The collision repair industry isn’t just for collision repairers anymore.

Since billionaire Wayne Huzienga, owner of Republic Industries, began buying up dealerships (many with body shops) at an alarming rate a few years back and became the owner of the most collision repair shops in the United States, the industry was forever altered.

Huzienga knew nothing about repairing cars, nor did he care to. He had a lot of money. He wanted to make more. And, frankly, he saw in this industry the opportunity to do just that. Period. End of story.

This opportunistic attitude caused many collision repairers to cringe. "How could this man have the nerve to come into our industry and buy up a huge piece of our market when he doesn’t know the first thing about repairing cars?"

Money talks.

And it wasn’t long after Huzienga’s appearance that others — others with a lot of money behind them too — began taking a closer look at our industry. Consolidators suddenly started sprouting up like weeds. Some of them were shop owners who formed allegiances with each other, and others were simply companies looking to buy out shop owners. Franchises and multiple-shop operations also became a more important part of the collision repair language.

If all this weren’t enough, U.S. Fidelity Holding Corp. (an insurance-holding company that specializes in auto insurance and claims appraisal services) recently bought two Texas-based body shops. Then, to top it all off, Ford invested in the small, Indianapolis-based consolidator Collision Team of America (CTA), raising the eyebrows of collision repairers across America.

It would seem that collision repair is shedding its image as a mom-and-pop industry. In fact, the changes in recent years have elevated the industry to where it’s recognized as a legitimate business — a lucrative business worth the attention of investors. And Ford’s investment will only further arouse interest in the industry. "If it’s good enough for Ford … "

What does all this mean, especially for the single-shop operator? More specifically, what does it mean for the average, independent single-shop owner who doesn’t want to expand or sell out? It means that to compete successfully in the next millennium, they — you? — need to become savvy business people. Only those single-shop operators who learn how to solidify their positions within the marketplace will still find themselves in the marketplace in the next few years.

Who’s the Competition?
Consolidators & franchisers: not an immediate concern.

According to Karen Fierst — president of KerenOr Consultants, a company that aids with corporate development and management training for collision repairers — although franchises and consolidators have created quite a stir during the past few years, so far, few have successfully capitalized on the theoretical advantages of size to operate more efficiently and cost effectively than single shops. Good news for now but don’t count them out. Let’s face it, they will, eventually, hone and refine their operational procedures. They also, by virtue of their size, have an advantage in purchasing that smaller organizations don’t have.

For now, however, one of their problems is that their management teams are fairly complex and their team members have varying degrees of shop-management experience. Not to mention, the shops within their organizations are often states apart. They are, in a sense, a "fragmented bureaucracy," which makes it difficult for them to make rapid decisions (much like it’s difficult for any bureaucracy, which is composed of many layers, to make a quick decision, e.g. our government).

"Some of the consolidators are using regional or area structures to facilitate better management and faster decision making," says Fierst. "In spite of this, I believe consolidators are all still having problems with production uniformity. At this point, I’m not sure if any entity has successfully tackled this problem."

Another problem for consolidators and franchises: Many have said that the industry is in the process of being McDonald-ized, but few have actually been able to capitalize on this — to ensure uniform levels of quality and service across their organizations. Collision repair is, to many’s chagrin, much more complex than serving burgers. A lot more factors come into play in a shop than in a McDonalds.

Part of the problem here is that most franchisers and consolidators are more focused on growth rather than on strengthening internal management weaknesses and daily operations. They haven’t yet focused on developing consistent quality from shop to shop or on training their constantly growing number of employees. Because these consolidators and franchises are almost constantly in a state of acquiring and growing, they’re also, internally, often in a state of confusion. There’s little time for management to grow into their positions because they’re too busy just trying to keep up.

All this, for now, is good news for single-shop operators. But "it will definitely change," says Fierst. "as soon as the consolidators have their internal organizations operating at full capacity and they turn their attention more fully to the training issue, away from the expansion issue."

Multiple-shop operations: the short-term threat.

While consolidators will pose a long-term threat to single-shop operators, Fierst says the immediate concern should be multiple-shop operations (organizations with up to 10 shops, all of them concentrated in one area or state).

Why? Because these organizations are easily accessible to each other (business decisions can be made much faster), the management team is usually smaller and more knowledgeable of the industry than the consolidators, and an experienced shop owner is usually involved in the daily operations of the business.

Also, while multiple-shop operations do still suffer, somewhat, from internal management weaknesses and inconsistent quality from shop to shop, this is less of a factor for them than for consolidators. Multiple-shop operations grow more slowly, which allows employees to grow as the business grows. Not to mention, training is more manageable because the organizations themselves are more manageable (they’re concentrated in one area or state, they’re not growing by leaps and bounds, management is more experienced, etc.)

Another thing multiple-shop operations have going for them is name recognition, a solid reputation, and already established relationships with insurers and customers. If Al, owner of Al’s Auto Body, decides to open location No. 2 and No. 3, his 15 years of running Al’s Auto Body No. 1 will be a major benefit to him. He’s already known and loved in the area — as opposed to a consolidator that comes in, changes the shop name, changes the management team and basically starts from scratch with the public.

"[Multiple-shop operations] are well-situated to organize on uniform best practices," says Fierst. "Once they’ve accomplished this, they’ll have more leverage with insurers and the public. And they’ll have more money for local advertising than single independents."

Setting Up for Success
With the immediate competition identified, a single-shop owner can now identify his organization’s strengths and weaknesses. For example, before a shop owner expands with an additional location, he ensures that his current facility is running at capacity — that he can’t get any more production out of this facility if he tried. This shop owner’s goal of opening another shop almost forces him to evaluate his current facility. Oftentimes, however, a single-shop owner with no desire to open another facility never evaluates his facility’s output. Why? Because he’s never had to.

But now he has to — if he wants to compete.

Just like consolidators, franchises and multiple-shop operations do, single-shop operators also need to develop management and operations systems — and then benchmark the effectiveness of management, sales, production, customer service, etc. Why? Because everyone else is. And this is a case where if everyone else is doing it, you should be doing it too.

For example, do you know how your shop compares to other shops similar in size and situation to yours? What sort of sales are they doing? What kind of production is coming out of those shops? Where are you in comparison?

Are you doing everything you can to improve efficiency and productivity at your shop? Are you attending industry meetings/seminars and association meetings in which non-competing shop owners learn from one another? And don’t forget about paint company value-added programs, says Fierst. Many of these programs have developed what are called 20 groups — groups of non-competing shop owners who get together periodically to compare notes. This can be a priceless resource. If you surround yourself with successful shop owners who aren’t competing with you and are willing to share their best practices, you will, without a doubt, become more successful too. Learn from the people who are where you want to be.

Some shop owners are going one step further than participating in 20 groups and are actually forming alliances. "In order to better position themselves, some independents around the country are creating cooperative groups that will enable them to compete head to head in areas with multiple-shop operators," says Fierst. Strangely enough, some of these partnering shops are competitors. But, as many are finding, it’s sometimes more beneficial to be friends than foes.

Besides strengthening your relationships with other successful shop owners, it’s also important to solidify and strengthen your position within your community. Have you marketed your shop well enough that people recognize your name? Have you established a good reputation within your community? "Vocally support community or charitable issues," says Fierst. "This will give [you] a competitive advantage on the image side within [your] market."

Part of strengthening your community image may also include strengthening your relationship with insurance companies. How can you do this? Save them money, of course. Consider this: Consolidators, franchises and multiple-shop operations usually establish direct-repair relationships with insurers and, "with such a large shop base, these companies offer insurers a great savings," says Mark Clark, owner of Professional PBE Systems in Waterloo, Iowa, and a contributing editor to BodyShop Business. But there are also things single-shop owners can do. For instance, a single-shop owner can save an insurer money by accepting one check for payment of multiple repairs. "By one estimate, it costs an insurance company $30 to $70 to process a check for payment of a collision repair," says Clark. "[And] a consolidator, which owns multiple shops, will gladly accept a single check paying for 20 repairs. At $30 per check, that would save the insurer at least $570."

Also keep in mind that bigger players usually establish personal relationships with insurers. And so should you. "An independent, single-shop owner may have a great relationship with the local agent and even with the local adjuster, but seldom knows the person who actually directs the assignment of repairs at the insurance company’s home office," says Clark. Why is this? "A consolidator may well have an insurance liaison employed who does nothing but pursue DRP relationships for multiple shops."

All this positioning within the marketplace, however, doesn’t do a single-shop operator a bit of good if recruiting, training and retaining of employees isn’t also a priority. The annual technician turnover rate in this industry is 22 percent — 45 percent for shops not offering a benefits package. What does this tell you? That you should be offering a comprehensive benefits package (health insurance, paid vacations, profit sharing, sick days, etc.).

"[Shop owners spend too much time] griping about the past and focusing on problems, rather than solutions," says Fierst. "Shop owners need to vest their employees in their mission in order to be effective in the future. Nordstroms and Wal-Mart didn’t flourish only because they had CEOs who had a great idea."

Set Up to Sell
Shop owners can no longer afford to only be shop owners. It’s not enough to just understand the business of collision repair. You must also understand business.

As a single-shop operator, you’re now competing with people who are geniuses at keeping costs low and profits high — people who focus more on the bottom line than quality repairs. If, however, you can learn to become a better business person while continuing to perform quality repairs, you’ll have an advantage over much of your competition.

It’s ironic, really, because once a single-shop operator takes charge of his business and makes the necessary changes and improvements, he’s not only set up his shop for success, but also for sale. Making a shop more profitable also makes it more buyable in the eyes of consolidators and multiple-shop operators.

Whether or not you change your mind and sell your now-lucrative business will be a totally personal decision — based on your goals for the future. You may choose to enjoy the hard work you’ve put into your shop and revel in your newfound success. Or you may sell. It’s easy to say you’ll never sell out — especially if no one has ever made you an offer — but when someone dangles a large check and an early retirement in front of your face like a big, juicy carrot, you may, as one shop owner put it, "make like a bunny and take off with the money."

Regardless of whether you keep or sell your business later on, you first need to ensure your shop’s survival by better positioning it in the marketplace. Single-shop operations aren’t doomed. But, some of them are. The saddest part is, it will be their owners’ mom-and-pop mentality that does them in.

Writer Georgina Kajganic is editor of BodyShop Business.