I have been in the collision repair industry for over 35 years now and I have never seen shops so busy while making less money, relatively speaking. Recently, a shop owner, and client of ours, commented, “I don’t know exactly how to describe it, but business feels ‘sluggish’.” I think that is a pretty fair description of how many in our industry feel right now. What do you suppose is causing this sluggishness?
Many are quick to jump to easily explained conclusions such as talent and part shortages, while others will tell you the problem is a result of the insurance companies taking too long to approve supplements. All very convincing reasons for sure, and with a fair amount of truth to them; however, I believe there is more to it.
When you as a shop owner or manager built your shop, you built its systems, staffing, and tooling around the mix of work that regularly comes to your shop. This mix of small, medium, and large repair jobs, as well as your most common makes and models, is how you structured your business model, whether done intentionally or not.
For example, if your shop performs a high percentage of light cosmetic repairs on Toyotas, you would likely build your shop’s operational model and staffing quite differently than if you typically had a lot of heavy hits BMWs constantly being towed in. With me so far?
So, this is where the problem arises for many shops. They are geared up and optimized to profit on their unique, historical mix of work and now, all of a sudden, there seems to be a line of tow trucks with heavy hit BMWs coming from who knows where!
Some shops tell me there is something weird going on… “Dave, all of a sudden, the severity at our shop has mysteriously and miraculously jumped; people are wrecking their cars harder than ever!” Do you think that is true?
What’s Really Going On
Severity has definitely increased as a result of more and more vehicles being equipped with ADAS. There is also evidence that shops are beginning to get better about billing for required OEM procedures, calibrations, and other necessities which, again, drives up repair costs. This trend happened prior to the pandemic so it still doesn’t fully explain this recent, mysterious spike in severity, does it?
As I mentioned a moment ago, most shops have built their operating model around their historical work mix and the large consolidator chain stores are no exception. Like everyone else, they are struggling to find highly skilled technicians and when a non-drive comes onto their premises there is a good chance it will sit around for a while waiting for an available technician possessing the skill required to repair it and, as if that wasn’t enough, they are waiting for parts too.
Collision consolidators are educated enough to know that heavy hit non-drives are a bad thing for most of their stores for several reasons. First, it ties up cash too long. Second, non-drives negatively affect the performance guarantees they have with insurers. Key performance indicators such as cycle time / length of rental, repair versus replace, and CSI are all negatively impacted, potentially costing them millions of dollars. So, what do the big companies do? They gladly let you guys, the independent collision repairer, take them off their hands!
So, with all these factors working together, it certainly does feel like we are bombarded with heavy hits. If you as a business have not yet figured out how to re-optimize your business to effectively process them, what do you do?
When many of our clients began reporting their businesses felt ‘sluggish’ we began carefully studying our clients using our BodyShop Toolbox solution. This tool allows us to look at individual shops or groups of shops and sort their work in process (WIP) by three categories of repair jobs:
Small $0 – $2499
Medium $2500 – $5499
Large $5500 and above.
Not surprisingly, in 9 out of 10 cases, the shops were actually deficient in small and medium hits and grossly over the optimum WIP levels for category three. This is proof that the reason they feel sluggish is simply because they don’t have the right mix of work to feed their business which is optimized for a proper mix of work.
Many of these same shops are complaining of poor cash flow, stressed out employees, unhappy customers and a multitude of admin and repair process mistakes taking place.
Shop owners really need to come to grips with the fact that excess WIP is killing them. They have cars waiting on the lot for parts, insurance adjusters, and available skilled techs and they want to argue they don’t have any control over that… Yes, you do!
There are two primary actions a shop can take. The first solution is fairly straight-forward, but sometimes tricky to get the team on board with… You need to learn how to say NO. Follow after me, N… O… See, that wasn’t so hard, was it?
If the current situation isn’t working, it’s time to do something different. Saying “yes” to customers who want to tow their car to you when you already have category 3 repairs booked out for 4 months is insanity!
The second solution a shop needs to do, in order to say NO with intelligence, is determine an optimum work mix and then schedule to it religiously. One of the primary reasons shops feel sluggish is because they don’t schedule non-drives, and they end up sticking them into production where small and medium repairs were needed to optimize the system.
For example, ask yourself this… Are all my resources operating at full speed? Are my painters turning good hours? Are my lower skilled techs being wisely utilized while non-drives are tying up all my high skilled guys?
You might ask, “Well Dave, how do you schedule a non-drive?” Good question. You may or may not be able to schedule it when it gets dropped off at the shop, but it most certainly can be scheduled into your production system when it makes sense, thereby allowing you to sell and process the small and medium jobs too. If your schedule for Category 3 repairs extends too far out in the future, then say… NO. And preferably before the tow truck gets to your shop!
There are plenty of shops using this simple strategy and, other than a few parts and insurance delays, they are making tons of money. I want this for all of you! If you want some help with a better scheduling solution and team training, check out this short video training.
Are you ready for world-class training on specific ways to calculate optimum WIP and schedule appraisals and repairs more efficiently?
Join Elite Body Shop Solutions’ online body shop management training community, Operations Monthly Live (OML), an online management training program and community of high performers. We also cover ways to help independent repairers massively increase the growth of their businesses with little or no money. With a very affordable OML subscription, you can join me live for an hour each month, where you will learn a new, relevant topic and be able to ask questions while interacting with many of North America’s best collision operators.