The clock is ticking. Tick-tock. Tick-tock. Less than 30 days remain until the end of the 20th century, the end of the second millennium and, according to some soothsayers, the end of civilization as we know it. (Yikes!)
News programs, radio broadcasts and newspaper stories are predicting mass hysteria the second the clock strikes midnight. Stocks may plummet, distribution channels may run dry and looting may become the national pastime. (Talk about a New Year’s Eve party!)
If you’re one of the pessimists who subscribe to such theories, there’s no need to read the rest of this article — becoming a better business person to ensure the future success of your shop is of little consequence if you’re holed up in a bomb shelter waiting for the nuclear fallout to subside.
If, on the other hand, you have a more positive outlook on the next century and you’d like a more positive outlook on your business’ future, read on. Time is ticking away for you, too. The collision repair industry is changing and so must your role as an independent shop owner.
A Student of Business
Just what should independent shop owners do to survive in a changing industry? According to many industry members, it means they have to become better businesspeople.
"Many of us started out as technicians, so our business background is a little weak," says Mark Pierson, owner of Princeton Auto Body in Princeton, Ill. "It takes some trial and error before we learn the hard way about profit and loss. I think that’s been an industry-wide problem for years."
Shop owner Mark Cobb agrees. "Although I don’t want to take the tech out of myself, I believe the only way [independent shop owners] are going to succeed in business is by becoming better business people," says Cobb, owner of Cobb’s Collision Center in Wyndham, Maine.
Cobb started his shop 16 years ago — one month after graduating from a collision repair trade school. "I ran [the shop] as a ‘tech owner’ for the first seven or eight years before I realized that I had to learn to run it as a business person," he says.
To do that, Cobb immersed himself in management courses and training programs. "The best thing a business owner can do is go back to school and take some college courses in accounting, marketing and management," says Cobb. "Learn how to run the business the way it was meant to be run — from the front office, not the repair shop."
To overcome a weak business background, Pierson suggests allocating time every month for business education. "It’s just as important for the people who write the estimates and run the shop to get education as it is for techs," he says.
But it takes more than knowing how to read a financial statement, calculate your gross profit and manage personnel to be a better business person. Collision repair has become a complex industry. Independent shop owners who, years ago, answered mainly to vehicle owners, are now faced with increased insurer involvement, consolidation and tighter government regulations. Understanding insurance law has become an essential part of business.
"[Shop owners] don’t understand insurance law and, therefore, we allow ourselves to be tricked almost every day," says Ann Spink, co-owner of American Coach Works in Denham Springs, La. "As we become more and more educated, we’ll see less and less of that sort of behavior."
In Illinois, 75 shop owners have formed a legal group intent on understanding insurance law. They’ve employed a full-time insurance attorney who offers legal advice to everyone in the group and who holds monthly three-hour seminars instructing the shop owners on legal issues.
"We’ve had tremendous advancements during the last year in our state just because of that legal class," says Pierson. "Not only are we more educated, but we’ve seen some changes in our insurance department and insurance law just because we exist. It’s a frightening thought, but we actually have people in the [state] insurance department deferring questions about insurance law to us."
Though Spink — whose shop is located in Louisiana — isn’t a member of the Illinois group, she and Pierson have discussed the benefits of such an alliance on many occasions.
"Shop owners are going to have to be aware of things outside their own circles," she says. "It’s no longer sufficient to [deal only with] customers and fixing cars. They have to be aware of the legal and political issues that affect the industry."
One, Singular Sensation
Besides becoming a better businessperson, many shop owners tout the importance of setting your shop apart from the others. And though they all agree that individuality would play an important part in the success of shops in the next century, they offered various approaches.
"The way to succeed in the future is to find some niche market that you specialize in, like framework, diminished-value assessment or foreign-car repair. Something you can offer over and above the other guy," says Spink.
This push for specialty shops is partially the result of increased industry consolidation, says Spink. "[In the future], there are going to be the big, huge consolidators who put out average work, and then there are going to be smaller specialty shops. If you’re an independent, you’re going to have to carve out your niche."
Though Cobb agrees that independent shops need to stand out, he’s taken a different approach with his business.
"Most everything that has to do with our success in the future will have to do with consumers having the tools and the knowledge to know when they’re getting a proper repair," he says.
The reception area at Cobb’s Collision Center is a testament to his commitment to consumer education. Brochures and information packets can be found in every corner, and an educated, ready-to-help staff awaits.
"We do very heavy one-on-one education with customers," says Cobb. "We take five or 10 minutes with them initially and during the estimate, which can save hours and days throughout the repair process because of confusion or misleading by insurers."
Strategic Alliances
For some independents, accepting the fact that they need help isn’t a matter of pride, it’s a matter of profits. Many have aligned themselves with insurance companies and joined direct-repair programs (DRPs) as a means to secure future volume and profits.
"There’s no doubt that having a direct-repair relationship will help," says Bill Wicklund, owner of Wicklund’s CARSTAR Collision Repair Center in Liberty, Mo. "Any time you can get closer to an insurance company, it’ll help you."
But not everyone agrees that partnering with insurance companies is a profitable or sound decision.
"Being a DRP is a slow suffocation of your business," says Cobb. "When someone else has their hands in your pockets and is managing your money, it takes away the independent [shop owner’s] ability to manage on his own."
Cobb also believes that DRP shops are constantly concerned with whether they’re going to lose a relationship with an insurer. But without those agreements, says Cobb, shop owners can focus on what’s important — their market and their customers.
Though Wicklund recommends establishing relationships with insurance companies, he cautions shop owners not to get too much business from any one insurer.
"If you have half your business coming from one insurance company, that company, in a sense, owns you because if they decide not to pay for front fenders next week, you’re stuck giving them front fenders," says Wicklund. "Balance is good. You don’t want any more than one insurance company you can afford to lose."
Wicklund doesn’t, however, caution independent shop owners about aligning themselves with franchises.
"I think [independent shop owners] should at least look at franchises as an option," he says. "If I was one guy out there by myself, it would make me awful nervous right now. As one person, you’re very limited in what you can do."
As members of a franchise, facility owners can benefit from national advertising, increased buying power, extensive business education and involvement in "20 groups." Franchises also ask for periodic business reports, which force shop owners to look at their shops a little closer than they might if they were on their own, says Wicklund. "There’s somebody else who can say, ‘You’re not doing this right. Here’s what you should be doing.’ "
I Will Survive
If you’ve chosen to buy into the millennium hype, then you’ve probably got a cache of canned goods, bottled water and other necessities stored in your basement. On the other hand, if you’ve decided to ignore the "doomsday" predictions, you’ve probably got really cool plans for celebrating New Year’s Eve.
But when it comes to your business and your success in the next century, you don’t have much of a choice. Either you prepare yourself for the changing times ahead or you may not be a part of them.
"When I first opened my shop, I talked with a veteran body shop owner and I didn’t believe a word he said," says a now older and wiser Cobb. "He told me about all this [business] stuff I’d have to worry about; that it wasn’t just about repairing vehicles. Being young, I kind of blew it off.
"But [collision repair] is more than repairing cars. It’s a business," he says. "And you need to know how business works in order to operate [your shop] successfully — today and in the future."
Writer Melissa McGee is managing editor of BodyShop Business.
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Making Money in the Next Millennium "Most shops won’t try to sell a consumer on any repairs beyond what an insurance company pays for when, in fact, there’s as much as a 10 to 25 percent increase in possible repairs," says Cobb. As many as 50 percent of Cobb’s customers pay out of pocket for additional repairs. "A lot of shops claim customers will never do that," he says. "But if you don’t sell [the repairs that] are already in your front door, then you’ll have to work twice as hard to get twice as much work out your door. "The key," says Cobb, "is learning how to sell it to the customer." |
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