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Three Shop Operators on Keys to Profitability

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Keys to Profitability

After all, the tiniest of issues can hinder a repair. One small oversight can derail an entire day of workflow, put the shop at a standstill, and, ultimately, kill profitability. 

Michael Walters gets why you’re worried about it; he has four collision repair facilities to operate. He could, in theory, spend his days running between each of West Herr Collision Center’s upper-New York dealership shops, micromanaging every aspect of the repair process, looking over the shoulder of each estimator, and eavesdropping on his CSR’s calls. 

But he’s not losing sleep. He’s not overworked. He’s not worried.

And it’s not because of the numbers Walters’ team produces—including a near 20 percent net profit. No, it’s actually the opposite; those numbers are the direct result of Walters’ mindset and approach to operations. 

“Simplify,” he says. “Simplify everything.”

So, let’s state this simply: Profit just comes down to math. Maximize your revenue, minimize your expenses, and your business will truly make money. Yes, there are a lot of variables and moving pieces thrown into that equation, but Walters—just like the two other shop operators in this piece—says that controlling those factors comes down to some simple (there’s that word again), foundational business-building basics. Don’t overthink. Don’t overcomplicate things. Get out of your own way. Find the simplest approach, refine it, and allow your business to thrive. 


Profit from Leadership

The Operator: Michael Walters, collision director, West Herr Collision Center

The Approach: Systematic leadership

The Net Result: A team of 110 that works autonomously throughout four locations to produce a 16-plus percent net profit

SHOP STATS: West Herr Collision Center  Location: Four shops in Hamburg, N.Y.  Operator: Michael Walters  Staff Size: 100+  Average Monthly Car Count: 970  Efficiency: 150+%  Productivity: 110+%  Key-to-Key Cycle Time: 5-7 Days Touch Time: 2-3 Hours Average Ticket: $1,875  Gross Profit: 55+%  Net Profit: 16+%

Independent collision repair facilities have a distinct advantage over dealerships and large MSOs, Walters says, and it comes down to autonomy—indy facilities have a unique, agile approach to operations in that they can quickly adapt to changes, obstacles and issues. 

That flexibility can get lost in a corporate culture, or when trying to push change across multiple platforms at multiple locations.

“That’s why we’re dealer body shops, but run them as independents,” Walters says. “All of our competition in our markets that are close to us in volume are independents. … We want to be comparable [to them] and take anything and everything.”

That’s a tall order with four facilities, and that’s why Walters focuses on leadership—or rather, setting a surefire system of full organizational leadership that starts with himself and works its way down to his facility managers and their teams. 

Again, the concept is simple: If you have the right people in the right places, all with the same mindset, vision, focus and processes, then it’s easy to trust those people to make decisions to benefit the organization, Walters says. 

Walters has been at West Herr Collision for 21 years, and over that time he’s developed a systematic leadership approach that allows that kind of autonomy—that leaves each facility manager operating their shop similar to a high-performing independent. 

Here’s how it works: 

 

1. Start at the Top.

Walters has to set the tone for his facilities—and, no, “setting the tone” isn’t an intangible cliche in this case. 

As the head of the company’s four collision facilities, it is Walters’ responsibility to formulate the shops’ overall operational philosophies, vision and goals. Culture is a key, Walters says, and it’s created by setting those standards within the business, then serving as an example for them. 

Start by developing a mission statement, a clear company vision, and long-term goals for the business and an action plan for how they can be achieved.

 

2. Give Managers True Responsibility and Direction.

Walters has regular and consistent communication with each of his four body shop managers, but he also has one set monthly meeting in which the five of them all get together in person. 

“The last year or so, we’ve really been focusing hard on driving gross profits to the bottom line,” he says. “We have these monthly meetings and go over everything.”

He has three goals and focus areas for each meeting:

 

Goal 1: Expense Control

Walters doesn’t want to skimp on necessary spending (see the sidebar: “Prepare for the Future”), but he does want his managers focused on unnecessary waste of resources. Expense control needs to be top of mind with his team. 

The simplest way to do this is by focusing on KPIs and setting specific benchmarks. Overall, each shop needs to hit a 60 percent gross profit—and if numbers aren’t there, Walters works with the manager to break it down to see where the discrepancies occur. 

“It all adds up,” he says. “Look at labor, look at parts and materials, look at costs. If we set these data points, and a shop is 5 [percent] off, then where can we find that 5 percent?”

Often, this leads to the analysis and deconstruction of processes and systems, focusing on fine-tuning operations to produce those desired results. 

In the end, if you control expenses, profit will be there if your team performs, Walters says. 

 

Goal 2: Friendly Competition

By holding these meetings and analyzing numbers with his managers, Walters has created a dynamic of friendly competition between the four shops.

“We want the four stores to compete with one another to drive improvement,” he says. “We want to help each other get better.” 

Competition not only pushes performance, but it also helps each manager both teach and learn from one another. If one shop developed a unique solution, that improvement can be passed along to the other three. Competition is healthy, Walters says, and does not have to turn ugly if all parties have the same, unified goals and vision.

 

Goal 3: Autonomous Leadership

Walters sets the overall goals and vision for each shop, but each manager is responsible for working with his team to set the specific action items required to achieve those marks. 

Each manager also sets the specific budget for his facility (a number determined according to the overall profit goals Walters lays out). This includes training for technicians and front office staff. That’s a crucial part of not only improving, but also being able to maintain the quality of repairs required. 

“Each manager has their own ability to manipulate their budget as they need,” he says. “We have requirements—we want all techs to be fully trained, I-CAR Platinum across every tech. … We want to be OEM certified by most manufacturers as well. We have 23 car lines in our dealership, so we’re what you’d call a non-denominational shop. We need to invest very heavily.”

From the budget, separate goals are defined and acted upon by the managers and their teams. The manager is responsible for the micro goals of that facility, and for outlining the path to achieving them, which is handled in the manager’s meetings/interactions with his staff.

 

3. Have Managers Pass Responsibility to Their Teams.

Each manager holds specific meetings with both technicians and front-office staff at his respective facility. Some meetings—like larger goal-setting projects—occur on a monthly basis; others, such as KPI reporting and process evaluation, happen on a fluid, weekly or even daily basis depending on the need and department. 

Because managers act as their own independent operators of that facility, they are responsible for bringing the vision and approach of the company to the shop level, articulating projects, systems and goals to the team. They monitor more specific KPIs with their teams, like technician efficiency, cycle time, touch time, etc. Those numbers, Walters says, play into the bigger picture of profitability. 

By taking this approach, you delegate responsibility throughout the team, Walters says. Instead of it being an owner or operator to ensure profitability, it’s a team effort. There are systems in place. There is a level of oversight, evaluation and analysis at each level. And, when you add it up, the result is an autonomous team making decisions for the betterment of the company—and making money.

It’s that simple, Walters says.

Prepare for the Future

Bottom line: “If you don’t understand how to repair vehicles today, you shouldn’t be in this business,” says Michael Walters, collision director for  the four-location dealer-based West Herr Collision Centers in New York.

“You need to manage your investment, but it’s not all about gross profit; it’s about understanding technology and making sure the  cars are getting repair the way manufactures want them repaired,” he adds. 

Walters takes a holistic approach to it, wanting each facility and each team to be equipped to handle the vehicles they repair. Look at your vehicle mix, look at your customer mix, and ensure you can repair everything to safe and proper standards, he says. In the end, a well-trained, efficient team will pay back that investment very quickly.

 


Profit from Planning

The Operator: Jim Smiciklas, co-owner, Express Collision Center

The Approach: Creating an operational “blueprint” to overcome typical profitability killers

The Result:  Smiciklas’ shop tops 20 percent net profit and 160 percent efficiency each year

SHOP STATS: Express Collision Center  Location: Las Vegas  Operator: Jim Smiciklas  Shop Size: 10,000 Square feet  Staff Size: 8  Average Monthly Car Count: 40  Annual Revenue: $1.1 Million  Efficiency: 160+%  Productivity: 110+%  Key-to-Key Cycle Time: 11+ Days Touch Time: 2-3 Hours Average Ticket: $2,300  Gross Profit: 60+%  Net Profit: 16+%

Take a peek at your numbers. Look through the data, add it all up, and answer a simple question: How is your business performing?

“Some people really don’t know, even with the numbers sitting in front of them,” says Jim Smiciklas, co-owner of Express Collision Center in Las Vegas. “It doesn’t matter if it’s an independent or a dealer, they don’t understand their financial means and how [operational aspects] affect it. They fly by the seat of their pants and hope things add up.”

Express Collision Center tops 20 percent in net profit each year, and hits at industry-leading levels in nearly every measurement. And after 46 years in the industry, which included a spell as a management trainer for BMW dealerships, Smiciklas says it all comes down to a simple problem-solution mentality.

You need to dictate your own profit, Smiciklas says. Don’t let other outside influences affect it. Take control.

 

Problem 1: Understanding Profit

Solution: Everything starts, Smiciklas says, with finding your true break-even point—down to the number of vehicles and time of the month in which it’s hit. To truly understand how you make money, you must know what it takes to simply pay the bills.

Smiciklas says to plot it out on paper. Set up a business plan that identifies your true break-even point, and profit points that follow based on the goals you want to achieve. Smiciklas looks for a 20 percent net (and gets it), which means he needs to set his business up to achieve that. Focus on:

Proper Staff Setup. Smiciklas and his wife, Renee, still take an active role in the business. “Because of the size we are, I handle some of the estimating work,” he says. “I run the office and my wife works with me. Then, we have an estimator.” The message here: Don’t hire unnecessarily. 

Work Mix and Marketing. Determine the type of customers you want to attract, based on the structure of the business you’ve set up. Smiciklas does not do DRP work, and never has. It means he puts an added emphasis on marketing to attract his customers (money that he feels pays off from gaining in margins on non-DRP work). He looks to online outlets to set his business apart; the shop currently has all five-star reviews from Yelp and receives roughly 18 percent of its total workload through that site.

Set Proper Revenue Expectations. Smiciklas’ team of technicians top 160 percent efficiency, which allows Express Collision to project $1.5 million in sales for 2017. Without understanding a realistic revenue goal for the business, all other planning will be moot.

 

Problem 2: Growth Does Not Equate to Profits

Solution: Let’s rephrase that quickly: Growth does not equate to profits unless costs are controlled. To increase profitability, you need to control expenses in the business, Smiciklas says. 

Smiciklas does this in a number of ways (we already went over the staffing roles of the front office), but he also looks at saving in labor costs in terms of time and efficiency, rather than salaries and pay. Don’t waste a team member’s time with tasks that are unnecessary. One particular focus area can be your front counter, he says. A simple tip: Rather than wasting an estimator’s time by requiring them to call each customer a certain amount of times on a certain amount of days during the repair, have them check with the customer for their preferred method of communication and their preferred frequency. 

“Why would we waste their time and ours?” he asks. “It is possible to over communicate, which costs time and efficiency.” 

Also, Smiciklas suggests using technology to to cut out unneeded and outdated procedures in the shop. If you don’t use an electronic management system to monitor your numbers, start now, Smiciklas says. That’s a basic starting point, and once you have that, continue to find additional tools that will help you cut costs.


Profit from Consistency

The Operator: Bill Cochran, owner, Cochran Coach Works

The Approach: Build a consistent team—and retain it

The Net Result: A consistent focus on team-building and employee retention that leads to a 20 percent net profit

SHOP STATS: Cochran Coach Works  Location: Perry, Ga.  Operator: Bill Cochran  Shop Size: 8,000 square feet  Staff Size: 12  Average Monthly Car Count: 100  Annual Revenue: $2.5 Million  Efficiency: 130+%  Productivity: 110+%  Key-to-Key Cycle Time: 5-7 Days  Touch Time: 4-5 Hours  Average Ticket: $3,500  Gross Profit: 60+%  Net Profit: 16+%

Bill Cochran’s military career has played a deep role in his business’s development. For starters, Cochran Coach Works is in Perry, Ga., which by all accounts is a true military town. The sign outside his shop reads “Veteran-Owned Business”; he hung that up in the early days, and his revenue quickly tripled. 

Then there’s Cochran’s approach to operating his $2.5 million facility; everything stems from a team-first focus.

“A lot of people in this town like using us because they know once we do the job, we’ll stand behind it,” he says. “No customer complaints. No comebacks. We do it the right way—and we’ve done it this way for 20 years. And the reason it’s possible is the people.”

Profit, he says, starts with people; it starts with your team, and your ability as a leader to recruit and retain talent. Nearly every member of Cochran’s 12-person team has been with the company for more than 10 years, and it’s a key reason he feels his shop tops 20 percent net profit each year. 

Maintaining that staff, he says, is his job as an owner, and is simpler than many might think.  He helps outline three key tactics to employee retention, and how each plays a critical role in a shop’s profitability.

 

Three Keys to Employee Retention

1. Treat Your Team Right. Cochran says this should go without saying, but too often still needs to be repeated as a reminder: Treat your team the same way you would want to be treated if in their positions. This includes transparency with business performance, KPIs, and review of work. Put in the time. Give praise when deserved. Give assistance when needed. More than anything, Cochran says, show appreciation. A team that feels appreciated will perform at a higher level.

2. Teach; Don’t Correct. Mistakes are moments to teach, not correct or blame, Cochran says. “Don’t cuss them out for something they messed up,” Cochran says. “That doesn’t help them and it doesn’t help your shop.” Constant improvement has to be a focus, and that mindset leads to better attitudes, more collaboration and teamwork, and in the end, increased production.

3. Open-Door Policy. Cochran works to have all members of his team feel open in both staff and one-on-one meetings to hash out any issues they may have. Problems that linger tend to turn larger and larger. Get ahead of issues, and help team members solve them on their own

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