Service King’s Success

Oct. 26, 2009
Eddie Lennox built Service King from a one-man operation to a Dallas fixture with 27 locations, and more planned. Here’s how he did it and how his strategies might work for you, no matter what size your business.

Eddie Lennox followed a fairly typical path in starting his collision repair business, starting with an auto mechanic course in high school and some classes in college that included accounting and estimating. At age 23, in 1976, he turned a $10,000 loan from a neighbor into Service King, a grand name for what he admits was a pretty humble operation.

“It was in a horrible part of town, and in a two-car garage that was more like a shack,” he recalls, with a laugh. For two decades, he kept following that usual path, growing slowly to six locations, and dealing with standard issues like employee retention and brand recognition.

Then, everything changed.

Tired of fighting “the same battles” over and over, he decided to hop off that well-traveled auto collision road and forge his own, by employing fresh strategies and drawing on strong business philosophies. Although his actions have provided a huge boost to Service King in the past 15 years—allowing the company to grow to 27 locations, with 800 employees and $120 million in revenue—it’s not just big collision centers that can benefit from his insights. Even smaller shops with no plans to expand can learn a thing or two from his story, and how he turned a lackluster operation into a major collision force. Here’s a look at how Lennox found his winning strategy.

Extending Ownership

About 12 years ago, Lennox took a hard look at the roadblocks he faced in trying to grow faster and saturate the Dallas market. He says, “To set ambitious goals and meet them, you need a company where employees and management are happy, and that was where I had my biggest problem.”

Service King attracted quality management, but retention was an issue, as it was at other area shops. Lennox fought the problem for 20 years before he hit upon the idea of creating a minority shareholder program that would give top managers profit sharing in the company. About 20 percent of Service King’s stock was allocated to about 15 managers when Lennox started the program. Today, about 50 managers are included.

The idea stemmed from Lennox’s youth, when his father worked for a freight company that had a similar prgram. “I saw how important that was to my Dad, who was a shareholder,” he says. “It gave him a sense of ownership, and investment, and it really motivated him.”

Lennox hired a consultant from audit and advisory firm KPMG, and the pair worked together for a year to cement the details of the program, and how it would all work in terms of compensation to the shareholders. Now, managers own a certain amount of stock based on their position within the company. Looking back, Lennox feels it was the single most important strategy that he employed to create a bigger, stronger company.

“It was amazing how it changed the entire landscape here,” he says. “When these people were tied to the equity in the company, there was a big attitude change, a sense of responsibility. They became very intense about improving operations, and it wasn’t long before I didn’t have to worry about my company anymore because these people became fanatics about growing the business. They work together to make the company as strong as it is.”

Keeping Employees Happy

The minority shareholder program also worked to build on one of Lennox’s business fundamentals: Always communicate financial information companywide. At Service King, the books are open not just to managers, but to every employee.

“Everyone knows how we’re doing, and that allows shops to compete with each other for the best profits and best referral scores,” says Lennox.

For five years, Service King has been named as one of the best places to work in Dallas by a local paper, and the award is based on an online survey filled out by the city’s workforce. Lennox believes that in addition to having open communication, it’s the little things that keep employees. Any show of appreciation has a major effect, he notes.

The company has a strong health care program through Blue Cross Blue Shield, offers up to four weeks vacation, and has a 401(k) program where Service King matches $.75 to every dollar contributed by an employee, up to the maximum allowed by the tax code. Compensation programs have been created that are specific to a job role; for example, estimators have incentives for earning high service ratings. The company does charity work like Habitat for Humanity, and has several all-company parties per year as well.

Another strong strategy to further boost employee bonding was the development of several "zones" that include five or six shops. Each zone has a manager who arranges events for just those shops, such as picnics or dinners.

All of these efforts contribute to the operation's very low turnover rate, Lennox says: "Everything is designed for employees to perform at the highest level."

Creating Customer Diversity

“One of the biggest issues that we saw in trying to grow the company was that there are too few customers if you’re only dealing with the insurance industry,” notes Lennox. If a shop has 10 insurers, for instance, losing one would be a 10 percent loss for the business.

To combat this potential growth stopper, Service King works to be as diversified as possible. Insurers account for about 50 percent of the business, fleet for 5 percent, and walk-in retail for 25 percent. The other 20 percent comes from new car dealers. 

Service King has established relationships with more than 30 dealers in the Dallas/Ft. Worth area as well, and Lennox focused on dealers that don’t have body shops of their own.

Getting that kind of diversity required two strategies—sales reps that visit the car dealers and insurers on a regular basis, and advertising for that robust retail segment. And when Lennox talks about advertising, he means it: The company spends about $2 million per year on radio and television ads. It’s the frequency that has made Service King become a household name there, he believes.

“Branding is extremely important, and it extends to all types of customers,” he says. “If our rep calls on a dealer client and they’ve heard of us, it’s easier to establish that relationship. Advertising is a key component of our strategy.” 

For shops that don’t have millions to spend, there are still tactics that work well for a smaller campaign, Lennox notes. One is consistency: All of Service King’s ads look the same, just as the company’s shops look the same. The colors chosen for the collision centers also appear on the ads, he says.

“We’re a learning company. We’re constantly evaluating what we’re doing, but also looking at what other people are doing—even in other industries.”
—Eddie Lennox, owner, Service King

Centralized Customer Care and Management

With 27 locations, communication is critically important, and to keep the information flowing well, Lennox created a single operations location that has about 40 employees, including service representatives, accounting, sales, and marketing.

Keeping these key management personnel in one location allows for better communication and more cohesion, Lennox has learned. A large part of that unity comes from the customer care center, which was created about five years ago as a way to distribute work more effectively among the different shops.

Using software developed by the IT department at Service King, the reps take all calls coming in to Service King, and when determining which shop will take the repair, they can consult a large, big-screen TV that has a live feed with information on project turnaround time and current sales. If a shop seems too busy for the assignment, the repair is shuttled to another that might have time available, or that might not be meeting sales benchmarks.

Customers are happier, Lennox says, because it cuts down significantly on repair time, and the shops have a consistent amount of work that doesn’t leave employees feeling overwhelmed or underutilized. The call center handles about 60,000 calls per year, and every call comes in through the center, whether it’s a walk-in customer or an insurance agency.

“This center has been an incredible part of the difference in our profitability,” says Lennox. “What ends up happening otherwise is that an assignment might come in to a certain shop, and if they’re loaded with work, the estimator might not follow up the way he should. So, the shop would lose business. When the assignment comes through one place like this, it keeps the work balanced.”

The system also allows management to keep track of numbers on a real-time basis and make immediate adjustments to workflow, rather than waiting until the end of the week or even the end of the month to examine the numbers and see what can be tweaked.

Constant Improvement

Service King has come a long way from where it was a dozen years ago, but that doesn’t mean Lennox and his employees are resting on their accomplishments. As part of his business philosophy, Lennox believes that a shop should always be seeking improvement. “We’re a learning company,” he says. “We’re constantly evaluating what we’re doing, but also looking at what other people are doing—even in other industries. We’re always measuring one shop against another, and all shops against other body shop operations.”

For 33 years, Lennox has been asking questions, he says. That quest to continually look for ways to operate better—instead of focusing only on what’s being done right—has led him to build a business that still has plenty of room for growth.

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