Sharp insights from vendor support group and shop network help small-town business beat the competition and buid a top-notch reputation
Shelton Collision Repair faces significant challenges operating in Derby, Kan., a small town of 20,000 located seven miles outside of Wichita. The shop was the only one in town when Shelton’s father opened it in 1976, but now faces competition from another independent and from a consolidator.
Shelton credits his company’s success and longevity to a strong staff and to the advice he gets from other body shop owners through a self-support program sponsored by one of his key vendors. Shelton is part of a group of 15 to 20 collision repair shop owners from around the country who get together twice a year and are in contact with one another throughout the year by phone.
“They’ve helped tremendously on growing the business, improving procedures, key performance indicators, and benchmarks against other shops,” says Shelton, who has managed the shop since 1992 and owned it since 1999, after his father retired. “There’s always something brought to the table that you learn, even if nothing comes out of it other than just energizing you. You get to step back and talk to other shops. As a shop owner, you can get caught up in the day-to-day. You come back with a charged feeling that you can make a difference in your business.
“I’ve personally come a long way since joining,” adds Shelton. “Sitting around with a bunch of other owners at the dinner table has given me a lot of ideas.”
Shelton has particularly benefited from sessions in which other owners review key performance measurements for his shop. “You submit your numbers and you’re scrutinized and you take it on the chin,” says Shelton. “You get your feet put to the fire all the time.”
Members of Shelton’s owner group often criticize his cost per employee, which exceeds industry benchmarks. But Shelton defends his choice there. “I like to do more work with fewer people. Some businesses have equivalent sales and 18 people,” says Shelton, who has just 10 employees.
Shelton’s employees are paid based on performance indicators such as sales, customer satisfaction index (CSI), profitability, closing ratios and hours produced. Technicians receive a sliding flat rate. “The more hours they produce, the more money they make per hour,” Shelton says of the technicians. “That dips into the gross profit percentage. We’re not as profitable as we could be on labor. But when I look at the dollars produced, it looks better. The way I look at it, I spend dollars, I don’t spend percentages.” Shelton adds that attracting and retaining people can be particularly difficult in a small town. “I’ve weeded through several people to get to the cream of the crop.”
Quality work is particularly critical in a small town such as Derby. “In a small town atmosphere, you’ve got to turn out a good product because word of mouth and reputation are everything. You see customers at restaurants, at church and at ball games. You’ve got to do it that way, even if it costs a bit more to achieve that product.”
The quality work of Shelton’s technicians is apparent in the company’s high CSI numbers, which have run at 99.6 or higher for the last year. “Every time we hit 100 percent, the shop picks what they want for lunch and we cater it in,” says Shelton.
It’s probably no coincidence that Shelton’s sales began to take off in 1995, the same year that he joined the shop owner program. Good employees also were critical to the doubling of sales between 1995 and 1998. Near the beginning of that period, Shelton hired a dedicated estimator, Kenny Thompson, who had previously worked at a shop in Wichita. “He was more of a salesman than I was,” says Shelton. “I was trying to do everything myself and consequently I didn’t take the time needed to sell the job.”
Thompson brought in some good technicians who are still with the company. Without them, Shelton feels it would have been difficult to grow so quickly without sacrificing quality. Thompson also helped make important equipment decisions and, through good contacts with insurance companies, was able to bring in some additional direct repair programs (DRPs).
With those programs came a different set of challenges, however. Shelton says it’s difficult to do the work cheaply enough to meet the requirements of some DRP programs and still meet his own quality requirements.
“With some shops, the insurance company is the customer,” says Shelton. “We make sure that the person who owns the car is our customer. Of course the insurance company is also a customer. But if comes down to erring on one side, I’m going to err on the customer’s side. People deserve to be put back whole. I lost a DRP because I wasn’t willing to sacrifice my quality or reputation to remain on their program and meet their numbers. We chose to part ways and now the shop is running more efficiently. I’ve got people who take pride in their work when they see it roll out the door, and we don’t have the administrative nightmares that were required to keep up with that particular program.”
Adds Shelton, “I’m educated, I’ve got a college degree, I could do other things. And if I’m ever forced into not turning out the product people deserve, I’ll do something different.”
Shelton’s biggest challenge, he says, is that it’s tough to grow substantially in a market as small as Derby. “To really grow, we’d have to expand,” he says. That’s an option the company has considered, but Shelton feels the timing would not be right now. The economy in and around Wichita is heavily dependent on the aircraft industry, which has been in a slump since September 11, 2001. But Shelton hasn’t ruled out the possibility of opening another shop, perhaps in Wichita, in the future.
Snapshop
Name: Shelton Collision Repair
Location: Derby, Kan.
Volume: 100 repairs per month
Revenue: $1.5 million annual revenue
Employees: 10
Size: 8,600 sq. ft.