I remember 20 years ago when a wreck would be driven in or towed in and we would let the insurance company write the estimate, putting “repair as per insurance estimate” on the work order. Then, we would order the parts and fix the car. There might even have been an occasional phone call made predicating the final bill, either to fix a parts price difference, add some parts or add a few missing hours here and there. Usually, you knew the adjuster or appraiser and it wasn’t too much of a hassle to get your final bill covered. Heck, you probably had no problem letting the car go and waiting a month to get reimbursed for the shortages. Those were the good ol’ days, when only a handshake and a promise sufficed.
Fast forward 20 years.
The days of trusting the payer of the claim to do the right thing are long gone. I used to think the guy writing the estimate actually cared about the quality of the repaired vehicle. Now I know better. His goal is to beat you out of every single dollar he possibly can in the name of corporate profits. Loyalty to a 30-year customer without a claim makes no difference whatsoever. We’re repairing a new vehicle with 2,000 miles on it and we’re supposed to explain to the customer why he or she isn’t getting the parts he or she may want.
For those of you who are still operating this way, I think you’re flat off your rocker. To some of us enlightened shop owners who have seen victims on both sides of the claim, the good ol’ days are truly gone forever.
The June 2008 cover article of BodyShop Business, “A Legal Primer,” should have sunk in pretty well as far as explaining the do’s and don’ts of today’s environment. However, for those of you who need it broken down for you, I’ll do my best to make this simple.
Know Your True Cost
This all got a real boost when estimates went electronic. We used to be able to look in the book and say, “Well, it pays two hours to hang that fender.” Now, insurers have custom profiles that trim time off operations, deduct for overlap, “this is included in the overhaul,” “that’s included in the time for the replacement panel,” and even blend within panel because you’re only base-coating half the panel so now we get half the total refinish time. I used to blame “drips” for our downfall, but seeing how 80 percent of the shops that are left are “drips,” I blame every body shop but a handful for our current state of affairs.
In the “cost containment environment” of today, we don’t have any friends who work at the insurance company. I’ve crafted a phrase for my customers that says, “They just don’t pay for everything it takes to make your car like it was before the accident. They don’t feel good unless you let them beat you out of a few hundred dollars.”
That’s what it has come to now. But instead of a couple of hundred bucks, now it’s $1,000 or $2,000 short and we’re either supposed to eat the loss or get steered right out of business. If we stand up for our customers, we’re left out in the rain with
The point of this editorial is not to summarize this current state of working at a loss but to get across one thing you all should be doing and most are not. And this one thing works for all shops, not just us independents: It’s to run the true labor cost software to determine what your labor rate should be.
You should know how much it costs to keep your shop open for an hour. It’s simple math: Take your annual or monthly overhead and divide it by the number of hours your shop is open. If you factor in all fixed costs, salaries, utilities, insurance, office supplies, leases on equipment, all your nuts, bolts, clips and anything you don’t collect for on the repair order, you should have a good idea of your fixed costs.
You should also know what you make on parts and materials and factor that in as well. Run a program like Paintex to determine your true cost of materials. Mark your parts up 35 percent or more like a mechanical shop does.
Take a medium to hard hit at $2,000 or more. When it comes into the shop, disassemble it, measure the chassis, look at the passenger compartment, check for broken knee bolsters and spilled coffee, look in the trunk for loose spare tires or dislodged components, check the fluids, check the warning lights to see if any are on, and check for bent rims and kinks in the roof. Look it over good. Write a thorough estimate.
Include cover car and body materials, and charge a fair markup for your materials and parts. Don’t miss anything. Sand and buff, mask jambs and do everything you have to do including washing the car and disposing of the damaged parts and contaminated fluids. Put the estimate in your system and save it. As you repair the car, keep track of it as it goes through the shop and make sure the final bill matches what you did and all the operations are charged for, your parts prices are correct and all the parts are on the bill. Make sure there are no “includeds” or “inc’s” on this bill and put at least a tenth on every labor line. Save this as the “final bill.”
Now, take the insurance version of the estimate and do what you normally do, negotiate your way through it and, if your final bill matches the insurer’s total, you can stop reading now.
If they don’t match, I doubt the insurance estimate was higher than yours. But if it was, your estimator needs some training.
If your final bill was more than the insurance-estimated repair cost, and you didn’t collect for it, how much money did you lose? About $100, or maybe $1,000? If there’s a percentage of loss on your shop’s end, it generally transfers to every job by about the same percentage. You can then multiply the loss by the number of vehicles you do a year to get an idea of how much your shop is being fleeced.
Insurer Estimate = Claim Number
We never use the insurance company’s estimate. No matter what the insurer writes, we use it as a claim number and contact sheet. We have to assume all the liability for all that’s done to the vehicle and the parts and materials used. Because of this, all of our customers get a copy of what we did exactly. If the customer won’t take on the payer of the claim, we ask him or her to pay the difference. The responsibility for payment recovery is entirely up to the consumer. It’s solely up to the claimant or insured to recover what he or she is owed. We have written some off as uncollectible, but they’re on my year-end accounting ledger and written off on my taxes.
The days of accept- ing liability for a cost containment company have long passed for the smart shop owners. The rest of the shops that don’t collect for their work or cut corners to make a breakeven are the cause of the dilemma we’re in.
Take a lesson, people: two of the biggest chains to bite the dust were fixing cars at a loss for a couple of years – all for fear of losing their partners! And the “partners” came to their aid when the going got tough, didn’t they? Not! Please wake up before you become a statistic.
Writer Bob Winfrey is owner of All Precision Collision Repair in Marshville, N.C. If you need help figuring out your true labor cost, e-mail him at [email protected] To check out the Paintex invoicing program, visit www.paintex.com.