Liability Limitations

May 1, 2012
Shop owners interested in growing their businesses need to keep liability fears from getting in the way of profitable opportunities.

The collision repair business forces an owner to consider a multitude of liability concerns. If faulty repairs result in excess vehicle damage or worse, human damage or death, a shop owner could face serious consequences. The nature of the business calls for employing technicians, estimators and office personnel. Their actions can also put the owner in a serious liability situation. And the intense use of equipment and vehicles also carries the possibility of liability circumstances. It is not surprising most shop owners are reluctant to enter into new connections that open them to even more liability concerns.

One shop owner I know of had several opportunities to enter into very profitable partnerships or to purchase a very profitable shop. In each situation, he chose not to get involved. It was obvious the main deciding factor was the possibility of greatly increased liability. But can any business grow and become more profitable without taking on at least some risk of increased liability? At what point does this risk become so great that it overpowers the possibility of significantly increased profits?

Many times the best gauge of risk is the trustworthiness of the other individuals who will become partners or participants in a venture. With the new emphasis on products being offered at SEMA that could be appropriate for collision shops to sell and/or install, an alliance with an accessory shop could greatly expand a shop’s market. One shop owner I know of had an opportunity to buy into a nearby accessory shop with a ridiculously small investment. Auto body repair prospect referrals alone would have paid for the investment. Many accessories could best be installed at a collision repair shop yielding a nice profit over the investment. And yet this shop owner chose not to make the investment. The accessory shop owner was a young guy with limited business experience.

The recession took a heavy toll on shops in my area. Many have downsized and quite a number have closed altogether, putting many technicians and other shop employees out of work. I suggested to a couple of clients that this could be an opportunity to put an inexpensive referral crew on the street. These out-of-work former shop employees would be very familiar with vehicle damage and generally capable of writing a simple on-the-spot estimate of minor vehicle damage in parking lots or on the street. I even designed a folded business card with a few lines on the back to indicate probable cost of parts and labor. The card stated this would only be a rough estimate and the vehicle owner would have to bring the vehicle in for a final estimate. A code on the card would tell the shop owner who wrote the estimate and was due a commission if the shop got the job. Once again, a fear of liability inclined my clients to pass on this opportunity. Perhaps one problem is whether or not a shop’s liability insurance would cover unusual situations like this. And if a policy could be adapted, would the potential increase in profits exceed the cost of liability insurance?

Apart from the battle that every business owner and manager wages with the competition, there is often a greater battle to be waged within. Perhaps these owners who chose not to invest in an untried venture feared failure more than liability. Military General Patton once said, “When there is fear of failure, there will be failure.” Eleanor Roosevelt once wrote, “You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. You are able to say to yourself ‘I have lived through this horror and I can take the next thing that comes along.’ You must do the thing you think you cannot do.” Another very determined woman, Helen Keller, also said it well: “Security is mostly a superstition. It does not exist in nature, nor do the children of man as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing.”

Certainly the risk of liability can be a very real deterrent to trying new things, but the collision industry is changing.  The shop owner must weigh the possibility of risk against the probability of profit. But perhaps he or she has to add two more things on the scale: the courage needed to take those risks, and a vision of a future where the same old, same old will no longer provide, where it’s necessary to risk taking on something new.

Tom Franklin, author of Strategies for Greater Body Shop Growth, has been a sales and marketing consultant for more than 40 years.

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