Good Shop Image = Impressed Customers

Our shop has recently become a memeber of a nation chain in an effort to grow our buisiness. At which point we were required to do a serious overhaul on the image of our building, our office in particular. After doing some work costing around $5000-6000 we were a little concerned over the money spent. Well it hasn't taken us long to see the differnce in the attitudes of our customers, aswell as our own. Having a professional looking office makes us feel better about the image we put off & the customers pick this up and seems to increase their confidence in us.

Yesterday we had one customer whom came to see us for an estimate & afterwards was directed to a preferred shop. After visiting the preferred shop he immediately took his car and brought it to us and stated the reason was that our shop seemed more professional. This was about a $3000 job that would have went elsewhere had we not had that image, a few moths ago it probably would have!

Anyhow, it seems to me the cost of these renovations will quickly go from minus to plus. It reinforces the saying image is everything....I am starting to beleive!

Shops' Recommended Items to Set as Charges:

Color, Sand and Buff
Hazardous Waste Removal
Car Cover
AntiFreeze
Pin Striping
Front End Alignment
Mask Jambs
Clean & Re-tape emblems/mldgs
Seam Sealer
BAG FOR OVERSPRAY
Flex Additive
Corrosion Resistant Material
Chip Guardon
specials - promotions such as 'bumper day'
Protect undercoating
Tire Mount & Balance
Rack & Measure Frame
Towing
CLEAN VEHICLE FROM REPAIRS
Masking
Color Spray Out Card for Color Match
Used Part Clean-up
Broken Glass Clean-up
Wheel Alingment
refridgerent
Shop Materials
PDR Repairs
Let-Down Panel
Batteries
Adhesive Removal
Clips & Hardware
Prime & Block
Set Back Truck Bed

When someone decides they are going to start a business, it usually comes from the thought that "Hey...not only can I do that...but I can do it better than the other guy....AND I can make some money doing it." As such, the entrepreneurial spirit in us kicks in. We put together a business plan, we weigh the options of cost/loss versus profit and we decide to roll the dice, as it were, because we know we can build a better mouse trap. It is this spirit that drives us all in business.

In starting a collision repair facility, there are essentially two schools of thought. The first being the "corporate" path where one looks to build large scale, borrowing heavily either from banks or investors to finance the designing, building, staffing and managing of a larger facility. The second, and far more common is the "mom and pop" approach. Now arguments can be made as to which one is better for the ROI of the investment, but I tend to believe that the smaller shop is a better investment, long term for the ownership. I recently spoke with a long-time customer of mine about his thoughts on a start up body shop. He had successfully expanded and maintained a very large facility over the past 20 years. His annual gross numbers are well above 2 million. When I asked him his opinion on a best case scenario for starting a body shop, I was surprised to hear that his views are very much like mine considering he chose the "corporate" method and it has done extremely well for him.

When my friend Robert went to the bank 8 years ago, he was asking to borrow about one million dollars to build his new shop. He was looking at increasing the size of his operation by over four times its current state. Expanding his operation from a 4200 square feet facility to a building well over 22,000 square feet was a mammoth undertaking. He rolled the dice, borrowed heavily and has since made a very good living for himself as well as his employees. Yet when asked if he would recommend doing the "corporate" start up, he said he would not and that the "mom & pop" approach was a much better decision for a new shop owner. As we discussed the issue over a few phone calls, these were some of the key points we agreed upon.

1. You should not start any business without a business plan and you will not borrow money from a bank for a new business without a business plan, period. My advice is to seek professional help on this. Look to the Small Business Administration to help you with establishing your plan. They have a large library of "how do I's" for the small business starter. They can recommend advisors, give ideas about money management and in some case help you secure some funding sources to help in the startup process. Additionally, with the current economy having banks scared of lending money to anyone regardless of your credit score, borrowing history or cash flow, they can help you solidify your smaller business plan. Also getting a bank to lend you a smaller amount of money maybe a little easier if you have a well thought out and structured business plan as long as they feel comfortable with the amounts and the diligence you have put into the research of the plan. Be sure to include studies of the surrounding marketplace. How many other shops are in an immediate proximity to your proposed location? Is there sufficient egress to the property via main intersections or other businesses in the area that can generate potential "drive by" advertising for you? Do you plan to build or perhaps lease an existing building? Have you made any contacts with potential clients such as rental companies, delivery companies, cab companies, or perhaps municipalities for bid work? Getting secured, contracted work will add bottom line receivables to your business that banks like to see. Be sure to approach suppliers and work out some soft numbers for discounts on parts and materials so you know your margins based on percentages. As you are looking for a location or perhaps looking to build, remember that you can always expand if the business calls for it. Avoid going into "building" debt and not being able to afford to install the necessary tools you need for opening day. Try not to over extend your business on Day 1 by over borrowing. Establish the track record with the lender by borrowing what you need to get your shop up and running and perhaps a small operating cushion. Sell them on the fact that you will be profitable quickly.

2. You will need to further decide how your business plan will be incorporated into a complete business model for your shop. A common misconception is that "bigger makes more money". This can be true as we see in the larger consolidators. It means, however, as we are starting up more cost, higher risk and an inability, far too often, to survive. Start with what you know. Perhaps you are a good painter/body man. You have a good body man ready to come on board. Perhaps another fellow is a frame man. All you need is a small space, perhaps three bays, a small Chief rack and a paint booth to make it all happen. It is as simple as that. Start small and grow. Do not over commit unless you have something you can fall back on. In Robert's case, he was maintaining his original shop while he expanded and built his new shop. As you establish your business, your customer base and your reputation, you will see opportunities to expand as your bottom line grows.

3. Pay "cash" as much as possible until you have established your cash flow patterns. Many shops I have talked to over the years get strangled in a cash flow net. It is easy to do regardless of the industry but in our collision repair industry, it happens more than most due to the nature of the business. Fronting repair costs of parts and labor, awaiting payment for past repairs, fleet accounts that pay on 30 or 60 notes or getting stuck with abandoned vehicles are only few of the problems shops face. These and many more lead to faster cash out and slower cash in. So do what you can to minimize credit exposure. Pay cash for parts when possible. Try not to give away profits by "financing" deductibles whenever you can. As you establish your profit margins, you could consider this as an alternate revenue source but I caution against it in a start up shop.

4. Try not to bog your shop down with "stall sitters" such as severe hits or restoration projects. If you have the physical space to store them or move them easily from the work areas, it isn't a big deal but remember, we are looking at a small shop scenario. The longer a car sits on the frame rack or in a tear down stall waiting on another car to come out means higher turn time and less flow through your shop. Try to establish a quick fix mentality. "Hang and Paint" repairs, while considerably less dollar amounts, tend to be as high or higher profit percentage than heavy hits. The turn time for fender benders is obviously less and can lead to attracting clients such as rental companies or service companies that need their vehicles on the road. A faster turn time for repairs on a rental car equates to more money for the rental company. This can obviously lead to more work in volume from the rental company to your shop. So consider keeping a streamlined process to handle smaller hits more efficiently to be more profitable. I am not suggesting you turn work away but rather be a little selective on the scheduling if you can.

5. Work to make sure your customers are the top priority in your business. They are the reason you are here. Go the extra mile. Make them realize they came to your business for a reason. A business man I know is fond of saying "the difference in ordinary and extraordinary is the extra." When you think about it, it is the extra things one does for the customer that offsets them from the competition. Taking care of your customer is the easiest way to secure another customer. Generations of family member continue to take their vehicles the same shop because they have an attachment to the repair facility by some means. If you can establish that type of relationship by taking care of the extras, you can grow your client base laterally without much cost. Remember, every job we do in a body shop is like a rolling billboard for the next potential customer. Friends know that "Joe Consumer" wrecked his car. When they ask, you clearly want "Joe" to tell them that every aspect of the repair process was handled professionally, quickly and without incident. Since on the average, drivers only come to need repairs done once every 7 years. That is a long stretch if you are not ambitiously going after more customers. You do this by taking care of the details, the extras.

While these steps might seem simplistically drawn out, they are the cornerstone to a thriving business. What needs to be understood is that there are a lot of moving parts to getting a shop open. These are more fundamental practices. In my next article, we are going to get more involved with the actual shop set up, discuss DRP relationship and how we go about marketing to the public for our new body shop.

Keep an eye out for the next posting by Matt Shanks on how to Start a New Shop

Posted April 28, 2009

I know that right now, we are all feeling the crunch: low claims counts, rising costs of everything involved in our business ventures, customers cashing in instead of repairing their cars. The list goes on...

I am going to help with a few tricks I use to control costs at my facility. I am not going to use any particular order but here are a few.

To help lower energy costs at the shop, I have lowered the thermostat in the shop to 60 degree's during the day and to 50 degree's at night. An electronic programmable thermostat runs about $140.00. When we are not working we also set it at 50 degree's. These units can be programmed for seven days and four to six different time zones for each day. Some will even start warming or cooling an hour before the start time to meet the setting a little at a time instead of all at once. We only heat from November to April and I have cut my heating bill in half. I switched to cold weather hardeners and reducer's for all products that I can for the winter months (all 60 degree range).

I purchased several infra red portable electric heaters for the rush jobs, seam sealers and other products that need the heat to cure to keep from slowing production in the shop.

There are many good clears and undercoats that air dry quickly at lower temperatures. You can cut your bake time to 10 to 25 minutes with the proper clear and lower you spray temperatures with winter low temp reducers and products. I never use slow reducers unless it's 100 degrees plus. This helps keep flash time between base coats and clear coats quick as possible. You can cheat the hardeners by 5 degrees if it is not too humid outside.

I have a mixing station provided by my paint supplier. I keep a set of aftermarket binders, primers, sealers and clear's for the older cars and vehicles out of warranty. This saves me about 30% on material costs without sacrificing color match and all my products still have a lifetime warranty.

I also have a paint invoicing program to bill for my materials. This has boosted my profits on paint and materials and now kept me from loosing money during this recession. Try the demo www.paintex.com.

This program is very simple to set up and the ability to cover every product you use in the shop from razor blades to clear coats. Bob Klem is a great mind and has used his years with Mitchell and KLM to build us a great program.

I use Web Est and set my own thresholds for clear coats, overlap, two tones, tri stages and I never write included on any item on an estimate. Everything takes time and should not be included in some other operations, regardless of what insurers tell you.

I successfully bill for all operations necessary to repair that vehicle. I charge to mask jambs, buff, dispose of damaged parts, test fit panels, block and prime, cover car twice, sand and buff, nuts bolts clips, weld thru primer and even to clean up and deliver. I mark up anything I write a check for including tow bills and alignments. I don't do my own glass work and I mark that up also. I make my money using my money.

I use the estimating systems as "Guides to replace parts on undamaged vehicles" as they were intended.

I pitted five vendors against each other and buy the products that work best for me at the lowest possible price and check pricing every 60 days or so. My money goes a little farther that way.

I pay my guys salary plus an incentive if they turn over there worked hours in labor. It gives them an incentive to go that extra mile for the customer and themselves.

I use the Oem web sites for a two or three day pass to get repair information and charge for the research time and log on marked up.

My margins are true accounting mark up not an add on percentage, quite a difference (almost 10%) on the same percentage.

I always shop for the best price on a salvage part and charge to repair damage and transfer components. I charge more to skin a door than a new door shell costs. We don't waist time skinning too many doors.

We charge for disassembly, towing with mark up, a damage analysis and storage on total losses. Sometimes I make more if they total.

Do I collect from every cut throat company 100%, 100% of the time? No but would you believe 98%, 100% of the time?

If you do not try or have given up, you are not understanding the system.Most companies I deal with have a job to do and that is control costs. My job is to make a profit.

Think out of the box, charge for items that we have been giving away for years.
Here is a short list:

Disposal of damaged parts $5.00
Clean for delivery $20.00
Mask jambs .6 per opening (in the p-pages)
Sand and buff to match factory texture 60% of refinish time
Razor blades
Rubber gloves
Paint mixing cups
Buffing compound
Polishing compound
Polishing pads
Self etching primer
Two part epoxies
Block and re prime 20% of body labor at refinish labor rate
Body filler
Polyester putty
Buffing pads
Sand paper
Mark up on ALL sublets including alignments and glass work
Admin time to schedule alignments, provide rental updates, etc.
Damage analysis $150.00 (not prepare estimate)
Disassemble to prepare damage analysis (not tear down)
Access time
Test fit panels
Remove adhesive from trim R
Check fluids
Oil. Trans fluid, PS Fluid, Brake fluid
Nuts, Bolts, Clips, Wire ties, Electrical tape, Solder, Butt connectors etc.
Remove wheel or wheels
Set up on Frame rack 2.0 hrs at Frame rate, Truck Tie downs 4.0 hrs at Frame rate
Road test
Check for wind noise
Check for water leak
Fax Fee $5.00
Copy parts documents $40.00
Steering is a tough issue to work around but signed repair contracts at the time of estimate are tough to steer away.

Questions, comments?

E-mail me I have done this for over thirty years, if I do not have an answer I may know someone that does! apcrmt@aol.com

Robert P. Winfrey Jr. www.apcr.biz