Collision Repair Profitability Takes Work

For most of my adult life, I have never had the respect for medical doctors that I should have. Now that one of our kids is nearly through medical school, I have had a change of heart. As the bible says it best, “I am fearfully and wonderfully made." Medical students spend hours upon hours and months on end, studying and memorizing material. Then they must pass several eight-hour long milestone tests to keep moving forward. After graduation comes three years of residency while making $65-70k per year working 60 to 70+ hours per week. Get this, then to specialize to become, say, a cardiologist, that’s an additional three years of fellowship. That’s 27 years of schooling from kindergarten to, say, age 32... minimum!

What does becoming a doctor have to do with collision repair, you’re wondering? When it comes to profitability for our shops, a lot! Do we spend at least one to two hours per month studying our Profit & Loss statement? Some may be saying to themselves, “Greg, you don’t understand. I just don’t have the time.” Well, the answer to more time is literally in the palm of our hands. Get this, the average American spends five hours per day on their phone. That’s over 150 hours, or six 24-hour days per month. Shut that baby off!

So, now that we have just found all that time to study our P&L, it must make sense, and we must have clean numbers. There are many ways to look at our P&L. That can be Month to Date, Year to Date, by Quarter, this YTD compared to Last YTD, Trailing Twelve Months etc. When it comes to comparison to a prior period, I like to look at mine by the quarter to level out any paint bulk buys or monster jobs that finally leave, once a year bills, etc. We need to study each passing month, of course and be looking for errors. These errors can be in many forms, for example: Not seeing an electric bill for July, but June shows double the normal coding errors for, say, a Towing bill under Scanning etc.

I unfortunately need to mention this one. We all want to trust people, but we must be smart at the same time. Several years ago, I had a bookkeeper who had stolen from me. Fortunately, I know where every penny goes in my business, and it didn’t take long for me to realize her vehicle repairs at the local dealership were being paid by my shop! She was quickly fired and reimbursed me the next day. Point being, owners MUST be aware of where every penny goes. I know owners who have been the victim of embezzlement of six figures, and it took years for them to discover it. Ronald Reagan said it the best, “Trust, but verify.” Sometimes, it is not an integrity issue, but rather a lack of knowledge or complacency. I know of a shop that had the U.S. government show up and chain their front doors together, as the bookkeeper wasn’t paying payroll taxes.

I know owners who have been the victim of embezzlement of six figures, and it took years for them to discover it. Ronald Reagan said it the best, “Trust, but verify.” Sometimes, it is not an integrity issue, but rather a lack of knowledge or complacency.

The owner’s responsibility is ultimately to make sure the business is healthy with good profitability and cash flow. As an example, our Paint & Materials profitability was 50% GP Jan-Mar 2025 and then was 42% Apr-Jun 2025. That’s an 8% drop, right? We need to go on a discovery process and ask these questions. 1. Was there a paint price increase? 2. Did we get a new painter? 3. Did we get a new estimator who needs more training in writing for proper refinish hours? 4. Did we switch paint lines? You get my point here, as we must be detectives to discover the problem.

Recently, I was reviewing my P&L and discovered our Stock Parts Gross Profit was lower than normal. We then met as an entire shop and reviewed what all is included in stock parts and coding was correct for:

1. Clips & Fasteners.

2. Seam Sealers.

3. Freon.

4. Antifreeze.

5. Double-sided tape.

6. Adhesives and application tips

7. Drill bits.

8. Sanding belts.

9. Alu. welding studs, etc.

I explained that even down to the Stock Parts Gross Profit level can determine whether all get a bonus or not. Let’s say a shop does 750 cars per year and misses $30 of stock parts on every job — that’s a loss of $22,500 per year.

I never signed up to be a medical doctor, but I did sign up to be a body shop owner. We must take time every month to close our office door, shut off our phones and study our P&L. For most of us, we are bringing in millions of dollars every year. Are we at least keeping $20 (20% net profit) of every $100 from leaving?