Minding your business: The strength of one

As an industry trainer, consultant and "20 group" facilitator, Mike Anderson helps single-location shop owners understand and improve financial numbers. But Anderson – himself a shop owner in Alexandria, Va., – thinks many single-location businesses will not survive long-term as they go up against the increasing number of multi-shop operations (MSOs).

Other industry players point to the collapse of large chains such as CARA Collision & Glass, M2 and Fox Collision, and say that customers, insurers and shop owners may be placing too much faith in the benefits MSOs offer.

"The problem has been execution," consultant and former consolidator CEO Matt Ohrnstein of Symphony Advisors says of the mixed success of MSOs. "It's very difficult ... I can tell you that firsthand."

Ohrnstein, Anderson and other industry participants were asked about the prospects of single-shop operators facing competition from MSOs. Here are their suggestions for surviving and thriving.

"In some cases, that credit is gone, so they're much more vulnerable," she says. "My advice for any size collision repair business is to get debt-free. Don't try to start another location if you're under-funded or don't have 100-percent process-orientation in your current shop."

Ron Reichen, owner of the single-location Precision Body & Paint in Beaverton, Ore., agrees. MSOs have financial advantages sharing costs across multiple shops. But, they have the overhead of multiple buildings, property tax bills and utility bills. Efficiency is key for competing single-location shops.

"Are you maximizing use of your facility? I'd rather have one or two locations running more hours per day than six or seven just running eight," Reichen says, who looks for ways to be lean and not waste materials. "Pick up that partial roll of tape on the floor and don't mix more than you need."

"If you've always been in the right spot, MSOs might not necessarily affect you," she says. "It's always harder to get into a (new) market (to do business) than it is for those who have been there."

Some vehicle owners prefer to work with the single-location facility where they get something they won't at MSOs: An on-site owner making sure quality and customer service remain high.

"In this business, you have to have some passion for it," says Al Estorga, who took back the reins of Estorga's Collision Repair Center, his Long Beach, Calif, shop after the M2 consolidator chain to which he sold it in the mid-1990s failed. "You have to have something at stake. And you have to be very personable and warm with your customers and employees."

Reichen, too, said treating customers the way "you would want your wife or child treated if they were buying any kind of service" will go a long way to helping single-location shops compete. He also sees it as a benefit to have all his company's equipment and talent in one location.

MSOs can "load level," moving vehicles from one location to another to improve turnaround time, Reichen said, but not every customer will appreciate that.

"They come back in (to the MSO) to get the garage door opener they left in their car and find out the car is 20 miles away in a facility they've never seen," Reichen says. "Some people won't like that, and want to have their car repaired where they left it."

EXTEND YOUR REACH. Bill Rupp, owner of Akins Collision Center in Santa Clara, Calif., has opened two satellite estimating/vehicle drop-off centers that help the shop attract DRP and other work in those communities to help keep the 24,000-square-foot shop running closer to capacity.

Rupp said some are a little skeptical at first as they realize the satellites are only an office and not a repair facility. He has worked to make the satellites look and feel much like their main facility's office, which is packed with antiques and collectibles.

CONSIDER TEAMING UP. Another option for single-store operators competing against MSOs is to join a group that gives independently owned businesses some of the advantages enjoyed by larger operations. These may include franchise or similar organizations like CARSTAR (www.carstar.com) or Fix Auto (www.fixautousa.com) that work to be branded under one name, or buying groups like Assured Performance Network (www.assurredperformance.net) or Collision Automotive Repair Services (www.cars.coop).

Bob Schubert, owner of Impact Auto Body in Mesa, Ariz., and a member of the board of Assured Performance Network, compares it to Ace Hardware, which gives even mom-and-pop hardware stores the ability to buy products at rates more comparable to big chains. The larger a co-op grows, he said, the more services and discounts it can offer its members, who still remain individual business owners.

"I like that business model," says Schubert. "I think it's one of – and maybe the best – possible tools for success for single shops like mine in a metropolitan area."

COMPETE LOCALLY. Anderson expects to see more growth in MSOs this year. "I see them positioning themselves to look for 'fire sales' where they can buy a business lock, stock and barrel for less than they might have during better economic times," Anderson says. "For anyone who has the cash, this is a great time to buy."

But Ohrnstein, who was CEO of the California-based Caliber Collision Centers consolidator chain during some of its most rapid growth, points out that more than a decade after the much-discussed industry consolidation began, the nation's 10 largest repair operations still only capture 4 percent of the total market. He believes the total number of shops will continue to decline from about 43,000 today to between 30,000 to 40,000 by 2015. The number of larger MSOs will continue to grow, and the biggest decline will be among single-shop locations with annual sales less than $1 million, he said.

Ohrnstein is more optimistic about the single-shop operator's ability to compete than he might have acknowledged in the past.

"In spite of pressures to perform, insurers need these repairers," he says. "You just have to be best in your market."