WHEN IT comes to growing the bottom line, shops have three basic choices: (1) Grow their entire business; (2) Cut expenses (go lean); or (3) Add new profit centers. Each has its advantages and disadvantages.
Of the three, adding new profit centers has always been the least popular choice – for several key reasons. First, shops often believe the costs and headaches related to investing in a speculative new profit area won't be offset by suitable revenue. Just as significant, taking this kind of business path usually means moving into some unfamiliar waters – a decision many repairers aren't comfortable in making. Finally, shops ask themselves, "If adding profit centers was such a great choice, why wouldn't more repairers be doing this?"
Vehicle restoration and custom painting can't always be counted on to return a shop's investment. Despite a background in this industry, shop owner Ray Donahan failed to add these services to his shop's business. (IMAGES/ O’RIELLY COLLISION CENTER)
Bob Gelder, co-owner of B&L Auto Wreck in Arlington, Texas, used to be a part of this crowd.
"I always laughed ideas like this off as a pipe dream, like buying some new-fangled cooking appliance that was supposed to replace most of what I have in my kitchen," Gelder says.
Gelder isn't laughing any more. Two years ago, he reluctantly, at the urging of his co-owner and spouse Louise, began selling truck accessories at his shop.
That addition is paying off handsomely, to the tune of an average extra $600 to $1,200 per repair. Gelder is quick to point out that adding such a profit center isn't right for every shop.
Express repairs aren't guaranteed to put new profits in the fast lane. Shop owner Robert Gearling says he waited too long to successfully implement this profit stream.
Indeed, before you take the plunge into a new profit center, consider the lessons and experiences of shops that have succeeded and failed at building their businesses this way.
Keep on truckin'
Gelder still exhibits disbelief over the good fortune he's experienced by adding truck accessories and other services to his small, four-tech shop. His decision actually sprang from a chance run-in with a neighbor.
"I happened to mention to him that we were working on his son-in-law's pickup. He said he'd like to pitch in by adding some custom floor mats and other parts," Gelder says. "My wife Louise ordered them off the Internet, and we installed them."
When he picked up his truck, the customer was so impressed that he asked the shop to order more accessories. Within days, other customers began showing up at the shop after seeing the truck.
Gelder couldn't believe the interest (or the potential profit), especially considering the number of nearby department stores and parts retailers who also were selling accessories. It still took some nudging from his wife to convince him to buy into an accessories revenue center. That nudging took the form of growing profits from this area, driven by Louise, who made sales to most of the shop's customers and then to their acquaintances.