It is a safe bet that the majority of folks who read this column supply mechanical repair shops. You have a pretty good handle on this market and are able to predict the trends, and it’s one that stays at least reasonably stable during down economies. One thing is certain – there will probably be fewer mechanical shops as time goes on. There are a number of reasons for that, but that is not really the point of this month’s column. To increase revenues you have to sell more product. Once you have the fat trimmed from your production process and distribution chains you wind up returning to the question of how do we sell more?
For many businesses it is some form of diversification that leads their list of revenue generators. So how about selling the same product to a large industry that has stable income in most economies? I am speaking of the collision repair industry. Many of you already know that collision shops are similar but very different from mechanical shops. In fact, many of you have programs that are offered specifically to collision shops with varying degrees of success. I don’t run a collision shop, but I several friends who do and I am here to tell you that they are looking for decidedly different things than your mechanical-only customers. Let me share some of what I have heard with you.
Collision shops run on a completely different profit structure than mechanical shops and have considerable input from the middleman, who represents their customer, namely insurance companies. This is one of the only businesses I am aware of where the customer not only gets to look at the books but also gets to manipulate prices. I might get some heat for saying that, but once you strip away all the nuances, that is exactly what is going on. Why does that make any difference to you? It is hypercritical that the products you offer are competitive with OE parts or the collision estimator is just going to hit that magic button to send the order to the dealer. During estimating, if you have a part that is actually more than the OE list, trust me – they will know it. That creates another issue to consider; how do you get your cataloging and parts information into all the systems that various insurers require their shops use? That question I will have to leave you to answer because I want to share what I know more than what I can guess.
The operative phrase when you are a direct repair provider or DRP is “cycle time.” Cycle time is the total time that the vehicle is out of service for most insurers. Anything that reduces cycle time is very collision-shop friendly. When they order a part, they need it to fall right into their game plan for the vehicle. Unlike most of my mechanical brethren, collision shops will often order parts and not even start on the car until everything arrives to meet their schedule. This means that if you run a local parts store or distribute through them you already have a great ability to assist collision shops with their “cycle time.”
Another important consideration for many collision professionals is the percentage of like kind quality or LKQ parts they use in a repair. Since most of you reading are not OE manufacturers, it is a safe bet that anything a collision shop would buy from you falls into this classification. So just what are common LKQ items that come out of the traditional aftermarket parts channels? There are some obvious items such as radiators, condensers and lamps that come to mind. Other less obvious items can include emission control devices, ABS components, steering and suspension, shop supplies like sand paper, masking materials and so on. Many collision shops are running full mechanical shops that offer maintenance services to their customers.
As you look toward new revenue streams keep in mind that it will be a pretty steep learning curve, and you will have to demonstrate that you are a real player. But the collision repair industry is a natural consumer for many of the products you already offer.
It is a safe bet that the majority of folks who read this column supply mechanical repair shops. You have a pretty good handle on this market and are able to predict the trends, and it’s one that stays at least reasonably stable during down economies. One thing is certain – there will probably be fewer mechanical shops as time goes on. There are a number of reasons for that, but that is not really the point of this month’s column. To increase revenues you have to sell more product. Once you have the fat trimmed from your production process and distribution chains you wind up returning to the question of how do we sell more?
For many businesses it is some form of diversification that leads their list of revenue generators. So how about selling the same product to a large industry that has stable income in most economies? I am speaking of the collision repair industry. Many of you already know that collision shops are similar but very different from mechanical shops. In fact, many of you have programs that are offered specifically to collision shops with varying degrees of success. I don’t run a collision shop, but I several friends who do and I am here to tell you that they are looking for decidedly different things than your mechanical-only customers. Let me share some of what I have heard with you.
Collision shops run on a completely different profit structure than mechanical shops and have considerable input from the middleman, who represents their customer, namely insurance companies. This is one of the only businesses I am aware of where the customer not only gets to look at the books but also gets to manipulate prices. I might get some heat for saying that, but once you strip away all the nuances, that is exactly what is going on. Why does that make any difference to you? It is hypercritical that the products you offer are competitive with OE parts or the collision estimator is just going to hit that magic button to send the order to the dealer. During estimating, if you have a part that is actually more than the OE list, trust me – they will know it. That creates another issue to consider; how do you get your cataloging and parts information into all the systems that various insurers require their shops use? That question I will have to leave you to answer because I want to share what I know more than what I can guess.
The operative phrase when you are a direct repair provider or DRP is “cycle time.” Cycle time is the total time that the vehicle is out of service for most insurers. Anything that reduces cycle time is very collision-shop friendly. When they order a part, they need it to fall right into their game plan for the vehicle. Unlike most of my mechanical brethren, collision shops will often order parts and not even start on the car until everything arrives to meet their schedule. This means that if you run a local parts store or distribute through them you already have a great ability to assist collision shops with their “cycle time.”
Another important consideration for many collision professionals is the percentage of like kind quality or LKQ parts they use in a repair. Since most of you reading are not OE manufacturers, it is a safe bet that anything a collision shop would buy from you falls into this classification. So just what are common LKQ items that come out of the traditional aftermarket parts channels? There are some obvious items such as radiators, condensers and lamps that come to mind. Other less obvious items can include emission control devices, ABS components, steering and suspension, shop supplies like sand paper, masking materials and so on. Many collision shops are running full mechanical shops that offer maintenance services to their customers.
As you look toward new revenue streams keep in mind that it will be a pretty steep learning curve, and you will have to demonstrate that you are a real player. But the collision repair industry is a natural consumer for many of the products you already offer.
