Friday, 29 February 2008 17:00

Common Estimating Mistakes Could Be Costing Your Shop Money

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Steve Feltovich recalls some years ago walking into a large shop for which he was going to be doing some consulting work. Feltovich, who conducts estimating and other training as the manager of business consulting services for Sherwin-Williams Automotive Finishes, recalls that the manager of the shop said he needed a few minutes to finish up some projects but told Feltovich to feel free to walk around and check out the shop.

Feltovich said he went out into the production area of the shop and looked at the paperwork and work-in-progress on three vehicles.
    "In less than 30 minutes, I found $1,740 of actual repair work being done that was not on the original estimate nor being tracked for a supplement,” Feltovich said. "This was easy-to-document and easy-to-negotiate stuff, and that was on just three vehicles."
    Feltovich believes that type of inaccurate or incomplete estimating costs shops thousands of dollars in lost sales every year, and brings with it other problems such as increased cycle time, added administrative costs and even hits to customer satisfaction.
    Here are some of what Feltovich and others believe are some of the most common causes of estimating mistakes that can have a big impact on a shop’s bottom line.

    Being distracted and rushed during estimating. Preparing a proper estimate takes time and concentration, cautions Bruce Burrow, an Automotive Management Institute (AMI) instructor who specializes in estimating system training. You won’t write a complete, accurate estimate if you’re trying to answer phones and technicians’ questions at the same time.
    Burrow recommends having a dedicated desk or area where estimators can work with limited distractions. Keep the "tools" the estimator may need handy: a flashlight, floor jack, paint mil gauge, etc. Provide magazines or a television to give customers something to do while the estimate is being written.

    Not understanding the link between good estimating and cycle time, technician efficiency, and effective scheduling.
Feltovich said poor quality, incomplete estimates lead to delays in completing jobs because of last-minute parts orders, and prevent a shop from scheduling in work effectively based on accurate assessments of labor hours per job. Poor estimates also increase supplements and the administrative time they require.
    Mike Anderson, owner of Wagonwork Collision Centers in Alexandria, Virginia., also points out that it’s rarely fair to compare your technicians’ efficiency with that of other shops given that efficiency can be as much driven by the quality of a shop’s estimates as it is the technicans’ abilities. Anderson, for example, said his shops’ estimates have an average of 15 or 16 paint labor hours, nearly double that of the overall industry average.
    "So if your tech works 40 hours and mine works 40 hours, your tech will never be as efficient as mine because the efficiency rate is based on the quality of the estimate you write," Anderson said. "Too many shops track technician efficiency but don’t track the average number of body, paint or mechanical labor hours per ticket."

    Not making sure you have read and understand the "P-pages."
Even if your shop uses only one estimating system, there’s no excuse for not becoming familiar with the estimating guides and procedure pages for all three major estimating systems.
    "There’s a load of money in becoming a student of the procedure pages and being able to interpret them," Feltovich said.
    They can be viewed or downloaded and printed at no charge from each of the estimate system company’s websites:
    •Audatex (www.audatex.us): Find the link on the "Support" page for the "Audatex Database Reference Manual."
    •Information Services (cccis.com): From the homepage search for the "MOTOR Crash Estimating Data" guide.
    •Mitchell Internat’l (mitchell.com): Click on "Collision Repair" from the homepage, then on "Collision Estimating & Imaging," then select the "Collision Estimating Guide."

    Not getting estimators adequate and on-going training.
Feltovich said at one time he was a trainer for insurance adjustors and knows that many of them receive training every few months.
    "But only 2 to 3 percent of front-line managers and estimate writing staff at shops have had any training within the last 3 to 5 years," he said. "So if that’s the case at your shop, if they’re not receiving formal estimating training, guess who has been training them? They’re being trained by the insurance companies."

    Not detailing out frame time.
Even if your estimate lists only a lump time for frame or unibody damage, make sure you have notes or a worksheet that breaks that time out: x hours for buckle, x hours for twist, x hours for floor pull, etc. This will make your labor time easier to understand (and for you to defend) when it is reviewed by an insurer.

    Not creating or using an "unforgettable list." The industry’s best estimators have on their desk lists of non-included items that are often needed as line items on estimates but are often overlooked. Items on such a list may include common R&I parts (mirrors, optional moldings or emblems), materials (seam sealer, panel bonding adhesive, sound deadening foam), refinish items (mask engine compartment), disassembly items (stripe/decal removal), re-assembly items (caulk seams) and job completion items (glass clean-up, road test).
    The Automotive Service Association offers two such lists, one related to new parts and one related to used parts. They are available for $10 each (or $15 for both) through the ASA online store (www.ASAstore.com) or by calling (800) 272-7467, ext. 295.

    Not considering use of estimate review software. Insurers use such software to audit estimates to find and tag particular items, such as a charge for a particular operation that is outside an acceptable range. But some estimate review software is designed to help shops not only comply with direct repair program agreements but also check for items that may have been missed on the estimate. If new headlamps are listed on an estimate, for example, the software will prompt the estimator to consider including aiming the new headlamps as an estimate line item.
    Some of the estimate review software options available include:
    •Fix Auto’s "Estimate Review Program (ERP)" (www.fixauto.com/USA/ Products/ERP.aspx)
    • Mitchell International’s "Estimate Review" (www.mitchell.com/mitch/products/product.asp?pf_id=382)
    • Summit Software’s "Estimate Profit System" (estimateprofits.com/index.html)

    Not understanding what one small missed item per estimate can mean.
Feltovich cites an example of a shop that does 150 repair order a months missing just one operation, worth three-tenths of an hour, on every estimate – a legitimate charge for an operation the shop is actually doing.
    "You can multiply that by your door rate and the number of repair orders you have every month," Feltovich said. "For this shop, that three-tenths operation was worth $1,890 a month or $22,680 over the course of a year. And that’s without having to add any additional staff, equipment or brick-and-mortar."
    But Feltovich said that writing complete estimates is important not just for the impact it can have on a shop’s bottom line. Such thorough documentation, he said, will help protect the shop from liability if there is a question of what was actual done to the vehicle.
    "As the professional, you are responsible for the repairs, for the crashworthiness and safety of that vehicle regardless of what the insurance company paid you for," Feltovich said. "I’m not saying it’s right, I’m not saying it’s fair. But that’s the way it is. Some shops seem to think that if an insurance company tells you to write an estimate a certain way that they’re assuming responsibility. That’s dead wrong. You’re ultimately responsible."

    John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988. He can be contacted by email at jyoswick@SpiritOne.com.

 

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