Shop owners must make careful decisions about their future

Dec. 18, 2018
With the rate of change this industry is experiencing, there’s one phrase that continues to come to my mind: It’s time to decide whether to step up or to step out.

With the rate of change this industry is experiencing, and the investment so many collision repairers still face to get their shops equipped and trained to face even just the present (let alone the future), there’s one phrase that continues to come to my mind: It’s time to decide whether to step up or to step out.

It’s a phrase I picked up from Phil Harmon of Precision Auto Body in Tacoma, Wash. Phil in recent years understood what it was going to take to make sure his business could continue to fix vehicles – especially high-end vehicles – correctly. And he’s taken on that challenge, investing the past couple of years in new welding and riveting equipment, new aluminum tools, a new bench and measuring system, and more.

But I also recently got a call from friend of mine who owns a shop in Seattle who surprised me by saying he was closing his shop. Like Phil, he recognized that he needed to step up or step out. But everyone’s situation in business and life is different, and when my friend in Seattle did the calculations, he chose differently than Phil did.

“Right now, I own my house,” he said. “I have my boat and my motorhome. I know at a minimum I’m going to have put at least $150,000 into my shop if I want to continue to play the game. I may have to work for the next 10 or 15 years to make that pay-off. I’m 60 years old, and everything I have is paid for. For me, I’m stepping out.”

He closed his shop, sold his equipment, and went to work as an adjuster for an insurance company for a few years until he is ready to retire.

“I’m totally happy,” he told me. “Life’s good.”

So I can quickly point to multiple examples of people who have stepped up, and others who have stepped out, with both being equally happy with their decision. But unfortunately that’s not always the case, which is why I’m urging shop owners to make those decisions thoughtfully.

I know of another former shop owner who may have made the wrong decision. He’d lost his lease on his building, and decided to mortgage his home and borrow $200,000 to equip another building and move his business to another location. But he ended up with a large MSO right next door, and that MSO struck a national deal with a particular insurer that had been a key piece of the relocated shop’s business. That shop owner started seeing his business decline precipitously almost immediately.

Eventually he realized he couldn’t compete, and he’s since sold the shop to yet another large MSO – although at a fraction of what he’d invested. He’s now in mid-60s, facing both a mortgage on his home as well as still having to pay off some of the debt he took on to try to “step up.”

So the calculation of whether to step up or step out is never the same for any two shop owners. But I think more than at any time in the industry, there’s a sense of urgency to make those calculations and decisions.

Can it make good sense to “step up” and invest in the training, equipment and facility you need to continue in this business as vehicles becoming increasingly complex? Absolutely. I see some brilliant business people in this industry making that decision. You just need to recognize what’s required to do that, and make sure that pencils out in terms of where you are in life and where you see yourself moving forward.

Can it also make sense to decide to step out? You bet. Recouping a significant business investment takes time, and that may be more time than you want to spend working for the pay-off.

The only thing that isn’t an option is to just continue doing what you’ve always been doing. Things are just moving far too fast for that.

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