Scale the KPI concept up for larger success

July 29, 2019
KPIs helped this owner build – and successfully sell – a multi-location collision business.

In some previous columns, I shared how a shop owner in Idaho is using a basic set of key performance indicators (KPIs) to improve his two-location collision repair business.

Now I’d like to scale the concept up by introducing (or re-introducing) you to John Gagliano. Like the shop owner in Idaho, John started using KPIs when he opened his second Collex Collision Experts location in Michigan back in 1985. He wanted a way to see how each location was doing.

“It was a manual system, but until we had that tool in place, I did not feel comfortable. I always had to be there, running between the shops,” John told me as we reconnected by phone earlier this year.

When I decided to write some columns about KPIs, I knew I needed to call John. He developed and implemented what was probably the premier system to track and improve KPIs of any business in this industry.

“I get excited about talking about this because I think this was one of the key tools for the success of our business,” John told me.

And by any measure, it was a very successful business. Collex grew to 16 locations in two states – with another five in various stages of coming under the brand – when John sold it all to The Boyd Group in 2014 for about $45 million. At that time, it marked a dramatic jump in The Boyd Group’s North American footprint (including its Gerber Collision & Glass brand here in the United States).

I asked John to talk about the role he saw KPIs having in the growth and successful sale of his business. Here are some of the fundamental take-aways for any shop owner looking to implement or improve the use of KPIs in their business.

Start at the end – and then work backwards. John said the most effective KPIs are essentially an “upside down” financial statement. Choose the number you want at the end of that statement, then work back step by step to determine what has to happen to hit that number. Keep breaking it down into smaller and smaller chunks until you are down to monthly, weekly and daily goals.

Production hours are a good place to start, he said.

“Because we’re in the business of buying hours from technicians at one rate and then selling them for another, hopefully with something left over in between,” John said.

If you know you need $110,000 in monthly labor sales to hit your goals, you know you need $5,000 in labor sales per day in a month with 22 business days. At $50 an hour, you need 100 labor hours produced per day. If you have seven technicians, they each need to produce 14-15 labor hours per day.

Boom. You’ve just created some powerful KPIs to track.

Measuring spurs improvement. John firmly believes that anything you can measure can – and likely will – improve.

“There’s that competitive nature in us, that if we see a number, we are going to try to beat it,” he said.

Ask anyone in your front office responsible for sales what his or her closing ratio is, he cited as an example. If it’s not something that’s being measured, they will likely guess around 80 percent. Start tracking it, and in reality, it’s probably half that, he said.

“People closing even in the 70 percent range are super-stars,” John said.

But start tracking it and show them their numbers, John suggests, and it likely will improve. Combine it with some sales training in closing techniques, and they may over time reach that 80 percent they presumed they were at from the start. But measurement is a key to any such improvement.

KPIs offer a roadmap to consistency. Too often in this industry, John said, we hire managers and give them a big picture, but expect them to bring their own formula and processes to hitting the goal.

“But if they don’t do it, we just get someone else, and that person brings their own systems.” John said. “You end up with inconsistence and no one really knows what’s right or wrong. Instead, the organization needs to build a process that that those managers can use to hit the KPIs you’ve given them.”

I’ll share more of John’s insights into effective use of KPIs in my next column.

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