Running a Shop Operations

Measuring Performance

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The world of statistical analysis is such that you can’t so much as turn on a baseball game anymore without being inundated with numbers. Fans and sports executives alike have access to more information than ever, helping predict the outcome of the next at-bat or finding the next superstar. 

Shop owners all across the country are diving into the numbers to increase their performance as well, though it can be tougher than ever to make sense of the numbers.

“You can have a parking lot full of cars, but it doesn’t mean you’re making the money you would normally make on a certain gross sale,” says Joel Ozbun of Linear Automotive in Plano, Texas. “So everything has dwindled, cost of doing business has gone up dramatically, everything from the company that empties your dumpster has gone up in price, there’s nothing that hasn’t gone up in price at least 20 or 25 percent, minimum. So your cost of doing business has changed dramatically as well.”

The rising cost of doing business is one of the top concerns for the future among the 506 respondents of the 2022 FenderBender Industry Survey. Eleven percent of respondents cited it as the single biggest concern, one among a wide spectrum of answers illustrating how many challenges shops face today. FenderBender talked to four shop owners from around the nation who use numbers like those found throughout the Industry Survey to stay on track, identify trouble sources and, ideally, keep their shops growing into the future.

A ‘Real Stickler’ with Numbers

SHOP STATS: Ernie's Auto Body   Location:  Hayward, Wisconsin  Operator/s: John Magowan   Shop Size: 14,000 square feet Staff Size: 14  Average Monthly Car Count: 80  Average Repair Order: $3,200  Annual Revenue: $3 million

Ernie’s Auto Body, in many ways, is a perfectly representative shop according to the metrics of our Industry Survey. The Hayward, Wisconsin, shop is located in the Midwest, where 32% of survey respondents work. It has a staff of more than 11, like 38% of surveyed shops. And its $3 million in revenue is right in line with a majority of what other shops reported. 

Owner John Magowan also falls right in line with the typical owner who took the survey. He’s in the average age range of 50 to 59 and took over his shop between the ages of 20 and 29. Additionally, he has more than three decades of experience in the industry. Magowan calls himself a “real stickler on numbers,” and has several KPIs that he tracks, as most survey respondents report doing. While Magowan has just one shop in Western Wisconsin, he’s partnered with other area shops to join forces and take a deeper dive into the numbers to benefit everybody.

“I, along with a few other partners, started a company several years ago called Key Choice Collision Centers,” says Magowan, 52. “We are a group of body shops that basically [are] a lending organization. So we do all of our training together, whether it would be administrative all the way down to a detailer. So we can compare numbers on all kinds of things, so it’s kind of similar to a 20 Group only much bigger than that.”

The group looks at the finer details, especially materials costs as the shops share things like a paint line. The shops that are performing well in certain metrics, say, ounces of primer sprayed per refinish hour, maybe have found an efficiency that other shops haven’t yet. The data also allows the shops to make comparisons, like dealership locations tending to spray more primer because they also tend to repair more and replace less.

Overall, anything that’s a job-costing number is of primary interest to Magowan. Parts, labor and materials are all huge, and all also happen to cost more than ever. Magowan does comparisons to see where costs are in relation to the previous year, reviewing numbers weekly, monthly, quarterly and annually.

“Quarterly, I’ll do comparisons with similar quarters from the prior year when I’m looking at overheard items,” Magowan says. “I am a real stickler on numbers, making sure that everything goes into their same categories in our accounting, and that way I have real comparisons from year to year.”

Issues in parts sourcing was among the top three concerns for survey takers, and Ernie’s Auto Body certainly has been dealing with those challenges as well. Magowan’s shop is a little more stressed than most however, owing to its somewhat remote location. That means an inherent increase in cycle time, about which the shop can do little.

“It even can be a little more difficult for me because parts are at a minimum next day for me,” Magowan says. “So we don’t ever get parts same-day, even if we can get them. Everybody’s feeling that pain, we just have to tack another day onto it if we’re going to have some sort of a delay.”

Like a majority of survey respondents, Magowan doesn’t have a firm succession plan in place for his business. But he also doesn’t have any plans to retire in the near future. While most respondents reported themselves having inherited their business from a family member, Magowan doesn’t expect that to be the case with his family, and that would be the biggest stumbling block in finishing a succession plan.

“I have children, but none that are in the industry or interested in taking over the business,” Magowan says. “So it would mean that I would need to find somebody to purchase, and that plan is in place. However, I need the person.”

‘Keep Swinging’

SHOP STATS: Linear Automotive   Location:  Plano, Texas  Operator/s: Joel Ozbun   Shop Size: 9,000 square feet  Staff Size: 14  Average Monthly Car Count: 100  Average Repair Order: $3,800  Annual Revenue: $2.7 million

Like Magowan, Linear Automotive owner Joel Ozbun describes himself as a big numbers guy. He tracks KPIs “monthly, quarterly, weekly, daily.” But as mentioned above, it’s getting harder and harder to interpret KPIs without a caveat. And you can find one for nearly every one of them, including key-to-key cycle time, which was the KPI tracked the most, according to the Industry Survey.

“Throwing the supply chain into the equation and you can’t even watch your business based on cycle time anymore,” says Ozbun, 60. “What used to be an eight- to 10-day repair has, with insurance delays and how they’re operating these days and supply chain problems, that 10-day average repair has turned into a 30-day average repair by the time you get on the back end of it. So I’ve kind of quit watching that number.”

The No. 3 KPI owners track, to the tune of 93 percent, is gross profit margin, and Ozbun keeps a close eye on that one as well. But that number doesn’t mean what it did even a few short years ago. And that ties back into all the other factors. Ozbun says that as labor cost and part sales numbers go up the gross profit has naturally gone down.

“Used to [be] you could factor your labor, your gross labor sales and your gross parts sales and you’d probably be somewhere in the 30, 32, 35 percent range, say four years ago,” Ozbun says. “For parts and the balance in labor now, it hovers more in a 45 to 55 mark. We’ve still held a pretty good parts profit margin but labor’s a little different now.”

Like 34 percent of survey respondents, Ozbun does not operate on any DRPs. And he never has in his 40 years in collision repair. Dealing with insurance companies continues to be a pain point among operators, with 14 percent of survey takers citing the influence of insurers on the repair process to be their biggest concern about the industry. For Ozbun, their influence on labor rates is particularly noticeable. What insurers expect lags $12 to $15 behind, per Ozbun’s calculations.

“That’s an imaginary world that somehow nobody seems to be able to show the proof of where they come up with that,” Ozbun says. “That prevailing labor rate, that elusive number that they come up with. The industry, the insurance company’s gonna have to step up to the plate, you’ve got a couple of ‘em that are starting to push labor and material rates up there. But 90 percent of them are still where they’re operating now at what our posted rates were five, six, seven, eight years ago.”

Ozbun has seen numerous changes to the industry over his four decades in business after buying his first shop at the age of 28. That was right in the range in which most shop owners bought their first shop, but Ozbun came to the industry as an owner first without being a technician. He’s worked at dealerships, independents and chains and has owned Linear for 10 years. Continuity and staff in leadership are important as he looks to share his knowledge with his team.

“I’m still 60 years old, so I still got a lot of fight left in me and I’ve got a good staff that understands all of it,” Ozbun says. “A majority of everybody here that I have has been with me for I think, probably my low end in management is eight years. So, they grew up in my world and how I see things and how I teach them.”

Ozbun reports that prior to the pandemic, the shop was on a continual upward trend in sales year over year. So 2019 has now become the benchmark, with the data from 2020 and 2021 being somewhat skewed with the effects of the pandemic. Keeping staff focused on short term successes and doing their best each week has kept everyone moving forward.

“Every day you come to work these days and you wake up in the morning it’s like, ‘What challenge am I going to have to overcome today’ that you wouldn’t normally have to worry about,” Ozbun says. “You get thrown a lot of curveballs; you just have to learn how to swing your bat and keep swinging it. And hopefully you hit it.”

‘That’s my inner accountant talking.’

SHOP STATS: Village Auto Body   Location:  Hampton Bays, New York  Operator/s: Jim Dubrowsky, Jr.  Shop Size: 2,500 square feet  Staff Size: 9  Average Monthly Car Count: 40  Average Repair Order: $3,500  Annual Revenue: $1.6 million

Jim Dubrowsky Jr. is in his 36th year in collision repair, still at the first shop he ever bought and the first one he ever worked in. Dubrowsky came to the body shop business after a career as an accountant. Talk about a guy who knows the importance of numbers.

“Kind of how I got into it is that the [shop I own now] was one of my clients,” Dubrowsky said. “And [previous owner] had a nice business and he didn’t pay his sales tax and didn’t pay his bills so a mechanic in there and I got together and were like, ‘All right, let’s open this up.’ And I kind of had an interest in cars and I’m always good at taking things apart and putting them together and figuring things out, so I figured it out.”

The shop, Village Auto Body in Hampton Bays, New York, now has nine employees and is firmly entrenched in the community, one that Dubrowsky and his wife specifically selected for where they wanted to start their own business. Village Auto Body has a presence on Facebook—by far the top social media platform that respondents said they utilized the most—but Dubrowsky also cited the shop’s reputation and other community involvement as most important to their marketing efforts.

“We’re always involved in local sponsorships and charities and activities, doing things to get our name out in the local community,” Dubrowsky said. “And along with longevity comes good reputation, and we still battle the steering and the insurance companies steering and directing thing all the time. I gotta laugh when my customers come in and tell us, ‘Hey we called our insurance company and they want us to go to their shop which is two towns away, we told ‘em, absolutely not, we’re going to our own shop. It’s our choice.’”

Community reputation can be the ultimate barometer. Dubrowsky cited the familiar ratio of the speed with which bad news travels fast with poor customer service experience. One person telling 10 people about a bad experience can be ruinous to a shop, Dubrowsky said, especially in a town the size of Hampton Bays.

In terms of other methods of getting customers in the door, Village Auto Body used to operate on DRPs but doesn’t any longer. The shop falls into the majority 47% of survey respondents who hold no OEM certifications with no plans to acquire any. The return on investment just isn’t there, Dubrowsky says, echoing the reasoning of many other responses on the survey. 

“I look at the market like what the locals around us drive and they’re all over the place,” Dubrowsky says. “Not everybody drives an Audi or a BMW, they still drive Chevys and Dodges, too. We saw no cost benefit in becoming specifically certified as of right now.”

Return on investment is a number Dubrowsky watches closely; as an accountant, it ultimately comes down to the bottom line. He knows not to go invest in that $150,000 tow truck without a clear picture of how it’s going to increase revenue. One number that Dubrowsky will not compromise on is labor rate, despite the escalating challenges. Labor rates were the second-biggest concern among survey respondents, cited by 22 percent of people.

“One of the other challenges that popped up after COVID and the labor shortage is pay rates all went up, went sky high,” Dubrowsky said. “And we had to increase our shop rate to make sure our employees are paid fairly—and well, not fairly, better than fairly, make sure our employees are paid well—so that they can all live a good life and come in and work hard for us, know they’re appreciated.”

While Dubrowsky is beginning to think about life after running his shop, he’s still plenty engaged in making sure the shop’s long-term future is secure. Dubrowsky says they continually invest in training, as most survey respondents do, as well as in technology. That’s an example of a return on investment that Dubrowsky knows will pay off down the line as cars only get more advanced and more involved.

“The shop keeps up fine,” Dubrowsky said. “We spend a good deal of time in training, we spend a good deal of time and spend a good deal of money in the last 10 years in upgrading all my shop equipment. So I got out of the old unibody car equipment and now we’re pulled up and configured for everything modern that comes through the shop, technology-wise and everything. So it required kind of a substantial investment and substantial training.”

‘It’s a great trade.’

SHOP STATS: Top Gun Auto Body  Location:  Helena, Montana  Operator/s: Ted Culbertson  Shop Size: 32,000 square feet  Staff Size: 22  Average Monthly Car Count: 100–110  Average Repair Order: $10,000  Annual Revenue: $6 million

Among all the concerns respondents cited in the Industry Survey, No. 1 by a good margin was the belief that there is a lack of qualified technicians in the labor force, held by 34% of the responses. Shops have had to search high and low to find quality techs over the past year. For Montana owner Ted Culbertson, it’s retaining his existing quality staff that has helped his shop maintain its level of success.

Culbertson is one of those long-time collision repair professionals, starting in the business when he was 16. Though in his case he took some years off in the late 2000s to join a professional motorbike jumping tour. The 46-year-old now owns and operates Top Gun Auto Body in Helena. The Montana native believes his shop’s position in the community is a responsibility, which has included programs like “Heroes for Helena” in which the shop picks a non-profit organization to assist.

“People pay attention when you help the community, they’ll help you,” Culbertson says. “It’s been the best thing that I’ve done. And ultimately too teaching my staff, putting your best foot forward and it feels good, right? It’s a good thing for my staff with the culture to be a part of so it’s been a really powerful impact for me, my shop, and then the community as well.”

The topic of culture comes up repeatedly with Culbertson as he believes it’s part and parcel with benefitting employees and customers alike. “I’ve always ran with, you can’t have happy customers without happy workers,” he says, and he cultivates a family-like atmosphere at his shop. That means activities like renting out a theater for employees and their families to see the new “Top Gun” film—it’s in the name of the shop after all. And it’s events like “Heroes for Helena” in which all employees have a say in selecting that year’s charity.

Promoting that culture is what allows the shop to hold onto its talented techs and not have to worry as much about recruiting.

“I get the business model is always to steal [an employee],” Culbertson says. “Well I’ve never really believed in stealing fish from another man’s pond, so I just grew technicians and I’m telling you it’s been great. A lot of the new stuff with the technical, I guess electronics and stuff on these cars, I mean they get it. They understand it. That’s the world they’re living. And your staff, they’re not going to time out on me anytime soon.”

Only 19 percent of respondents said they use some kind of consultant or business coach, and Culbertson is one of them. He utilizes a consultant who comes in once per quarter to identify issues that may get lost in the day-to-day running of the shop. Culbertson also invests in training that can be valuable in a number of ways.

“A lot of the training, I like to partner with the OEs, so any of that sort of training has always been really good to get with the guys,” Culbertson said. “So there’s no doubt, any training, a lot of the association meetings I bring my management staff. Sometimes it’s not even always necessarily about what they learn but it’s a breath of fresh air visiting with other people, gets you a restart too.”

As for numbers, Culbertson considers the profit-and-loss statement to be “the bible.” He reviews weekly and monthly reports in CCC to monitor the bottom line. But even that relates back to people and filling out a management team that is empowered to track success as much as the owner.

“I’m pretty good about my management structure here, and each department has to bring me a sheet they have to fill out at day end,” Culbertson said. “Every department as far as parts, admin sales, painters, one of my lead body techs, so I think that’s been a really good thing for them to come in at night end. … That’s been very successful for me and the guys like it, just a recap at the end of the day.”

In a constantly shifting industry, Culbertson likes the constant need to innovate and never be idle—maybe owing to his motorcycle-riding background. But in the end all the numbers are a result of the team you employ and how you manage them. That’s something that all Industry Survey respondents can agree to, and something Culbertson feels won’t change.

“Definitely being proactive with your technicians and growing some that are reactive is a really good thing to do,” Culbertson said. “It’s a great trade, there’s no doubt, and it’s fairly recession proof. The recession hits, people are still getting into wrecks and that sort of thing. Amazon hasn’t figured out how to fix cars yet.”

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