Q: Okay, David—let’s get it out of the way. What are your feelings about PartsTrader?
DT: PartsTrader was implemented in the St. Louis, MO, market later in 2013, but prior to that, I was asking around and the consensus is it hasn’t been a good thing. In Missouri just like in any state, we have specific concerns, but in the end we’re all in this business to do good work and get paid fairly for it. But one thing the industry has to be aware of is the fact that we’re in fluid motion here in this industry. This is not where we stop and then that’s it—we’re constantly changing and we’re a work in progress. One thing that I’m concerned about are these additional processes that are now required. Some of them come mandated by the insurance companies, and PartsTrader seems to be one of those types of things. And I think there will be more and more of those coming around, tied into DRPs. But it’s not just about the processes; it also has to do with all of the other things that are attached to them. Somebody has to perform these tasks, and in most cases, they will require more administrative staff to get them done. In Missouri, we’ve definitely seen that the ratio between shop employees versus front office administrative people has changed because now the shops are requiring more of the latter.
Back in the day, you could have one manager and four to five techs, but now we’re seeing more of a one-to-one ratio of techs opposed to office people to accommodate all of this new paperwork created by the DRPs. For MSOs, it’s obviously an economy of scale situation, but I don’t care if you’re talking to a shop that’s doing $600,000 a year versus an MSO that is doing $7 million a year, the amount and costs of administrative work is getting everyone’s attention because it’s getting up there.
I can foresee in the future that programs like PartsTrader will bleed into how we get other things like paint, for example. I can see an insurer that at some point will try to build relationships with paint companies from a direct buy-type scenario. Those are some of the things that are concerns of mine. Another concern is the shrinking profit margins. If you look at those across the board and talk to people that have been in this industry for a significant amount of time, they’ll tell you the same. And I believe that one of the main reasons is this deluge of added procedures and all of the things that come with it. These guidelines that come along with many of these DRPs assure that we’re going to make less profit. There’s always going to be a little push-and-shove between the buyer and seller, regardless of the industry or the market. Somebody always wants too much, and the other guy is telling him, “I don’t want to pay that much.” That’s business, and it won’t ever change.
But I think the real issue as we’re going forward should be that collision shop owners are going to have to be continually improving their businesses, know what their product costs are, and determine what they want to sell it for in this industry. We need to be better business people when it comes to knowing the cost and value of our product and charging a fair amount to fix these cars. Sometimes you have to say no, I can’t do it at that amount and draw the line. And that’s tough when you’re looking for work to do and stay busy. On top of it, we now have fewer cars to fix. There are more total losses now and fewer accidents, and these new accident-avoidance features are going to mean there will be even fewer accidents in the future.
Q: When your father started in this business, DRPs were nonexistent, and you’ve seen them as they’ve evolved. Have DRPs helped or hindered the collision industry?
DT: When the DRP network system became prevalent, there was definitely a large undercurrent of bad feelings, and many shops didn’t like the process. A lot of shops in this area especially just didn’t like it ,and to be honest, I was one of those people and so was my father. It finally got to the point where we realized that if we wanted to be in this business, we needed to participate in the DRP system and get involved in a few of these networks.
The bottom line is that these DRPs bring you a steady flow of work, depending on who you’re talking to. The most important thing is keeping it all in balance, between DRP and non-DRP work—and that’s been one of the biggest challenges in this industry. Many body shops have welcomed numerous DRPs because it brings them business, but now that we’ve been in this DRP thing for 20 years or so, we’re starting to see there’s a cost that comes with this. So, we’ve had to re-learn some of the things we were doing before we could rely on these DRPs, like going out and meeting people, marketing to them, and branding your shop—things that shops don’t feel they need in a DRP environment. So, in many ways, we’re reverting back to the old ways of doing things because they work. The downside is that if you get almost all your work from your DRPs, what happens when you lose a few of them?
Q: Based on your experience, where do shops tend to drop the ball when it comes to marketing?
DT: One common mistake shops make is they don’t track the source of each customer or lead. We spend a lot of time and effort into finding out how each and every customer through the door found us and what they saw or read that caused them to call us. Was it social media, a neighbor referral, an agent referral, an email blast, newsletter, advertising—or is our name on their insurance company’s list? What we learn is that usually it’s a combination of several things and rarely just one of them. The key is to keep your name out there so that when there’s a dip in business for whatever reason, you’re prepared.
Q: In some states, there is still a problem with unlicensed body shops operating under the radar and taking money away from legitimate operators. Does this exist in Missouri?
DT: The old days of shady operators in this area of Missouri at least are a thing of the past. They’ve gone away and what’s left are good shops that do good business. But there are a ton of them, and consequently, this is a very competitive market. The midnight body shops can’t survive now, because of the technology, specialized equipment, and training. They couldn’t fix today’s cars or simply chose not to, probably because they could no longer tie on to an oak tree with a pull along and fix them that way. It’s better for the whole industry because in the past these under the radar shops were doing unsatisfactory work, which gives us all bad name.
Q: Body shops all over the country are setting themselves up to repair cars containing aluminum. Are you part of this movement currently, or will you be in the near future?
DT: As far as aluminum goes, I think I’m going to wait and see how this plays out. It is here and more of it is coming, but at what pace? The new Ford F-150 will bring a lot more shops to the party, but will all of the added equipment and training pay for itself over time? We’re interested, of course, but we want to do it in a smart way and not just rush into it just because the guy down the street is doing it.
Q: Do you embrace new technology as part of your business model?
DT: We’re always trying to improve ourselves by continually looking for new technologies, but there are so many things out there that it’s a little overwhelming. So, we have to decide what works for us and what doesn’t because it’s a big universe. Most of my employees are considerably younger than I am, and we often have discussions about technology and how to use it. For a long time a young woman in our office said we need everyone to have dual computer monitors to be more effective, and I fought it for a time. Then one day she was out and I sat down and could quickly tell why she wanted two monitors. As soon as she got back from vacation, everyone got two monitors because it makes them more effective and they can do a better job.