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7 Steps to a Better Tech+Tools Budget

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Everything to consider when tooling up your shop next year.

The technician shortage is swallowing up many shops. The independents, the dealers—and yeah, even the big dogs.

But here’s the thing: The big dogs are doing something about it.

“Just look at what Gerber has done to increase benefits,” says Steve Trapp, North American strategic accounts manager for Axalta, in reference to Gerber Collision & Glass’ recent commitment to increasing vacation pay and holiday pay for technicians, as well as doubling company contributions and caps for the 401(k) retirement savings plan, all in reaction to low 2017 sales. “They’re trying to steal people away.”

In that department, it’s hard to compete with the resources available to a Gerber, an ABRA, a Service King, a Caliber. But there is one area where you can separate your shop from those giants, Trapp says, and make your shop more enticing to the technician population: by outfitting your shop with the latest and greatest tools and equipment.

The only problem? Trapp says a majority of shops don’t properly plan for new technology.

In fact … many of them don’t plan at all.

According to the 2018 FenderBender Industry Survey, shop after shop has failed to form an actual technology and tools budget. When asked, “What percentage of your business’s annual revenue do you allot for technology, tools and equipment purchases?” about 34 percent of the 300 respondents claimed to not even have a budget. When, really, Trapp says you should evaluate your profit and loss statement, track your region’s vehicle demographics, and research tools and equipment that work for your shop.

And by not doing any of that, you’ll likely crumble under the goliaths, Trapp says.

“Shops need to understand: You can’t make profit from industry and not reinvest in training and tooling,” he says. “It’s not logical. The evolution of the vehicle demands it. It’s part of the cost of doing business.”

So, Trapp—along with two other industry experts—wants to help. And there’s no reason you can’t start planning ahead right now. What follows is a seven-step plan when building your 2019 tech+tools budget.

Along with it, information from the 2018 FenderBender Industry Survey provides insight into what this article’s sources claim are the top trends in tooling and equipment.

 

Step 1: Discuss tools and technology with your team.

Week after week, dozens of students pass through Steve Marks’ classroom. Over at I-CAR, where he serves as the industry technical support manager, Marks has trained technicians on so many different tools and technologies over the past 23 years that it can be sometimes hard to keep up.

But … you have to keep up. And those students in his classroom are the key.

“The other big thing for equipment is, ‘How much do you buy?’” Marks says.

According to him, your entire team should determine when your shop needs to upgrade or add equipment. And you can’t understand that without the planning, the research and the full-on evaluation of your team, your demographics and your current tool lineup.

Jim Siegfried and his Crystal Lake Automotive staff sit down often three times per year and talk about what tools and equipment are needed, constantly evolving his tech+tools budget.

“This process helps the technician to have a say and creates more buy-in for the process,” says the co-owner of the two-facility, $6 million Lakeville, Minn., shop.

For the shop’s recent purchase of a waterborne paint booth, Siegfried had his lead painter travel with management to survey the options. The new paint booth was a significant investment and cost the shop roughly $350,000, and his team wanted the person who would spend the most time with the purchase to be involved in the decision.

And while Siegfried finds it important to involve his staff, he says it’s on shop owners and managers to determine if a purchase makes business sense.

“If we need it, we buy it,” he says. “But the tool needs to make money for us and also be able to safely repair the vehicle.”

For instance, his shop held back on a $60,000 investment in aluminum repair equipment and tools. The staff determined three to four Ford F-150 vehicles per month would be required to achieve an ROI, and the shop hadn’t reached that level yet. Also, the shop is not fully certified for aluminum repairs, and would need to invest in a separate clean room and dust system.

 

Step 2: Stay on top of technology trends.

Until you fully immerse yourself in the industry and all of its constantly changing components, you won’t ever know where to start with your tech+tools budget, Siegfried says.

In order to stay educated on the latest industry trends, resources he uses are trade magazines and his local auto body association. As a member of AASP-MN, he sends his team to courses through that organization.

“We flew Mike Anderson to the shop for a day because he’s always up to date on industry trends,” he says. “We had him sit down with the staff and explain what was changing in the business.”

Whether it’s through a 20 Group, a training class or an industry event, Trapp says you should converse with other shop owners, not only to understand what tools they’re investing in, but also to know how much of their budgets they’re dedicating to those tools.

One trend Marks notes is lightweight material and the use of more plastic, aluminum and harder and thinner steel on vehicles.

“This type of tech leans toward parts replacement rather than straightening,” he says.

At some point, shops will need someone who can aluminum weld and the shop will need an aluminum welding machine, Marks says. Some of the manufacturers are looking at pulse technology.

“Spot welding is now more commonly required than recommended,” he says.

Siegfried says there’s no reason to not start looking way down the line when building your tech+tools budget—like, way down.

“The one thing that should worry a lot of people but does not is more and more things being controlled by the computer,” he says.

Siegfried says the significant technology for the future of the business will be anything that is digital and prevents accidents. For example, advanced cruise control and blind spot detectors will need to be repaired properly, requiring a specific set of tools and training.

Siegfried predicts a need for more OEM scanners and investments in scanners to calibrate this type of technology. And with possible costs skyrocketing, he says it would be a significant investment of money, as the shop would basically need a scan tool for each OEM it handles.

 

Step 3: Research your region’s vehicle demographics.

It doesn’t matter if your shop is looking to obtain OEM certifications or not—if you’re not researching the latest tools required to properly repair the top makes sold in your area, you’re doing a disservice to the industry, your customers, your team, your bottom line, Trapp says.

“If there’s only been 400 Audis sold (in your region) in last five years, Audi’s requirements might not be a smart investment,” he says. “If there are a lot of Toyotas, though, if there enough vehicles to justify investment, get access to that OEM program.”

Siegfried says it’s important for shops to be aware of the OEM repair procedures. The knowing “how” to fix a car correctly comes before the knowing “what” to use to fix the car. By doing this, you can narrow down which tools are most worth the investment.

Say a shop owner is deciding between two bench systems. What many of them will do, Marks says, is compare which OEMs recommend the same type of system to lower their spending.

This plays into Trapp’s suggestion of building an “OEM grid” that gathers the tools required by the top OEMs in your area and identifies the tools that apply to multiple programs—those tools should make up your tech+tools budget.

“Build a spreadsheet with tooling requirements,” Trapp says. “Here’s what you have, here’s what you're missing.”

Siegfriend’s shop uses ALLDATA to access the OEM repair procedures, but also uses other sources like OEM1stop.

In addition to comparing OEM requirements, shop owners will also fulfill the required tooling equipment list and be compliant for that, Marks says.

If you don’t look at specific OEM programs, be sure to look at what technology is becoming more common, Siegfried says. Right now, there are so many vehicles that mix steel, plastic and carbon fiber components that there are now more complex welding and riveting processes than there were about five years ago.

 

Step 4: Improve communication between estimators and technicians.

In order to keep your technicians and estimators on the same page, the front office staff will need access to OEM collision repair information. This can be done through a manufacturer’s service website and companies like ALLDATA.

“To me, you also need the latest estimating systems,” Marks says, noting that your shop staff should know the required repair process that allows the estimator to produce a computerized estimate. The employees need to use software that allows them to get the latest, correct pricing on parts.

Another trick is to list all the parts for mixed-material vehicles, Marks says. Work with your staff to understand how to order the right amount and the correct types of parts.

Siegfried says the most important front office tool is communication. His staff communicates via cell phones or Skype on the computer monitors. Each day, the team texts each other updates on the repair process at minimum of three to four times.

“The front and back of the shop have to be in constant communication,” Siegfried says.

 

Step 5: Evaluate your cash flow.

Plain and simple: Your tech+tools budget is no good if you don’t manage your business to it.

“That doesn’t mean you can’t spend the money if it wasn’t budgeted for,” Trapp says, “but it does mean that you know there is a plan, you project your cash and project your business for it.”

And that all starts with evaluating your business’s cash flow, he says. Once you’ve nailed down the tools that will make up your budget, you’ll need to map out how much cash your business takes in, how much you can dedicate to technology to remain in the black, and where, when and how you’ll spend that cash.

“If you don’t look at your cash flow situation, (shop owners will) make some weird short-term decisions,” Trapp continues, meaning your expenditures should be planned out ahead of time—not just what kind of equipment you’ll buy, but when you’ll have the capacity to invest. This will allow you to nail down how much of your annual revenue should be dedicated to technology and tools (Trapp recommends no more than 3 percent).

By evaluating your past profit-and-loss statements, you can determine your high points each year and when you’re better situated to make investments. Trapp says that SEMA is scheduled for November each year because that’s when the profitability situation is maximized, as shop owners can plan for technology and tool expenditures to be tax write-offs.

Also, if an equipment purchase is necessary, but straps your business for cash, Trapp says to review any financing options offered.

“If you need a piece of equipment, why would you stretch your entire business out and short-pay a vendor?” he asks.

If you can can lease the equipment and pay for it over time, and those payments coincide with your cash flow, then it’s a smart investment.

 

Step 6: Write out a line-item budget.

This is where your tech+tools budget takes shape: Whether you’re planning for 2019, the midterm (2–3 months) or the long term (3–5 years), you’ll need a line-item spreadsheet that not only combines your planned expenditures with your cash flow, but also outlines what OEM-mandated tools you’re missing, what costs are required for equipment that needs to be updated regularly (such as scan tools), and what training costs are associated with those tools.

Basically, the one-time payment for a tool isn’t where the costs begin and end, so you should “try to budget for the entire business,” Trapp says.

While Trapp’s company provides an intense spreadsheet that outlines many of the aforementioned items, crafting your own spreadsheet isn’t difficult—in fact, crafting a basic line-item spreadsheet takes mere minutes.

Here are the building blocks of Axalta’s spreadsheet broken down:

  • Column A: List all the OEMs for which you’ll need to buy equipment.
  • Column B: List all of the specific equipment required by the OEMs you’re targeting.
  • Column C: Mark if that specific equipment is required by each OEM with an “X.” By doing this, you can figure out what equipment applies to multiple makes and is more worth the investment.
  • Column D: List the price for that equipment.
  • Column E: Mark if this will be a short-, mid- or long-term investment. Short-term means you plan to buy the equipment within a few months; mid-term means you plan to buy within the year; long-term is a purchase 2–3 years down the road.
  • Column F: Mark down any expected maintenance costs or updates you’ll need to make (such as you’ll need to do a few times per year with scanners).
  • Column G: Mark any expected costs for training your employees on the equipment.

 

Step 7: Ensure you can keep up with training.

As your shop’s equipment and technology evolves, so must your staff. And as OEMs offer better and better training programs, your training budget must coincide with your evolving tech+tools budget.

“You have to commit to make people part of the solution,” says Trapp. “Put people on training path. Invest in them. Help build them up and come from Level 1 to Level 5 over a 3–5 year period. That’s the long game. We’ll have to deal with that long game.

“Really, getting the right tools is easy. Building the people to use it—especially as the baby boomers retire—that’s the hard part.”

With that in mind, there’s just no way around it: “Training needs a new format,” Trapp says. “We used to be go to class, be away from the shop for a day. Now we can’t justify time away from production for a substantial amount of training.”

Having an online and classroom curriculum plan can help put a good training program together. If you have a new painter that starts on Monday, don’t call your paint representative and have him come in to train your technician, Trapp says. Have your employee spend a day or two watching learning modules and getting familiar with the system. Then, your painter is up to date and only needs to be trained on the nuances of the system, allowing your shop to maximize training time and efficient use of the product.

If you don’t want to send staff members away for training, OEM representatives will come to the shop to demonstrate a new type of tool, Siegfried says. After the demo and the team purchases the tool, the manufacturer will send someone to train the staff for anywhere between 2–4 hours.

When his shop switches over to waterborne paint, he says his team will undergo roughly a two-month process in training. Since waterborne paint has different properties and is color matched in a different way than solvent-based paint, Siegfried will need to significantly train his paint department.

“Ninety percent of the bottleneck would be in the paint shop because of the learning curve,” Siegfried says.

And not to toot his own horn, but Marks believes his organization is the ultimate key to your training needs—especially given the expanding presence of mixed-material vehicles.

“I think I-CAR is a good source and has hands-on skills-based training for steel welding, aluminum welding and riveting,” Marks says.

 

2020 and Beyond: Continually update your tool arsenal.

Planning for the year ahead is crucial—but planning for five years down the road will ensure you’re able to retain and pull in top technicians for years, Trapp says.

Marks says a good place to start as far as knowing what tooling your shop will require in the near future is the OEMs themselves.

“I think we will see it is getting to the point where referencing OEM repair information is absolutely critical,” he says.

Crystal Lake Automotive updates tools as needed, Siegfried says. The shop’s diagnostic scan tools need updates at least two to three times per year. That investment costs roughly $900 for each update.

As far as five years from now, it is going to be important for shop owners to read and do their research, Marks says. They should consistently read trade magazines and OEM repair websites.

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