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Budgeting for Success

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Budgeting for Success
Patrick Crozat increased revenue for his 12 shops when he focused on a missing part of his business: budgeting.

SHOP STATS: G&C Auto Body, Inc  Location: Santa Rosa, Calif.  Operator: Crozat family  Average Monthly Car Count: 400 at Santa Rosa, Calif.  Staff Size: 53  Shop Size: 50,000 square feet at Santa Rosa, Calif. Annual Revenue: $56 million for 12 locations

Management underwent a shift in 2016 for G&C Auto Body. Gene Crozat passed away in November 2016, leaving the Crozat siblings in charge of all of their dad’s operations. When Patrick Crozat moved into his brother’s role of chief operations officer when his father passed, Crozat quickly realized there were a few things that needed to be addressed—including the MSO’s budget.

For years, the shop had not planned ahead for investments in tools, equipment and expansion.

Crozat always wanted to supply his team with the best equipment and tools available on the market. One recent purchase of GFS paint booths led to Crozat having to re-evaluate how much money he was spending. He realized that when his team presented a tool purchase request to him, he just went and immediately bought it without considering the ROI.

Since 2008, G&C Auto Body has expanded from three locations to currently opening its 13th. Along with that expansion has come the need for new tools and equipment, something on which Crozat never wants to skimp. In order to be able to replace tools as he sees fit, he knows it’s important to not overextend debt.

Although G&C Auto Body does have some debt, it’s on the low end compared to the industry average, according to numbers provided by Crozat’s Bank of America. Higher debt may affect a company’s credit in the future, something that, as an expanding company, Crozat wanted at all cost.

As such, Crozat has found ways to make his investments last longer by investing in continual maintenance and purchasing equipment that will pay off as an investment and also meet the needs of his staff.

 

The Backstory

From 2008 on, G&C Auto Body expanded rapidly. In 2016, the company had 11 locations across California. Every year since then, the company has grown in the double digits percentage wise for its annual revenue.

“We’re going through a learning curve of being a smaller family-owned MSO while maintaining a corporate business structure,” Crozat says.

To grow in Northern California, the family first looked at markets, size of facility in potential markets and distance from the other shops’ locations. Every G&C shop is within a one-hour drive to the next location.

Beyond finding the right location, the Crozats had to equip each new facility, which meant investing hundreds of thousands of dollars in each new location. If the shop doesn’t have the right equipment, it can’t do business, he says. But the key to navigating purchases and investments, Crozat says, is to not over equip a facility.

 

The Problem

With a goal of expansion, high debt was not an option, but that is often easier said than done, Crozat says. G&C Auto Body’s DRP partners sometimes have a need in another market, so, the Crozat team will acquire a building in the location and set up shop. That includes a total outfitting of the shop’s tools and equipment, which doesn’t come cheap.

Crozat realized with all of the new locations, it was no longer feasible to buy one piece of equipment for each of his technicians. For example, it wouldn’t make sense for each technician to have his or her own frame rack.

In order to invest in equipment and tools properly, four years ago, Crozat hired an internal CEO to come in and take a look at the numbers.

    

The Solution

The shop was able to reduce costs for older locations by investing in continuous maintenance rather than being stuck investing a large amount of money when equipment completely broke down.

For new facilities, Crozat spends roughly $400,000–$500,000 to completely outfit the shop. In order to find the right tools, Crozat asked his staff at the shop he used to manage to test new products.

All tests and demonstrations of new products get sent to the Santa Rosa location.

“There’s a passion at our flagship shop of wanting to be guinea pigs and test new products,” Crozat says

After the products are demoed, the employees spend roughly two weeks testing the new tool or piece of equipment, or, in some rare cases, will call Crozat right away.

For example, a recent nitrogen welder was temperamental for his staff, so Crozat had the MWM  Automotive plastic welder showcased to his team. Right after the demo, a technician called him and said, “Pat, please buy this right now.”

That same day, Pat bought 12 new welders, one for each location.

Not only does Crozat listen to his team’s advice on how well the product worked or didn’t work, he also conducts his own research by online searching, talking to other local shops and reaching out to his paint jobber and vendors. Online searching often encompasses comparing distributors of products and reading reviews.

Another way he decreases the cost of expensive purchases is to contract repairs on that equipment to a local maintenance company.  For tools he buys again instead of repairing, Crozat and his team have had success in repurchasing Chief Genesis measuring systems and Car-O-Liner equipment.

Crozat has also learned that it sometimes pays to invest a little more up front on equipment that will save money in the long run. His recent nitrogen welder purchase, for example, has saved money because it produces its own nitrogen gas. It previously cost roughly $30 to fill a tank and the shop would go through a tank every three months across all 12 locations. Now, it doesn’t have that added cost.

In an effort to maintain the equipment that he has, Crozat schedules regular maintenance for his compressors, paint booths and any other larger equipment. Maintenance updates cost less than buying tools, he says. Without maintenance being done, the compressor could break, causing air flow to stop in the shop and shut down work for days.

In order to steer clear of debt, G&C Auto Body has a line of credit with its bank that it continuously adds to and pays off. The shop never justifies writing a huge check for a purchase. In order to maintain a good credit line, the Crozats have learned to be cautious and remember that a recession was not too long ago in the country’s history. The Crozat business has made sure they have a minimum of three months worth of expenses in the bank at all times.

 

The Aftermath

Because of Crozat’s thinking ahead and regularly scheduled maintenance, the MSO has been able to continue to grow. G&C Auto Body has grown its sales 16 percent since 2016 while adding two locations, all the while being able to purchase the right equipment when it’s needed.

 

The Takeaway

Crozat has learned that it’s important to go back and take a look at what the shop has spent historically in numbers.

“My dad would always say it doesn’t matter how much water you put in the bucket, it matters how many holes you have in the bucket,” he says.

When budgeting any part of the business, shops may need to work the numbers backwards, decide what margins to looking for, what percentage of the total sales each cost in your business and start working on the largest costs to reduce them.

 

Expert Advice: Dive into Budgeting with No Experience 

John Niechwiadowicz, owner and independent business consultant of Performance Consulting Services, says most shops do not form a budget when it comes to tools  and equipment. Common excuses as to why shops don’t form budgets are, “I don’t know where to start!” “I can’t predict the future!” and, “I’m not a numbers person”.

When it comes to budgeting, he says the key steps to making a budget with no experience is to review historical performance, dive into current numbers and then track progress.

The shop needs to look back through management system reports, financial records and even tax returns.

To create a budget, the shop has to forecast monthly sales to create a common goal for the team.

Then shops need to review the numbers and revise them to make a goal for the next month.

In addition to these steps, he says shops should create a capital investment plan and a staffing needs assessment to complement the budget, especially when considering certain OE certifications that are capital intensive.

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