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Adapting to Your Shop's Market

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The Pivot Your Shop Needs
How two shop owners adjusted their business models to stand out.

When attempting to navigate through the massive wave of activity flooding the collision repair industry—from the ongoing struggle between insurers and shops, to market consolidation, to the constant influx of vehicle technology—a fundamental truth is often overlooked: individual shop operators are just doing their best to stay afloat in their regional markets’ waters.

Finding a way to stand out in your environment requires a commitment not every shop is ready for—which is why Tom Adams and his company, Certified Collision Group, felt compelled to help.

“We realized there were a number of regional operators interested in assistance because of the chaos of consolidation,” he says. “The Big 4, large dealer groups, they have significant resources to not only engage insurance companies, but also the industry at large. Smaller shops need that connectivity.”

Formed by regional MSOs trying to compete in the busy California market, Certified Collision Group (CCG) takes in aspiring body shops to be part of its growing network (now comprised of more than 200 shops). And as senior vice president of CCG, Adams—who has studied the industry through several of his past employers, including CCC Information Services and OEConnection—identifies the steps a shop must take to remain in step. It requires you to do your research, to find an opportunity, and to come up with a game plan.

To put a single word to it: it requires adaptation.

As Gary Wano Jr. found out, sometimes the market doesn’t cater to your initial vision for your shop. And as Maria Carrillo discovered, your shop’s foundation can been swallowed up by the competition. But if you can adapt? If you can adjust your approach just a little bit? You won’t just find a new avenue, says Adams—you’ll build a new road and create your own market.

Here’s how Carrillo and Wano adapted to their environments—the first by marketing to insurance companies, and the latter by partnering with OEMs and dealers—and how Adams says you can adopt those approaches in your region.

SHOP STATS: CARRILLO & SONS COLLISION CENTER   Location: San Diego  Staff Size: 18  Average Monthly Car Count: 125 Annual Revenue: $3 million

A Better Story

“I appreciate you guys. You’re a good shop. But right now we don’t need anybody in the area.”

At one time, that was the kind of sentiment Maria Carrillo heard over and over from insurers. That situation was a far cry from just two year earlier, when Carrillo & Sons Collision Center, which churned out $1.5 million in annual revenue, was sitting pretty with its three prosperous DRPs in the San Diego market.

But once Carrillo divorced her husband and he left the business in 2010 and she moved from shop accountant to owner, everything changed.

“All three insurance companies, as I took over, said they were pulling out,” she says. “They were ‘changing directions.’ It happened all at once.”

“Changing directions” basically meant MSOs in the region could offer more to those DRP agreements. With little background in the industry and a loss of a huge source of revenue, Carrillo and her three sons (who still help run the shop to this day) saw sales dip $300,000 over the next two years.

Carrillo could have become dormant, could have given into the competition, could have sat back and watched it all fall apart.

But that’s not really her style.

“When my husband left, we didn’t really know what to do,” she says. “Tony was running the shop, Daniel was doing parts, and David was helping me in the office estimating. I tried to stay in the office like I was used to, to watch over finances—but I don’t like sitting around too much.”

Since her shop was built on DRPs, she naturally sought to regain those partnerships. So she went out into her market to prove she could offer something the competition didn’t.

 

The Opportunity

With little industry knowledge, Carrillo began to network with several collision entities—including the National Auto Body Council (NABC), AAA, I-CAR, the Collision Industry Conference (CIC) and CCC Information Services—gauging how to stand out in a sea of competition. But even after all that networking, she found her angle through an unlikely source: the Women Presidents’ Organization (WPO).

Through the collision industry organizations, Carrillo discovered the importance of training and certifications—but through WPO, Carrillo began to understand the importance of showing rather than telling.

“I quickly learned [through WPO] that people still want the family business,” she says. “I can get a lot of customers and win people over because we’re a woman-owned collision repair center.”

The women of WPO told story after story of how they won over their markets. This made Carrillo realize she needed to win back insurers by telling her own story, by showing that her shop was a staple in the community.

 

The Game Plan

Thus, Carrillo began to write that story. She started simple, with actions as little as sponsoring an area Little League team and working with NABC to donate refurbished vehicles. She wanted to build an identity for her shop that was infused with the community before calling up any insurers.

But once those seeds were planted, Carrillo quickly found out that researching DRP opportunities in her area wasn’t a passive task—she needed to prove Carrillo & Sons was the proper fit.

That started with identifying the carriers in need. Some insurers carried a heavy volume of drivers, and some were more strict about KPI requirements. This meant calling up insurers and surveying their needs—even when there was seemingly no chance of securing the partnership.

But when Carrillo got a bite? She advertised the hell out of her shop’s place in the community, its OEM certifications (in which she invested heavily), and her unique role as a female leader in a male-dominated industry.

That story went further than anything Carrillo had tried previously. She even won one insurer over after the carrier saw a flyer for the Carrillo & Sons–sponsored Little League team.

To seal the deal, Carrillo hosted shop tours, and, along the way, boasted about her shop’s stellar customer relationships and her technicians’ I-CAR Gold certifications, and showed off her specialized equipment for the shop’s OEM certifications.

 

The Adaptation

Carrillo went from a clueless industry newbie scrambling for insurers to a manager of the shop’s now eight DRP relationships, which make up 65 percent of the shop’s revenue.

She and her estimator split duties between those DRPs, both aware of the specific requirements of individual partnerships. By catering to those needs, Carrillo and her sons not only added multiple DRPs these past six years, but leveraged those partnerships for fleet accounts, as well.

By 2018, the cumulative effort resulted in an annual revenue of $3 million—up $1.8 million from just six years previous.

“What’s cool with DRPs is once you establish that relationship with a customer, you get customers coming back even if they’ve changed insurance companies,” she says. “Now we stand out and customers know who we are.”

 

Marketing to Insurers

Tom Adams says Certified Collision Group, for which he is senior vice president, has a team that will study any affiliate shop’s market and find DRP opportunities. In order to win over one of those accounts, the group has a tried-and-true pitch when advertising a shop’s services. Here’s a rundown of the approach:

Know what motivates the insurer. Building a relationship with an insurance company is a process, and it requires you to understand what data is motivating an insurer at any given time (as it can change month by month). If the regional manager changes hands or the company rolls out a new national program, certain expectations and KPI requirements may come with it. Being aware of those fluctuations not only helps during your pitch, but helps retain the DRP, as well.

Host the insurer. It’s one thing to know what motivates an insurer—it’s another to show you can meet those expectations. For instance, if cycle time is a key motivator and your shop sports a fast lane for small repairs, bring the carrier in and show it off.

Know your capacity. A meeting with an insurer may prove fruitless if your shop cannot handle the carrier’s workload. If you’re going after a larger client administering a high volume of vehicles, understand your technicians’ efficiency levels and your shop’s average monthly car count constraints before committing to any deals. Failing to honor a workload expectation could result in a bad reputation among area insurers.

SHOP STATS: G.W. and Son Auto Body Inc.   Location: Oklahoma City  Staff Size: 26  Average Monthly Car Count: 82 Annual Revenue: $4.4 million

Ahead of the Curve

Walking through Gary Wano Jr.’s 32,000-square-foot facility, you’ll notice a track system running above each of his dozen-plus technicians’ bays, so that the shop’s array of welding equipment can be pulled down and accessed for any repair. It’s an innovative, efficient—and expensive—system.

And it was all done for an insurance company.

Which may be surprising if you know the owner of G.W. and Son Auto Body Inc. in Oklahoma City, because his shop sports just one DRP with State Farm. On top of that, over the past several years, Wano has sat on panels for various entities—from I-CAR to CIC to SCRS—to encourage partnerships with dealers and OEMs.

But Wano didn’t get into the business with that mindset. When Wano effectively took over the business from his father (Wano is currently in the process of buying the shop), Wano envisioned building his shop around DRPs, to the point where he invested in the aforementioned tracking system in order to impress insurers.

“In 2003 … I had heard Oklahoma City was prime target, needed more facilities to handle DRPs,” he says. “So we added 20,000 square feet, sat with several designers, called paint companies, visited facilities all over country and tried to pulled in best ideas I could come up with.”

These days, ROI is a huge concern for Wano—and that attitude stems from this expensive facility makeover. Because after winning over several DRPs, the only consistent part of those relationships were the inconsistencies, he says, as market shares would dictate the flow of vehicles and create sales voids.

He needed another option, something that would conform to his deep investment in training and the latest equipment—which is where Mercedes-Benz came into the picture.

 

The Opportunity

At an I-CAR Nashville committee meeting, a Mercedes trainer had one simple question for Wano:

“If you guys are training, if you have this big, fancy facility … why aren’t you looking at [the Mercedes-Benz dealership] in your market?”

That seems like a reasonable thought these days. But back in 2004, the concept of partnering with OEMs and dealerships was a foreign concept to most—including Wano.

Essentially, Mercedes vehicles required specific equipment and training to be repaired properly, and Wano had already invested in most of the necessities. Past that, it was simply a case of reaching out to the area Mercedes dealership and pitching his shop’s services—effectively replacing what the DRPs had promised but on which they weren’t delivering.

 

The Game Plan

Becoming OEM focused was a top-down endeavor for Wano, as he not only had to instill that mindset in his employees, but also had to win the trust of area dealerships in order to understand what assets would make his shop a viable partnership option.

At first, with no dealer agreements to leverage, the latter task proved to be the most difficult.

“The owner of this [Mercedes] dealership had a bad taste for body shops,” Wano says. “He wanted everything subbed out, and didn’t want ties with collision repair facilities.”

Wano eventually won the dealership over by investing in the I-CAR classes that catered to desirable makes in his area. To determine that, Wano utilized his paint company, which attained market demographics and showed Wano which OEMs held the heaviest presences in Oklahoma City. And the biggest, untapped fish was Mercedes.

Focusing on the seemingly unattainable Mercedes dealer first, Wano started incentivizing members of his team to specialize in specific training. This culture shift would require much more traveling and expenses, which meant he needed company-wide buy-in from both technicians and estimators. Thus, he began to adjust wages based on the level of training employees were willing to obtain.

That all-around approach led Wano to securing the deal with Mercedes back in 2004.

 

The Adaptation

In that first year alone, Wano dropped seven of his eight DRPs. He went on to repeat the Mercedes formula with BMW, Jaguar, Land Rover and Volvo.

All of those dealer partnerships resulted in OEM certifications as they became more popular, meaning Wano was way ahead of competition on that front. In 2013, he even added Tesla to his shop’s list of certifications. By targeting luxury brand certifications (in which most shops won’t invest), Wano’s shop stands out when drivers search within those OEMs’ certified networks.

The culture of training Wano built is now instilled in new hires, as when they are hired, they are held accountable for the travel they must undertake each year for training.

Through that training, Wano’s shop stays on top of equipment required for forthcoming models, which dictates Wano’s tool budget each year. Knowing that tool budget ahead of time allows him to adjust his labor rates for specific OEM repairs.

“Based on cost of training, equipment, lost production for techs involved,” he explains, “if your costs raised up $41 per hour, and you’re charging $48 per hour labor rate, you won’t stay in business for long.”

That focus has catapulted his facility’s revenue, which has nearly doubled since he took over to $4.4 million.

 

Capitalize on OEM Certifications

Certified Collision Group (CCG) has certain requirements of its affiliate shops, including investments in OEM certifications. On average, CCG shops have at least eight certifications—and are seeing significant returns on their investments, says Tom Adams, the company’s senior vice president. And that’s mostly because of how they’re trained to capitalize on those certifications. Here are some tips:

Research the market. If you want to secure DRPs, you have to understand your area’s insurers—and the same goes for OEMs. Investing thousands of dollars in certifications for automakers without a large presence in your area would prove detrimental. Utilize partnerships with your insurers and paint companies to understand those numbers.

Ask dealers to market your services. Often, an OEM will help advertise your investment. In addition to OEMs including your business in a portal of certified shops, individual dealerships will push certified facilities with which they have positive relationships.

Adjust your labor rates. With your investment should come a higher price tag for your services. If few shops in your area are willing to, say, invest in luxury automaker training, then you’ve secured a niche that must be filled if the customer desires a certified facility. Don’t be shy about adjusting your labor rates to outweigh training costs.

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