Learning from others’ missteps

Oct. 9, 2014
MSOs talk about some of their more memorable business mistakes and what they — and you — can learn from them.

Phil Knight, the founder of Nike, may have summed it up best when he said, “The trouble in America is not that we are making too many mistakes, but that we are making too few.”

Mistakes, Knight understood, sometimes happen when you try something new, when you take a risk, when you attempt to do things differently from others. Knight embodies the success that also can come from these types of business activities. Too few mistakes, he said, may mean you’re playing it too safe.

Nearly everyone in business can point to mistakes they made – and the lessons they learned from them. One of the real benefits of interacting regularly with other shop owners is not to just learn from what they’ve done right, but also from what they’ve done wrong.

Here are the stories of what some MSO executives view as some of the mistakes they’ve made in business. In some cases, they asked not to be identified in print or to have some identifying details changed. But the real value here is not who made the mistake, but the lesson that they – and others – can learn from it.

Missing opportunities for growth
For many MSO executives, mistakes made related to growing their businesses come first to mind. Don Braden is the president of Kadel’s Auto Body, which operates 21 shops in Oregon, Washington and Idaho.

“Kadel’s was planning for growth in 2008, but because of the recession did not expand,” Braden said. “We waited until the economy had clearly began to grow, and missed significant opportunities.”

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For Bobby Price, the mistake wasn’t when to grow, but where.

“Without question, early on in the growth of Price’s Collision Centers I didn’t put the emphasis that I should have on selecting the right locations,” said Price, whose company has seven shops in Tennessee and Kentucky. “I made the mistake of buying locations that didn’t have the traffic count or visibility necessary to support a non-DRP model. I let the cost of property play too big of part in my choice of site.”

Price said cost clearly is still a factor when deciding where to expand, but that he gives other factors more emphasis now.

“The key ingredients that I look for today in expansion are location, the demographics of the area and, finally, cost,” he said. “I’ve looked at many potential locations over the last 20 years, and today I often comment on properties that I’m looking at that, ‘This address is 100 yards from success.’”

Overlooking integration details
Ron Nagy said he and his brother Dan could point to a lot mistakes they’ve made as second-generation owners of Nagy’s Collision Specialists, which operates nine locations in Ohio. Their overall strategy of adding locations in smaller markets has been successful, he said, but that doesn’t mean that expansion has always gone smoothly.

“When we took over one particular dealership body shop, we ran through our current process list and thought we had everything set,” Nagy said. “The day we moved in, Dan showed up to run operations and start implementing our culture. But there was not one car scheduled in. It seems the previous estimator didn’t feel it was necessary to schedule work because they felt we would being doing that. Of course, we thought they would do that.”

Nagy said that’s not a mistake that has been repeated.

“It is now part of our process to communicate our scheduling process during all take-overs and expansions,” he said.

Another lesson learned the hard way: Not everyone at a newly-acquired shop is going to be ideally suited to work at a Nagy’s shop.

“We have learned that not all employees fit our culture,” Nagy said. “At one specific location, within the first 30 days, 75 percent of the employees left the company.”

That’s led to a change in how Nagy’s interacts with employees at an existing shop the company has acquired.

“While we want to put their mind at ease that we will not come in and fire all employees, we have learned it is imperative when we purchase a business to treat each employee there as an applicant,” Nagy said. “We now start at the beginning with an interview process as if they were brand new to the company. We go through our orientation and review process. Nothing is taken for granted, including management positions.”

Staffing decision issues
Like Nagy, Darrell Amberson said he’s made plenty of mistakes during his career with MSOs, from bad hiring or DRP decisions to “saying too much – or saying too little.” Amberson is now the president of operations at LaMettry’s Collision, which operates eight shops in Minnesota’s Twin Cities market. One mistake he’s worked to overcome: getting staffing levels right to match the level of work.

“As much as you try to be somewhat scientific about it, it can be speculative, and you can be wrong, and you can look like an idiot,” Amberson said, laughing.

He said getting it right in his market can entail looking at the company’s performance relative to the same period a year earlier; getting what sense you can – from vendors or insurers – about how others in the market are doing; and even looking at such things as the long-range weather forecast for the winter.

“Let’s just say you’re humming along and comparing your financial performance to the same quarter the year before and you’re up 10 percent,” Amberson said. “Maybe you’re thinking you’re probably doing better than others and you’re gaining market share. Maybe the long-range forecasts indicate that you’re going to have a severe winter, so you have some courage and maybe you ramp up a bit, thinking you can sustain that. Sometimes you’re wrong. I’ve seen some long-range forecasts indicating a severe winter, and sometimes it’s been the opposite. And all of a sudden you’re dealing with excess staff.”

Under-staffing can be an equally bad mistake as well, Amberson said.

“You feel like you’re missing out on lost opportunity,” he said. “You’re behind and struggling to please your customers. And now everybody is busy and not many potential employees are looking for work.”

Amberson said he’s learned from his mistakes with staffing levels, though it’s still a challenge to get it right every time. He said with larger operations, he’s found it is usually better to have a little too much staff than not enough.

A believer in the theory of constraints, Amberson said he believes it’s body technicians that control the rhythm of the shop, given the complexity of their work. So he prefers to have a little excess capacity in other areas to ensure the body department is never the constraint.

For the steps prior to the body department, he said, that may mean extra help in the detailing department, pre-washing vehicles.

“And in recent years it’s not uncommon for the estimating and admin staff to become a constraint because we keep agreeing to do more and more for the insurers,” Amberson said. “Pretty soon you find yourself struggling to be current on blueprints and things like that, and that becomes a constraint.”

For the steps after the body department, Amberson said, a paint department staff willing to work overtime can help ensure it keeps up with the pace set by the body department. Or if total capacity calls for between four and five people in the paint department, he’ll “err” on the side of having “too much” staff with five people in the paint shop.

“You’re not necessarily maximizing them, but sometimes it’s worth it in order to maximize the overall flow,” Amberson said he’s learned.

Not investing in real estate
The president of a small MSO in California (who asked not to be identified because he was in final negotiations to be acquired by a larger firm) said that even with the boom and bust of the real estate market, he would have done well to have purchased rather than just leased some of his shops’ properties.

“At some points, the real estate is worth more than the business,” he said.

He said he knows several former shop owners who sold or redeveloped their shop property and “sit at home while the rent checks roll in.”

Mark O’Dell, who owns two shops in smaller communities west of Portland, Ore., said he, too, wished he’d purchased rather than leased shop property earlier in his career.

“I wished I’d done it years ago, but I always went to banks and they won’t lend a small business money,” O’Dell said. After three attempts earlier in his career, including once through the Small Business Administration, O’Dell instead sought owner-financing when he saw a vacant building he’s now in.

“Unlike everything the bank required in the past, we negotiated a loan interest rate and terms in about two hours,” O’Dell said. “I’m sure that renting in the past I’ve essentially bought other people’s buildings for them.”

Not owning a building earlier also meant several moves over the years for O’Dell’s original location. After six year in a dealership body shop space he rented, the dealership was sold, the new owner didn’t want a body shop, and O’Dell had just five weeks to move.

“Moving around is like starting over and over again,” O’Dell said. “Find a shop where you can stay and build up a reputation and a following. And if you can buy a building, do it.”

Letting employees learn
In addition to not focusing on marketing and not launching a second location sooner in his business, Dick Guthrie said his primary mistake was not letting others in his business make some.

“My No. 1 biggest mistake was trying to do too much myself, not having the confidence to delegate and the ability to let go of issues and let someone else deal with it,” said Guthrie, owner of J & D Auto Body, with locations in Galt and Lodi, Calif. “Body shop owners as a rule tend to be very controlling people. And because of that, we’re not good delegators. I’ve found it’s best to let people do their job, make a mistake and then coach based on those mistakes. Don’t pre-coach to the extent that you don’t want them to make a mistake. Then they’re only doing something because you told them to do it. They’re not doing it because they know it’s the right way.”

In short, Guthrie has learned, let them make some of the mistakes Phil Knight sees too few of in America.

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