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Friday, 01 November 2013 00:08

Virginia's John Shoemaker Continues to Negotiate for Success

John Shoemaker of Virginia is an Air Force veteran with 23 years of service in the automotive field as a technician, trainer and shop instructor, and with several additional years as a collision center director for a major dealership group, overseeing three Bowditch Collision Centers, including a new one  in Newport News, VA. Shoemaker is also a consultant with JSE, a company he created to share 35 years’ worth of automotive management experience and to assist other collision facilities in improving operations.

During the 30th anniversary of NACE in New Orleans, LA, in 2012, Shoemaker presented Negotiating for Success—a Look at the Negotiations Necessary to Keep Your Collision Center on Top.

Now, a year later, Shoemaker took some time to review why the topic of negotiating is a critical business skill; “shop owners are the only ones that know their needs and their abilities.”

Negotiations, Shoemaker says, not only affect profits but are important in preparing a contract or business deal. To negotiate successfully, several elements must be in place during the preliminary stage of a business deal. Those elements include establishing a set of core values, being honest and ethical, maintaining a standard that meets industry and customer expectations, delivering as agreed and responding to the customer’s needs. What is non-negotiable is making a profit.

Shoemaker emphasizes, “You should not start to negotiate without a set of core values. Your core values establish your standards; when somebody asks you to do something below your standards, you must be able to describe your core values. Show them how they fit in your daily business and how asking you to go outside the parameters of those values would not be a fair business practice. When they see that you have established core values, they will look at your business differently and change their requests. Describing your standards is the best way to defend your pricing and negotiate a fair price. I see all the time when a customer comes in for a paint job and expects to pay $600.00 and comes apart when you give them a price five times higher. If you explain your costs and describe the repair process and warranties, you become a step above the shops that advertise $600.00 paint jobs. I usually ask the customer why they came to me for an estimate if they know of a shop that will do it for the price they expected, and the general answer is ‘I heard about the quality of your work.’ That opens the door for your negotiations.”

Are you a negotiator? You can be if you are confident, focused, able to stay on track and be unemotional. A successful negotiator will know the objective before he or she begins, be able to define the main issues and can focus on them one at a time. Negotiations will go much smoother if a win-win is determined. Always have supporting documentation as back-up, which can include manufacturers specifications, a complete damage appraisal and structure measurements. The person with the most information usually wins, says Shoemaker.

One of the first steps to take when entering negotiations is identifying the appropriate person with whom to negotiate with. Develop a rapport with that person and determine their focus. Finding a common ground will help you to capitalize on similarities and keep the conversation from getting confrontational. Verbal tone and body language is important. Keep your emotions in check.

It is important that you establish your repair standards up front. Have a complete damage appraisal prepared and itemize each repair step required. Document only the repairs required and isolate prior damage. List customer concerns.

Evidence that Shoemaker practices what he preaches is seen in the posters he has made and displayed in Bowditch Collision Centers, detailing their core values.  These signs explain the process of estimating a repair and what equipment is used to complete the repair, as well as defining the shop’s mission, goal, warranty and payment plan. A sign explaining their core values lists “provide impeccable service, secure enjoyable workplace, sensible ethical and moral judgment, safe – quality repairs, positive community involvement, create a positive and lasting impact, and fairness – honest – openness.”

Negotiating with Insurers

When dealing with insurers, review the entire appraisal and make a note of the ‘no’s’ but keep moving. Go back to the ‘no’s’ after reviewing the complete appraisal. Negotiate the repair first, then the labor, but do not negotiate your repair standard. Realize that you will not see eye-to-eye with an insurer. Their job is to negotiate the cost down because they have specific numbers to meet and they are protective of their bonuses.

Negotiating with Insurer DRPs

One of the best things you can do when negotiating with a DRP insurer is to develop a friendship and a rapport with the insurance adjuster and get to know the insurer’s agents. You want to create a good reference by ensuring the adjuster’s experience is always good. Promote your efficiencies and your customer service. But also make sure the adjuster knows what you want on their program. Agents are required to maintain training and this can be an opportunity for your shop to sponsor events. Having a manufacturer certification makes your facility more attractive to an insurer and helps establish credibility. Have space available for them to work. Use existing work to establish opportunity with the insurer. Look at the number of non-DRP repairs performed for the insurer and provide insurer performance reports for those repairs. This cements your abilities and proves a need.
Shoemaker explains that “in reference to insurers, it is very important to find middle ground where you can help the insurer meet the needs of their insured as well as keeping the shop profitable. Everything in a DRP agreement is negotiable, but some items are more important to the insurer than others, and the only way you can find that out is to negotiate.  A shop should stay away from the items the insurer is firm on and work on the things that have wiggle room. The shop must know their basic KPI’s when they begin negotiating. It will help show the insurer what the shop is capable of and help the shop illustrate their capabilities. It does not help a shop to sign an agreement that has a requirement for 3.5 touch time when historically they have been at 2.2. Know your abilities and your needs, and relay those to the insurer through negotiation.”

Negotiating with Vendors

When negotiating with vendors, determine a retail rate for services, such as towing, alignments, and glass work. With parts suppliers, explain your needs and cycle time mandates. Find out what they need to get the correct part and incorporate electronic parts ordering. Give vendor complete order information to reduces parts errors.

Negotiate inventory levels by defining guidelines for out-of-stock parts and require them to search other dealers. Establish a process for parts returns and coordinate order cut-off times. Set a different time for each vendor. In addition, define the delivery process and specify that only complete orders are delivered. Identify inspection requirements and negotiate parts price differences. Parts price differences are the #1 cause of supplements, Shoemaker says, while insurance companies strive for zero supplements. Set a reasonable dollar amount for a price matching estimating system and establish guidelines for higher amounts. Set a performance measurement tool in place to manage system reporting; to track parts returns and delivery delays, to identify damaged or wrong parts and the frequency.

Shoemaker explains the importance of negotiating with vendors: “vendors do not know the needs of the shop owner. This must be relayed to the vendor through negotiation. If a shop is giving a parts discount to an insurer, the discount should be shared by the parts vendor, but you will not get it if you do not ask. Cycle time is not a normal topic for a vendor; I know quite a few parts vendors that believe if the part is ordered, they have met the requirement. Any parts vendor can order a part—you need to negotiate until you find one that feels getting the part is the top priority. Negotiate a delivery schedule, establishing a cut-off time that fits the need of the shop and the vendor. Negotiation is what gives the shops the support they need to meet customer’s expectations.”

Negotiating with Paint Suppliers

Explain your needs to the paint supplier. Define the paint level required and the flexibility you need in your paint line. Understand their distribution capabilities and specify your delivery expectations.  According to Shoemaker, “negotiating with paint suppliers is important in respect to delivery and training. Everybody has paint, and the prices have become very competitive. The separation between paint suppliers is in delivery and their ability to provide training. Delivery to me is important; some paint suppliers would prefer to stock your shelves, rather than have the ability to have regular deliveries. The problem with that is you become the warehouse, purchasing products you might not immediately need to ensure you have it on hand, rather than on demand ordering. Shop profit margins are continually decreasing, so purchasing items you do not immediately need could narrow your net profit margin very quickly. Negotiate for on-demand ordering; why have a back-up tint on a rarely used color?  Training is the other big negotiating point for paint suppliers. Paint products and processes are changing rapidly, so be sure to negotiate for continual training to keep your paint crew up to date on the products.”

Negotiating with the Vehicle Owner

Determine your customer’s need, identify their concerns and communicate to the customer so they know you understand them. Work to resolve the situation, not to sell. Provide a solution, but make sure you understand the complete situation before answering too quickly. Be flexible. Educate the customer on repairs required and write a complete damage appraisal. Is a complete repair needed and will aftermarket parts fit their need? It is easier to remove items than to add items later. Discuss a specific time for the repair and determine their transportation needs. In regards to payment, who is paying for the repair? Is it being processed through a third party? Is the customer aware of the deductible? Assist with claims processing and remember that vehicle owners don’t deal with this every day. Help them to understand the process and be their advocate if necessary.

Shoemaker clarifies, “customers are all different—the best reason to negotiate with a customer is to determine expectations. All customers have a different idea of how long a repair should take and how it should look when it is complete. Find out what the customer understands, and then explain the repair process to develop an expectation that the customer and shop can agree on. If this is set upfront, then the rest of the process will go smoothly. Some customers want to negotiate price, and the best way to overcome this is to sell yourself, describe the time and materials required to complete the repair, and instill the value.”

Shoemaker believes that the shops he has worked with have benefitted from his seminar on Negotiating for Success. “I think the most useful benefit is in parts pricing and delivery. Not many shops I have dealt with ever asked for a split on the discount the shop gave to an insurer, nor had they asked the parts vendor to absorb parts price differences. Just those two things benefit a shop tremendously, and it did not occur to them to ask. It is guaranteed that you will not get something you do not ask for, but generally, you will get a portion of something you do ask for.”

Shoemaker identified what he sees as some of the industry’s biggest challenges. “Insurer encroachment is probably the biggest issue affecting the collision repair industry. Years ago, the insurers stopped the shops’ ability to mark up towing, then they began regulating glass prices by trying to tell us how to paint cars by creating a base coat reduction and reducing blends, and now they are trying to control how we purchase parts and where we can buy them.  This has to stop, and I applaud organizations like SCRS who speak for the collision industry at many levels. Another challenge is locating qualified people. The collision industry is famous for shifting people around the industry but not for bringing new people into the industry. Brandon Eckenrode is trying to change that through the Collision Repair Education Foundation and has had some successes. It is very important for shops to support their local trade schools and community colleges and give young willing students an opportunity. We have one of the oldest  average age levels of any other industry, and it will impact us very shortly if we do not bring in new people.”

Shoemaker thinks that PartsTrader “reduces a shop’s ability to negotiate in the best interest of their business. I do not see the value of this program, nor do I feel it has a place in our industry. This program was created to overcome a need in several countries that did not have a parts procurement process. The United States has a very well-defined parts procurement process and a firm belief in free enterprise. PartsTrader works against what we have appreciated in free enterprise.”

In regards to the PARTS Act, Shoemaker believes, “the manufacturers should be able to keep their patents for the length of the vehicle in question’s warranty. I do not believe aftermarket parts should be used on a vehicle that is still under a manufacturer’s warranty. In that respect, I believe 2.5 years is too short. I do believe aftermarket parts have a place in our industry, but that place should be determined by the vehicle owner, not the insurance company. I think that if the vehicle owner was given the choice, more aftermarket parts would be used on older vehicles.”

Shoemaker agrees with certain aspects of the Right to Repair act because he believes that the consumer should be able to choose where they want to have their vehicle repaired, and he also thinks that the consumer’s chosen facility should have access to the technical information necessary to safely repair a vehicle. “I see where shops have the equipment to erase a computer code but do not necessarily know if they fixed the problem. Others are able to read a code but then have to pay for information to understand what the codes mean. Manufacturers need to understand that the dealerships cannot handle all the business; some don’t even have body shops, so holding that information back is essentially forcing repair shops to bypass systems. When the bypassed system malfunctions, it often reflects on the vehicle, not a shop, it just seems like good business to help others maintain your product to optimum operating capabilities.”

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