Financial Series: Minimizing Overhead Expenses 

With claims counts declining, it may be time to proactively trim overhead expenditures to save cash flow and cut the monthly expense budget.
Sept. 1, 2025
8 min read

Having run hundreds of performance groups over the past 40 years, FenderBender challenged me to recap the key learnings on the main topics the groups discuss. This is the fourth part of the series. 

Opportunity: Minimizing Overhead Expenses 

This last article in our financial series concerns limiting overhead expenses and optimizing operating profit. Post-COVID, as sales surged due to ADAS revenue and increased repair demand, sales grew to allow overhead expenses to fall to between 25-31%. This resulted in operating profits from 10.1% to over 20% for some. As you can see from the table below, if our sales decline by 10% and we don’t reduce overhead, the overhead expenses will grow as a percentage of total sales and operating profit will decline by that percentage.  

This article will examine all the categories of overhead expenses and how to evaluate and manage them: 

Overhead Wage Expense 

These expenses typically run 9.8% to 12.1%. With declining demand, this will probably grow to nearly 13%. Let’s look at some of the largest investments and considerations: 

In general, a well-run office has documented SOPs, routinely trains and reviews them (explaining why the shop does it that way), and agrees upon the role/accountabilities of all office team members. The team frequently reviews the insurance scorecards and adjusts operation codes and shop processes to optimize per the insurance scorecards. 

CSR wage: Have the CSR partner with the estimator to take control of assignments, gather images to triage repairs, greet and gather marketing source information, listen to customer needs, and mail out letters for unsold estimates. They also can improve GP by preclosing and closing files and can reduce AR by not releasing vehicles without a payment or approved final supplement sign-off. Further, you may want to have the CSR enter the paint and material and sublet invoices and overhead expense invoices and verify the accuracy of the daily pre-posting report to Accounts Payable. To keep them on track, pay them to help raise closing ratio (sales), to optimize gross profit, to raise CSI / NPS and help lower receivables. 

Estimator/Repair Planner: As a partner with the CSR, their primary role is to schedule the right type of repair volume to keep the inflows of work coming in to optimize the staff time. They need to focus on selling skills, AI and estimating skills, and solid communication skills. They do need to learn to QC the final repair to ensure it meets the standard they sold to the customer to optimize referrals and to drive repeat business. Pay them to optimize delivered sales, improve the per job gross profit, raise CSI/NPS, and to lower receivables. 

Parts Manager: Their focus is to source parts from preferred vendors whenever possible, to use automated tools to send all parts orders, to get parts price increases in the first supplement, to ensure the estimate and parts invoices reflect cost / profit matching when OEMs want to do this, and ensure parts are returned ASAP and the pending credits are treated as AR. Pay them to optimize parts gross profit %, limit pending credits (a form of AR), and to reduce overall repair cycle time. 

Production/General Manager: These roles have a broader role in the shop. They have to set sales targets, encourage level scheduling, ensure prompt repair planning, encourage parts organization and kitting prior to body, enable the paint flow line to drive 12 paint labor hours per paint booth cycle, to get reassembly done accurately and promptly, and to ensure we don’t have rework on delivered vehicles. It is important to reinforce each quality at source, so the technicians QC their own work to minimize administrative time spent on rework. Pay them for gross profit $ and %, repair cycle time, and overall operating profit. 

Finally, you need to evaluate your office-to-technician ratio. Some shops with experienced staffs can have 1.5-2.0 technicians to 1 administrative person. Staffs with less experience (lower salary range 1.0-1.5 technicians to 1 administrative person. Further, unproductive family members or people in the wrong seat on the bus (wrong role) can often slow the entire shop. Be sure the administrative team's limitations aren’t slowing the shop in any way. 

In short, evaluate the office staff with an open mind and be mindful that they remove the barriers for the technicians. Finding the right staff to follow the most efficient processes is a key part of the leaders job! 

Overhead Benefit Expense 

These expenses typically run 3.5% to 4.7%. Let’s look at some of the largest investments: 

This category of expenses reflects both the technical and administrative staff benefit expenses. The best way to review these expenses is to consider the sum of all employee benefits divided by the total of all wages paid (Total Body Labor + Total Paint Labor + Total Overhead Labor). When you compare the benefits costs/total wage cost, you see the percentage as a “TRUE COST OF LABOR”. Often, an additional 20-25% expense is incurred when considering the true cost of staffing. 

Reducing these expenses can be difficult because many are mandated by law, such as FICA, FUTA, SUTA. The amount invested in other benefits needs to be evaluated for the value placed on them by employees.  

Insurance: Shop periodically and join a larger buying group to procure in a larger risk-pool. 

Vacation / Sick PTO days: Many repairers choose to pay these expenses as they are accrued (when they have the cash) to avoid having to pay vacations in months when the staff wants to leave and sales are down. To make up for lost productivity during weeks of vacation, you may want to suggest a Saturday 6-hour day (voluntarily by some or all of staff) to make up for lost production in months with high demand and a number of vacations/sick days.  

401(k) Administration and Company Match: Again, shopping the administrative companies and their fees can be helpful along with comparing your company-match to your local competitors. If you pay more, be sure the staff knows the annual cost of this additional contribution. 

Bonuses or Profit-Sharing: Be sure the basis of this calculation assumes a bonus on cash flow. Shops need to pay for principal on loans and equipment on top of the net income. Paying bonuses on a rolling quarter prevents the staff sandbagging certain months and getting overpaid in others. 

Facilities Expense 

These expenses typically run 2.5% to 4.3%. Having an attractive and well-maintained shop is a form of marketing expense as the facility helps gain customer trust and influence buying motives. This expense may vary based on who owns the property. An industry standard for shop owner owned locations tend to be as high as 5% of gross sales. That often is a tax avoidance tool and money made by the landholding company isn’t subject to FICA, FUTA or SUTA and has a different tax treatment. Let’s look at some of the thoughts of the more profitable shops: 

Facility and Lot Rental: For shop owner-owned property, we recommend a base rent e.g. 3% of total sales) and a total 5% percentage rent during better times when sales exceed a certain number. 

$200,000 Total Sales 3% = $6,000 

$300,000 Total Sales 5% = $15,000 

Property Tax: To limit this expense, attend the meeting or hire a specialist to appeal the property tax if value seems high for the market. 

Garagekeepers Insurance: Solicit competitive bids periodically. Evaluate the office or production designation of key employees to avoid overpaying for office staff.  

Facility Maintenance: Limit damage to the building during its use and have a CapEx plan to maintain things such as lighting, HVAC, parking lot, signage and other facilities expenses. 

Maintenance Expense 

As we all know, it is less costly to maintain than it is to repair or replace. Keep the oil changed in compressors and replace booth filters at the prescribed time. These expenses typically run 1.4% to 2.3%, so here are some of the thoughts from the more profitable shops: 

Equipment Maintenance: Have a maintenance plan posted on the piece of equipment and maintain it on a schedule. Annually agree upon a 5 -10 year CapEx maintenance plan 

Shop Supplies: Be sure to code the right expenses here. Also, walk the shop looking for any waste which may be occurring. 

Small Tools: Often this is a way to reward technicians for longevity or as a bonus. Try to wisely invest in tools to optimize labor efficiency. 

Vehicles and Vehicle Maintenance: Ask yourself, does your staff with a company car know the equivalent salary value of this expenditure? Would they prefer wages and then buy their own vehicle? 

Editor’s note: We broke this extended-length article into two parts. Next month, we’ll dive into expenses for marketing, professional services, IT, utilities, education, and other expenses. 

About the Author

Steve Trapp

Steve Trapp is an internationally known consultant and speaker. His family operates a collision repair center in Wisconsin. He earned a degree in economics education and a minor in accounting from the University of Wisconsin.

After college, he worked for 3M in sales and marketing roles with the innovative 3M ARM$ training and software sales. He worked as a consultant for AutocheX doing financial consulting for a few years before joining AkzoNobel, where he started the industry’s first value-added program. While there, he started the industry’s first paint company-sponsored 20 groups and wrote numerous training programs with third-party experts on finance, marketing, selling, leadership, and other topics.

He later joined DuPont/Axalta, where he worked with Mike Anderson to manage their 20 groups and industry seminars. While at Axalta, he managed the North American Strategic Accounts SAM team and later the entire EMEA Strategic Accounts team. He followed that as senior consultant for LEAP, a global consulting firm that has presented in 10 countries and now again works for a major paint company.

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