Hard Lessons: Three Failures that Made Shops Better

Sept. 1, 2012
Shop operators who have embraced mistakes share how learning from errors can ultimately lead to business growth.

Most owners and managers of collision repair facilities travel a long road before taking over an operation—one paved with years of experiences in numerous positions as they worked their way toward leadership.

The trip to the top often isn’t a smooth one, and even after achieving an ownership or management position, there’s still plenty to be learned and many mistakes to be made. But failures are nothing to be afraid of. Shop operators who embrace, analyze, learn from, and ultimately use mistakes make their businesses better.

“It’s about constantly improving,” says Barry Burkholder, owner of Barry’s Paint Shop in Ephrata, Pa. “We’re never really there; there’s always room for improvement. You have to be on the lookout for it or it won’t ever happen.”

Burkholder, a three-decade veteran of the industry, isn’t shy about discussing his errors and how he’s used them to build a $3 million business. He and two other industry leading shop operators share their biggest mistakes, and how those failures fueled the growth of their operations.

Doing the wrong job

The Mistake

Barry Burkholder opened Barry’s Paint Shop in 1976 after about five years in the industry working as a technician. But even though his name was on the building, he didn’t quit being a tech.

“My biggest mistake was fixing cars rather than running a business,” Burkholder says, noting that it took him more than a decade to realize that his involvement in vehicle repairs kept him from closely monitoring his financials and overall operations.

He guesses that about 20 percent of his shop’s efforts in its early days were for a loss. The largest contributors to that slump: unchecked labor expenses and poor estimates.

The Solution

Burkholder started paying attention to those issues after realizing that his business was not moving in the right direction, despite his long hours and hard work. To solve the problem, he stepped back from the repair process and developed a plan to start assigning techs to perform specific tasks based on their skill levels.

“In the past, I was throwing high-paid techs at jobs that someone with half the skills could do,” says Burkholder. He says techs with lower skill levels can generally perform roughly 70 percent of a vehicle’s repairs.

Burkholder also began saving and tracking his shop’s action plans and completed job data, and comparing them with initial estimates to find and fill any holes. The estimating process improved almost overnight, and coupled with Burkholder’s new approach to assigning jobs, profit margins soared above 10 percent. The shop’s gross profit on labor alone is 60 percent.

The Takeaway

Burkholder’s big lesson from his early mistake: If you can’t measure it, you can’t manage it. Being a full-time owner has paid off, he says.  
“If you really manage and monitor stuff tightly, you can still be profitable in this business,” Burkholder says. “You really can’t afford to let things slip through the cracks much.”

Relying on one source for customers

The Mistake

Back in 2005, Kevin Rains had two years of experience at the helm of Center City Collision and business was growing, thanks in large part to an exclusive relationship with a neighboring Volkswagen dealership.

One day the owner of that dealership dropped off his personal vehicle for a repair. Rains, a minister-turned-shop owner who still had much to learn in the way of business, took the man out to lunch to discuss operations.  

“He asked me how much volume Volkswagen was sending,” Rains recalled. “I said about 50 percent of my overall revenue was from Volkswagen referrals that were being sent from his dealership. He said, ‘That’s your biggest vulnerability.’”

The partnership wasn’t in jeopardy, but the dealership owner told Rains that if anything did go wrong, Center City Collision could lose half of its business overnight. Rains, who relied on the Volkswagen dealership and walk-ins for all of his business, said he had never considered that potential pitfall. 

The Solution

Rains decided that he had to diversify where his customers were coming from to ensure his shop’s sustainability.

“So at that point I started pursuing insurance agents, DRP relationships and went down that route,” Rains says.

After some guidance from his father, who founded the family repair operation, and relentless communication with prospective DRPs, Rains secured partnerships with one large insurer and two smaller ones, which together account for roughly 30 percent of his total sales today. That’s on top of the same traffic he saw from walk-ins and dealership referrals. He has also diversified how he markets his facility to make sure traffic remains high.

“I’m finding that people are checking who their DRP shop is and going online and reading reviews and talking to friends,” Rains says. “People are looking at a spectrum now.”

The Takeaway

Rains says diversifying his customer base created a much-needed safety net and put his business in a good position to continue growing. He refers to his missteps as learning opportunities.

“Even the things when I look back that I’m embarrassed about or wish had never happened, they actually became the things that took me to the next place,” he says.

Too much faith in staff

The Mistake

Steve Saunders had worked as general manager at Faith Quality Auto Body for nearly a decade when he joined a 20 Group in 2005 to help organize and streamline the big shop’s operations. But he wasn’t prepared for the surprise his fellow shop operators pointed out at one of his first meetings.

While going through his shop’s numbers, everyone questioned why Saunders’ paint and materials gross profit was in the hole 16 percent, rather than the healthy 30–40 percent most other shops reported.

Saunders didn’t have an answer, other than that the shop generated more than $6 million a year in revenue, so the paint and materials numbers were never a noticeable concern.

It turned out that the shop lost more than $45,000 to paint and materials theft that year and Saunders says the problem had gone unchecked for years before it surfaced at the meeting. He had no security in place at the shop and simply placed too much trust in his staff. The discovery was a huge blow.

As soon as he returned to the shop, Saunders started finding stashes of paint and materials. They were hidden behind cabinets, stowed away in the bathroom—he found items all over the facility.

To make matters worse, he discovered that some employees were working at a competing shop at night and using materials stolen from Faith at that shop. Another employee was caught selling paint on Craigslist.

“It was a pretty serious issue,” Saunders says.

The Solution

To make sure all of the guilty employees were cleared out, Saunders went as far as hiring a private detective to investigate the theft. After completing the investigation and firing several employees, he put in place a variety of security measures, such as making only one entrance and exit available to staff. A video camera watches over that entrance at all times, and managers perform random checks on employees as they exit.

“Sometimes it takes everybody but yourself to look at it and see something that’s right in front of you.”
—Steve Saunders, general manager,
Faith Quality Auto Body

The shop got rid of technician cabinets and paint cabinets. Now all paint is in the mixing room and all supplies are in a supply room. Supplies that are in use are put on rolling carts that are visible to everyone. If a technician wants a new product, they must first show that they completely used the one that was already on the shop floor. 

Saunders says his current staff is aware of the past theft problems and understanding of the security measures, which have worked. Gross profit on paint and materials is now at 33 percent.

The Takeaway

Saunders says he learned to more carefully monitor all aspects of his business and avoid complacency at all costs.

“If we don’t enforce those processes each month, they’re gone,” he says. “You have to implement over and over and reinforce, or they just go away.”