The other day, I listened to my paint sales rep complain about shops asking for discounts. He was upset a shop owner wanted 10 percent off his bill because his shop wasn’t profiting enough on materials. He was making only about 8 percent profit – hardly enough margin to pay for the shop’s overhead, let alone put food on the table.
But the problem isn’t necessarily the cost of materials. More likely, the shop isn’t charging properly for materials. For example, using their figure of 8 percent profit, if they did a job that paid $100 for materials, they would’ve made $8. If they were given that additional 10 percent discount, they would’ve made a total of $17.20 ($92 cost less 10 percent = $82.80 cost. $100 received minus $82.80 = $17.20). Not too bad to pick up almost 10 percent And while any addition to the bottom line is good, 10 percent is nothing to write home about. They’d be far better off billing more accurately. By charging for each individual item used, they could gain much more than the pittance they get through the discount. For example:
- Separate line item charge for fasteners: $4 (and that’s minimal);
- Separate line item charge for foam tape (for door/hood/trunk jambs): $8;
- Separate line item charge for corrosion-resistant primer: $8;
- Separate line item charge for compound, polish and a portion of the buffing pad used: $10.
The list goes on and on and includes everything from tack rags to dust masks, car-covering plastic to ultrafine sandpaper. And each item you add increases your bottom line profit.
Because none of the estimating systems include these operations in the “included procedures” of the “P” pages, the materials would be additional. Knowing the “P” pages for your particular estimating system is vital. And for even better chances of getting paid, know the “P” pages for the system the insurance appraiser uses, too.
In the earlier example, the shop could have easily and legitimately added $30 to the materials charges. Figured into their original numbers, that would’ve made the profit $38 on the same job or a 38 percent profit (and still allow the jobber to eat and feed his employees).
Will you get everything you ask for every time? Of course not, but asking for it is the first step. Generally speaking, repairs are offer-and-acceptance. This means there’s plenty of room for negotiation. Usually when an appraiser says no to something, it gives you more bargaining strength on something else (unless, of course, the appraiser is a jerk or brainwashed).
I’m sure many of you are saying “Yeah, right! I still have a hard time getting my hourly rate!” But do you remember a few short years ago when “car cover” was unheard of? I can recall dozens of operations that we all charge for today that would never have found their way onto an estimate 10 years ago. Will you face resistance? Of course.
Insurers resisted blending at first, too. Now it’s on nearly every estimate. The key here is to not let it bother you so much that you get angry when an appraiser tells you he can’t pay for it. Personally, at that point I like to get the customer involved. “Mr. Smith, your insurance company doesn’t want us to mask off the door jambs so your car doesn’t get full of paint overspray. It’s only 30 bucks, but we feel it needs to be done.”
This approach to managing the customer’s expectations is fairly simple and extremely result-oriented. It can also be taken a step further by sending a written deficiency notice to both the vehicle owner and the insurer. But this approach isn’t for everyone. Many shop owners are afraid to stand up for their rights, fearing retribution from insurers in the form of steering. For that reason, this method may not be your best choice. (Although when you tell a potential customer that the insurer might tell him that your shop is “hard to get along with,” you get the customer’s full attention. And then you can follow with: “And they’d be right in saying so – we’re very difficult to get along with when someone tries to cheat our customers out of what they’re duly owed. We’ve built our reputation on top-quality workmanship and refuse to cut corners so the insurance company can benefit at your expense.” This is probably one of the best sales pitches I’ve ever used!)
If, however, you fall into the category of shop owners who don’t want to confront the insurer outright, try negotiation. But never let it get personal or emotional. Stay professional. Reason with the appraiser that the costs for all materials have gone up in the past – typically every year. And while expenses have consistently risen, the rate for materials hasn’t kept pace. Though in the past it might have been affordable to include certain materials, that simply isn’t possible anymore.
“Well, the guy down the street doesn’t charge for that – you’re the only one.” Phooey! Get on the Internet sometime, go to some of the more popular bulletin boards and ask how many people are charging for a specific material or operation. It’ll be easy to recognize the “business owners” from the “repairers.” A business owner measures everything or at least knows his true cost of doing business, while a repairer simply fixes cars. Besides, why should you compete with people who are giving things away and facing elimination from the marketplace just because they don’t know how to run their businesses?
The same rules apply to estimating. Shops routinely overlook dozens of not-included operations. A good rule of thumb is, if it needs to be done, charge for it. If it’s not listed in the “included” operations, then it must be “not included.” Read the “P” pages and if it’s not on the list of included procedures, add a line item.
Keep in mind, the item you’re charging for may not be included on the “not included” list either. In that case, you’ll likely get an insurance representative who’ll say, “It’s not listed in the ‘not included’ part.” But your argument is that it’s not listed in the “included operations” and the “not included” section is just a reminder of some of the items that aren’t included. Things like mask for primer (which needs to be done separately from masking for paint), mask jambs and repair the pinch welds after a visit on the frame rack are examples of “not included” operations that don’t appear on either list.
Knowing what you’re talking about and reasoning with the insurance representative can produce rewarding results. And you’ll certainly feel great the first time you explain to an insurer that, “Since the vehicle was on the frame machine, the paint on the pinchwelds has been damaged, so it’ll be necessary to repair this damage to prevent rust.” You’ll feel even better when you get paid for it.
We charge a base fee for this – roughly a half hour per side for repairs and another 90 minutes per side for refinishing. Add in the materials (don’t forget the anti-corrosion primer – it’s not included), and you come up with approximately $235 on every job that has frame time. I shudder when I think of how many cars we’ve sent through the door without performing this operation. Not only did we do the consumer a disservice by not repairing this part of the damage, we threw away $235!
Some would say this is “nickel and diming” the insurers. Say what you want, but I say, drop a handful of pocket change on the floor and I’ll be the first one to pick it up. And that’s exactly what we’re talking about here: Money that’s there simply for the asking.
| Knowing the “P” Pages Pays
When I was still working in New York, I had an appraiser tell me he couldn’t pay for all the stuff on my “wish list.” Knowing he was a fairly open-minded person with the misfortune of being employed by the insurance industry, I’d prepared in advance.
“What do you mean you can’t pay? Are you saying you can’t or you won’t?” I asked.
“Well,” he responded, “What’s this mask jambs [and the materials for doing it]? That’s included.”
Aha! So I produced a printed “P” page from my estimating system that clearly stated it was “not included.” He claimed that his system was different and that it included masking the recessed areas.
“Show me,” I said. And of course, he couldn’t. In fact, I think I knew his “P” pages better than he did.
Somewhat begrudgingly, he added it.
“Well,” he said again, “I can’t pay for color sanding and polishing. That’s included.”
Aha! So I pulled out the “P” page for that, and he added it.
“You have mask repaired area listed here …” he said.
So I pulled out another page showing that masking out to 36 inches was indeed included in the refinish time but that the additional masking on the estimate was for the priming process. And since it wasn’t listed as included, it must be “not included.”
I’d love to say that he added that too, but he didn’t. (Remember: negotiation). So it went on: Him saying no; me showing him why.
Though I wasn’t 100 percent successful with my “wish list,” I managed to add a substantial amount to my bottom line. And by him adding it to his estimate, I was able to show a “prevailing practice” and collect from other insurers for the same things.
This can even be taken a step further if you want to maximize your profits – and possibly end the “capping” of materials on insurance estimates. Materials invoicing programs are available that are easy to use and are paint manufacturer specific. I know of two systems like this, and both base the paint and materials costs on the specific color used -and are profitable. They’re priced around $400, so either system can easily pay for itself in just a few jobs.
Writer Patrick Yurek has 22 years of industry experience and has held every conceivable position in a collision repair facility from sweeper to management. Among his credits are several PPG certifications and General Motors technical certificates. He was the president of the General Motors Service and Parts Managers Organization of Western New York until he relocated to the Charlotte, N.C. area, where he’s now the manager of the Griffin Chrysler, Dodge, Jeep, Toyota, Pontiac, Buick, GMC collision center in Rockingham, N.C.