Your KPI-Tracking Guide
For years, Barrett Stamps fell for the same spiel.
“Whether it was from insurance company A or insurance company X, they would explain that my severity was higher than the market average; that our repair versus replace numbers were lagging in the market; or that our cycle time needed improvement,” he recalls. “Many times I would blindly agree that we needed improvement without having my KPIs or numbers in front of me and, in return, essentially admitted that our numbers weren’t great.”
As a 25-year-old newbie who had just taken over as manager of Auburn Collision 1—one of his father’s two locations in Auburn, Wash.—Stamps had very little knowledge of how to track and maintain KPIs.
But after joining a 20 Group and studying those numbers for a year and a half, there was a different story to tell.
“Really knowing the numbers is critical to remaining competitive, relevant, aware— whatever the opposite term for ‘complacency’ is,” says Stamps, who today is part of a two-location operation that posts nearly $6 million in annual revenue. “Even in today’s market, it isn’t enough to allow insurance companies to tell you what your numbers are. Many times they aren’t reliable, don’t make sense, and are designed to scare shops into reducing repair costs.”
There are so many different statistics that gauge the performance of your shop. From numbers that track production and throughput, to a score that showcases customer satisfaction, to the bottom-line percentages that display your shop’s profitability, there’s no silver bullet that provides a concrete direction for optimal performance. That’s why, as Stamps points out, you must take control of the narrative; you need a personalized, centralized system that outlines your overall KPI performance, that tells a story you’ve written.
That KPI mentality was reflected over and over in the 2018 FenderBender Industry Survey, a 96-question survey, conducted over the course of a month. Of the 310 shop operators that completed the survey, 68 percent of them claim to routinely track KPIs. And when asked what impact KPI measurement has on their businesses, the responses overwhelmingly told the same story:
Every aspect of business is predicated on KPIs.
If you don't measure KPIs, you can’t improve yourself.
If you are measuring accurately, you can tell if you are improving or not, and you can benchmark yourself with the industry and your area.
So FenderBender sought out these passionate respondents to find out which KPIs are essential to their success and how they get buy-in from their team. What follows is a four-part system for monitoring KPIs and a statistical breakdown of what numbers drive the most profitable shops from the 2018 FenderBender Industry Survey.
1. Determine the KPIs Essential to Profitability
Cycle time, touch time, NPS, average repair order—they’re all important numbers, of course. But they’re not the most important number, Tim Beal says.
The most important number is the one that shows your shop is making money.
“What does it take to break even each month? Because until you’re past that, nothing else matters,” says the owner of Beal’s Auto Body & Paint. “That’s what most shop owners don’t understand.”
But as the owner of a $4 million operation in Prescott, Ariz., Beal does understand that the key to achieving that break-even number—an optimal gross profit margin—is knowing which KPIs make your business the most profitable. And, as FenderBender’s survey shows, there is an immense difference between independent shops that do and do not understand those numbers (See Sidebar: “A World of Difference for Independents”).
For the three shop owners FenderBender spoke with for this article—which, on top of Beal and Stamps, includes Dan Wenzel, owner of the $5 million operation Wenzel’s Auto Body—two KPIs deemed essential to profitability across the board were CSI and paint hours per RO.
While CSI—customer satisfaction index—is a broader number that doesn’t directly display your shop’s throughput or efficiency, it does encompass your shop’s processes as a whole, Wenzel says, making it a fair gauge of whether your shop is even in position to post stellar sales.
"Our main focus now is on process improvement, CSI and following OEM procedures,” he says. “The other numbers come as a result, but if you’re not taking care of your customers and repairing cars properly, the rest does not matter.”
For Stamps’ shops, focusing specifically on paint hours per RO is a KPI that rose the operation’s gross profits on materials over time. Working with his team to raise that number has, in turn, helped raise efficiency, productivity and overall gross profits in the paint department.
Every business is different, of course, and there’s no set standard for what maximizes profit shop to shop. But there are trends from the survey that show which KPIs are being utilized the most (See Sidebar: “The Essential KPIs”), and which ones are largely missed by shops (See Sidebar: “The Lagging KPIs”).
A World of Difference for Independents
In 2016’s FenderBender KPI Survey, independents lagged far behind MSOs and franchises in terms of tracking KPIs. Just 57 percent of independents did it routinely, while 94 percent of MSOs and 100 percent of franchises made it a habit. This resulted in a vast gap between indys and bigger operations when it came to profitability.
2017’s FenderBender KPI Survey saw that trend change, however, and 64 percent of independents reported tracking KPIs. This year, that number held steady (63 percent) in the FenderBender Industry Survey, and a comparison between 2016 and 2018 shows how much of a difference the practice makes.
Annual Revenue Above $2.5 million: 14%
CSI Score Above 90%: 88%
NPS Score Above 90%: 79%
Closing Ratio Above 80%: 54%
Average Repair Order Above $3,000: 37%
Overall Gross Profit Margin Above 40%: 51%
Gross Profit Margin on Materials Above 30%: 51%
Gross Profit Margin on Parts Above 30%: 49%
Gross Profit Margin on Labor Above 40%: 68%
Efficiency Above 120%: 65%
Productivity Above 100%: 55%
Annual Revenue Above $2.5 million: 29%
CSI Score Above 90%: 91%
NPS Score Above 90%: 85%
Closing Ratio Above 80%: 57%
Average Repair Order Above $3,000: 50%
Overall Gross Profit Margin Above 40%: 55%
Gross Profit Margin on Materials Above 30%: 50%
Gross Profit Margin on Parts Above 30%: 55%
Gross Profit Margin on Labor Above 40%: 71%
Efficiency Above 120%: 69%
Productivity Above 100%: 65%
The Essential KPIs
Of the 310 survey respondents, 40 percent reported an annual revenue of $2.5 million or more. Here are the KPIs those shops are mostly likely to track:
Cycle Time: 98%
Touch Time: 97%
Gross Profit on Parts Sales: 98%
Overall Gross Profit: 97%
Gross Profit on Labor Sales: 96%
Gross Profit on Materials Sales: 95%
Technician Efficiency: 90%
Closing Ratio: 90%
Technician Productivity: 70%
The Lagging KPIs
Of the survey respondents who claimed to routinely track KPIs, a fair percentage still indicated certain shop measurements are falling to the wayside. For each of the following KPIs, here are the percentages of respondents not tracking them:
Technician Productivity: 38%
Technician Efficiency: 17%
Closing Ratio: 13%
Overall Gross Profit: 8%
Gross Profit on Labor Sales: 8%
Gross Profit on Materials Sales: 8%
Touch Time: 8%
Gross Profit on Parts Sales: 5%
Cycle Time: 4%
2. Determine the Proper Benchmarks
When it comes to paint hours per RO, Stamps wants to hit a specific number each month. It’s one thing to pinpoint that raising paint hours per RO leads to an overall profitability boost—it’s another to set tangible goals your team must meet.
“What we’ve noticed in past five years is constant use of basecoat reduction or reduced material refinish time on panels helps,” he says. “So that's definitely been another challenge we've managed to circumvent with documentation and educating insurance companies, so we're … getting paid what the vehicle requires.”
While you can start by measuring yourself against industry averages (See Sidebar: “The Average Benchmarks”), in order to discover which KPIs drive up profitability, it should start with a conversation with your team to find out what’s holding them back and where they see flaws in the system. Once you nail down those holes, you can set the proper benchmarks to fill them.
Essentially, Stamps says, benchmarks should play two roles:
First, benchmarks should set your shop up for maximum profitability, and that can only be done by evaluating the processes, personnel and equipment at hand. In Stamps’ case, he evaluated his team’s material usage and documented how it affected sales and profitability.
Second, benchmarks should be realistic. It doesn’t matter if a benchmark for paint hours per RO will result in a 60 percent gross profit margin if your team can’t function at the proper level (given the available manpower and equipment). Benchmarks should be discussed with your team, and everyone should be informed on what’s expected of them in order for the shop to be profitable.
After doing all of that, Stamps landed on a number: 10 paint hours per RO is the ideal benchmark. That also happens to be the benchmark for Beal’s and Wenzel’s shops, showing that a high gross profit margin on materials is a consistent theme of highly profitable shops from the FenderBender Industry Survey.
“If paint hours per RO is above 10, then we know we’re being thorough on appraisals and it has a trickle-down effect,” Wenzel says.
And hitting those high gross profit margin benchmarks is the result of perfecting several other KPIs (See Sidebar: “What’s Behind High Material Gross Profits?”), which means determining benchmarks should be a top-down process that considers how your business numbers affect one another.
There are plenty of numbers, such as productivity, efficiency and gross profit percentages, that aren’t exactly affected by your region. However, you should consider your market for other numbers. Depending on your target demographics and region’s vehicle make-up, that’ll tilt the numbers one way or another.
The Average Benchmarks
In the 2018 FenderBender Industry Survey, 40 percent of shops reported an annual revenue of at least $2.5 million. For some benchmarks to weigh your shop against, here are the ranges where most of those shops fell in each of the following KPI categories:
Key-to-Key Cycle Time: 8–10 Days
Touch Time: 2–3 Hours
CSI Score: Above 90%
NPS Score: Above 90%
Closing Ratio: 80–89%
Average Repair Order: $2,000–$3,000
Overall Gross Profit Margin: 40–49%
Gross Profit Margin on Materials: 40–49%
Gross Profit Margin on Parts: 30–39%
Gross Profit Margin on Labor Sales: 60% or higher
Net Profit Margin: 11–15%
Productivity: Above 110%
What’s Behind High Material Gross Profits?
As all three shop owners featured in this article have inferred, a high gross profit margin on materials goes a long way in upping overall profitability. Selling more hours and cutting materials usage is a simple goal, but what does it look like in a shop?
Well, thanks to the 2018 FenderBender Industry Survey, we can take a look at the average profile of a shop hitting those high gross profit margins on materials.
The Shop Profile
Annual Revenue Above $2.5 million: 75%
Part of More Than Four DRPs: 70%
Uses More Than One Paint Booth: 75%
Uses Advanced Drying Equipment: 50%
Key-to-Key Cycle Time Below 7 Days: 58%
Touch Time Above 3 Hours: 47%
Closing Ratio Above 70%: 72%
Efficiency Above 140%: 69%
Productivity Above 110%: 70%
Uses Waterborne Paint: 70%
3. Develop a System for Tracking KPIs
If gross profits are Beal’s No. 1 concern, and he has determined the benchmarks necessary for hitting a high margin, the third step—and perhaps the most strenuous step—is building a house for those numbers. While there are various systems that offer different insights into KPIs, developing your own centralized location to gauge the overall health of your business requires time and cooperation with your team.
Luckily, Beal has a key sheet that tracks his shop’s profitability (provided to him by Axalta Coatings System). He and Axalta shared the sheet with FenderBender so readers could get a feel for how one studies KPIs and determines what areas must be addressed in order to hit benchmarks.
If the end goal is high gross profits, then that should guide the spreadsheet’s narrative. For Beal, it means improving shop throughput and maximizing gross profits for all segments of the business, from body to paint to parts. The various KPIs that affect those numbers—including efficiency, cycle time and closing ratio—should all be on one sheet (See Sidebar: “Measure the Financial KPIs of Your Shop”). And your consumption and sales of paint and materials should be tracked on a similar sheet (See Sidebar: “Measure the P&M KPIs of Your Shop”).
From these numbers, you can make certain determinations about what direction your business needs to head in order to achieve maximum profits, Beal says.
“[If] you're doing 20 cars per week, and your average RO is $3,000, you're doing $60,000 per week, and you've got a GP of 40 percent,” he says. “But if you can get your shop cleaned up and get an extra car per day with the same team … you've made an extra $24,000 in net profit that month just pushing out those extra 30 cars.
“And that's what people don't get. They don’t understand why they’ll make more money being efficient and improving cycle time.”
Measure the Financial KPIs of Your Shop
Tim Beal, owner of Beal’s Auto Body & Paint, utilizes a spreadsheet from Axalta to determine how well his shop is maximizing gross profits. That means tracking the sales mix and average gross profits for several different business segments (body and paint labor, paint and materials, parts, and sublets), labor efficiency and cycle time. In addition, tracking KPIs and costs resulting from his individual employees and business expenses (overhead without benefits, marketing, sales per stall, closing ratio) all provide a snapshot of why gross profits stand where they do.
Measure the P&M KPIs of Your Shop
In addition to the broader business KPIs he tracks, Tim Beal, owner of Beal’s Auto Body & Paint, also has a paint and material–specific (P&M) spreadsheet (provided by Axalta). This means tracking both the sales and cost per hour on specific materials, which go on to signal the health of sales (P&M sales per RO), larger throughput trends (hours per booth cycle) and smaller percentages that, over time, go on to affect overall profitability (buff percentage).
4. Incentivize Your Team
If you’ve collaborated with your team to determine the proper KPIs and the realistic benchmarks, the final step is getting everyone on board with your KPI-tracking system.
To keep his team in the loop, Stamps goes over the numbers on a weekly basis with everyone on staff.
“On a weekly basis, I’ll go over everything with estimators individually,” he says. “Certain benchmarks, profitability, cycle time, supplement count—it all ties into managing the whole job as an individual. Everyone knows where everyone stands. There are certain opportunities to improve on, and it’s easy to pick out and bounce ideas between all estimators so they can all work better together.”
Beal incentivizes his team with a weekly bonus system. If his team maximizes throughput—which he’s determined is the ultimate signifier of high gross profit margins—then he rewards techs, painters, detailers, estimators and CSRs with 10.5 percent of whatever jobs are closed by the end of each week.
“The reason I do that,” he says, “is that I want everybody in the facility pushing as hard as they can to get as many cars out and dollars out to get that pot as big as it can be. And they have to hold each other accountable to get it done.”