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I recently had the opportunity to speak to 250 top shops from across the United States about today’s business environment. To prepare for the presentation, I had Babcox Research survey shops about how business was going this year. While my presentation was centered on customer satisfaction, the research highlighted a trend in our industry that’s worth discussing here.
First, let’s look at the data. When asked about business volumes and revenues for the first half of 2009, over 60 percent of those shops surveyed indicated that both their revenue and repair orders were down. Approximately 16 to 20 percent were up, with just over 20 percent unchanged. While this number is shocking at first, it probably doesn’t come as a surprise to any of us in the collision repair industry or in the general business world. It’s easy to explain the drop as a result of the overall economy, and just as easy to take the “wait for things to turn around” approach. If that works for you, don’t read any further.
The other data from the survey will probably not sit well with you. When the same group of shops were asked if they had thought about closing or selling in the last 12 months, 26 percent admitted thinking about selling, and 12 percent indicated that closing was an option. I don’t know about you, but those numbers startled me. When that many businesses in an industry are considering exiting, the statistic deserves a closer look.
It’s no secret in our industry that we’re in an overcapacity situation today. With more totals, increased automotive safety intelligence and fewer miles being driven, there are just fewer vehicles to repair than there used to be. There are currently about 42,000 stand-alone collision repair facilities in the U.S. In the upcoming years, that number will decrease due to consolidation. It’s a basic law of economics that when there’s overcapacity, consolidation usually follows. I think if you look around, you’ll already see it.
But consolidation doesn’t have to be a bad thing. Less capacity leads to a more stable pricing structure and puts an end to the discounting and price pressures that exist today. Shop owners need to be thinking now about which side of consolidation they want to be on.
If you’re looking to stay in business, you should eye other locations that might fit well with your brand and market area. It doesn’t have to mean multiple locations; it can include merging several locations into one great geographic spot that increases customer convenience and shop traffic. On the other side, now might be a good time for some of you to change careers and sell your existing businesses. If you’re thinking this might be the route to go, now may be an excellent time to do so. Sell to someone who’s in it for the long haul and take the opportunity to do something else.
As I’ve said in almost every one of my columns, change is inevitable and we’re far better off to plan for change than just let it happen to us. Take control and decide which side of this situation you plan to be on. Opportunities abound on both sides. See you at NACE!