It is often said that 70 percent of the way collision repairers do business has changed within the last decade, with the greatest changes occurring during the last five years. One of the most obvious changes is the level of competition facing single shop owners. Whether the competition is consolidators, franchises or multiple shop entities (MSEs), single-shop operators are struggling to keep up in an industry that is constantly redefining itself.
The challenges facing today’s collision repair industry are similar to those experienced by the Mom and Pop owned candy and stationery stores, the corner pharmacy and the local grocery store in earlier decades. With this comparison in mind, many single-shop operators are concerned about their future as the repair industry matures and consolidates.
Luckily for single-shop owners, to date, few of the franchise operations and would-be consolidators have successfully managed to capitalize on their theoretical advantages of size to operate more cost efficiently than single-shop enterprises. While this is true in the short-term, the bad news is that consolidators and franchises are building their long-term foundation as you read this article.
While much of the industry’s attention focuses on consolidators and franchise operations with national aspirations, in my opinion, the most significant short and long-term threat to single shop owners is really the MSEs.
Why is that? In order to answer that question, one must first compare MSEs to the consolidated or franchised shops.
For the purposes of this article, an MSE is defined as an organization with two to ten shops, located in a limited geographic region such as one state or portion of a state. In addition, the MSE has a relatively small management team. Typically, an experienced repair shop owner-manager is involved in daily operations. While there may be a number of owners, successful MSEs have a concentrated management team, easily accessible to each other so that business decisions can be made quickly.
In contrast, franchises and consolidated entities tend to have more management strata with significantly varying degrees of shop management experience and go beyond small, regional shop concentrations. These facts complicate the process of rapid decision-making and even force change in the criteria necessary to make the decisions themselves. By virtue of acquisition, consolidators bring experienced collision repair shop owners into the organization that are often involved in marketing, acquisitions and dealing with outside investors rather than daily shop operations. While size brings advantage in purchasing that smaller competitors do not enjoy, this is often not enough.
In spite of the advantages, very few of the new entrants have firmly demonstrated the ability to ensure comparable levels of service, quality and turn around time across their organization- an essential factor that makes a McDonalds a McDonalds. Many of these new groups are focusing on growth, rather than internal management weaknesses and daily operations, resulting in inconsistent quality from shop to shop. This is less of a factor for MSEs which tend to grow in moderation, not by leaps and bounds, building up a hands-on management style as they grow, rather than playing a tough game of catch up.
Where large consolidators often re-brand their acquisitions under the corporate banner, MSEs tend to keep their original names, capitalizing on long-term local or regional name recognition. MSEs who maintain their name and management team appear stable and have proven relationships with local insurers and car owners.
Employee issues are another area where consolidators and franchisees depart from the MSE or single-shop operation. Training issues in MSEs, whether technical, management or administrative, can be more manageable and cost effective than for consolidators and franchises because the overall size and location of the operation is limited. Of course, depending on the number of employees, MSEs may also need to hire dedicated, or part time, Human Resources (HR) professionals to deal with the myriad of issues managing a large, diverse group. The increased cost of providing in-house HR support can be balanced against the benefits of better employee training and retention and the other daily concerns addressed by the HR staff person.
So, what can single shop owners do to prepare for existing and future marketplace changes and compete with MSEs right now?
The first step is to decide where you want to be in five or ten years. Your goal may be to maintain a single shop presence, or it may be to sell your operation or merge with a consolidator or an MSE. In either case, the short-term steps are identical. Once you have established a goal, develop a plan to achieve that goal. You must be aware of the evolution of the industry and be proactive to position your shop to compete.
All of the items listed above cost money. Keep in mind, however, that now, more than ever, it is nearly impossible to stay in business without investing. Your goal should be to ensure that your investments in education, bench marking, marketing and human resources result in a profitable return.
Taking the steps listed above will enhance your future success, whether your end goal is to strengthen your shop in hopes that it will continue to stand alone or to make a sale to an MSE or consolidator more profitable.
Editor’s Note: Karen Fierst is the president of KerenOr Consultants. Readers of INSIGHT may be familiar with Karen from her eight years at the Certified Automotive Parts Association. Karen left CAPA in 1997 to found her own consulting firm specializing in marketing, managing and training. For more information, contact Karen at (301)681-4383 or via email: kfierst@aol.com
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Reprinted from the July 1998 Issue of Collision Repair Industry INSIGHT.
© 1998 Collision Repair Industry INSIGHT. All Rights Reserved
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