Young Guns in the MSO World
Amidst all the change and turmoil in the collision repair industry, the success of some of the fastest-growing MSOs is being driven by impressive young operators. This younger generation of leaders is navigating profound operating and technological changes and finding opportunity as industry consolidation continues to accelerate. FenderBender and David Roberts, Managing Director of Focus Investment Banking, explore the experiences and plans of three of these young executives.
The Romans Group estimates that the Big 4 Consolidators now generate more than $5 billion, or 14 percent of the industry’s revenue, through the operation of more than 1,700 shops. Behind the Big Four are another 190 MSOs accounting for roughly 1500 shops and more than $4.5 billion in revenue.
Among these MSOs are three with key leaders under 40: Shawn Crozat of G&C Auto Body, Tony Wiese of B Street Collision and DJ Mitchell of Car Guys. They are growing in many different ways: some through acquisitions, others via building new shops, and some are just converting free standing buildings into body shops. And they are varying in their approach to financing as well including cash flow, third party debt, and seller financing (or some combination of each).
In 1995, David Roberts and Matthew Ohrnstein founded Caliber Collision Centers as a true consolidator of collision repairers—acquiring single shops, branding them with a common name with standard operating practices and offerings to insurance companies. Ohrnstein and Roberts were what many considered the “young guns” of their era. They were unencumbered with any history in the industry. While they couldn’t write a “sheet” to save their lives, they understood that the industry was ripe for change and that there was a huge opportunity to lead that change.
Today, Caliber is a more than $2 billion organization with 560 shops and Roberts (no longer a Caliber shareholder) serves as the Managing Director of FOCUS Investment banking and President of consulting and advisory firm, Focus Advisors.
Like Roberts and Ohrnstein in their day, the three shop operators profiled here are leading a new a generation of MSO operators, finding opportunity amidst the changes that many of their competitors are resisting or denying. They are determined to continue to grow their respective businesses,compete head to head with the Big 4 and determine their own destinies.
Recently, Roberts and FenderBender sat down to talk about the industry’s continuing evolution and three Young Guns about their plans, strategies and challenges in rapidly growing new generation MSOs.
Name: Shawn Crozat
Shop: G&C Auto Body
Locations: 12 in California
Family owned and operated G&C Auto Body was opened in 1972 by Shawn Crozat’s father, Gene. Today, Gene’s wife, Teri, and their five children—Shawn, Josh, Jamie, Patrick and Ricky—all hold key positions at the company. Crozat started washing cars at G&C when he was a kid and continued working after school and on Saturdays through high school to save money for a car. At 19, he officially joined the shop as an estimator.
Seven years ago, when Crozat took over as COO, he had an idea for where he wanted to take the company.
At the time, G&C’s three locations operated independently from one another. This wasn’t the way that Crozat wanted to operate. He wanted to consolidate management—and expand the footprint. Instead of having three separately run shops, Crozat wanted to have a larger MSO that ran under a set of standard processes. It wasn’t easy.
“We hadn’t expanded in 10 years; I was learning everything new,” Crozat says.
As if opening a new location wasn’t difficult enough, Crozat also had the added obstacle of being in the California market—one that’s saturated with national and regional MSOs. Crozat is honest about his growth pursuits and admits that he made a lot of mistakes in the beginning.
“I didn’t know how to remodel a building and I was making bad hiring decisions,” Crozat says. “Without a playbook to go by, I had to learn so much on my own.”
However, after those initial bad hires, Crozat learned a lesson from them, that has helped him successfully open nine locations in six years.
“It’s all about people. Processes are great, but with the wrong leader, it’s not going to work,” Crozat says.
With each new location, Crozat focuses on finding the right leader to train to become the general manager of the shop. His secret? Promoting from within. Crozat says that almost all his general managers are home grown. He believes that employees that have been with your organization are easier to train up to the next level.
Another key for G&C has been to look beyond the industry to find new entry level employees that have potential. For those that complain and say there’s a lack of talent, Crozat suggests looking for people who want to hustle that aren’t necessarily in collision repair.
When asked about his plans for the future, Crozat says that he would like to open four locations this year and already has two in the works.
“Beyond 2018, the future gets a little murky. Consolidation is happening so fast, I don’t know if I can plan that far out.”
The key to navigating consolidation and uncertainty is making wise business investments. Crozat says that it’s easy to get caught up in the excitement and make a deal, but he’s realized that he needs to look at any investment—whether it’s an acquisition or a greenfield—with a critical eye. Before making a purchase, Crozat and his team analyze the ROI potential and how long that takes to make their required returns.
Beyond consolidation, Crozat is also carefully watching how autonomous vehicles could impact the collision repair business.
“Technology evolves. Six years ago, I was renting videos from Blockbuster,” Crozat says. “Autonomous technology is a threat for all of us and perhaps an opportunity for some of us.”
When asked if he’d ever consider selling to a consolidator, Crozat admits the opportunity has been presented to him, but he doesn’t see it as a viable option.
“Why sell? What would we do with our time?” Crozat says with a laugh. “We love our jobs and we’re passionate about auto body. We respectfully decline.”
Name: Tony Wiese
Shop: B Street Collision
Locations: 4 in Nebraska, 1 in Kansas
Tony Wiese became the owner of B Street Collision in 1999 when his father passed away unexpectedly. Wiese, who was in business school at the time, wanted to be an entrepreneur, so when the time came for him to take over his dad’s shop, he had dreams of taking it to the next level. It started with opening a second location in 2004 and the company has since opened three more locations—including one in Kansas City.
Wiese says that with each new location comes risk. The financial risk can be huge, considering the cost of the real estate and equipment. But the biggest risk, Wiese believes, is getting the right people to represent you in your market. With multiple locations, owners cannot oversee everything that goes on, so being able to trust the people that he hires has been key.
Many midsize MSOs stay in one state, so Wiese’s move into Kansas was a risk. It was his most challenging shop to open because he knew he would be unable to oversee it like his locations in Omaha. However, the purchase presented an immense opportunity in a market where there weren’t a lot of insurance-conscious shops.
“We listen to our insurers to see where there’s opportunity,” Wiese says.
B Street has been successful there due to their top-quality work, quick turnaround time and solid DRP relationships. Despite the distance, Wiese has found solid leadership for the location, allowing him to successfully manage from afar. He plans to continue growing in both areas.
Wiese attributes his success to the team system used in each of his locations, making a small group responsible for working on a vehicle from start to finish, rather than individuals. Wiese believes that this process allows the shop to produce faster cycle times, especially appreciated by insurers and customers alike.
“We have comparable pricing to our competitors, but we’re much faster,” Wiese says.
One of the biggest rewards of growing the business has been watching his staff grow and advance in the company.
“Within a few years of joining us, they’ve moved up the ladder and have a career,” Wiese says. “Being a vehicle to facilitate that is huge.”
Wiese says that B Street hasn’t hired a tech from another shop in a long time and that it almost always grows them from scratch.
At the moment, it’s not Wiese’s goal to sell, but he’s keeping all of his options open in the future. “Right now, we think we’ll do better running it than selling.”
Name: DJ Mitchell
Position: Director of operations
Shop: Car Guys Collision
Locations: 14 in Florida
DJ Mitchell was only 23 years old when his father, Dave, opened Car Guys. Being that young in the industry didn’t come without challenges.
“I think older employees have a hard time when someone comes in that’s so young and is telling them what to do,” Mitchell says.
Mitchell, although young, was anything but a newbie to the industry when he started as director of operations for Car Guys. Mitchell worked in his father’s shops after school and over the summers while he was growing up. Eventually, Dave sold those shops to Gerber and Mitchell began working with Gerber. When Dave decided he wanted to open a new MSO, his son Mitchell quickly joined the team. In a short span of five years, Car Guys has grown to 14 locations.
So, how did Mitchell finally earn the respect of his staff? With respect.
“I don’t try and act like I know more than they do—I realize that I don’t know everything,” he says.
Finding and staffing the MSO with the right people has been the biggest obstacle for Car Guys.
“The industry is changing. It’s getting harder and harder to find good people,” Mitchell says. “We [Car Guys] want everything handled as quickly as we can. We need to find people with a sense of urgency.”
Mitchell has learned that it’s better to hire someone that can be molded into the right person rather than hiring someone who has worked in the industry for a long time but is stuck in his or her ways. Now, he hires based on his gut feeling.
“I look for the type of person that changes the energy of the room when they walk in,” Mitchell says. “That’s the type of energy I want. If they have that infectious personality, they can be successful.”
One place that he looks for this type of person is in service departments. The staff that works there is used to interacting with customers and turning things around quickly, which is exactly what Car Guys aims to do.
When they find this right type of person, Mitchell and his father make sure to make them feel like a part of the team and hold onto them as long as possible. Mitchell makes a point to meet all new hires and states that one way Car Guys has stood out and made itself competitive is by showing employee appreciation.
In growing the MSO, Mitchell says one of the biggest rewards has been seeing how it’s impacted his employees and allowed them more opportunities for growth—both professionally and personally.
“My office manager bought a new house and sent us pictures and said, ‘Without Car Guys, I wouldn’t have been able to do this,’” Mitchell says. “That’s so much bigger than fixing cars.”
Mitchell says the goal for Car Guys next year is to gain three more locations—the same for the year after. However, Mitchell and his father need it to be the right opportunity.
As for the future, Mitchell says he’d be lying if he said he’d never considered selling.
“We’re interested in talking to anyone that wants to sell to us and we’re interested in talking to anyone that’s interested in buying us,” Mitchell says.
These “Young Guns” aren’t alone. Many of the industry’s rapidly growing MSOs are led by second and even third generation executives. Over the next year, FenderBender will continue to explore the industry’s emerging enterprises, their leaders and their plans for the future.