Branding a New Business Model

July 1, 2013
When Dave Rush decided to break away from CARSTAR, his shop lost 12 DRPs and a third of its sales. Could he claw his way back with a new business model?

The contract sat on Dave Rush’s desk for days, and the longer it sat there, the more he came to view it as a symbol of everything he disliked about the collision repair industry.

Modern insurance requirements and the growing trend of consolidation were making it increasingly harder for independent shops to succeed.

And he was part of that problem, Rush says. The CARSTAR contract on his desk, the one asking him to register for what would be his 16th year with the company, was burning a hole in his conscience that all the work and sales from his shop’s 13 direct repair programs (DRPs) couldn’t possibly repair.

“I was tired of it, just plain tired of it,” Rush says, remembering back to early 2006. “Fighting over replacement parts and having to battle on each repair to work up to our standards without cutting corners for insurers, I was just at the point where I was wondering why I was even doing it.

“I just kept looking at that bill and thinking that the only thing [CARSTAR] was doing anymore was selling insurance DRPs. So, it was like, why am I spending all this money?”

He decided not to. He dropped the CARSTAR contract in the trash—and his business quickly plummeted.

The Backstory

Rush, who co-founded D&M Auto Body in 1983, was one of the first-ever shop owners to join CARSTAR in January of 1990. He had done extensive training with the company’s founder, Lirel Holt, through 3M, and when Holt decided to start the network of shops, Rush was quick to sign up.

“I really have to credit them with so much of my success,” Rush says of CARSTAR. “We were with them for 15 years. I learned a lot about owning a business, running a business. I was the typical tech-turned-owner, and they were a big reason I was able to learn to run a business and run it by the numbers.”

With CARSTAR, D&M Auto Body flourished. By 2006, the shop was a hearty staple of the Rockaway, N.J., area, topping $3 million in sales out of a roughly 6,000-square-foot facility.

The Problem

More and more, Rush felt he was getting less and less out of being a CARSTAR shop. While in the early days he received guidance and counseling and invaluable tools for running his business, he now felt his only bonus was the insurance work they brought in—13 DRPs accounting for roughly a third of total sales.

Rush felt his shop’s reputation had more to do with his people and quality work than with the CARSTAR logo on the sign. And although he participated in CARSTAR 20 Groups, he felt he could just as easily do the same with another company.

So, he dropped CARSTAR.

“We battled steering, we battled everything. We were tired of it,” he says. “It was a rash decision, not overly thought out, but I thought we could handle the change.”

But he couldn’t—or at least the shop’s business model couldn’t.

By the end of 2006, Rush had just one DRP left and his sales were barely above $2 million.

“Some of [The DRPs] we were fine with dumping; others left with the CARSTAR name,” he says. “It was bad. I didn’t envision it being as much of a problem as it was.”

The shop, which had grown in revenue nearly every year since it opened, now was facing a dire future. Rush had to lay off two employees (the first time he’d ever done so), and now needed to find a way to bring back revenue without the help of those insurance companies.

The Options

Rush wasn’t going to crawl back to CARSTAR, and he refused to cut more staff and simply operate on a smaller scale.

What he needed was an altogether new business model that would allow him to regain his sales in a different way. To do that, he says, he needed to do two things: Get new customers to make up for those he lost and find a way to do more work with fewer resources in the shop.

That’s where the million-dollar mistake led to the million-dollar question: How?

The Decision

Because his shop had relied so heavily on DRP work in the past, Rush says they were complacent with marketing. He now needed new avenues to bring customers into the shop.

“We were looking at what was going to differentiate us from all the other shops in the area,” he says. And nothing stood out more than D&M’s DRP work—or lack thereof. 

Rush decided to brand his shop as the anti-insurance facility, the shop that would save customers from the “over-charging, money-first” companies that would “push for replacement parts and cheap repairs” over quality and safety.

Rush started a marketing campaign in his area’s newspapers and print publications using an “Honest Abe” character (modeled after our country’s 16th president), who touts the company’s customer-first attitude, while taking some sharp digs at insurance companies. In one ad, Honest Abe, behind the wheel of an enormous, souped-up muscle car, chases down caricatures that resemble spokespeople from various popular insurance commercials with the words “D&M Works For You/Not Your Insurance Co.!” across the top.

“We were trying to have a creative way to make us stand out,” Rush says. “It was a way to remind people what we were there for and have a little fun with it, too.”

Rush also started handing out free T-shirts with the company’s logo and advertising artwork on them to every customer, and the shop began an intense effort to connect with past customers, sending an average of three to four mail pieces to each customer throughout the year.

“We send out about 6,000 Christmas cards every year,” he says. “We do follow-up letters after the appointment, then other various advertising pieces throughout the year.”

The idea is to keep putting the company’s name in front of people, Rush says, reminding them of the service they received and where they should take their vehicle the next time around.

That would only help half the problem, though. Rush still needed to find a way to get more vehicles through his shop (and at a quicker rate) without the luxury of the staff and resources he had before.

This is when he switched to a team-based work system and began incorporating lean practices. With multiple technicians working on vehicles together, utilizing more effectively placed tools and equipment, Rush changed his shop’s entire workflow.

The Aftermath

Customers seemed to respond well to Rush’s new marketing tactics, and once they were in the shop, his staff worked to win them over with great customer service. (The shop gives daily updates throughout the repair process, and uses AutoWatch to let customers see the status of the work.)

Business started to build back up, albeit slowly. 

Sales snuck back above $2.5 million in 2007, and they made a steady climb over the next few years, topping out at $3.3 million in 2012. Still, with only one DRP (one Rush felt wasn’t intrusive on his operations), Rush says 73 percent of the shop’s sales now come from repeat customers.  

And with an uptick in efficiency from the new repair processes he put in place, Rush says the shop’s space was pretty much maxed out in 2011. The shop was doing roughly $55 in sales per square foot of floor space each month (industry average is closer to $17, Rush says). Rush put on an addition in 2012 that brought the shop’s space up to 13,500 square feet.

“We now have the potential to get a lot bigger and keep this momentum going,” he says.

The Takeaway

With consolidators gobbling up independent shops across the country, Rush says it’s getting harder and harder to run an independent shop not dependent on insurance carriers.

That doesn’t mean it can’t be done, though.

“You want customers coming back, and they need us only every 5–7 years,” he says. “We can do the best job in the world today, but if you don’t keep in touch with them, they’ll go elsewhere the next time around.”

Marketing and customer service are the keys, he says, and combined with an efficient shop, repair facilities should be able to compete with anyone.

That doesn’t mean he still doesn’t second-guess his decision to go rogue.

“It was a huge risk,” he says. “It was a lot of hard work to get past all that. Would I recommend it to someone else? Definitely not.

“CARSTAR did a lot of great things for us, but I just needed to do things the way I saw was best. In the end, that’s really all you have—you need to be proud of the business you’re in, and you need to love what you do.”