How to Grow in Today’s Challenging Industry
No doubt you’ve heard the warnings: The collision repair industry is shrinking. New in-vehicle technology has made cars safer and less likely to crash; a lack of repair work has caused attrition throughout the industry.
Some collision experts believe the industry is already much too large for the demand of work today1 and, because of that, many shops will not be able to survive.
“If you’re just taking an overall, industry view of this thing,” says Dan Stander, a Colorado shop owner and the collision division director of the Automotive Service Association (ASA), “all of these factors are what we see leading to a lot of consolidation—a lot of shops that are being absorbed or selling to larger MSOs (multiple-shop operations) and chains.”
Over the past 15 years, the total number of shops operating in the U.S. has decreased by 12 percent, falling from a total of 46,427 in 1998 to 40,488 in 2013, according the Collision Repair Education Foundation’s annual report.
Yet, plenty of collision businesses are thriving.
In a recent survey of shop owners and operators conducted by FenderBender, 57.3 percent of body shops claim to have grown sales volume over the past five years. Contrary to the not-so-sunny outlook on the industry by many, exactly two-thirds of all respondents (66.7 percent) believe their shops will grow over the next five years.
And, according the Education Foundation, 66.5 percent of all shops in the U.S. claimed revenue numbers above $1 million in 2013, compared to 23.6 percent in 1998 and just 15.3 percent in 1995.
Today’s market place is challenging, but there are a number of ways a shop—regardless of scale, sales or location—can successfully navigate the shaky waters of a consolidating industry.
FenderBender spoke with two leaders of the country’s fastest-growing consolidators, who each gave an inside look at the calculated, yet different, approaches each company is taking to rapidly expand.
Create Predictable Outcomes
Executive vice president of business development, ABRA Auto Body and Glass
Adelmann has been involved with ABRA since it opened its second location in Maplewood, Minn., in 1992. He oversaw that store for a number of years, before playing a large role in the company’s massive expansion over the coming decade. His current role focuses on the 179-store company’s growth plans. ABRA has experienced double-digit, same-center sales growth over the last five years.
It doesn’t matter the size of your business.
The focus in this industry needs to be on what you can offer customers, the value proposition you can offer them.
For us, our value proposition is built on education and training—having knowledgeable, skilled employees, following structured processes that will produce a predictable result.
That’s the most important aspect of everything today: providing a predictable result.
It’s not as easy as it sounds. Little tweaks in systems or processes, or training by individuals, can lead to a different result on a vehicle. That simply can’t happen, whether you’re looking at it in the scale of the entire company or in a particular facility.
Each one of our locations has to provide the same value to each customer.
That’s the goal, and to some out there, it might sound like a fairly different approach for us. For years, our strategy was based on price. That isn’t the case anymore; it won’t be and it can’t be. Being the cheapest can’t be a strategy for growth or for profitability or success. Instead, we need to focus on that value proposition. That involves marketing that way, but also, more importantly, focusing operations in that way.
Now, there are a lot of ways we go about trying to do that.
The foundation is training and education, and as a minimum requirement, all of our shops must be I-CAR Gold or on their way to becoming I-CAR Gold. Then we have our ABRA Learning Management System—an in-house Web portal that offers 140 different education modules. Currently, we have 1,300 users, and in 2013, more than 75,000 lessons were accessed.
That’s where it all starts: Having a well-trained company, where everyone is going to be on the same page day to day in the shop.
From there, it’s about standardization in the way we do things. We have an “ABRA Playbook” that gives 14 steps to repairing a vehicle. It’s about a quarter-inch thick, and each section has accompanying videos.
The idea, though, is to keep it simple. We follow lean principles—we call it “Operational Excellence,” where the focus in everything we do is on eliminating waste, whether that’s parts, material, money or time.
One example is that we have a simple system in every single shop to monitor the progress of jobs: All vehicles that are on schedule are marked green; all vehicles off schedule are red. We have daily production meetings, where we outline how, that day, we will keep all green vehicles at green and bring the red ones up to green.
You can’t make these concepts too complicated. Everyone needs to fully understand what we are doing and what we’re about, and everything needs to stay on that path. That’s how things become predictable, that’s how you can change your shop’s perception, and that’s how you can ensure quality when you’re growing.
Attrition is a real problem for smaller companies in this industry. I can say that we are looking for dramatic growth and we’re looking to be perceived as a leader. Our average shop does $3.3 million in sales each year.
For us, as an MSO, we see a bright future. For everyone in this industry, they need to fully understand what they provide and what differentiates them from the competition. It’s only going to get tougher for most, and they need to be ready.
Diversify Your Business
Costa has formerly served in executive positions with both JMC/Young & Rubicam and YUM Brands. He oversaw marketing and had direct P&L accountability over Burger King’s 1,400-plus restaurants in Latin America and the Caribbean. He has also worked on brand growth for Colgate, Bank of America, Sony and Ford Motor Company. He holds an MBA from the Booth Business School at the University of Chicago.
One thousand. That’s the number.
We’re a growing company, growing rapidly. We have 468 shops right now, and, by the end of
the first quarter of 2014, we expect to have topped 500 shops nationwide. By 2017, we want to double that and be at 1,000 shops.
Consolidation is the name of the game in today’s industry, but that doesn’t just mean gobbling up other businesses and going for straight quantity. Our goal is to become the best, most profitable collision company in the country.
It’s probably funny or interesting for people to hear us say that, because for years—for decades—Maaco has always been thought of as a paint company. For us, that’s going to be the biggest challenge: We want to maintain being experts in paint, but we want to diversify what we offer customers. We want to be known as a collision business and be a major player in the collision industry.
It’s going to take time; we’re going up against 40 years of history as a paint company. But we can leverage that reputation and slowly make this transition.
With our new stores and our expansion, we’re completely changing our game plan. And we already have a couple shops that are being looked at as a prototype. Franchisee Brian Greeley in Littleton, Colo., does $5 million a year in business, and there’s no reason that we can’t have 90 percent of our shops following a similar business model.
Again, it’s about diversifying what you offer. Brian’s shop has all three aspects of business: direct repair, fleet and retail. That’s the mix each shop needs to find a balance with; not only is that going to help provide additional revenue streams, but it can balance out when certain segments get hot or cold.
We’re instituting a new plan across the company to operate this way—a new game plan that includes new SOPs based on what shops like Brian’s are doing. We’ll have a new point-of-sales system and a new information service provider for our management system. Our new shops are being built with new digital sales boards to empower customers in making decisions. They’ll have completely redesigned kiosks for our front-desk staff to allow a more consultative approach with customers.
It’s about the ability to fix each car with quality work, and to treat each customer with the proper care. That’s something we’re trying to integrate from my experience in the food industry. We want things to be more visual for customers—we want them to be able to go in back and see what is happening and have them understand the process better. We want to make the industry more welcoming for women. We want to provide a cleaner, more comfortable, more friendly atmosphere for customers.
This is a mature industry with the opportunity to really excel through using new technology and an improved approach to customer service. These changes should be something to embrace; not something to be scared of. This is an exciting time to be in this industry.
CONSOLIDATION SURVIVAL GUIDE
Dan Stander is the third-generation owner of Fix Auto Highlands Ranch (formerly Jerry Stander’s Collision Repair) in Littleton, Colo., and works alongside thousands of shops across the country to tackle some of the industry’s biggest issues as the collision division director for the ASA.
He shares his top tactics and those of the most successful shops in the U.S. for how independent shops can survive, thrive and remain independent through industry consolidation.
Consolidation is going to affect each shop differently based on their markets. I know that, through ASA, I hear shops in rural areas shrug off the issue, and maybe they’re right—for where they are. For most of us, though, this is the new reality of the industry.
The shops that sit back and refuse to adapt are the ones that will go away; I’ve seen it in my market. Independents used to rule the Denver market. Now, it’s saturated with successful MSOs.
We should be learning from these successful companies, and advancing the way we do business. Here are some strategies I’ve seen work:
Create a Customer-First Culture. This sounds obvious, but it simply doesn’t happen enough in shops. It took a long time for me to shift it in mine. But bottom line: The customer is our guest in our shop, and we need to do whatever we can to make them as comfortable as possible—and that means creating systems, processes and procedures that help staff do that.
Build Relationships with (gasp!) Insurers. Not a popular suggestion these days, right? I get it. I used to rail against DRPs all day. But then it sort of hit me: If you kick someone in the shin, and ask them for an extra hundred bucks, how’s that going to go over? If you’re courteous, professional and treat them like an actual customer—which they are—how much different does the exchange go? It’s not about giving it. It’s not about giving away anything. It’s about making relationships that help your business succeed. It’s about business success—not egos.
Become Lean—and Leaner. Whatever you call it—Six Sigma, Kaizen, Operational Excellence—becoming leaner in operations helps efficiency and it transforms your profitability. It’s a never-ending process; you can always improve. Get your shop as lean as possible. Then make it leaner.
Train, Educate, Improve Quality. Vehicles are getting more and more complex. We have to make the proper investments in training, education and equipment now and always to be able to be ready for the vehicles that come in. In the end, everything is about the quality of the repair experience; everything is based on the foundation of completing a proper repair.