Howard Batchelor, Executive Director of GCIA, stated, "As always, Mike did a fantastic job of updating attendees about what's going on in the industry. He focused on the 3Cs: CSI, cycle times and closing ratio, and he talked to shops about their need to retain more gross profit. There were 40 attendees at the meeting, and Mike got everyone fired up, teaching them that it's not just a body shop - it's a business! Responses to the presentation were very favorable."
Anderson began his presentation, "Positioning Yourself in the Collision Repair Industry," by discussing how businesses that want to thrive, instead of merely surviving, need to focus on the three major areas: sales and marketing, production and finance/HR. Looking at sales and marketing, Anderson noted OEMs' intent to have vehicles notify them when a car is in an accident. This system would suggest nearby repair facilities to the consumer, creating the possibility of virtual steering. The OEMs' interest in body shops is directly related to the fact that 60 percent of consumers sell or trade their vehicle within a year of a repair, and of that number, 63 percent change brands when they switch vehicles.
Because of this opportunity for virtual steering, several insurance companies have already talked about becoming the certified carrier for specific brands. Anderson noted, "DRPs are NOT going away; however, I do believe that we need to set our customers up to win, and this OEM trend needs to be clearly considered."
Moving to the 3Cs, Anderson explained the importance of CSI lies in keeping everyone informed, measuring the time assignment is received to when the estimate is uploaded, and delivering the vehicle on time; most importantly, vehicles should be fixed correctly the first time. Regarding closing ratio, Anderson emphasized the value of sales scripts, sales training, estimate follow up and corporate espionage. When it comes to cycle time, shops should review the length of rental reporting and focus on being two days better than the market average. Utilizing Enterprise's ARMS report and Forecast report will also allow facilities to focus on the data and being proactive.
Exploring how to obtain more production, Anderson noted that increasing labor gross profits is imperative in order to offset the cost of training and OEM Certification Equipment requirements. In order to achieve the 65-70 percent labor gross profit required, shops can accomplish this through bonus-based pay plans, team systems, the tiered approach and labor rate increases. In reviewing length of rental (LOR), Anderson insists that shops should stay four days faster than the nine-day average to stay high on their CSI ratings. He also suggested focusing more on repairs instead of replacement since a shop's profitability lies in labor. He also stressed the value of obtaining proper training on aluminum and steel to make educated decisions, encouraging jobbers to "be a conduit of information!"
Regarding finance and HR, data is and will remain key. Anderson believes that shops should be on an accrual accounting system, not cash, and they need to know how to manage cash flow and determine ROI on investments, such as equipment. He recommends a sales mix to achieve maximum gross profit, consisting of 30 percent body, frame and mechanical labor, 20 percent paint labor and 10 percent paint materials. Parts sales should account for 36-38 percent of profit with 2-4 percent of sales being sublets. This varies greatly from what he has observed, and his suggestions to realign the ratios is bringing sublets in-house, repairing vs. replacing, offering more refinish operations, and invoicing paint materials.
Anderson said shops must improve quality of employees in a shorter time by offering after hours training clinics and establishing a training matrix. He emphasizes that jobbers and equipment companies will be vital to their training plan. Explaining the importance of offering superior customer service with a speedy cycle time and ensuring accuracy, Anderson concluded, "It is a bright future in the industry. Independent shops can succeed and thrive, not just survive! Align yourself with winners!"
During the meeting, Howard said attendees also discussed the need to create awareness with the tax authority about the fact that only 948 Georgia shops filed a payroll tax return, leaving 3308 "backyard shops" that aren't paying payroll taxes. They also mentioned that PartsTrader is not going away; in fact, PartsTrader will likely announce their intent to work with another insurer in the next couple months.
Anderson and Batchelor also encouraged attendees to complete labor rate surveys in order to make a fair and reasonable profit. GCIA's survey on PMRR and PRP variable rates is now available 24/7/365.