Don’t get overwhelmed running your shop

March 19, 2014
Owning a shop today is not all about fixing cars; one critical part of success today is having the skills to develop an accurate estimate and repair plan.

I have the opportunity to work with many shops and owners every week. It is very common to work with an owner who started in the industry as a technician who eventually decided to purchase the shop where they worked or leave and open their own shop. This is great, as we keep the knowledge and skills that have been gained over the years in the industry. But many times they find that fulfilling their dream of being an owner is not as glamorous as they had thought. Owning a shop today is not all about fixing cars. Today, the owner needs to be a master of many disciplines including accounting, cost control, sales, human resources and marketing, to name a few. One critical part of being successful today is having the skills to develop an accurate estimate and repair plan.

Financial performance
During conversations with owners, regardless of where the shop is located, I continue to see where they are having challenges in measuring their financial performance. Many times it is due to moving from being a technician to being the owner and needing training and coaching on how to effectively manage and operate the business. A common cause of difficulty in making the transition is the chart of accounts being used in the accounting software. I is often not organized in a manner that allows the owner to determine their profit margins for labor, parts, paint and materials, sublet or for other key sales and cost areas of their organization.

Many times, I discover that they are relying on their accountant to provide them with their profit or loss statement. In most cases, by the time they get their statement from their accountant, it is too late to make a correction. For example, it is very common to see a shop receive their February profit or loss statement in April. This means the shop owner cannot make adjustments to improve their performance in February or March. Depending on when in April they get their statement, they may not even be able to make changes to the business that can affect April. Measuring your financial key performance indicators (KPIs) weekly and monthly is key to identifying your shop’s strengths and opportunities for improvement.

Vehicle technology and your repair plan
In addition to being able to determine your sales and the costs and margins associated with your shop’s financial performance, the role of your estimator or repair planner is also changing. When you look at the changes in vehicles today, we are now faced with advanced high-strength steels, collision avoidance systems, multiple air bags, alternative fuels, composites, aluminum and other materials. I do not see how any individual can make the proper repair decision from past experience or memory alone. Your estimator or repair planner needs to have knowledge of how vehicles are constructed, the construction materials used, how they react in a collision, what parts can be repaired and which require replacement, not to mention all of the electronics involved in today’s vehicles that require diagnostics, recalibration or re-initialization.

Estimating and repair planning toolbox
In addition to vehicle technology, your estimators and repair planners need to be experts at operating the electronic estimating system you are using to make sure they are capturing all of the not-included operations for each repair. Give them copies of the estimating guides that are available online from the major information providers and provide access to the Database Enhancement Gateway. Because of the complexity of vehicles today, your estimator or repair planner also needs to have access to OEM information to be able to properly create a repair plan that is specific to the year, make, model and drivetrain for the vehicle they are working on.

I have a difficult time listening to shop owners say, “My guys have been doing this for 30 years,” and therefore know everything; or “My estimator doesn’t have time to do that,” while they are struggling to make a profit. Make sure your team has all the tools they need. They cannot do it by memory or past experience alone.

It comes down to details
To be successful today, you and your team must focus on the details of the estimate or repair plan. Some common errors I see on estimates and repair plans that I review are:

·      Not including labor and refinish time for backside refinishing

·      Not including labor and refinish time for weld damage to adjacent parts

·      Not including all removal and re-install (R&I) labor time for parts that need to be removed to perform a repair

·      Not including labor time for removing or repositioning electronics in the area where welding is to be performed

·      Not determining the capacity and type of the cooling and air conditioning systems to properly reflect the capacity and type of engine coolant, refrigerant and refrigerant oil, or other fluids that need to be replaced. Watch for “recover and recycle fluids” when they are on the pavement or in the atmosphere at the intersection where the collision occurred.

·      Not identifying the amount and type of adhesives required to perform a repair

·      Not determining the amount of seam sealers that are required to duplicate the original appearance

This list could go on and on, but to be profitable today, you and your team need to detail out every operation that needs to be performed on every repair. Once you have the detail, you also have a basis to perform any negotiations that may be necessary. Because no one individual can know or remember everything about every vehicle and type of collision damage a vehicle may have, it is important to have as much documentation as possible to support the estimate or repair plan that you are creating. It is harder to argue with fact than it is with opinion.

Share the knowledge with the person you are negotiating with, since they have the same challenges in trying to keep up with the rapid changes we are seeing today.

Download Free training offer!

You can visit http://www.ationlinetraining.com/abrn14-04 to download a worksheet that you can complete to calculate the additional revenue you can gain by focusing on the small details. It also makes a great tool for training and coaching your staff on how the work they do makes a difference to the business.

Tom McGee is Director of ATI Collision for the Automotive Training Institute, founded in 1974. ATI’s 108 associates train and coach more than 1,150 shop owners across North America to drive profits and dreams home to their families. You can contact Tom at [email protected] and visit ATI’s website at www.autotraining.net. Check out “Profit Matters” for mechanical repair management tips in Motor Age by ATI’s CEO Chris “Chubby” Frederick.

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