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Letter to the Editor

Growing the Business

A look at how a variety of collision repair businesses are growing their sales and profits in a competitive environment

At a time when much of the national business and financial news isn't particularly cheering, INSIGHT this month turns its attention to successful, growing collision repair businesses. We interviewed more than two dozen principals in businesses that have experienced significant growth in sales and profits over the past three to five years to see what they and their businesses may share in common, and for insights into what has spurred their growth.

While certainly not a scientific study, some of our findings do prove comforting.

First, growth is by no means limited to select regions or markets; we readily found 'winners' in both urban and rural communities and in 20 states broadly scattered across the country.

Second, these successful businesspeople range from a high school dropout to those with MBAs. The vast majority has some college but not a four-year degree. A background as a technician seems to be neither automatically a help nor a hindrance. Just over half grew up in the business or spent some time actually working on vehicles, but almost just as many entered the industry without repair experience.

Third, we found growing businesses in a wide spectrum of sizes and formats: the single location family-run shop that has doubled its annual sales (to $1.6 million) in just three years; the increasingly common situation of an operator adding a second or third shop; the consolidator that has grown from $30 million to $200 million in annualized sales.

Their paths to growth at times seem more contradictory than similar, but many of the concepts they offer are applicable to a wide range of collision repair businesses.

Adding locations

Nick Gojmeric, of Collision Plus in Illinois, said that while you might not have achieved maximum use of your current shop, opening an additional location is often the right move to make for growth. Gojmeric, who opened a third shop two years ago in southern Illinois, said he probably waited longer than he should have after opening the second shop in 1989.

"You could work on these [stores] until they run like a Swiss watch, but at some point in time you need to spread out and build another," he said.

There have been two keys to his third store doing $1.5 million its first year, and $2 million the second year, Gojmeric said. First, is building first-class looking facilities in high-visibility locations in growth areas, getting in early enough before growth drives property prices too high. Second, he said, is having a reliable source of work from day one.

"I had a perfect dance partner, a car dealership that was moving, and that made it a little easier," Gojmeric said of opening the third shop.

He has also focused on three insurers, who combined cover 60 to 70 percent of the vehicles in his market.

Wisconsin shop owner Bob Goff, of Goff's Enterprises, also knew a second location would be a good move thanks to some unique research.

"I took a college kid and put him in a pick-up truck for about eight months, driving up and down the road in the area I was thinking about building the second shop," Goff said. "He'd stop often and toot the horn and ask people, 'Do you know where can I find a good body shop?'"

What he found, Goff said, was that, "Exactly 80 percent of the people who responded told him that they'd never heard of us before. That's heartbreaking at first. You spend 30 years building a business in the community, marketing in all kinds of ways, and 80 percent of the people don't know you exist."

But that also told him building a second shop two miles away from his first could be a smart move. And although the industry already suffers from a glut of capacity, most of the companies INSIGHT talked to about their growth said that, like Gojmeric, they were relying on greenfielding of new stores.

"We believe that model allows us to provide better consistency from market to market, by replicating what we did in Memphis into Nashville and then into Raleigh," said Pat James of Autobody America, which has grown from two stores in 1998 to 14 now with another three planned by year-end.

Finding a niche

"If I could only give one piece of advice to someone in this industry, it'd be that survival is going to depend on either specialization or DRPs," said Gene Hamilton of Sports & Imports in the Atlanta area. "You can't play in the middle."

Hamilton has chosen the specialization route - quite successfully. He opened his third store, a 40,000-square-foot shop, less than two years ago, and fills all three with virtually nothing but Lexus and Mercedes. Sales growth for the past year? About ten percent, he said.

That growth is "absolutely" based on his decision to focus on a niche market. Many of the benefits of such specialization are obvious: standardization of procedures, fewer color match problems, technician familiarity with the vehicles, the ability to justify specialty equipment and service information subscriptions.

But with many insurers requiring their DRP shops to work on "anything and everything," niche marketers cannot rely solely on insurers for referrals, Hamilton said.

"Half of them love it and moves cars into the shop; the other half says it's too expensive and forces them out," he said. "It all depends on the quality of the service that the insurance company is trying to deliver. State Farm is top of the list [for referrals]. So is Progressive, believe it or not. I had a conversation today with one of their guys and asked about diminished value and he said, 'I just wish I had more cars repaired here. We just don't have any problems with those customers. They already know they got the best repair in town.' I'm actually setting up appointments [with insurers], marketing the likely reduction of diminished value [problems] for an insurance company having cars repaired here."

Hamilton admitted he hasn't been successful when he has approached some insurers to say he's less interested in their entire DRP programs' offers - after all, he wants only two makes of vehicles - as he is in just the ability to fix the vehicles that do come in as if his company were on the program. (He does grant the insurer as frequent access to the shop for inspections as they want).

He is now considering offering a plan in which he will agree to pay the rental vehicle costs for insurers that are willing to pay a labor rate surcharge and that allow him to proceed with repairs based on an authorization arrangement similar to DRP shops.

Hamilton has also found other successful marketing techniques to fuel his growth, including close relationships with dealerships, and pouring his marketing budget not into advertising but back into 'extras' for his current customers.

"We're just about endless as to what we'll do for a customer," Hamilton said. "That gets them to tell someone else, and the insurance company can't change that."

Setting yourself apart

Collision repair businesses experiencing growth aren't necessarily doing something unique - just something unique to their market, or marketed in a unique way.

Michael Quinn and several partners launched 911 Collision Centers in Tucson, Ariz., in August of 1998 with no prior book of business nor pre-established DRP relationships. The company now has three stores, 32 employees and annual sales of about $3 million, a number Quinn expects to double by the end of next year.

"Of course we wanted DRPs but we had to start the business as if we'd never get any, and marketing played a key role in that," Quinn said.

With a marketing budget of five to seven percent of sales, the company has done a significant amount of traditional advertising (particularly cable television and bus benches), but it also focuses on systems and strategies to offer customers a better experience.

"We offer 24/7 service, for example," Quinn said. "We use a live answering service trained to take the necessary information, contact the towing company if needed, and contact the staff member that's on call. Not all accidents occur from 8 a.m. to 5 p.m. And when they happen at 10 p.m. at night, a lot of people don't know what to do. We tell them what to do in our advertising: Call us."

Industry consolidator Cal-iber Collision Centers, on the other hand, spends less than one-half of one percent of its budget for traditional marketing for its more than 60 stores in Texas and California.

Bill Lawrence, Caliber's chief operating officer, said the company is instead investing that money in things that will build its business-to-business relationships with insurers: a call center to field claims calls; Saturday hours and split shifts to speed up repair cycles; even vans to handle repair warranty issues at the customer's home or work.

Getting good help

Well over half of those interviewed for this article are active participants in a 20 group or business development program - and another 15 percent say they have been at one time or another. Some participate in a group organized by their paint vendor, and others are involved in a paint company value-added program.

Hamilton was among the most vocal advocates for these avenues of help.

"I think they have made the most sizable difference of anything I can think of," he said. "When I joined Akzo's first Acoat 20 group, there was only one guy [in my group] with two shops. Now [about eight years later] there's only one guy with only one shop, and the others range from having anywhere from two to seven shops each."

Many credited their growth with their regular attendance at regional and national meetings and events, where both learning and networking opportunities abound.

"That's where I've learned everything, at trade shows and going to association meetings and the 'meetings after the meeting,' staying around at the bar to talk to the smart folks in this industry and getting information," Quinn said. "We don't do anything unique; we just execute on the good ideas we learn."

So: Go Grow

Talking to growing collision repair businesses is a good reminder that growth, while important, is not the only solution to the challenges those in the repair industry face. Gojmeric said he recalls standing in a line at a convention at a time when he had two shops and about 20 employees.

"I had these feelings that if I could just grow the business a little bit, things would get better," Gojmeric said. "Then as I was talking with the fellow in line in front of me - he had three or four technicians - he told me he just felt if he could just get a little bigger things would get better."

Getting a little bit bigger, Gojmeric said he realized, often seems like more of a cure-all than it really is.

It is fascinating to see that recent growth in many shops has been attainable by a variety of means for collision repair businesses of all sizes and in varying markets.

The challenge of profitable growth for the shop owner is to discover what works for him, given his unique market situation and his operation's strengths. The challenge can be immensely enjoyable -a good thing, because it will undoubtedly demand a great deal of hard work.   o

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