Collision repairs happen "by accident,"
but success doesn't. Quit praying for hail and start considering
what mechanical services you can offer your customers
If you're like most collision repair business
owners who've been around a while, you probably consider your
pride and joy a "single line" business. Except for a
few minor scratches and paint jobs, not too many customers wake
up in the morning and decide they want collision work done on
their vehicles. It is, instead, strictly by accident (excuse the
pun) that they end up in your shop. Hence, when weather doesn't
cooperate and accidents are down, collision repair work decreases.
So, now that the El Nino has turned the nation's weather pattern upside down for at least this year and insurance claims have dropped more than 30 percent in some areas, what are your plans to survive? Because much of our industry relies on the misfortune of others brought on by adverse weather conditions, when the weather doesn't cooperate, many areas have too many collision facilities and not enough available repairs.
You could hope for a May snow storm, some real big hail storms or even another hurricane (probably not likely in the Midwest), but why build your future on chance?
Today's opportunities are endless.
A progressive operator needs to think "auto
care," not just collision repair. In addition, consider the
income that could be realized doing some or all operations that
are currently sublet, such as mechanical repairs.
Considering the Job
Vehicles today are much different than those
of 20 years ago. Back then, the closest thing to mechanical repairs
after a collision was changing a water pump, clutch fan, motor
mount or alternator. Of course, you could also open the hood and
see ground! Today, electronics and mechanicals are damaged consistently
in most accidents, so if you sublet these out, you may be throwing
away dollars.
In this article, I'll discuss two main types
of mechanical work: retail work and internal work. Retail work
includes income from mechanical repairs not caused by the accident.
In other words, the customer came because he specifically needed
mechanical work done or was "upsold" on additional services
needed during the collision repair. Internal work includes mechanical
work done in conjunction with the collision work and is a direct
result of the accident.
Internal Mechanical Work
You may currently be subletting many mechanical
operations, and there may be many reasons for this: "No one
on staff is qualified (see box on "Finding the Right Employees),"
"I don't have the needed 'high tech' equipment," "No
space or time," "The mechanical shop is right next door,"
"No desire to diversify," "The mechanic is my best
buddy and I went to high school with him," "They are
very good," "I don't need much mechanical work done
due to the type or size of my business" or "I already
make a 40 percent gross profit on all sublet repairs."
Do any of these sound familiar? In most cases, one or more of these is the reason most collision shops don't do mechanical work, but the last two are the only ones that need further analyzing; the others aren't good enough.
If your volume is very small or your work mix doesn't justify it, it probably is too costly to do internal mechanical work. Let's hope, then, that you're currently getting at least 40 percent gross profit on all your sublets!
As for facilities doing a sufficient volume of sublets, the consideration is primarily how much gross profit is being made (or lost) on how you're currently doing it. (Before considering this, look at timing as well. In today's competitive marketplace, one key element of comparison is "turn rate." How fast can the customer get his car back? In most cases, doing mechanical work internally will allow for a quicker turn rate.)
Gross profit margins on internal jobs should exceed 40 percent. But, if you can get 40 percent gross profit without doing it yourself, just looking at direct profit on internal jobs may not be enough to convince you to take on the work. There is, however, much more to the equation.
Keep in mind, you won't get rich fixing cars,
but you may get wealthy by utilizing your business to acquire
assets. These appreciating assets will, over time, make you wealthy
or your business very valuable. Even if you can get 40 percent
gross profit on all sublets, obtaining property and a building
and doing all mechanical work there at a slightly higher gross
profit while paying for the assets will be a much more profitable
course of action for the long term.
Retail Mechanical Work
It's here that retail mechanical work enters
the picture. Let's do some math. Let's say you do 1,000 collision
jobs per year. In five years, that's conservatively about a 4,000-person
customer base (excluding multiple jobs for fleet accounts or individuals
and normal attrition). If you could do $200 of mechanical work
to 20 percent of these jobs per year at a 45 percent gross profit,
how many dollars per year is that?
4,000 X 20 percent = 800 customers;
800 X $200 = $160,000 gross sales;
$160, 000 X 45 percent = $72,000 gross profit.
What type of work, you ask? Just look at the possibilities of a $20 oil change. That would normally be something each customer would need done three times a year on average. Using 50 percent as the gross profit margin, that produces $24,000. And during each oil change, a safety inspection is performed, A/C system is checked, brakes are examined, emissions are checked and needed wheel alignments are identified for additional mechanical services on, let's say, just 30 percent of the visits. What does that translate to?
Then there's the cross over: detailing jobs, complete body checks and additional collision work … all from a $20 oil change! And for those of you in areas where heating is necessary, the recovered oil can be used for heating fuel and even for the spraybooth baking cycle.
The grocery industry has used "leader items" for years. Think about it: How often does someone go in and buy just the loaf of bread or milk and not pick up other groceries? Not too often. So what's stopping you from using this tactic?
For customer retention, why not give away
a free oil change? What have you lost? Ten dollars? With proper
marketing this doesn't cost you anything, but it does bring in
additional work.
Other Possibilities for Profit
This concept for oil changes is but one of
the many possibilities; many other internal and retail areas of
mechanical work are profitable for collision repair businesses,
and what follows is a partial listing of them. (To list all the
options would cause this magazine to accrue additional freight
charges from the post office!)
Look at it this way: If you hired a contractor to build your house, when you have a problem with something, do you call the carpenter who did the work or the contractor? You accept the liabilities whether you do the work yourself, have an employee do it or subcontract it to another vendor.
As for lack of knowledge, training is readily available for servicing passive restraint systems, and equipment vendors have clinics and support, too. Also, the scan tools are very user friendly and basically walk you through the diagnosis step by step.
Performing a wheel alignment is the easy part; diagnosing what's really wrong is the challenge. This is where the collision repair industry has the advantage. Technicians trained properly on suspension diagnosis can determine what, where and how much damage is really there - avoiding the "musical replacement game" that happens so often otherwise.
Offering this service will lead to more mechanical work, including brakes, CV joint work, springs, shocks/struts, steering and suspension components, and even tires and wheel service. Can you be competitive? Sure, if you look at it like the oil change scenario and distinguish between an alignment check, maintenance-type alignments that may only require "setting the toe and letting it go" and collision alignments that may require a more thorough analysis.
The scope of this article doesn't allow me to explain in depth the differences, but procedures and techniques are available to provide excellent service to your customers at a competitive price. On the retail side, why wouldn't your satisfied customers come back to have their wheel alignment work done by the tech who corrected their body structure and did their last wheel alignment?
If you plan to stay internal with alignments, there are other options besides computerized systems that will adapt to your frame rack setup. These systems are less costly, but they also may not have the features many computerized systems offer. One common feature on most computerized systems is the vehicle "print out." I've mentioned in previous articles the power of this feature for marketing and employee validation, as well as future documentation. This, by itself, offers great benefits to those doing wheel alignments on today's collision-damaged vehicles.
Since eliminating the production of R-12 and the subsequent use of R-134a (and other refrigerants) by auto manufacturers, today's equipment has to recover refrigerant, clean it (recycle it) and reinstall it (recharge the system). This sounds complicated, but it's very "automatic" with the current equipment. The systems are extremely user friendly for those who will just follow the directions. And the systems today can do all the current refrigerants when properly flushed (if necessary).
As for training, it's readily available and will include the complete servicing of A/C systems, including leak and system testing.
This is definitely one area of mechanical work that has major advantages when done internally and for retail customers. Think of the oil change scenario again … get your satisfied customers back again … and again … and again.
Other options include exhaust, electrical, head lights and other
driveability areas.
Why Pray for Hail?
Your destiny isn't totally predetermined by Mother Nature. Just
because she's not destroying cars and creating chaos doesn't mean
you can't turn a profit.
Many business owners would sacrifice their left arm for additional services to sell their customers. You have the opportunity - and you don't need to sacrifice anything.
Much of your business may happen "by accident," but it's no accident when shop owners take advantage of mechanical repairs and market them to their customers to pull in additional profits.
It's OK to pray for hail. But, as some shop owners have already
discovered, mechanical repairs may be the answer to those "please
send me more profits" prayers.
Writer Tony Passwater is a long-time industry educator and consultant who's been a collision repair facility owner, vocational educator and I-CAR international instructor; has taught seminars across the United States, Korea and China; and is currently an industry consultant. He can be contacted at (317) 290-0611 or Tony.Passwater@aeii.net.