Predictability Can be Found in Sales Forecasts
Shop Name: Isherwood Body & Fender Ltd. Owner: Ryan Isherwood Location: Duncan, British Columbia Size: 7,000 square feet Staff size: 11 Average Monthly Car Count: 80 ARO: $3,000 CAD Annual Revenue: $2.8 million CAD
What can it mean to your business to set goals through sales forecasting and projections?
Ryan Isherwood knows—he started in the collision repair business at 16, volunteering to sweep floors and maybe cut a bumper at the local body shop. Right out of high school he became a trained body tech and in September 2009 he struck out on his own, opening Isherwood Body & Fender Ltd. in Duncan, British Columbia, a town of 5,000 on the southern end of Canada’s Vancouver Island.
From his solo beginning in Duncan—“I was the only employee, I would fix cars, write estimates, order parts”—Isherwood now operates three shops, two that do collision repair as CARSTAR franchises, and a third that does mechanical work.
Early on, Isherwood says, his business plan, essentially, was to fix as many cars as he could and hope there was enough money left over at the end of the month. Now, Isherwood Body & Fender alone brings in the equivalent of $2.2 million USD per year.
Isherwood says his expansion and success was helped by working with CARSTAR, though, moreover, it was achieved through working with a financial professional who helped him map out sales projections and forecasts, helping him see clear paths to attaining his goals.
“All I knew how to do was keep working, keep working,” he says. “Now it’s a little more manageable.”
Isherwood says that from the get-go he always kept an eye on his numbers, even if he didn’t know what they meant. The shop generated $120,000 CAD in sales that first year, and Isherwood says he doubled his sales each of the next two years.
That original shop became a CARSTAR franchise in 2013—he says he was seeking some institutional support.
“Just because I was a small, independent guy, had no real business background, I needed some help and structure, and that’s why I was looking at the franchise model,” Isherwood says. Around the time he was about to close on the mechanical shop and was bringing in about $800,000 CAD in sales, he still felt he could use more one-on-one consulting, a type of “mentoring” that CARSTAR didn’t offer. Enter Brad Mewes.
Mewes, principal at Supplemental Advisory, says his father ran a collision repair shop and he “fell into it by accident,” finding himself in his early 20s running a multi-million dollar business. He went on to get an MBA with a focus on finance and special equity work and now consults both with shop owners and investors.
Mewes and Isherwood together created sales projections based on his shop’s historical sales data. Mewes says he often breaks sales down into more categories, including sales by customer and referral source (direct repair program or non-DRP, fleet, dealer), number of jobs by customer, and average repair order, so that he can get a more complete picture of how money comes into the shop. Creating sales projections is effectively goal-setting, and that leads to accountability—once the projections are made and written down, they become more concrete.
“Brad and I can set goals and he holds me accountable,” says Isherwood, who speaks to Mewes a minimum of once per week. “I know my phone is going to ring on Wednesday morning.”
Projections not only set goals but also provide answers on how to achieve them.
“Putting together those projections forces us to look at what is realistic here and what would [a shop’s] employees have to do to meet those projections,” Mewes says.
For Isherwood Body and Fender, Mewes and Isherwood made projections and then honed in on a KPI that made the most sense for the shop.
“We focus on hours sold,” says Isherwood. “If we can focus on hours … it just becomes very predictable.”
He pays his techs an hourly rate of $27.50, and charges a door rate of $73.41 (all cash figures here are in Canadian dollars). From there, the goal is always to have a 50/50 or better repair to replace ratio, since he says the margin for labor is twice as much as it is for parts, 62.5 percent vs. 30 percent.
“If we hit 1,800 labor hours in the month … we will likely wind up at around $264,000 in gross sales for the month,” Isherwood says, noting that assumes the 50/50 or better ratio. “Do that every month and we’ll be at $3.1 million in annual sales.”
That number—$3.1 million—was what Isherwood says he was on pace to bring in at his Duncan shop in 2020 before COVID-19 hit. His expected sales for 2020 were scaled back to $2.8 million, which is still more than 20 times what he brought in his first year at the shop.
Isherwood says he doesn’t expect his technicians and other employees to be businessmen, but he knows they have direct control over how many hours they sell.
“We just knew unless the shop got slow,” he says, “you knew monthly how much profit you’re going to make, it’s pretty predictable. Then after that, it’s just managing your spending ... to work on your growth.”
After buying the mechanical repair shop in 2016 and then getting his operations in order by working with Mewes, Isherwood says he gained the confidence to buy his second collision repair shop.
“We had this model down pat,” says Isherwood, who notes he’d met the owner of his future shop in Courtenay, B.C., at CARSTAR meetings, and was aware he was maybe looking to sell. He took the historical numbers from Isherwood Body & Fender, and applied them to the prospective new shop.
“It just became a more replicable model,” says Isherwood, adding he wouldn’t rule out acquiring a fourth collision repair shop.
“I’ll look at the owner’s financials, and they’ll have to make sense just so I can get the funding, they can’t be a complete disaster,” he says. “If there’s something to be desired, it’s not too scary, because I know I can get in there and apply my methods and improve what’s already there.”