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Strategic Partnerships

No business exists in a vacuum, least of all a collision repair shop.

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Mark R. Clark is owner of Professional PBE Systems in Waterloo, Iowa. He’s a popular industry speaker and consultant and is celebrating his 32nd year as a contributing editor to BodyShop Business.

Not only is the business dependent on
a steady traffic of consumers looking for a preaccident, quality
repair, the successful shop also must make it easy for the insurance
industry to adjust and pay for those same repairs.

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Other businesses also have a direct effect
on the repairs that take place in your shop: the dealerships that
sell crash parts, the aftermarket crash-part vendors, the distributor
who supplies the paint, the jobber who delivers the mechanical
parts and even the welding-supply house that provides the MIG-welder
gas – they all impact how the work flows through your shop. And
having these folks on your side can literally spell the difference
between success and failure.

Paying Promptly

All businesses run on money, so it’s logical
that the best customers are those who pay their bills on time.
If you’re 60 or 90 days behind paying your paint jobber or your
GM dealer, he’ll want to talk about getting your bill caught up
before he’ll want to hear what special services you desire.

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Paying your bill on time isn’t the only criteria
for a desirable body shop customer, but it may well be the most
important one. Not only will prompt payment get you on your vendor’s
"A" list, but most industry vendors will reward you
for paying your bill by the 10th of the next month (this prompt-payment
discount is the easiest way to earn money in our industry).

The industry standard – if such a thing exists
– is a 2 percent discount on a current balance in exchange for
early payment. For example, if you charge $1,000 a week at the
Ford dealer for the month of August, your bill will be $4,000.
But, if you pay the Ford dealer by Sept. 10th (the 10th of the
next month), you can deduct 2 percent (or $80) and settle your
bill for $3,920. (A 2 percent discount each month – all 12 months
– works out to an annual interest rate of 24 percent on your average
monthly bill.)

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In fact, some vendors give an even greater
cash discount in exchange for larger sales volume or all of the
shop’s business. Before your shop can demand these better discounts,
however, your current bills had better be paid.

Speaking of paying bills, most industry vendors
impose a service charge on past-due balances – typically, 1.5
percent on the unpaid balance. If your shop is 90 days behind
on an average monthly balance of $4,000, not only did you pass
up an opportunity to save $240 in prompt-payment discounts, but
you also cost yourself an additional $180 in service charges!
Two percent plus 1.5 percent equals 3.5 percent per month, times
12 months equals an annual effective interest rate of 42 percent
on your average month’s material bill. Even the most unfriendly
bank will loan you money for less!

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Your Parts Supplier: Tell ‘Em What You
Need

The biggest bill that most collision repair
shops pay each month is for sheet metal, OEM parts and assemblies
provided by a franchised, new-car dealer’s parts department. Some
of those parts departments do a great job for their body shop
customers; many don’t.

Fixing the problem in your market may be as
simple as some clear communication with the parts department manager
to make your needs known. After all, good vendor relationships
depend on good communication. If your vendor doesn’t know exactly
what you expect and you don’t know exactly what the vendor can
provide, you’re both missing the boat.

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To get any vendor’s attention, you’ll probably
have to commit to buying more of what he sells or, at least, buy
it from him exclusively. If you spread your crash-parts buying
over six or seven dealerships, no one is getting a very big piece
of the pie. But, if you promise to take all your GM crash-part
orders to one dealer, he’s liable to listen closely when you talk.

What do you want from a good dealership parts
department? Someone who pays attention when you order is a good
place to start. Who’s the most competent person in the parts department?
Ask to have him or her handle your orders exclusively. So many
crash parts today are "order by application," so unless
the parts person knows how and takes the time to use the VIN to
identify which fan shroud your car takes, shop production will
be slowed.

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Another perk of working with someone exclusively
is that you both get to know – and understand – each other. When
a you tell the random parts person that you "need the part
right away," do you mean with the next big parts order or
by 8 a.m. tomorrow? If, however, you’re accustomed to dealing
with one another, the parts person knows that when you say "Now,"
you mean now.

Parts Delivery

Getting parts delivered to the shop is yet
another aspect of this customer/supplier relationship. Many shop
owners would prefer that the dealership parts department wait
until all the parts are in before delivering the order. If you
want it some other way, ask!

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The actual act of delivering the parts is
an opportunity to have your vendor partner save your shop some
work. For example, the parts order was checked onto the delivery
truck before it left the dealership – along with the other seven
or eight parts orders for other body shops – and the left front
molding you were supposed to get ended up at your competitor,
while you got his left rear molding. If, however, the dealership
parts runner had rechecked the order when the truck was unloaded,
some grief could have been prevented.

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In addition, the parts and paint order should
be delivered exactly where you – the shop owner – want them. It
only takes a moment longer for the delivery driver to walk the
parts to whichever nook or cranny they belong in. Having all the
deliveries just dumped off by the back door makes more work for
your personnel. If you don’t trust your vendor to make an accurate
count of the parts or to stack them where you want them, you need
a better vendor.

Paperwork on Parts

Maybe what would make life easier in your
shop is if the parts department did a better job with the paperwork.
If the only way your shop discovers that a part is back ordered
is when the technician goes to assemble the car, a better system
is needed – and is available.

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Ask the dealership to staple a list of the
back-ordered parts to the front of the packing slip. Your technician
or manager can then tell at a glance if it’s worth starting on
that car with the available parts. If the fender is missing, leave
the car till it comes; if only the hub cap is back ordered, start
fixing the car with the available parts.

Accommodating vendor partners will change
their paperwork to suit their customers. If you want three copies
of each parts invoice, don’t have your office staff make the other
two, ask the vendor to send the extras along.

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Bonding with Your Parts Supplier

The object should be to make it easy for your
shop to fix cars. The more cars you fix, the more crash parts
and paint you’ll buy. After all, the dealership and the jobber
are dependent on the body shop fixing the car correctly and quickly
before any money starts to flow up the distribution chain.

Good crash-parts suppliers will customize
the paperwork, pay the freight to get the parts to the shop, follow
up on back orders, pay attention when the shop owner calls and
maybe even offer a better prompt-payment discount on the 10th.

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In exchange, a good body shop customer won’t
make unreasonable demands on the parts department, which can’t
have every single part at the shop door by noon tomorrow; they’ll
understand that everyone is human and that mistakes will be made;
they’ll clearly communicate their wishes; and they’ll pay their
bills promptly.

Everybody has to make a profit for this to
work. If the shop intends to beat the parts department out of
every last penny, the parts department can’t staff the phones
or the delivery trucks with good people. Unless dealer principals
see their parts departments finishing in black ink each month,
they won’t be very interested in stocking more sheet metal.

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Your PBE Supplier: Keep Him or Ditch Him?

In most markets, the Paint, Body & Equipment
(PBE) distributors are much more responsive to their body shop
customers than the dealership parts departments. Finding a great
paint jobber, then, should be easier than finding a great sheet-metal
vendor.

Many paint companies offer super-duper deals
to shop owners who switch to their brand of paint. But, if your
current jobber isn’t doing a good enough job for your shop, talk
to him before you jump ship. Explain what your problems are and
ask for help.

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One enticement of a new paint line is that
the paint manufacturer will send a rep or two into the shop for
a couple weeks to train everybody on productively using the new
brand – so maybe all your shop needs is a week with your present
paint rep! Keep in mind before switching that other shop owners
are switching to your present brand of paint at the same time
you’re switching to a new brand. The other guys are making it
work and are delighted by all the swell stuff their new (your
old) brand does.

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To many shop owners, the promise of "free"
sounds great. A new mixing bank, fresh tinting colors, a computer
scale and a spot in "shop management school" – all at
no charge – sound too good to resist. But, like anything in life,
look closely at what appears to be the best deal. If the new brand
of paint is so good, how come the manufacturer has to give away
umpteen thousand dollars worth of mixing equipment and paint booths
to get the business? "Gifts" of big equipment usually
come with a contract, tying up the shop’s paint business years
into the future. No vendor can afford to give away tens of thousands
of dollars with no return.

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Virtually every paint company offers a fine
product that will last the life of the car if applied properly.
Slight cost differences are often made up in more square-foot
coverage or faster completion of the paint work. As every shop-management
program will teach you, it’s not how much the paint costs, it’s
how much work gets done. After all, labor time is the most expensive
thing in every body shop. Good vendors will strive to save their
shop customers labor time and to help them produce more work.

Before you sign on the dotted line with some
fantastic "free" paint deal, ask your accountant or
banker to look at the numbers. You may be able to borrow the money
to buy your own prep stations and make the payment with the discount
and additional help you negotiate with your present paint distributor.

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It’s What You Do, Not What You Use

This isn’t to say that different brands of
paint don’t have individual differences. We’re proud of the brand
we sell and relish the opportunity to show painters what our brand
can do better than the other guys. The other guys, of course,
also have features and benefits that they want to brag about.

The right choice for your shop may, indeed,
be to switch brands; but, before you do, check to see if your
present brand has a higher solids or easier sanding or quicker
drying product that you aren’t using. For example, years ago,
the huge amount of air moving through a downdraft booth sucked
all the solvent out of some paints too quickly – and European
paints often had a higher solids content and the resulting slower
dry that downdraft users wanted. In response, the other paint
companies simply went back to their labs and concocted their versions
of a downdraft topcoats. By the same token, the early European
paint companies were surprised by how much work got painted on
the shop floor here in America. What they needed were some faster
drying products. A couple trips back to their laboratory and presto,
they had just the thing.

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Painting success isn’t in the brand of paint
your shop uses, it’s in what you do with it.

A Good PBE Relationship

A good partnership with your paint jobber
includes:

Ample inventory
– Your paint jobber should have an adequate inventory of goods
on hand, including a variety of offerings and stock of fast-moving
items. For example, good PBE jobbers try to never run out of 3/4-inch
masking tape or 220-grit D/A paper.

Credit
Don’t underrate the importance of the credit your jobber extends
you. Thirty or 40 days using someone else’s money should help
your shop’s cash flow considerably.

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Sales calls
– Regular sales calls from a good PBE jobber provide a weekly
opportunity to ask product questions and to order new stock and
return the old. The product knowledge your jobber offers should
be the painter’s first stop when looking for immediate answers
to product questions. The distributor can help inform your techs
by holding regular clinics that offer solutions to real-world
problems.

Responsibility
– Good PBE jobbers will willingly accept responsibility for what
they sold you. If your shop has a product problem and the jobber
wants no part of it – claiming it’s all the paint manufacturer’s
fault – this may not be the vendor partner you need.

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Love ‘Em or Leave ‘Em

Good supplier relationships are just like
good marriages: They should be based on trust. If you can’t believe
your vendor or he can’t take your word as gospel, you both may
end up going your separate ways.

Communication is one of the hardest skills
to master; telling your spouse exactly how you feel is so difficult
that many people never do and end up divorced. Same with your
suppliers: If you can’t talk frankly with them about "our"
business, you’ll have a very hard time getting things to go your
way.

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There are few secrets in this business. What
the average shop makes for profit percentages are published in
several trade magazines all the time and, likewise, the jobber
and OEM dealer profit margins are also poorly kept secrets. You
can’t demand a 30 percent discount from a guy who only makes 25
percent on the sale! Just as body shop owners don’t like being
told exactly what discounts and concessions they’ll give to insurance
companies, jobbers and dealerships don’t like to be held hostage
either. It’s important to be reasonable.

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It’s also important to partner with vendors
who have the same goal you do – to produce more collision work
from your existing facility. The goal for both partners should
be to make the most money with the least duplication of efforts.
If this isn’t the case, you and your partner may be better off
parting ways.

Mark Clark, owner of Clark Supply Corporation
in Waterloo, Iowa, is a contributing editor to BodyShop Business.

Joining Forces with the Enemy

by Larry Edwards

Steve McGlothlin, owner of SM Service Company
in Mt. Mourne, N.C., is currently opening two new locations this
year and plans to open three more during the next three years.
Randle Montgomery, owner of Montgomery Autobody in Huntersville,
N.C., has just become a preferred provider for a large, local
automobile dealership and will be providing management services
for it once the body shop is built.

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What’s separates these two successful shop
owners from other successful shop owners across the country, however,
is the profitable partnerships they’ve developed. These partnerships
have taken their businesses to a whole new level of sales, customer
satisfaction and profits.

You see, both McGlothlin and Montgomery are
expanding their businesses and, at the same time, sharing advertising
and marketing costs with each other for their original shops.
This is unique – and a bit bizarre – considering that they’re
in direct competition with each other.

How did they form this strategic alliance?
How can these shops, which are only 10 miles apart, compete with
each other, share advertising expenses and continue to grow?

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Before answering these questions, let’s take
a quick look at what led these shop owners to unite.

A Brief History

McGlothlin’s SM Service Company, Inc. opened
in 1979 and mainly did subcontract work for a used-car sales and
wreck rebuilder. By 1985, the total-loss vehicles being rebuilt
and sold started to bring those customers back for collision work,
and by 1992, SM began to run more like a collision repair center.

About this time, McGlothlin began developing
key partnerships with his paint, frame and equipment suppliers
because he was realizing the importance of these relationships
for training and support. He also began to realize the necessity
for systems to manage the processes of repairing vehicles. In
McGlothlin’s market, it’s not unusual to encounter BMWs or Mercedes
with repair orders of $10,000 to $15,000. These wrecks are less
profitable, but management systems help SM turn them around quickly,
profitably and with less frustration for the techs.

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McGlothlin also began working closer with
other facilities in his paint-supplier program to provide better
training for all employees and greater service for customers.
These shop owners coordinated training dates for I-Car Gold classes
and specialty clinics and advertised together.

By not discrediting the competition, these
united shop owners helped to build consumer confidence in the
industry as a whole. "Plus," adds McGlothlin, "with
all the consolidation happening in our industry, today’s competition
may be tomorrow’s new business partner."

Montgomery’s story is similar to McGlothlin’s.
In 12 years, Montgomery has bootstrapped his business from a small
shop to a sparkling new, 10,000-square-foot facility earning about
$2 million annually.

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Why They United

The year 1996 was a key turning point for
both shop owners. By this time, both men were firmly embedded
in what’s been described as the Founders Trap – a disease that
eventually affects all business founders. It generally occurs
when the founders finally get their businesses performing with
some degree of consistency and thoughts of how to enjoy the fruits
of their labors start to enter their minds. This is the point
when owners stop focusing on growing their businesses and, unfortunately,
discover just how vulnerable their businesses are. Because it’s
always revolved around one individual, the business simply cannot
survive without that person.

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This is when the Founders Trap begins to set
in – which, by the way, is one of the most miserable experiences
a small-business owner will endure.

Imagine working your whole life so your business
can support you, and now that it’s financially capable of doing
so, it can’t run without you. Every time you try to leave, things
simply fall apart.

In 1996, a solution to both McGlothlin’s and
Montgomery’s Founders Trap problems emerged. Both men were using
the same paint, and their representative invited them to attend
a series of shop-management classes designed to assist shop owners
with taking their shops to the next level. Both men signed up
for the classes – and both were skeptical.

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The training consisted of six courses spread
out over a six-month period and, as it turned out, challenged
conventional thinking about running a shop. The training encouraged
shopping your competition to understand how they write estimates,
hiring apprentice technicians, starting your own mentoring program,
paying technicians for what they know versus what they do, and
forming strategic alliances for advertising, marketing and

promotions.

The real gains from attending these classes,
however, occurred when McGlothlin and Montgomery saw the reason
they were stuck in the Founders Trap: Neither of them ever developed
systematic methods for running their businesses – all their systems
had evolved more out of necessity than planning. Paper flowed
one way because that’s the way it evolved; same with estimating,
scheduling, parts ordering, management, etc. No thought was ever
given as to how efficient the processes were.

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With this knowledge, McGlothlin and Montgomery
set in motion tremendous shop changes. For example, employees,
who for years were accustomed to doing things their own ways,
were now required to document their work and to follow systematic
steps. Although some employees refused to adapt or change, both
McGlothlin and Montgomery persevered.

After nearly a year of education and implementation,
both men have broken out of the Founders Trap. Neither one of
them has to spend time writing estimates, ordering parts, dispatching
jobs or dealing with everyday issues. Their businesses now rely
on systems and procedures rather than on them – leaving both McGlothlin
and Montgomery time to focus their efforts on growing their

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businesses.

A Strategic Alliance

Taking the first step to grow their businesses,
McGlothlin and Montgomery teamed up to purchase advertising space
together, which allows them to reduce ad costs while increasing
ad impact. Their ads feature pictures of both shops with the tag
line, "Two Great Shops, Same Great Service."

The second step occurred when they sought
assistance from their paint manufacturer to develop written five-year
business plans designed to make both shops industry leaders in
their market. The plans are still in the development phases, but
initial evaluations prove that both shop owners will be able to
capture a 20-plus percent share of their market in the next five
years. McGlothlin is going to develop multiple locations under
one banner, while Montgomery is developing a shop-management program
for dealership body shops.

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The most profitable aspect of their partnership,
however, is that McGlothlin and Montgomery now spend their days
managing their businesses – instead of their businesses managing
them.

What’s In It for You?

How can you build a profitable partnership
like McGlothlin and Montgomery? First, recognize the value of
programs offered by your suppliers; they’re often designed to
help you grow your business. But, before signing, it’s advisable
to follow these steps:

  1. Evaluate your current business from a financial – as well
    as a strengths-and-weaknesses – viewpoint.

  2. Determine where your business is today and decide where you
    want it to go.

  3. Look at all the programs available, and determine which one
    is best suited to your needs.

  4. Be prepared to take on a partner for success. Value-added
    programs have one goal: to help you improve your business. Partners
    can’t help you if you won’t share with them how well or how poorly
    you’re doing. Be prepared to take on a partner for success by
    being prepared to share your goals, hopes and dreams.
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  • Be patient! Real change takes time. Don’t expect to see immediate
    results. It typically takes at least 12 months to implement real
    change.

  • Be courageous. Employees hate change, and they love to be
    able to ask "The Boss" questions. As you transition
    your business from owner orientation to system orientation, your
    employees might balk, cry, pitch a fit or leave. Make sure you’re
    willing to deal with this.

    A Paradigm Shift

    The business of repairing wrecked vehicles is changing; therefore,
    our old paradigms about how to manage a successful shop are being
    challenged. In order to survive the next millennium, you’ll probably
    have to go through a merger, acquisition, downsizing, restructuring,
    or re-engineering or realignment.

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    For this reason, it’s wise to begin looking now for partners who
    can help guide you through these turbulent waters – partners who
    can help you take your business, and theirs, to the next level.

    Writer Larry Edwards is a Certified Management Consultant (CMC)
    and is president of Edwards & Associates Consulting in Charlotte,
    N.C. Edwards & Associates is the exclusive consulting provider
    for ICI Autocolor’s Partnership Plus Program.

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