Shop Management | Operations - Collision Repair

Search Autoparts/Abrn/Shop-owner/Shop-management-operations-collision-repair/

How to increase profits while reducing severity

Thursday, February 7, 2013 - 12:01
Print Article

While it might seem like a conundrum, you can increase profits while reducing severity. While there are several ways to control severity, I think the quickest way to make an impact on severity is by repairing bumpers.

Bumpers have become more and more costly as they have become a major portion of a vehicle. Take a look in your trash bin and see how many bumpers are being thrown away that could have been repaired. There are many tools available now to assist with bumper repair, such as staplers, hot wire embossers, and mesh systems to restore tabs.

To illustrate this I will compare the difference between a six-hour repair on a bumper versus the replacement cost. The retail price for a 2011 Camaro rear bumper is $411.13, using an average parts gross profit of 17 percent you will make around $70 profit by replacing the rear bumper. Performing a six-hour repair on the same bumper would cost approximately $240. Using average labor gross profit of 65 percent you would make $156 profit on the repair and reduce the severity by almost half while doubling your profits. Since severity is calculated by an average of your repairs, anytime you can reduce the severity on one repair by half, you will show great benefits to the insurance company.

Another way to control severity is by looking at the labor hours on your estimates. Are they all whole or half hours? There are more options than using just whole or half hours. Have you ever thought of using 3.7 or 4.2? I know the thought process when writing a sheet; you look at a dent and say, "that could be 3.5 or 4, hmm, I will write 4, what about trying 3.7? You can argue that this will cost you money, but does it? How many times has an insurance company told you, "No, I think that dent is worth 3.5. How difficult would it be for them to argue the point if you wrote 3.7? By using 3.7 you reduce the severity by three tenths and gain two tenths by eliminating the negotiation.

Are you charging for an entire tube of "Superfast" when making a small bumper repair or do you calculate it based on the amount used? The same process can be used for Freon and other consumables you use to perform repairs. If you have a blanket cost for your consumables you might be over-charging (or possibly under-charging) compared to what you are using. Using a formula based on repair needs is a better way to charge for consumables that not only helps with severity but it also eliminates the need to negotiate the expense.

Article Details
blog comments powered by Disqus