Market Profile: Is the Industry that Bad? - BodyShop Business

Market Profile: Is the Industry that Bad?

It’s not uncommon to hear shop owners complaining about how awful the collision repair industry is. In fact, when a group of such shop owners get together, it’s worse than a group of old ladies sitting around discussing all their health problems. I know because I speak with a lot of collision repairers and I’m related to a lot of old Italian women (my mother, for one). And, although I have no desire to hear my family discussing bladder control, a group of collision repairers complaining is still worse — especially since most of their problems are fixable.

Why is it so common to hear collision repairers complaining? Is the industry that bad? Well … it’d be easy to draw that conclusion, but follow me for a second: Content people don’t typically run around talking about being content. Miserable people, however, tend to want other people to be miserable, and the only way to accomplish that is by explaining — in detail — why everything’s so bad that being miserable is necessary. So, because miserable people are more vocal and we often hear only their side — never hearing anything from the content/non-miserable shop owners — it’s easy to think that everyone must be miserable. But …

Based on our Industry Profile results, most shop owners aren’t miserable. In fact, they’re fairly optimistic. When asked if they think their businesses are financially better off today than five years ago, 68 percent of our respondents said yes and only 24 percent said no. And when asked if they think their businesses will be more successful in the next five years, 75 percent said yes, with only 8.5 percent saying no.

Why do some respondents think their businesses will be less successful in the future? Here’s what a few of them had to say:

• "The cost of doing business compared to the rate of pay."

• "Insurance companies have our neck in a tight rope."

• "Too much control by insurance companies."

• "Insurance control/cost of qualified employees."

• "Insurance companies are sending business to their shops."

• "Insurance companies and franchising."

On the other hand, here’s what other respondents said about why they think they’ll be more successful in the future:

• "I’m trying to obtain contracts."

• "Better management and production techniques."

• "New addition — two new spraybooths."

• "Expansion will give us more production."

• "Business keeps getting better each year due to DRPs and our good quality and service."

• "By then, we should be a pro shop with all insurance companies."

• "Purchased new frame and measuring equipment."

• "Better cost controls and productivity."

But just because respondents were — overall — optimistic doesn’t mean they weren’t also realistic. Most of them seemed well aware of the challenges that face them. And a lot of them identified not only what those challenges would be, but what they were going to do to overcome them.

What follows are what some respondents said would be their major challenge in the next 12 months, along with their plans for dealing with it:

• Challenge: "Staying independent/competing with DRPs." Solution: "Advertising insureds’ rights to not be forced to DRP shops."

• Challenge: "Phasing out of unprofitable insurance work and getting back into rebuilding salvage automobiles." Solution: "Refusing to repair vehicles that are insured by companies that consistently underestimate the collision damage and expect the body shops/owners to make up for their shortcomings."

• Challenge: "Competition." Solution: "Aggressive marketing."

• Challenge: "DRPs."Solution: "Work closely with insurance companies; educate consumers on choices."

• Challenge: "Finding qualified technicians." Solution: "In-house training/apprentice program."

• Challenge: "Positioning [my shop] to be sold." Solution: "Detailed financials and efficiency reports."

• Challenge: "Trying to get DRPs to pay a fair price for quality repairs." Solution: "If we had the answer, we’d be making a fair wage."

• Challenge: "Finding good bodymen." Solution: "Grow my own bodymen and steal from other shops."

• Challenge: "Getting our labor rate and materials charges where they should be." Solution: "Talking to state and local organizations."

• Challenge: "Growth with ease and profitability." Solution: "Well-planned expansion."

• Challenge: "Competing with DRPs." Solution: "Develop a closer relationship with local insurance agents."

• Challenge: "Competing with insurance steering." Solution: "Inform my customers with informational pamphlets."

• Challenge: "Overhead cost." Solution: "Take shortcuts in work." (Yes, this is really what a shop owner said. But don’t call me and ask for his name because I don’t have it. If I did have it, I’d call him myself. Since respondents to our Industry Profile are kept anonymous, I can tell you the names of the 6,000 shop owners who received the survey, but you’ll have to narrow it down from there.)

• Challenge: "Competing for and maintaining DRPs at a profitable level." Solution: "Direct insurance calls."

• Challenge: "Increasing traffic." Solution: "Advertising."

• Challenge: "Making a better profit on DRP. We are a Pro Allstate, and they get a heavy discount — up to 8 percent off." Solution: "Make my estimates very complete."

• Challenge: "Collecting money from insurance companies and making enough to pay for parts." Solution: "Working somewhere else, possibly in a different profession."

• Challenge: "Getting some DRPs and competing with consolidators." Solution: "Sound management, aggressive sales, and better techniques and production management."

Writer Georgina Kajganic is editor of BodyShop Business.

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