How to compete in the repair industry

How does one compete or even continue to exist within the fast-changing collision repair industry? Constant changes come from every direction.

Consider the growth of dealer groups and independent consolidators, forces that were almost non-existent five years ago. Also consider the changes driven by insurance companies such as direct repair programs and insurance company financing divisions.

Is the insurance company becoming the one-stop shop for the customer? Will the insurance companies exert power over the repair process? With ever increasing obstacles, it becomes critical for the dealer to aggressively and willingly make necessary changes.

Moreover, the dealer's body shop must become an integral part of his overall operation and contribute to customer retention and profitability.

In many instances the body shop has been viewed as a necessary evil for the dealer operation. In theory, it will assist in the overall retention of the customer.

In practice,however, the body shop often is poorly marketed and is not promoted to the customer at the time of a new car sale or service visit. The body shop then can become a profit drain rather than a profit builder.

The body shop should be viewed as a self-sufficient profit center, not reliant on other departments to continue to exist.

To stay in the game, a dealership must better manage the daily body shop operations and relationships with both of its customers: the insurance company and the vehicle owner.

The dealer collision repair shop must also focus on reducing costs and increasing efficiency.

As a fixed operations consulting firm (ASC Retail Consulting), often we find that these are the most critical and easily influenced areas within the operation.

Often the talent and skill exist within the organization but have not been provided the platform to maximize performance. The key element is a management system allowing dealership management to control the variables of the business rather than the variables controlling them. A system will build customer loyalty to the total operation while increasing dealer profits.

As a dealer or manager could you actively and accurately answer the following questions?

What is my current closing ratio? What percentage of my business is coming from each insurance provider? At what level of production is my breakeven point? How well do I promote my body shop to the vehicle owner and insurance companies? Is my current cycle time efficient and can it be improved?

These and similar questions typically are not evaluated frequently enough if at all. Cycle time, for instance, has recently become a key phrase within the body industry and incorporates many facets of the body operation.

Consider how a poorly written estimate can produce a longer cycle time. The need for supplements will obviously increase, while the time incurred for supplement approvals becomes a factor causing down time for the technician as well as dead stall space.

Cycle time also is impacted by various other elements such as technician productivity, part holds, paint booth production and limited production area.

Look at processes and procedures to improve and ensure a shorter cycle time. Cycle time obviously has an important impact on customer satisfaction, rental car costs and insurance company distribution of work.

Focus not only on production issues but also on the merchandising your body shop.

There are basically two phases to appropriate merchandising of the body shop, internal and external. There are various internal elements, the first being the educational process at the time of new vehicle delivery. Each customer should be given a tour of all departments and given the necessary information such as what steps to take when involved in a collision.

We should also be certain the body shop is clearly identified throughout the dealership with the appropriate signage.

Another internal element to be considered is a professionally trained estimator staff. Again, the appropriate training and tools are necessary for successes to take place at this level. Typically, the body shop estimators will have a low closing ratio if there are poor write-up, follow-up and closing procedures.

Our average client prior to training has a closing ratio between 30%-40%. After training and implementation, it's 60%-80%.

The second phase in merchandising is done externally. Management should have an active plan for communicating and building relationships with the local insurance adjusters.

Offer potential discounts to those that provide volume business rather than charging the same rate for all companies. This will allow your body shop to improve either the volume of work from currently low volume companies or improve the total gross profit.

Body shop management often believes the insurance company has all the power, yet the customer still has the power to choose the shop he or she desires to do business with.

One might ask, "If this industry is so tough why should I try to exist in it?"

While there are many obstacles, there are also great rewards. A well managed, highly efficient shop can produce outstanding bottom-line profits and become an integral part of the overall dealership operation. For the dealer principal, a profitable body shop allows him to become more diversified and less dependent on the fluctuations in new- and used-unit sales.

Jeff Snider, ASC's client services manager, has extensive experience in service and body shop consulting.