When I discuss paint profitability with collision center owners and managers, they often compare purchases to reimbursements to calculate profits. As I coach them, I explain that it is a little more complicated than that, as there are many factors involved that drive costs.
As with most conversations, I begin in the front office when discussing profitability,.The damage appraisal plays a vital role in profitability and is one of the first places I look when helping owners and managers improve their paint material gross profit. Missed operations are a detriment to profits, and they must be reviewed to ensure that non-included refinish operations are documented. You often will not find hours to add, but you will benefit greatly from the one- and two-tenths you can find in most operations. It is important to capture all the refinish labor opportunities, as the estimating systems calculate material reimbursement based on hours.
Which brings me to my next point: you cannot rely on that materials calculator to cover all paint material expenses. As I mentioned in “How to collect for today’s paint materials” in my Aug. 2022 FenderBender article, paint colors have continued to evolve over the years, with colors becoming more and more complex. Unless you are billing for paint materials by invoice, you are being shortchanged on every repair. Ensuring you are billing for all the materials consumed in a repair is just one of the challenges in gaining optimum paint profitability.
Another challenge to overcome is how well your paint team is managing the materials you purchase. I covered this in “Controlling your paint costs” in my November 2021 FenderBender article when I discussed monitoring how much liquid remained in a paint cup when a job was finished. This is just as critical as ensuring all required operations are on a damage appraisal. You cannot relate your purchases to your cost; the cost of your liquid products is based on usage, not on the price you paid! Reviewing paint system mix reports to validate product is being mixed properly and to highlight low profit percentages helps you “inspect what you expect.” Properly managing paint materials is a major step in improving paint profitability.
The last challenge I will address is to ensure that what you buy is in the right bucket. I’m not talking about the container it comes in; I’m referring to the accounting buckets. To account for your purchases correctly, they should be broken down into four buckets: liquid (all refinish products), refinish sundry items, body sundry items, and tool/miscellaneous. The first two are the only ones that should be included in paint material profitability calculations. As I discussed in “The intricacies of paint material profitability” December 2022 FenderBender article, the paint material allowance on a damage appraisal only covers the products used during the refinishing processes. If you have other items mixed into that bucket, you will not be able to identify your paint profitability calculations will not be accurate.
While gaining profits from materials can be challenging as prices continue to rise, I hope you have learned that it is not what you pay for a product that matters; it is how it is consumed. Everything we purchase in the collision industry has had a price increase. Parts, equipment, and even labor costs have risen. The key to profitability is to monitor the usage and invoice for what is consumed.
A colleague of mine and I will be discussing this topic at the Society of Collision Repair Specialists (SCRS) Repairer Driven Education @SEMA seminar RD9 Unlock Hidden Profit: Leverage Missed Operations, Materials, and Labor to Transform Your Refinish Department on Tuesday, Nov. 4, from 2:30 p.m. to 4 p.m.
