The Key to a Brighter Future
No one recalls, with any real certainty, who was the first to speak up and make the suggestion. But they agree on this much: The group quickly formed a unified voice.
Back in 2004, at a modest hotel bar near the Mall of America in Bloomington, Minn., several shop owners from throughout the upper Midwest voiced their growing displeasure with their 20 Group, following one of its meetings. Eventually, the shop operators reached the conclusion that they were sick of inconsistent pricing with regard to tools and equipment.
“We looked at how we purchased our product from the manufacturer; we found out that there were all kinds of different invoice prices for the same product, all the way from Hayward, Wis., to Sioux Falls, S.D.,” notes Jerry Knoll, the owner of Hawkeye Auto Body in Mason City, Iowa. “The product cost was different. We felt that it was unfair.”
“Pricing was all over the map,” recalls John Magowan, owner of Ernie’s Auto Body in Hayward, Wis. “That’s really one of the triggers that started the discussion of, ‘Hey, what if we all just bought together?’”
And there was another reason for the Midwestern owners’ growing unease: They were wary of the threat that consolidation posed to their individually owned businesses.
“We had seen that the industry was looking like it was starting to go to consolidators,” Knoll explains. “The small mom-and-pop shops, we felt that at some point in time we could be eliminated.”
So, 13 years ago, they saw an opportunity to band together and form a unified front, to fight back against the industry pressures weighing on independent shops. That, in essence, is how the Key Choice Collision Centers group came to be.
KEY ELEMENTS OF KEY CHOICE
Key Choice’s formation has granted members the means with which to be heard, rather than pushed around.
“We felt that we could make ourselves a little stronger, and also be able to have a little more say with insurance people,” Knoll explains of the group’s formation. “We also felt that we could do a better job of training.”
Key Choice is its own independent LLC, run independently by its member shops. But vendors play a significant role in its success. Sherwin-Williams aids the group in finding shops that are an ideal fit, and the initiation process for Key Choice is equitable, though somewhat rigorous. There’s an application process, followed by a review process, followed by an eventual on-site visit to the prospective collision repair center. There is no membership fee—aside from a fierce dedication to the group’s cause.
Key Choice, which holds four meetings per year, differs from typical 20 Groups in the respect that its member collision repair businesses (12, as of this writing) aren’t required to meet any monetary goals. The group mainly provides guidance in an effort to spur growth. Members aim to help each other boost net profits, in addition to KPIs like cycle time and customer satisfaction. Key Choice shop operators value the training (like occasional group technician instruction), networking opportunities, and pricing breaks (they often purchase direct from manufacturers) that group membership provides.
The aim is to take reasonably successful shops and, through the use of lean production methods, make them extraordinary, even in the face of an evolving industry.
THE GROUP’S GENESIS
The states of Minnesota, South Dakota, Iowa and Wisconsin are often referred to as “flyover country.” The term implies that the region boasts little of significance.
Midwestern businessmen like Knoll beg to differ. He knows his collision center impacts the local community.
And, Knoll didn’t become a successful businessman by accident. When he sees an opportunity to grow his business, he seizes upon it. That explains why Knoll eventually became part of the board of directors for the Key Choice group. Taking a detour from his old 20 Group has helped Knoll get closer to maximizing his shop’s potential.
“There’s a point where you have to look at the situation and say, ‘OK, where are they taking us?’” Knoll says in regard to 20 Groups. “And, can we do better ourselves?”
It didn’t take long for Knoll and company to declare the Key Choice group a success. For one thing, the smaller, tightly knit group makes for fewer inefficiencies than their old 20 Group, which constantly seemed to bring in new members that needed to be brought up to speed during meetings. At times, that drawn-out acclimation process stunted the business growth of longtime members.
Conversely, the new group—comprised of efficient shops that typically earn around $1 million annually—allows members to better address fellow operators’ problems.
“We’re a very strong, unified group,” Knoll declares.
THE VALUE OF GROUP INSIGHT
Magowan appreciates the seemingly all-encompassing knowledge that Key Choice members share. It is expertise he feels that a consultant would have a hard time matching. The group holds conference calls once per month, in addition to its quarterly meetings.
“We are not about ‘body-shop-in-a-box,’ where we’re going to come in for a day and teach you a million things, or give you 100 clues,” Magowan says. “There is no magic pill and silver bullet—it is [an] ongoing and never-ending, relentless commitment to reducing waste.”
Key Choice preaches the virtues of lean processes—Knoll estimates his shop’s productivity improved nearly 30 percent after switching to those methods—which take time to implement in a shop. The group’s mass training events help in that respect. Not long ago, for example, Key Choice painters attended a group training session in Cleveland, at Sherwin-Williams’ headquarters.
If a new addition to the group needs help implementing lean processes, the shop owner can tour another Key Choice shop for multiple days, studying each stage of the repair, and speaking with technicians to glean insight.
A GROWING POWER SOURCE
Key Choice’s purchasing power belies its shops’ perceived small-town statuses. When their ever-evolving industry dictates a need for the Midwestern shops to stay current through expenditures on equipment, materials or training, they call upon their strength in numbers. The group has been able to purchase, under an MSO status, numerous pieces of equipment, for example.
Being able to buy direct from partner manufacturers has allowed the group to save around 20 percent on certain pieces of equipment, compared to what they could if fending for themselves individually, Magowan says. In the same vein, jaws dropped the first time the group’s members purchased a truckload of plastic covers to put on vehicles in the paint booth, due to the surprising amount of dollars saved.
When Key Choice’s contracts are near their expiration, the group meets, determines its present needs, and then begins negotiating. And, the group has little hesitation about pulling up a chair to the big-boy table.
“When you’re a single body shop,” Magowan notes, “it’s not nearly as impressive as when you go to somebody, as a group, doing over $50 million a year in sales. At that point, you … get some leverage within some of the manufacturers.
“We’ve [seen] a huge impact on materials, not only because of purchasing, but because we’ve been able to not only decrease our inventory, but also with training and common practices between shops we’ve been able to basically use less product.”
FUTURE APPEARS BRIGHT
These days, the supposed little guys that comprise Key Choice are making plenty of noise.
Consider Magowan’s shop: Despite residing in a northwest Wisconsin town of barely 2,300 people, Ernie’s Auto Body does nearly $2.5 million in annual sales.
“One of the bigger things that we’ve been able to achieve—and certainly I never would’ve been able to achieve on my own—we obviously have been able to reduce waste in several ways,” Magowan says. “We’ve proven that cycle times can be reduced [and] quality can be improved at the same time, with less employees. So financially we’ve been able to have huge gains.”
Knoll, owner of a shop that has been in business for 40 years, had feared for his business’s future. Nowadays, those concerns are tempered.
His current business group is the key reason for that.
“I’m reading all those articles about all the consolidators that are buying up five or six shops in a metro area throughout the U.S.,” the industry veteran says.
“We’re building that shop up within these small communities—we’re the mom-and-pop stores that can now be able to have a say.”