If you’re like most collision repair business
owners who’ve been around a while, you probably consider your
pride and joy a "single line" business. Except for a
few minor scratches and paint jobs, not too many customers wake
up in the morning and decide they want collision work done on
their vehicles. It is, instead, strictly by accident (excuse the
pun) that they end up in your shop. Hence, when weather doesn’t
cooperate and accidents are down, collision repair work decreases.
So, now that the El Nino has turned the nation’s
weather pattern upside down for at least this year and insurance
claims have dropped more than 30 percent in some areas, what are
your plans to survive? Because much of our industry relies on
the misfortune of others brought on by adverse weather conditions,
when the weather doesn’t cooperate, many areas have too many collision
facilities and not enough available repairs.
You could hope for a May snow storm, some
real big hail storms or even another hurricane (probably not likely
in the Midwest), but why build your future on chance?
Today’s opportunities are endless.
A progressive operator needs to think "auto
care," not just collision repair. In addition, consider the
income that could be realized doing some or all operations that
are currently sublet, such as mechanical repairs.
Considering the Job
Vehicles today are much different than those
of 20 years ago. Back then, the closest thing to mechanical repairs
after a collision was changing a water pump, clutch fan, motor
mount or alternator. Of course, you could also open the hood and
see ground! Today, electronics and mechanicals are damaged consistently
in most accidents, so if you sublet these out, you may be throwing
away dollars.
In this article, I’ll discuss two main types
of mechanical work: retail work and internal work. Retail work
includes income from mechanical repairs not caused by the accident.
In other words, the customer came because he specifically needed
mechanical work done or was "upsold" on additional services
needed during the collision repair. Internal work includes mechanical
work done in conjunction with the collision work and is a direct
result of the accident.
Internal Mechanical Work
You may currently be subletting many mechanical
operations, and there may be many reasons for this: "No one
on staff is qualified (see box on "Finding the Right Employees),"
"I don’t have the needed ‘high tech’ equipment," "No
space or time," "The mechanical shop is right next door,"
"No desire to diversify," "The mechanic is my best
buddy and I went to high school with him," "They are
very good," "I don’t need much mechanical work done
due to the type or size of my business" or "I already
make a 40 percent gross profit on all sublet repairs."
Do any of these sound familiar? In most cases,
one or more of these is the reason most collision shops don’t
do mechanical work, but the last two are the only ones that need
further analyzing; the others aren’t good enough.
If your volume is very small or your work
mix doesn’t justify it, it probably is too costly to do internal
mechanical work. Let’s hope, then, that you’re currently getting
at least 40 percent gross profit on all your sublets!
As for facilities doing a sufficient volume
of sublets, the consideration is primarily how much gross profit
is being made (or lost) on how you’re currently doing it. (Before
considering this, look at timing as well. In today’s competitive
marketplace, one key element of comparison is "turn rate."
How fast can the customer get his car back? In most cases, doing
mechanical work internally will allow for a quicker turn rate.)
Gross profit margins on internal jobs should
exceed 40 percent. But, if you can get 40 percent gross profit
without doing it yourself, just looking at direct profit on internal
jobs may not be enough to convince you to take on the work. There
is, however, much more to the equation.
Keep in mind, you won’t get rich fixing cars,
but you may get wealthy by utilizing your business to acquire
assets. These appreciating assets will, over time, make you wealthy
or your business very valuable. Even if you can get 40 percent
gross profit on all sublets, obtaining property and a building
and doing all mechanical work there at a slightly higher gross
profit while paying for the assets will be a much more profitable
course of action for the long term.
Retail Mechanical Work
It’s here that retail mechanical work enters
the picture. Let’s do some math. Let’s say you do 1,000 collision
jobs per year. In five years, that’s conservatively about a 4,000-person
customer base (excluding multiple jobs for fleet accounts or individuals
and normal attrition). If you could do $200 of mechanical work
to 20 percent of these jobs per year at a 45 percent gross profit,
how many dollars per year is that?
4,000 X 20 percent = 800 customers;
800 X $200 = $160,000 gross sales;
$160, 000 X 45 percent = $72,000 gross profit.
What type of work, you ask? Just look at the
possibilities of a $20 oil change. That would normally be something
each customer would need done three times a year on average. Using
50 percent as the gross profit margin, that produces $24,000.
And during each oil change, a safety inspection is performed,
A/C system is checked, brakes are examined, emissions are checked
and needed wheel alignments are identified for additional mechanical
services on, let’s say, just 30 percent of the visits. What does
that translate to?
Then there’s the cross over: detailing jobs,
complete body checks and additional collision work … all
from a $20 oil change! And for those of you in areas where heating
is necessary, the recovered oil can be used for heating fuel and
even for the spraybooth baking cycle.
The grocery industry has used "leader
items" for years. Think about it: How often does someone
go in and buy just the loaf of bread or milk and not pick up other
groceries? Not too often. So what’s stopping you from using this
tactic?
For customer retention, why not give away
a free oil change? What have you lost? Ten dollars? With proper
marketing this doesn’t cost you anything, but it does bring in
additional work.
Other Possibilities for Profit
This concept for oil changes is but one of
the many possibilities; many other internal and retail areas of
mechanical work are profitable for collision repair businesses,
and what follows is a partial listing of them. (To list all the
options would cause this magazine to accrue additional freight
charges from the post office!)
- Passive Restraint Systems -Passive restraint systems
are here to stay, so if you’re subletting this work, you’re really
losing dollars. The reasons I’ve run across for not doing this
type of work are incredible, and many times it boils down to lack
of knowledge and plain fright – the fright being a direct result
of lack of knowledge. One amazing, common reason I hear is, "I
don’t want the liability of being responsible, so I always send
out air-bag work." Well, I have some unfortunate news …
you’re still liable! Your customer has a contract with you, not
with whom you elected to do the work.
Look at it this way: If you hired a contractor to build your house,
when you have a problem with something, do you call the carpenter
who did the work or the contractor? You accept the liabilities
whether you do the work yourself, have an employee do it or subcontract
it to another vendor.
As for lack of knowledge, training is readily available for servicing
passive restraint systems, and equipment vendors have clinics
and support, too. Also, the scan tools are very user friendly
and basically walk you through the diagnosis step by step.
- Wheel Alignment – Wheel alignments and wheel alignment
checks are a normal part of collision repair today. I’ve seen
large operations struggle with sending vehicles out each day (up
to four to six daily) and being told that something isn’t correct
or something else needs replaced (remember leader items). In most
cases, large chains have very low-tech people run the alignment
racks because that’s all it takes. Today’s computerized wheel
alignment machines walk a technician through each step of the
operation and, in many cases, show exactly how to perform the
operation in a video segment right on the screen.
Performing a wheel alignment is the easy part; diagnosing what’s
really wrong is the challenge. This is where the collision repair
industry has the advantage. Technicians trained properly on suspension
diagnosis can determine what, where and how much damage is really
there – avoiding the "musical replacement game" that
happens so often otherwise.
Offering this service will lead to more mechanical work, including
brakes, CV joint work, springs, shocks/struts, steering and suspension
components, and even tires and wheel service. Can you be competitive?
Sure, if you look at it like the oil change scenario and distinguish
between an alignment check, maintenance-type alignments that may
only require "setting the toe and letting it go" and
collision alignments that may require a more thorough analysis.
The scope of this article doesn’t allow me to explain in depth
the differences, but procedures and techniques are available to
provide excellent service to your customers at a competitive price.
On the retail side, why wouldn’t your satisfied customers come
back to have their wheel alignment work done by the tech who corrected
their body structure and did their last wheel alignment?
If you plan to stay internal with alignments, there are other
options besides computerized systems that will adapt to your frame
rack setup. These systems are less costly, but they also may not
have the features many computerized systems offer. One common
feature on most computerized systems is the vehicle "print
out." I’ve mentioned in previous articles the power of this
feature for marketing and employee validation, as well as future
documentation. This, by itself, offers great benefits to those
doing wheel alignments on today’s collision-damaged vehicles.
- Air Conditioning Service -Today, with the laws and
certifications involving the handling of refrigerants, many have
just given up and gotten out. But why? The test to become certified
to handle the refrigerant is all but a "cake walk."
Granted, the necessary equipment has changed, but could this really
be your reason for not offering this service?
Since eliminating the production of R-12 and the subsequent use
of R-134a (and other refrigerants) by auto manufacturers, today’s
equipment has to recover refrigerant, clean it (recycle it) and
reinstall it (recharge the system). This sounds complicated, but
it’s very "automatic" with the current equipment. The
systems are extremely user friendly for those who will just follow
the directions. And the systems today can do all the current refrigerants
when properly flushed (if necessary).
As for training, it’s readily available and will include the complete
servicing of A/C systems, including leak and system testing.
This is definitely one area of mechanical work that has major
advantages when done internally and for retail customers. Think
of the oil change scenario again … get your satisfied customers
back again … and again … and again.
- Emission Testing – In some states, emission testing
can be beneficial and profitable for your business. The state
laws vary on much of the regulations and restrictions, but if
your state does have emission testing requirements, it would pay
to look into the possibilities. - Brake Service – Brake service, including anti-lock
brake work, may also be a consideration. These systems, like any
electromechanic system used today, use similar procedures, tools
and equipment, and training that isn’t rocket science is readily
available. For your retail customers, reminders at predetermined
intervals encouraging safety inspections or complete "body
checks" can assist in your capturing the extra $200 per year/per
customer from your customer base.
Other options include exhaust, electrical, head lights and other
driveability areas.
Why Pray for Hail?
Your destiny isn’t totally predetermined by Mother Nature. Just
because she’s not destroying cars and creating chaos doesn’t mean
you can’t turn a profit.
Many business owners would sacrifice their left arm for additional
services to sell their customers. You have the opportunity – and
you don’t need to sacrifice anything.
Much of your business may happen "by accident," but
it’s no accident when shop owners take advantage of mechanical
repairs and market them to their customers to pull in additional
profits.
It’s OK to pray for hail. But, as some shop owners have already
discovered, mechanical repairs may be the answer to those "please
send me more profits" prayers.
Writer Tony Passwater is a long-time industry educator and
consultant who’s been a collision repair facility owner, vocational
educator and I-CAR international instructor; has taught seminars
across the United States, Korea and China; and is currently an
industry consultant. He can be contacted at (317) 290-0611 or
[email protected].
