For the old folks like me from the 1980s, we likely remember this old advertising line from Wendy’s restaurant. For you young folks, it is basically a commercial about how some fast-food hamburgers can have a great-looking hamburger bun, but once opened you only find a small hamburger patty inside.
When we parallel this TV ad with collision repair, many shops are booked out months and are having record gross sales. Instead of “Where’s the beef?” it’s “Where’s the profit?” Most shops’ parking lots are still full of wrecked cars waiting to get inside. Most customers must wait three weeks to three months to get their vehicle repaired. Then I will see shops’ P&L’s and their profit many times isn’t any higher now than last year’s to date.
Each one of us must stop and just ask ourselves, “What are we trying to do here?” Is our goal to serve the customer in a noble way and fix wrecked cars to benefit society with little regard to profitability? For most collision repairers including myself, we want to serve the customer with safe & properly repaired vehicle and give them the best customer experience we can. What’s the answer to “WHY do we do this?” Well, it’s really pretty simple, WE WANT THEIR MONEY and for them to send their friends and family to our shops. Last I checked, we are not subsidized by the government, and insurers aren’t sending us “that a boy” checks in thanks for taking care of their insureds.
So, why are many not enjoying higher profits during this “Gold Rush” of wrecked cars? Let’s look at one of the greatest football coaches of all time, Vince Lombardi, who won five national championships with his teams.
In July 1961, Vince Lombardi kicked off the first day of training camp for the 38 players of his Green Bay Packers football team. The prior season had ended in a heartbreaking loss to the Philadelphia Eagles after the Packers blew a lead in the 4th quarter of the NFL Championship Game.
The players came in to start training camp for the new season fully expecting to immediately begin where they left off, planning to work on ways to advance their game and learn fancy new ways to win the championship. When they sat down and began, Vince Lombardi held up the ball and said, “Gentlemen, this is a football!” This became one of the all-time famous quotes by a coach in the professional football world.
He then had everyone open their playbooks and start on page one, where they began to learn the fundamentals – blocking, tackling, throwing, catching, etc. That was clearly not what they expected as players who were at the top of their game.
This hyper-focus on fundamentals allowed them to win the NFL Championship that season 37-0 against the New York Giants. He never coached a team with a losing season after that and never lost a playoff game again.
If focusing on fundamentals can elevate a great football team to such heights, imagine what it can do for our collision shops and our employees’ lives. We can easily focus our time, energy, and money on the latest equipment, training, OEM certifications, ADAS, different management systems etc. There is not one thing wrong with any of these! Trouble is, we can quickly take our eye off the ball by NOT focusing on the fundamentals of profitability. Otherwise, we must “PROTECT THE HOUSE” no matter what!
No matter what our level is in the collision repair business, just as in the game of football, we must never forget the fundamentals. As far as our profitability, here are 10 questions owners and managers must constantly be monitoring at least every month: 1. Are we spending at least one hour dissecting our profit & loss statement for a desired 20%+ net profit? 2. Do we have any parts credits that are more than two weeks old? 3. Are we keeping our accounts receivable total less than three days of our gross sales average? 4. Are we adjusting our Work in Process first thing the first day of every new month? 5. Are we tracking our average R.O. hours on a monthly graph to monitor our estimate quality? 6. Are we constantly asking for higher labor rates due to insurer labor rate suppression, along with having our door rate at least 25% higher than what insurers are paying? 7. Are we constantly studying the P-pages for new items we do but have never charged for? 8. Are we submitting degweb.org inquiries on a regular basis to improve estimating database labor times, along with studying the DEG database submitted inquiries? 9. Are we monitoring our paint department for at least 50% P&M G.P.? How about our cost of labor for 65% G.P. and parts department for a 30+% G.P. monthly? 10. Is our business growing at least 10-12% over the same month last year?