Implementing Commision-Based Pay for Estimators
A new era in the collision center business is on the way. With NACE leaving Las Vegas and moving to Florida this fall, many shop owners and managers may opt to go to SEMA in Las Vegas instead of NACE. Those who pay close attention to the many products at SEMA being sold a very nice profit may return home considering a new business model. By turning their estimators into real salespeople, the sales of accessories and cosmetic car upgrades could generate many thousands of new dollars to their bottom line.
But there is one major problem. Many shops in this industry are addicted to insurance pay. If a customer, after collision repairs, is sold on special running boards, wheels and hubcaps or a fancy new spoiler, insurance isn’t going to pay. This means convincing the customer that this purchase is worth shelling out money for from his or her own pocket. Estimators are thought of as good salespeople if they can turn an estimate into an R.O. and get the keys. But moving beyond insurance pay requires a much higher level of salesmanship. There may be more than a few estimators who don’t make it into this new era of “collision repair plus.”
There may be another problem: How willing are collision shops to pay salespeople more? The kind of generous commissions that will motivate estimator/salespeople to make that extra effort—and tack on a few hundred dollars to the repair bill—may be hard to give up. Commissions and bonuses for converting repair estimates to R.O.s are common and well understood. The sales of accessories and other add-on products are a completely different story. Many items are high mark-up and potentially very profitable, but unless presented and sold by a highly competent salesperson, there will be no additional profit at all.
I once knew a saleslady in the garment district who worked for a distributor of decorative buttons, buckles and related items. She was so good at her job, she generated sales of more than $500,000 a month, and her commission was appropriately generous for the business she brought the company. The problem was, she began earning more than each of the two owners of the company. Instead of recognizing the long-term value of her sales that would be bringing in money for many years after she was gone, they were jealous of her immediate income and kept reducing her commissions. Because her customers had a huge amount of trust in her, she simply left the company and started her own company, taking the lion’s share of sales with her. A shop owner entering this new era of direct add-on sales needs to understand the dynamics of non-collision-related direct sales.
Another major difference between collision repair sales and product sales is the frequency-of-purchase factor. Collision repair generally occurs only after damage is caused to a vehicle. There may be three to five years before a customer comes back. Product sales can occur any time, over and over. If a customer is pleased with one product, he or she may well come back for another in a short time. In his excellent book, Getting Everything You Can Out of All You’ve Got, management guru Jay Abraham counsels clients to consider the lifetime value of a customer and the importance of capturing that first sale. One of his suggestions is to pay the salesperson 100 percent of the profit as a commission on the first few sales, to maximize the salesperson’s motivation to capture those first few sales. An old merchant’s “Rule of Three” says. “If you can get a customer to happily come back three times for a service or product, he or she will remain a customer for life.” While this is also true of collision repair, it can be more difficult in product sales when dealerships and accessory specialty shops and stores are selling similar products.
As insurance companies continue to work to reduce their severity by not paying shops for certain operations or for new OEM parts, the profitability of insurance pay jobs will decline. And as vehicle manufacturers figure out ways to make vehicles and their drivers less accident-prone, the number of vehicles to repair will decline. The forward-thinking shop owner who sees this new era of product sales emerging and masters the new skills needed to excel in it can easily exceed any loss of collision repair income. And the shop owner or manager who can overcome the “no-insurance-pay” factor and the reluctance to pay adequate commissions may well enjoy an enormous jump in profitability to his or her bottom line.
Tom Franklin, author of Strategies for Greater Body Shop Growth, has been a sales and marketing consultant for more than 40 years.