precarious balancing act — one slip and the leading edge quickly becomes the bleeding edge.

Consolidation and globalization of collision businesses create a complexity in our industry that may be perilous to our future, yet provides opportunities not seen since the invention of the automobile. Some business owners will identify and grasp the chance for prosperity and succeed while others with similar opportunities will succumb to bankruptcy and perish.

How did some of today’s most flourishing businesses rise to the heights of success in the face of adversity? Looking at achievements of other industries may provide insights as we proceed in today’s current market situation.

McDonald’s, for example, was started by Ray Kroc, a 52-year-old man with no money and no business experience. Kroc couldn’t borrow money from a bank since bankers treated the fast-food industry like a pariah. In fact, they wouldn’t even talk to him. Yet, McDonald’s made business history, while White Castle (a chain of hamburger stands that had been in business 20 years longer than McDonald’s) shriveled up and died. Why?

The Chrysler Corporation was bankrupt before Lee Iaccoca turned it into one of the most significant success stories of all time. Why was it that Iaccoca performed his miracle with Chrysler while GM lost more money than the entire automobile industry had earned since the very first vehicle came off the production line more than a half-century before?

Then there’s Tom Watson and IBM. IBM wasn’t always one of the world’s largest corporations. In the beginning, it was a David in a world of Goliaths. IBM competed with corporations that had the money, the market and the people. Yet IBM, a small and insignificant start-up at the time, beat the big companies at their own game. Why?

Was it money? Was it the economy? Was it just plain luck?

No. It was because these men had something their competitors didn’t have. Kroc, Iaccoca and Watson were entrepreneurs. But the vast majority of people who go into business aren’t.

Through the Eyes of an Entrepreneur
Michael Gerber, in his book, "The E-Myth," professes that most business owners aren’t entrepreneurs but technicians suffering from an entrepreneurial seizure. Gerber says most people in business believe that by understanding the technical work of a business, they automatically understand how to run a business that does technical work. Subsequently, most owners work in their businesses instead of on their businesses, which suppresses growth, opportunity and success.

When you’re overwhelmed with the day-to-day tasks of working in your business, understanding where to focus your primary attention is often difficult. But stepping back and taking a look at your company and the industry from a different perspective often will open your eyes to solutions and opportunities.

Insurance companies are often seen as the evil empire, the "Darth Vader" of the collision industry. Yet insurance checks constitute the majority of revenue deposited in the bank accounts of collision repair facilities. For this reason, some owners have decided that instead of biting the hand that feeds them, they’ll attempt to see their relationship with the insurance company from a different point of view. They’ll look at it through the eyes of an insurance company CEO:

Insurance is a cash-flow business. Premiums are received, and claims and expenses of claims and operations are paid. Claim reserves, as required by regulations, and profits are then invested to maximize returns.

Traditionally, insurance has primarily been sold through brokers and agents who have provided cash flow to the insurance company through sales of new insurance and renewal of existing accounts. Just like our business, the insurance business is experiencing consolidation and fierce competition for market share. People buy automobile insurance mainly on "price," so the CEO must reduce the cost of the product to compete.

Some insurance companies are gaining tremendous market share by selling automobile insurance on the Internet and bypassing the brokers and agents to reduce costs. This new has created anxiety for the primary decision makers of insurance companies that use traditional marketing outlets. And upsetting the sales force in a cash-flow business can have dire consequences; losing market share to a competitor isn’t looked upon favorably by the board of directors.

The plight of insurance executives and the reaction to their market dilemma is consequential to how you position your business for success. For example, experienced insurance executives know that a new business, on average, is unprofitable for its first two to three years. This makes it very important for companies to retain their existing policyholder base.

With all this in mind, ask yourself these questions:
• How can my business help the insurance company retain its existing policyholders?
• What are the primary concerns of the policyholder that my business must address?
• How can we, as a business, profitably satisfy the needs of both parties?

The normal response of a collision business owner to the above questions is centered on the quality of the repair, materials, OEM or aftermarket parts, etc. In reality, however, it’s a given assumption that the car will be repaired properly — not to mention that the quality of the repair isn’t the primary focus of dissatisfaction with customers today.

Studies indicate the amount of time taken for the completion of the entire repair process has the greatest effect on customer satisfaction and the accuracy and/or delay of the vehicle delivery dates are a major influence on the satisfaction rating. While the repair experience isn’t the only deciding factor, the greater the level of dissatisfaction, the higher the probability the insured will change to another insurance company.

This information isn’t surprising in today’s fast-paced society. We expect more for less money, and we want it yesterday. Years ago, the belief in business was that you could provide a product cheaper, faster or better — pick two. But to achieve success today, you must offer all three.

Your ability to provide a product more efficiently is, and will continue to be, a major focus as you strive to meet the expectations of the mutual customer of the insurance company and your business.

In planning a strategy, it’s important to analyze the contrasts of successful and unsuccessful organizations.

Good Shop, Bad Shop …
Successful collision repair operations vary in their business conduct, but most consistently do the following:
• Paint a consistent number of vehicles daily.
• Have established material incentive plans.
• Effectively utilize equipment, products and training for efficiency.
• Accurately blueprint the repair process.
• Have written procedures.
• Make sure the management and production staff share a common focus.
• Keep up exceptional levels of housekeeping in the production areas.
• Maintain steady sales growth.

Not surprisingly, the similar traits of unsuccessful operations are the opposite of the successful shops with a few exceptions. Unsuccessful shops:
• Schedule in on Monday and try to deliver on Friday.
• Pay technicians on percentage of labor. (Implying a shop can’t be successful because it pays on a percentage of labor isn’t accurate. However, the most successful shops with the highest operating efficiencies, do not use this method.)
• Try to improve profit margins via discounts.
• Have poorly maintained equipment.
• Train only new employees or don’t train at all.
• Write inaccurate estimates and don’t blueprint repairs.
• Have dirty and cluttered production areas.
• Make excuses for low employee moral and high employee turnover.
• Have mercurial fluctuations in sales volume.
With all that said, let’s cover, in detail, a few of the things successful shops do.

Streamlining the Paint Shop
Everyone in the collision repair business strives do the repairs more efficiently, and businesses become more efficient by following a set procedure for each process. Because every repair is different, replication of procedures is very difficult considering the different makes, models and types of repairs performed by collision repair facilities. By breaking down the collision repair process into smaller segments, the shop owner can identify areas of process consistency.

Studies show the only consistently successful franchised area in collision repair is the paint production facility. The painting preparation process is normally consistent regardless of the vehicle’s make and model.

Since almost every repair requires refinishing, production capacity is limited to the amount of vehicles the paint department produces. So, when facilities — whether large or small — place a focus on engineering the paint shop into a "re-manufacturing assembly line," areas of inefficiency in all areas of the repair process become more evident.

Using the re-manufacturing process in the paint shop is a proven method of production management. A word of caution: To change a facility with established systems and work habits requires a well-planned implementation strategy.

Let’s assume your shop has one spraybooth with a 90-minute average cycle time (load, spray, bake and unload a vehicle). Your business should theoretically paint six vehicles each day during a nine-hour shift. If your average paint labor per repair order is seven hours, the refinish department would have a capacity of 42 refinish labor hours per day.

The first step is to create a simple rule. Before the refinish crew leaves in the evening, a car must be prepped, masked and ready to enter the booth when work begins the next day. The "game" from that point is preparing another vehicle to paint before the next baking cycle begins. (This assumes, of course, you have a consistent volume of work.)

The Domino Effect
The approach of the paint shop’s re-manufacturing system quickly forces improvement in other departments of the business. The metal repair department will need to meet delivery deadlines to the refinishing department on a daily basis because, with a specific amount of paint preparation work, vehicles have to be available at a pre-determined time. When metal shop production needs to improve efficiency, inherently the parts department begins to experience pressure to streamline its operational procedures, too. Each department of the shop, including the front office, becomes a supplier to the paint shop’s re-manufacturing operation.

To streamline the shop, you also need to take a look at your scheduling system. Is it an in-on-Monday, out-on-Friday (IMOF) scheduling system? If so, it creates many inefficiencies and quality problems. The modern paint shop has a higher cost per square foot than any other department because of the amount of necessary equipment. To achieve the highest return on investment, the paint shop should produce the maximum achievable hours per day. And the IMOF work schedule doesn’t allow the business to accomplish maximum return.

When you use IMOF scheduling, you conduct the majority of refinishing in the middle and latter part of the week. IMOF requires longer paint labor shift hours on specific days and high-pressure re-assembly at the end of the week. Higher pressure and longer shift hours create a higher frequency of mistakes and accidents, which lowers efficiency.

Don’t allow concerns about weekend rental charges to dissuade you from addressing this problem. Lack of efficiency and re-work from mistakes created by extended work shifts cost your business more than additional rental fees. If possible, negotiate a weekend rental-car rate.

Establishing Incentive Programs
After a business establishes production capacity, analysis of the shop’s financial performance numbers will allow the owner to establish production and material incentive programs. Careful planning and strategy are necessary when setting the goals and incentive programs for the production crew. A few basic rules when establishing production and material goals and incentives include:
• Keep it simple. If it’s too complicated or is an administrative nightmare, someone will drop the ball.
• Establish the goal based on department or company performance. An entire company or department reward creates a common focus.
• Keep score. Charting progress against daily and monthly goals maintains trust and productivity.
• Update the information daily.

Blueprinting the Repair Process
The repair blueprint is another key to production efficiency. Blueprinting, or "staging the repair," is an essential element to increasing productivity and meeting delivery deadlines.

The primary goal of the blueprinting process is maximizing the amount of time the technician spends productively repairing collision-damaged vehicles. This is accomplished by providing a thorough blueprint, or work order, for the repair. When a technician must stop and seek an answer from another department to continue his repair, there’s inefficiency. Ideally, the blueprint should be such that the technician is always productively engaged in the repair process.

For example, requiring a technician to identify missing and additional damaged items on the work order while repairing the vehicle is a common practice and is not a productive use of the technician’s time. The resulting inefficiency can be determined by auditing the number of times additional parts are ordered for each repaired vehicle. Tally the average number of parts invoices per work order for the last 50 repairs. The frequency is usually alarming. When you calculate the time and number of people involved each time your shop orders a part that’s not included on the original work order, the cost of this inefficiency is staggering.

The key is to establish a system where a vehicle isn’t dispatched into production until a blueprint is completed, reviewed and authorized. Prepare vehicles for production with the same thorough frame of mind that you prepare vehicles for paint.

Documenting Your Way to Success
As you start to identify areas of increased productivity and target others for improvement, you’ll need to document your operating processes, procedures, forms, etc. Documentation allows you to train new employees, as well as improve performance of existing personnel.

Written policies and procedures will also assist in removing personalities from discipline situations. With established documented procedures, you only need to address three issues with the employee during a corrective action:

1. Does your employee understand your procedure for the particular area in question?
2. Do you need to evaluate the procedure that created the problem?
3. Is the employee unwilling to follow the procedure that created the problem?

The course of action based on the answer to each question is obvious. Documenting procedures for each department of the collision business is a proven way of creating a departmental efficiency implementation strategy. And including employees in this process is beneficial because it allows them to embrace the procedures as the department’s, and not just the owner’s, rules.

Understanding Data
If a collision repair business doesn’t have consistent sales volume, it won’t prosper.

An important part of the sales process is tracking and understanding informational data. Successful sales organizations religiously gather information so they can understand what works. For instance, a business may know that employees wearing a blue suit rather than a gray suit results in 13 percent more sales. It may also know that if employees answer the telephone a certain way, they produce a 20 percent higher conversion rate, or if the business advertises in a certain publication, it increases the probability of response by 2 percent, increasing gross profits by $10,000.

What does this have to do with you? Successful collision repair businesses closely parallel many of the successful sales-tracking practices of other industries. Therefore, you, too, can benefit from tracking.

To get started, try to answer the following questions about your business:
• What is the sales closing ratio between men and women for your salespeople?
• What form of advertising (radio, TV, print) creates the greatest return?
• What is your rate of return for each advertising vendor?
• Which person in your office closes more sales of European imports?
• What’s the success ratio between walk-in customers and pre-assigned claims?
• How many sales does it take your company to break even?
• What are your established sales goals per day?

Most organizations don’t know the answers to these simple questions. Do you? If not, how can you tell what your people need to do? How can you tell which ads should run next week and in what publication? How can you tell who should write which estimate?

Without keeping track of the information, how can you make any decisions at all? It’s simple — you can’t. Without knowing the numbers — without measuring the impact of doing business one way rather than another — you can’t begin to determine what works, except by chance.

Closely managing the closing ratio of your business will significantly impact your gross sales. Most collision repair businesses experiencing inconsistent sales volume don’t track closing ratios of their sales staff, and if organizations do record sales ratios, normally they don’t distinguish between insurance referrals and walk-in customers.

Action, Not Words
It’s one thing to know what has to be done, but it’s quite another to actually implement it. Unfortunately, having the entrepreneurial perspective of Kroc, Iaccoca or Watson isn’t enough. What’s also true about great entrepreneurs is that they acknowledge what they don’t know, and they know enough to get the help and the expertise from those who have it — whether it be marketing expertise, management expertise, financial expertise, technical expertise, etc. One person doesn’t have all the answers.

But one person does hold the key to your shop’s success — you.

If you continue to work in your business but not on your business, you may well find yourself out of business in the not-so-distant future. If, however, you’re willing to accept that times are changing and to put forth the effort to change some of your shop’s procedures, your business will successfully transit into the next millennium.

Writer Ron Kuehn is director of business development for Sherwin-Williams Automotive Finishes.