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Caliber CEO on the State of the Industry

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Steve Grimshaw came to Caliber Collision in September 2009 after a 20-year career in retail operations, most recently as executive vice president of Safety-Kleen Systems Inc. Since Grimshaw joined Caliber, the Irvine, Calif.-based repairer has acquired eight shops, continuing its growth strategy of buying shops and integrating them into its company-owned model. Caliber Collision, founded in 1997, has expanded—often through acquisition—to 76 shops in California and Texas. Under Grimshaw, Caliber continues to seek acquisition opportunities. FenderBender’s Jennifer Niemela caught up with Grimshaw recently to talk acquisition strategy, the state of the industry and why a background in environmental services and waste management is apropos to the collision repair industry

You’re new to the collision repair industry, coming to us from a billion-dollar environmental service company. What stays with you from your time at Safety-Kleen?

We focused on oil refining, parts cleaning and containerized waste, hazardous and nonhazardous. Safety-Kleen takes care of waste that other companies generate, in an environmentally sound manner. Less than two years after I joined the company, in June 2000, they went into Ch. 11 bankruptcy. Turn-around mode lasted three years: shedding assets, refinancing, restructuring, and getting out of bankruptcy. By September 2003, we were in a growth mindset. My last job was as executive vice president of the West group, running the branch operations for the western U.S. and international operations in Canada and Mexico. I ran the national accounts sales organization too.

In and out of bankruptcy and then jumping to growth, that’s challenging and exciting. What did Caliber do to bring you over?

When I was approached by Caliber, I could see it was very similar. Safety-Kleen had 163 locations in the U.S. and Canada. Caliber had 68 company-owned locations. Both companies are service providers, and Caliber was at a point where they needed someone to instill a growth-oriented mindset, rather than just internally focusing on costs and productivity. So it made a lot of sense to me, and it looked like a really interesting opportunity.

We’re not perfect. There’s a lot we can learn from other shop cultures. When there’s something they do better, we instill that in our locations.

I get along well with the Caliber owner, a private equity group out of Toronto. It was important to me to have an ownership that’s committed to growing and understanding the business. I had an extremely successful and good career at Safety-Kleen. It was a major decision to leave, but I felt like the opportunity was greater for me here.

What goes into growing a company that’s already good-sized, like Caliber was when you came on board?

It’s not easy to turn to a growth-oriented mindset. It’s about defining a strategy for the company. You have to figure out what differentiates you from your competitors. You have to figure out what you’re going to do to hit short- and long-term financial objectives.

Growing a company isn’t easy these days. Most companies are happy to just maintain the status quo. How do you go about creating a growth strategy, and where do you start?

Even when you have clear financial targets established, like Caliber did, you have to start at the beginning when you define a growth strategy: Why does every Caliber employee come to work each day? Define your purpose, vision, mission and overall strategy. And then clearly communicate that—in our case, to all 1,800 employees.

Customer service must be on your mind often.

Our highest purpose is not just about fixing a car. When someone’s car is damaged, everything in their lives is disrupted. Their life’s rhythm is totally out of whack. Our customers didn’t want to come to the shop in the first place. Our intent is to make sure they have a great customer experience from the time they come in to the time they leave. Whatever little things our employees can do for our customers, we expect them to do that. Internally, we have a Caliber service excellence program. The three areas of focus are operational consistency, estimate accuracy and cycle time. We expect all our locations to operate at the industry average, at the very least.

You operate in Texas and California. Do you have plans to expand beyond those two states?

There’s certainly enough [in Texas and California] to keep us going for a couple of years. In December, we entered the Houston market. That’s a large market. We’re in Dallas, Austin, San Antonio, Houston. For us to get full market coverage for our clients, we could easily open up 30-plus locations in California and Texas.

We’re not opposed to going outside those markets. We’re constantly evaluating opportunities. We have weekly calls where we review the opportunities, to prioritize and eventually to market in the state.

Acquiring a shop means assimilating an established shop culture with your company culture. That can’t be easy.

Right, you don’t go in and Caliberize the employees. We’re not perfect. There’s a lot we can learn from other shop cultures. We evaluate how they run the front and the back of their shop. When there’s something they do better, we instill that in our locations.

There are some things we do have to instill in new acquisitions from Day One. Our safety standards are typically higher. There’s a bit of an adjustment to make sure they adhere to our policy. There are little tweaks with cash management. Some things we try to change from Day One. Other things we change over time. It’s not as if over the course of three or six or even nine months they’ll be fully integrated.

The question that must be on the forefront of every employee’s mind when his shop gets acquired: Who stays and who goes?

In most cases, we go into the acquisition with the intent of retaining every single employee who works there. Obviously, we are a different company, and it’s an individual decision whether people want to join with us. Some employees like working at an independent facility. Employees do have to go through a qualification process. Of the employees eligible to work for us, far and away, the majority stay.

There are many benefits to working for Caliber. Our shops have consistent volume because we load level cars when we get into an overcapacity situation. Our pay plans are commission-based so consistent volume is important to our employees. Our overall financial position eliminates the concern for employees regarding whether or not the doors will remain open. And we usually have better employee benefit programs.

When you have a good quality acquisition, like the last one we did in Houston, we want the employees and the management team at those well-established locations.

And what about the owners of the shop? A shop owner often has so much expertise and experience with the community. Do you try to keep the owners as part of the team?

That’s part of the decision [when Caliber is considering whether to buy a shop]. In some cases, this is the exit strategy for an owner or operator. But if it’s a solid manager, we try and retain them. Typically these are very talented people who have built a great business.

Ron Davis owned four shops we acquired. We brought Ron into the organization, and now he’s the chief development officer for our acquisition strategy.

Terral Hill, who managed two Houston locations we acquired, joined us as director of operations for all of Houston, where we’ll have up to 12 locations by year-end. He’s able to apply his talents to his benefit as well as to ours.

Let’s talk shop ops: You operate in California, which is making the switch to waterborne right now, and Texas, which will likely mandate low-VOC products in the next few years. What’s the Caliber status?

Let’s face facts, we’re switching someone from a solvent paint to a waterborne paint. It’s change. Most people end up liking the paint, but change is hard. Even though the product is more expensive, there are many benefits when it comes to productivity and color matching, which I would say make up for the cost differential.

The page on your website titled “Investors” says, “Content coming soon.” Are you looking for investors?

We’re just putting pertinent information on the website. There’s no underlying reason. We’re not in a position today where we’re going public or anything of that nature. It’s more of an informational section than anything else.

Would you ever consider franchising?

Right now we’ll continue with the company-owned model. Our target customer is really the carrier and their clients. We don’t focus on glass repair. We do have some relationships with dealers. We don’t have a lot of fleet businesses.

Caliber’s business is getting bigger, but the industry has been getting smaller. As you develop your growth strategy, what do you expect from industry consolidation?

The multishop operators are starting to differentiate themselves from the industry as a whole. The level of performance is increasing. They’re capable of decreasing cycle time and increasing CSI.

At the end of the day, it’s all about who will deliver the results for the customer. We’re only as good as our poorest-performing shop. The more DRPs, the more volume, the better performances. The customers are getting a high-quality repair, as quickly as possible. Everyone wins in this scenario. That’s why I believe there will be more consolidation.

Let’s face facts: There are a lot of independents out there. Dealerships are struggling in this environment. When you have a well-capitalized multishop operation, that creates more opportunity.
 

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