Lowering Your Overhead - BodyShop Business

Lowering Your Overhead

Earning money is one thing. Keeping it is another. You'd be surprised what shops can do to reduce overhead besides raising door rates

As if earning money isn’t hard enough (competition in many areas is fierce), keeping it is constantly getting harder as well.

Every year, major supply manufacturers such as paint and sandpaper companies have a price increase. So regular are these increases that you can almost set your calendar by them.
With all your overhead increasing, what can a you do besides raise your door rates and buy cheaper, one-ply toilet paper?


Employees: Don’t Bite the Hands that Feed You

Unfortunately when many shop owners start looking to reduce overhead, they look at their employees’ wages and benefits. After all, they directly get 35 to 40 cents of every dollar coming into the shop, and another 10 to 15 cents indirectly through benefits.

Generally, however, this isn’t the area you want to look at. It’s bad enough that workers often think the owner makes too much money for performing minimal work (that 25-foot Glasstron boat doesn’t help that image either). Taking away from the production staff can – and usually does – dampen morale and hurt production. And this could end up putting the you back where you were – less overhead, yes, but combined with lowered production, you’re soon back at square one.

This isn’t to say that you shouldn’t compare costs of uniform services and health benefit packages, but you shouldn’t reduce benefits for the people who earn money for you either. If you haven’t looked at the health care package in a few years, this would be a good time. There are more HMOs out there than ever before, and you may be able to reduce costs while actually increasing benefits.

Compare uniform services, too. Many times, people simply stick with their current company without comparing prices – and may simply be renewing their service contract without seeing what else is available to them. If a new laundry service comes into town, you can almost bet their prices will be lower to attract new customers. Contracts like this should be reviewed on an annual basis. I even know of one shop owner who bought a used washing machine and dryer from Goodwill or the Salvation Army. They now do all their own laundry, uniforms and shop towels/rags.

Business Operations: Examining the Paperwork End
A lot of companies outsource their payroll, accounting and other bookkeeping, as well as CSI follow ups. While you need to be careful whom you choose to reveal your financial information to, there are still some cost-saving alternatives to consider here. For example, there’s a huge untapped workforce out there that many people never consider: stay-at-home moms.

Rather than spending hundreds of dollars on a formal CSI service, why not hire someone to work from her home? Instead of a monthly report (when it’s often too late to do anything about a consumer’s concern), you can usually get results weekly – or in serious cases, immediately – when you’re employing someone in your local area. Not only is the relationship much more personal, I think you’ll find you get better overall service as well. Simply draw up your own brief questionnaire based on the professional services survey you already have and give copies to the caller.

Also, instead of paying for professional payroll services, consider doing that in house. A part-time receptionist looking for more hours could easily be trained to issue paychecks – just be sure you have sufficient security measures in place such as not authorizing that person to actually endorse checks. Not only does this serve to help satisfy an employee’s need for more income, you may be able to better control things by keeping it within the confines of your business.

Larger accounting firms have greater overhead than smaller firms do, and these expenses are passed along to the client. Seeking out a smaller firm, or perhaps even someone “freelancing,” may be worthwhile. A younger company looking to become established may offer better service at a reduced price. But be careful to choose someone properly qualified and suited to your needs.

Electric: the Lights Are On – but Is Anyone Home?
It always irked me when my stepdaughter left the lights on in a room. It’s no different in a business. Replacing incandescent light bulbs with the new energy-saving fluorescent bulbs can save something like $40 per year per bulb. Of course, turning off lights when not needed would save even more.

I’d be willing to bet the lights are on in your restrooms right now. And chances are, no one’s in there. While this might not be the greatest idea for the customer restroom, your employees know where the light switch is. Have them use it.

27 Ways to Reduce Overhead

And saving on energy costs doesn’t end with the work day. What do you leave on at night? I’ve seen shops that leave the compressor on all night long, and leaking airlines can cause the compressor to fire up several times overnight. Unless you want to help the electric company make money, be sure it’s switched off when the last production employee leaves.

Also, do you have internal lights that could be shut off at night and still maintain security? Could some of the outdoor floodlights be repositioned to cover larger areas and eliminate one or two? If a small incandescent light bulb can save $40 a year, imagine how much turning off a 200-watt floodlight would save!

If you let your employees work on their own vehicles after hours, pick one or two nights a week for them to do this. Not only is it safer (one person should never be allowed to work alone), it helps to avoid having all the lights on five nights a week.

Consider, too, that most utility companies charge rates based on peak usage. This means that your entire monthly rate can be based on one spike of use. See if you can equalize your power consumption by spreading out the high-demand items.

Heat: That Warm Fuzzy Feeling
Everyone knows employees are more productive when they’re comfortable. It’s hard to work when you’re freezing your butt off.

Regardless of whether you use gas or electric for heat, you should examine the efficiency of your current system and upgrade if necessary. While the return on an investment such as this may not be as immediate as some other things mentioned here, it can pay huge dividends in the long run (and help the environment as well).

An old, inefficient heating system can cost hundreds, if not thousands, of dollars every season. Some new systems are also eligible for rebates from the utility companies – and well worth looking into.

You should also look at the placement of the blowers and radiant heaters. Do you have one right next to the overhead door that kicks on every time a vehicle is pulled in? Is there a tech right by the front door who makes this necessary? Consider moving the work stall so this heater (which does little more than heat the outdoors) can be eliminated.

In the South, it’s not uncommon to see little or no insulation on the roof – where most of the heat escapes in the winter. I guess the “logic” (more like illogic) is that it’s not that cold and it rarely ever snows. But if the heat goes on, the building should be insulated. Consider installing insulation or adding to what you have. It doesn’t cost much for materials, and if business is slow, maybe your techs would be willing to install it – which would be better all around than hiring a contractor.

If you’re in a Southern climate, the roof should be a lighter color, especially if the shop is air conditioned, since darker colors absorb more heat. There may even be a minor cost savings by having a darker roof in cooler climates.

Telephones: Let’s Talk
Just because it’s a business, it doesn’t mean you have to use an expensive long distance service. There are multiple “10-10” type services available that charge a fraction of what the major carriers do for long distance service. Compare the offerings between major carriers too. You’d be surprised what you may be able to get with a little negotiation or by switching companies.

Depending on your plan, you may also be able to realize a savings by sending faxes in the evening when rates are lower. After all, the insurance companies don’t look at them right away anyway.

Materials: the Nitty Gritty
Compare prices from different jobbers. If you can get the same thing for less from a different source, you might want to mention it to your sales rep. It can’t hurt. Yeah, I know, you’ve been with the same supplier for 30 years, but we’re talking about business, not friendship, and making money – not friends – is what business is all about. The supplier, being a businessperson, will understand. And if not, what kind of friend was he in the first place?

Seriously, though, remember that a jobber offering you a better discount is meaningless if his customer service or product is poor. (See box, “Cost Isn’t the Only Consideration!”)

We’ve all gotten calls from some out-of-state supplier of various materials offering discount products, but what good is a 30 or 40 percent price savings if you use twice as much? While some brands do indeed offer cost savings and equal performance, some of the “off brand” products are simply garbage. If you’re considering switching brands of sandpaper, buy one or two rolls to try out first. Nobody needs six packs of sandpaper sitting on a shelf because the techs won’t use it.

Another thing to consider is buying in bulk. Usually the case price is less than individual package pricing. There is a downside to this though. When the supply is “unlimited,” people tend to be less discerning about consumption. Nothing is more maddening than to see your savings sitting on the floor in the form of half-used sanding discs.

If you’re a member of an association, see if you can get group pricing. Just like case pricing, pallet pricing can mean a very real savings to all involved.

Another strategy that’s worked for me is to offer a bonus to employees for a reduction in materials used. Individual supply cabinets for each tech can be stocked with the products he regularly uses. After a couple of months of monitoring consumption, offer them 10, 20 or even 25 percent of the savings realized by the business if they reduce their use. The shop still saves a minimum of 75 percent. At year end, the cost savings from this simple program can be incredible. And if you have a good enough relationship with your jobber, he’ll often monitor the use for you. If not, you can usually set up multiple sub-accounts for each technician and keep track that way.

Parts: Part of the Equation
Shop, compare and purchase accordingly. Face it, a Chevy fender is a Chevy fender, and a Nissan hood is a Nissan hood – no matter who delivers it. I’ve found that I could save an additional 5 percent by switching where I bought parts from.

You might find that a dealership parts manager will offer you a greater discount if you promise to use him for the brand exclusively. The same thing applies to aftermarket parts (if you use them).

Sublet Tasks: Keep Some In House
Groundskeeping can be done in house, as can many of the tasks you sublet. A detailer who has little to do first thing in the morning can be assigned the duties of mowing the grass and trimming the bushes. Not only does this help reduce non-productive time spent, you can tailor these duties as needed, as opposed to paying a company to do something weekly that only needs to be done every other week.

Several of the maintenance and repair tasks can be kept in-house as well. We had a compressor croak one time, so the techs essentially couldn’t do much of anything. Rather than sending them home for a day or two, we decided to let them fix the compressor. They earned money, and the business saved on a healthy bill from a repair company. Same thing with our pressure washer. One of the techs was a wizard at small engine repair and fixed it in the evening at a savings to the company.

Another sublet task to consider keeping in house: When things get slow, use your employees to paint the building instead of hiring the job out. Not only do you help to keep food on loyal employees’ tables, you can save a bundle considering what an independent contractor would charge.

It’s In the Details
Yes, this may seem like a daunting task when you view it as a single objective. But it isn’t nearly as intimidating when you break down everything into individual categories. And no matter what the service or supply, closely scrutinizing each individual product or service can result in substantial savings.

Writer Patrick Yurek is the vice president of Collision Consulting LLC (www.CollisionConsulting.com). He 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 also the president of the General Motors Service and Parts Managers Organization of Western New York. Yurek can be reached by e-mail at [email protected] or [email protected] or by calling (704) 821-4190.

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