Basically, if you want to make more money, and we all do, you have to either reduce your cost or increase your sales. That's pretty much it. The math is pretty easy.
Let's look at the "increase your sale" side of the equation. That too, is pretty simple. There are only two ways to increase sales in a collision shop. One: increase the number of repair orders (ROs). Two: get more dollars per RO.
How do you get more ROs? Increase your door traffic through improved marketing or increase your closing ratio. Closing Ratio is the percentage of estimates that you convert to ROs. Either way works. Hopefully you have room and technicians available to handle the increased workload.
Simple stuff? Sounds like it in those seminars but in real life it may not be so easy. You need a plan. Go to NACE. Go to the Marketing Seminars, there are several. One really good one will be Wednesday afternoon at 3:30, WE-26, "Building an Effective Shop Marketing Plan".
But that's not what we're going to talk about today.
Get more dollars per RO
Let's talk about getting more dollars per RO. Once again, there are two ways. One way is to get paid for more of what you do. Checking the P pages (P-page audits) for not included items and asking to get paid for them is a pretty easy way to increase your average RO. Unfortunately, there is that adjuster or DRP re-inspector whose job it is to keep costs down. They fight it. It only makes sense. Your sale is their cost. It will never change.
But you have to ask and document what you are asking for. Eventually, you might even get paid for some of those items you are currently doing for free. They might say "no" but you'll be amazed how frequently they say "yes" if you can document the need to be paid through the P pages. But you've gotta ask.
There are some cool things emerging in the P-page audit world. Look for automated P-page audit systems which will list the non-included items that you or your estimator neglected to include on your estimate. The systems will even check your estimate to be sure that it conforms to your DRP guidelines. Cool! Gotta go to NACE
The other way to get more money per RO is to sell the customer something else. Something besides the damage the insurance company is paying to repair. Believe it or not, customers have checks and cash and credit cards. These are nice things because the customer can use those things to pay for stuff other than the loss. And there is no adjuster attached to the customer's credit card.
Ask the customer
I visit lots of shops. I frequently see symptoms of a serious disease infecting many in the autobody repair industry. I call it the "That's Not Part of The Loss" syndrome.
For example, I walked up to a painter who had achieved a very accurate blendable color match for a rear bumper he was about to paint. He had been struggling for an hour trying to butt match the color to the quarter panel. He was holding a test panel over the quarter panel he had to butt match. He held the test panel not just over the quarter, but over a scratch on the quarter. I asked why he didn't just blend it over the quarter as it has a scratch in it anyway and he replied, "That's not part of the loss."
So I asked the shop owner why they weren't blending over the quarter and he explained, "That's not part of the loss. The adjuster won't pay for it."
"Did anyone ask the customer?" I asked. I can be a jerk.
We asked the estimator and we were told that no, he never asked the customer. "I didn't bother because it really wasn't part of the loss and the customer might have wanted us to do it for free and besides, those are the jobs that always cause problems."
The three of us discussed the situation. Since the painter has spent over an hour trying to butt match the color instead of painting cars, it was decided to go ahead and blend the quarters. The car was a 4-door Neon, the quarter is not much bigger than this piece of paper. Maybe we could find a way to get paid for it.
We decided to call the customer with an offer to take care of the scratch: "Ms Jones, since we already have your car in process and we've got some paint in the gun, would you like us to go ahead and take the scratch out of your right quarter panel today. We can save you about $100 if we do it along with the bumper. It will cost an additional $200."
She said "yes!"
Don't fear the word "no"
Tom Egelhoff in his book, "How to Market, Advertise & Promote your Business or Service in a Small Town" writes "The overwhelming reason that most people give for not buying a product is - no one asked me to. Fear of rejection is pretty powerful. We will risk losing the sale before we'll face the disgrace of rejection. Most salespeople wait for the customer to buy and if that does not happen they blame the loss of the sale on price, delivery options, any excuse other than the real one: they did not ask for the order."
Sound like our estimator? Sales skills in our industry are pathetic. We manage a 62% industry close ratio. Sounds good? Most of our customers are sent to us either by previous customers or by an insurance agent or adjustor. They've got a wrecked car, we have a body shop. Selling ought to be easy. A closing ratio of 62% in our environment is nothing to be proud of. Ask for the job. Learn sales skills.
Once we get the base sale - the loss - it's time to try to sell the customer something else. It's called "upselling" and it is a good thing.
What else can you sell?
Make a list of things you can sell other than "the loss." Oil changes, alignments, the second tire, unrelated damage (like the scratch on the Neon), stereo, alarms, ground effects, stripes, detail services, PDR and a bunch of other stuff can be sold from a collision shop. Set up a price list or a menu and then try to sell it. If you ask, some will say no and you will have to suffer the disgrace of rejection and simply fix "the loss." You will be surprised at how many say "yes" and open their wallets and give you cash or a credit card to increase the RO.
Profits from up-selling go right to the bottom line, as long as you are operating above your breakeven point. I have seen good body shop sales people add $400 to jobs by doing nothing more than up-selling products and services to existing customers.
That's a very good thing.
Simple rule for up-selling: Get "the loss" closed before you try to up-sell. Try selling something small first, then move up until they say "no."
Ideas at NACE, SEMA
Don't know what you can sell from your shop? Gotta go to NACE. Actually, go to the SEMA show as well while you are in Vegas for NACE. You will be amazed at all of the things available to sell in the automotive "aftermarket." Flares, mirrors, trim, car care products - there will be aisles and aisles of stuff you can sell from your shop. Someone has to install those things and someone has to paint those things. Might as well be you.
Expand on what you already have
Increasing the average RO is a powerful tool to build business. Last year I was working with a shop owner who wanted to increase his sales by 10%. He wanted my opinion about regional cable TV as a tool to increase his sales. The cable TV salesman wanted $3,000 per month for an ad campaign virtually guaranteed to bring in the additional 10%.
Before making a commitment, we looked at some numbers from the shop. Close ratio of 65%, average RO of $1,650 along with some other KPIs told me that the shop didn't need to buy additional door traffic through advertising. They needed to improve their sales skills to close more of the jobs that were already coming by and increase their average RO through P-page audits and up-selling.
The shop was able to achieve a 3% increase in the average RO by forcing themselves to check P-pages for not included operations and getting paid for some of them. They increased the average RO another 2% through up-selling. Increasing the close ratio from 65% to 70% was fairly easy. They just had to learn to close the sale. They exceeded their goal of a 10% sales increase and everyone was happy, except the cable guy.
Of course now they have a production problem. But that's a good problem to have.
For help with that, they are going to NACE. There will be a few good production programs offered. I can highly recommend WE-02 "Pre-Repair Management, Key to Reduced Cycle Time" on Wednesday morning.
Hank Nunn has been active in the collision industry for over 27 years as a successful shop owner, technician and even a jobber store owner. Nunn has been a seminar facilitator since 1990 and currently facilitates DPC SMART Seminars across North America. Coincidentally, Nunn will be instructing the programs he so highly recommends in this article.