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Consider these lessons before you try to grow your shop into an MSO

Wednesday, May 16, 2012 - 02:44
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For a picture of j(GETTY / GEORGE DOYLE)ust how complex, vibrant and variable the collision repair market is, consider these transformative events from the last five years. In 2007, as the world economy tanked, so did shop revenues. As the economy struggled to revive, much of the industry struggled simply to survive. Some of the industry's most reputable shops reported slipping profits. Anecdotal evidence suggested a market whose landscape was being increasingly dotted with the hulks of shuttered shops, whose owners either decided they could no longer afford to compete or didn't believe their efforts would pay off.

From this gloom and misery grew a repair industry that appears to be in many ways much stronger and survival-capable than the one that preceded it. The changing landscape is proving to be fertile business ground for shops with successful operational models that are looking to expand. Weakened competition and the ready availability of repair space, equipment and labor are making the transformation of single-site operations to multiple-shop operators (MSOs) – and the growth of MSOs – more appealing than ever.

Indeed, according to numbers collected by ABRN, MSOs are grabbing market share faster than any other industry business model. In the last decade, MSOs grew from handling 10 percent of claims to 18 percent — nearly doubling their business and their chunk of the repair industry pie. As the cost of necessary investments in training and equipment continue to rise, becoming an MSO is beginning to look like a desirable option for many shops needing to increase revenue.

 Ron Nagy

The steps to making this decision and transforming a repair business into a successful MSO are unique to each shop. The lessons learned from others who have successfully made this change can be valuable to every repairer. Let's look at some of the most significant lessons provided by ABRN Top Shops, along with the decisions of Top Shop winners who currently plan to stick with their single-site format.

Lesson 1: Find a motivation beyond the money

Bringing in more revenue is usually one of the main, if not the most significant, motivation for growing into an MSO. MSOs also offer other economic advantages, perhaps most notably, buying power, since vendors often offer significant discounts to businesses that purchase for multiple sites. The shops ABRN spoke to noted other, more significant reasons for their decisions.

Ron Nagy, president of Wooster, Ohio-based Nagy's Collision Specialists (a 2011 Top Shop finalist), said he and his brother Dan came to their decision in 2005 after sitting down for a cup of coffee at a local restaurant. Nagy says he and his brother realized they either could "roll the dice" and open another location or stay put at their current spot, where they had been successful and relatively content for a decade.

They decided to open a second location ultimately, not because they were seeking more revenue, but because they wanted to take advantage of the opportunity.

"What was most important to us is that we didn't want to look back one day and wonder what could have been," Nagy says.

While basing such an important decision on personal belief may seem a bit reckless, Nagy says the decision also was economically feasible. The investment needed for a second site – several hundred thousand dollars – wasn't a deal breaker. Nagy now has five shops and one express location.

"Taken over the course of a business lifetime, several hundred thousand dollars really isn't that much," he says. "In time, you can absorb a cost like that. So why not open another site?"

Laura Gay, who co-owns Fort Washington Auto Body in Oxon Hill, Md., with her husband Rodney, says the couple was motivated by several considerations. One of them was gaining new insight into the collision market and buying power.

"We wanted to see how another shop handles its business," Gay says. "If you're going to grow, you can't let your thinking be stagnant. We wanted to know how others look at the industry and approach running their business."

Kyle Danielson, general manager of Mesa, Ariz.-based Invision Auto Body, said expanding was a natural progression. Invision always has been focused on building every part of its business. By expanding, the shop was staying true to its identity since adding sites was a way of building new business, Danielson says.

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