In a previous column (Ready, set, grow; April), I discussed some of the homework you should do prior to choosing a location for a new shop – whether a brownfield, greenfield, acquisition or take over.
It starts, as I explained in that previous column, with researching traffic counts and demographics. But numbers on paper won’t tell you the full story. Our next step is to visit the location and the surrounding area. I look for a Home Depot or Lowe’s, a McDonald’s or Burger King. These types of national chains have checked out the demographics of the area, so why not utilize their research. Their presence can be another indication of the vitality of an area.
If direct repair programs are a key part of your business, you’ll also want to check with those insurers to see if they will include the proposed new location on the program. We had several DRPs on Day 1 of the new location we opened earlier this year. Making sure your key referral sources – insurers, dealerships, etc. – either have a need in an area or will put you on their program can be a key step in choosing a new location.
If you’ll be buying or leasing a building, another key piece of homework is an inspection by qualified contractors to check out the roof, plumbing, electrical system and overall building structure. Make sure it all can handle a body shop and that it’s a sound building.
All this due diligence isn’t difficult and will help make your decision about a potential new location pretty easy. In looking for our next shop, for example, we checked out approximately 10 locations over six months. Only one got a thumbs-up when we took into account visibility, demographics, insurer interest and the building itself. Another one of the 10, a take over of an existing body shop space, looked good initially; but with due diligence, we found we couldn’t get the insurer DRPs there that we wanted, and the building needed too much work.
Whether you are buying or leasing a building, the numbers need to pencil out. Make sure, for example, the size of the building fits with your business model. For us, that’s generally 2,000 square feet upfront for offices and 10,000 square feet in the back, ideally on two acres.
But that’s just the optimum, the ideal. The new location we opened earlier this year is considerably larger than that. But it penciled out as a successful brownfield given the cost of the building. We try to keep our occupancy costs at a location at or below 5 percent of projected sales. So if we expect to produce $100,000 per month in sales at a new location, we want the rent to be about $5,000.
When we buy a building, we rely on the relationship we have built with a bank for financing. But most of our growth is financed through cashflow and paint company “prebates,” keeping our debt to a minimum.
After settling on a location, it’s time to consult with a layout and design person, whether you work with one through your paint vendor or you hire one privately. There’s no substitute for having someone familiar with the industry use the right software tools to help you move things around on paper until you create a nice flow for the new shop.
At that point, I hire a general contractor to manage the project and all the subcontractors. Since I’m the one overseeing new locations, I’m in touch with the general contractor regularly. I’m generally onsite once or twice a week to check on progress, and I meet with the general contractor at the end of each week to discuss what was done that week and what’s planned for the next week.
In my next column, I’ll discuss making sure there is staff – and work – at the new shop on Day 1.
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