Learning From the ‘Big Boys’

Independent shops can implement many of the ideas being used by multi-shop businesses

By John Joswick

It’s understandable for independent shops to view the arrival in their market of a large multi-shop operation (MSO) as a potential threat. After all, MSOs generally have the resources and buying power to be a tough competitor.

But some smaller collision repair businesses see some potential upside with MSOs, viewing them as another source of ideas for their own company. The processes and tools MSOs develop can often be implemented just as easily by a creative single-location shop — sometimes with superior results.

Here are some of the things MSOs are doing that could potentially work for your business, even if you put yourself in the category of a smaller “mom-and-pop” shop.

Build in-house tools

Scale does offer MSOs more options for in-house “talent development.” Max Sorensen of Minnesota-based ABRA Auto Body & Glass, for example, said his company has a 300-module “learning management system” that covers subjects ranging from how to greet a customer coming into the shop to preparing final billing of an insurer. Employees can use the system to learn new skills, he said, or use the system as a “refresher” when they have questions.

Smaller collision repair operations may not be able to duplicate such a sophisticated system, but they can build written SOPs (standard operating procedures) for the shop or office that can be used to train new employees and help them produce consistent outcomes. Choose several commonly-used procedures, have an employee who does those tasks document what they do, then see if others can repeat the task correctly using that documentation.

Better parts handling

Lorenzo Avila and Norberto Salas operate two Luxe Collision locations in the San Francisco Bay Area, but most of the systems they’ve implemented related to parts and production will work in any size shop.

In the shop’s parts department, for example, all damaged parts are “mirror-matched” against their replacements when they are delivered to ensure they are correct. Every job is assigned a parts cart for both the removed and replacement parts, with the cart number included with other information written on the vehicle’s windshield.

“I don’t ever like to see parts on the floor,” Avila said. “We have racks and stands for all parts.”

In addition to the parts cart number, technicians have access to lots of other information on the vehicle itself. The windshields are labeled with information about when the car has been promised to the customer, who is working on it, and any sublet work it will require. Color-coded tags indicate if the job is for a dealership, or is insurance- or customer-pay. Color-coded markings on panels or parts indicate whether damage is to be repaired or not.

Appealing to younger workers

With shops needing to attract and retain a new generation of workers, Paul Gange of the Fix Auto USA network of shops thinks employee break rooms are one way shops can help distinguish themselves.

“I know it sounds silly, but we put a lot of energy into developing an environment in our break rooms that’s appealing to a younger generation,” Gange said. “Go into our break rooms, and you’re going to find flat-screen TVs, foosball tables, a very clean environment, maybe free snacks or food, and a place where people can truly unwind and relax and get away from the loud environment they work in every day. It may seem like a trivial thing, but it goes a long way, particularly when you’re recruiting.”

If your shop space won’t allow for much beyond a small break room, think about converting a portion of your lot. Mark Franklin, a young body technician at Touch of Class Auto Body in Battle Ground, Wash., convinced shop owner Jerry Daniels to allow him to develop an employee area on the property behind the shop with a barbecue, picnic table and horseshoe pit.

“When you’re at work, you need to have fun,” Franklin said. “You need a few minutes to get away, zone out, throw some horseshoes and eat some good food, before getting back at it.”

Flexibility is another key to attracting younger workers, Michael Macaluso, the president of CARSTAR North America, said. They are looking for options, he said.

“Opportunities to start at 8:15 or 8:30 a.m., so we can bring our kids to school in the morning, or opportunities to leave at 4 p.m. to go to catch a movie or ballgame or something,” he said. “It’s not necessarily all about money. Pride of ownership is always important. Get them actively engaged in the different segments of the business they may be interested in.

Aaron Schulenburg, the executive director of the Society of Collision Repair Specialists, agreed on the desire young people have for “strategic involvement.”

“Helping them understand different aspects of the business and involve them in some of the strategy discussion gives them opportunities to feel engaged and part of the team,” he said.

Getting needed financing

Want to fund growth of your business through an expansion or an acquisition? Or just want to finance an equipment purchase without going through a bank? Sure, you’re not likely to attract the money from private equity firms like the largest MSOs. But Doug Keller said over the 37 years he’s grown Nebraska-based Eustis Body Shop into a five-shop MSO, he has used just about every form of financing available, from refinancing his home, to loans from family, suppliers and the SBA.

Keller’s grandfather, for example, helped him finance the first of his five shops back in 1979, a conversion of a 1913 Ford dealership.

“I just paid him as I could, and in about 10 years I had him paid off,” Keller said.

Keller said he suspects that’s an even more viable financing option for shops today. The economy and demographics, he said, have likely resulted in a lot of retired people who, like his grandfather years ago, have money and might be interested in investing in a good local business.

“They might not like the stock market, and banks are only paying less than one percent of interest right now,” he said. “If they can get three to five percent from you, they’d be better off.”

Bringing in new employees

If you’ve talked with anyone at Enterprise Rent-a-Car, you know that virtually all of them started their career with the company by washing cars. One of the largest MSOs, Gerber Collision & Glass, thinks that can work for shops, too. Kevin Burnett, Gerber’s vice president of operations, said entry-level employees — for almost any position in a Gerber shop —spend several weeks as a porter or detailer. He said it helps the new employee get a sense of the business and allows the shop to get a preview of the employee’s chances for success.

“You get a good feel about whether they have a good attitude, do they show up on time, that kind of stuff,” Burnett, said.

That can prevent both the shop (single-location or large MSO) and the employee from making an larger investment in training, etc., before they know if it’s a good fit for both.

Getting your books in order

If you have any interest in selling your business in the next few years, there is lots you can learn from the MSOs buying up shops. The first thing they will all tell you: Get your books in order. Accurate financials help you not only manage your business more effectively, but also will give any buyer an accurate understanding of the value of your business.

Unfortunately, MSOs and consultants say, business owners often do things that distort their financials, which can hurt them at the time of a sale. They take cash out of the business, for example, or run personal expenses through it.

Dan Dutra of Sigs Body Shop, a three-shop MSO in Hawaii, said that although his company is currently looking more toward growing than selling, he and his business partner have been scrupulous about keeping “personal” expenses out of the business books.

“It’s probably because as a partnership, we wanted everything to be transparent, above-board and visible to both of us,” Dutra said.

But he also noted that any business has expenses within their financials that a buyer isn’t likely to have after the sale; clean financials can help the seller clearly show how these “add-backs” improve the bottom line. Dutra, for example, said he regularly attends the Collision Industry Conference (CIC) meetings, a business expense that a future owner of the business may not have. “Add-backs” such as these should be easily pointed to within the company’s financial records.

“So that if there is an opportunity to sell the business, there’s no debate about it,” Dutra said.

Understand the value of training

You may think the real value of getting employees to training is to help them do their job better — and that’s certainly a key benefit. But MSOs say it can have a human resources impact as well. Training is an indication of the investment you are willing to make in them, and gives them job satisfaction in knowing they are doing repairs as they should be.

Gary Wano of G.W. and Son Auto Body in Oklahoma City, Okla., said his company has found the training and distinction that comes with earning automaker certifications has helped his business attract, develop and retain quality technicians.

“We’ve found over the years that a body or refinishing tech can make it to a plateau relatively quickly,” he said. “With the inception of the certified programs, there’s another level that’s obtainable to these technicians. It also helps us attract some of the best-of-the-best technicians. We are known within our market area as the only ones who have stepped up, to make the investment in our facility as well as our people. That says something.”

Look for talent outside the industry

The last time Jeanne Silver, owner of Butterfield Bodyworks CARSTAR in Mundelein, Ill., needed an estimator, she ended up hiring someone who had worked at Best Buy, who knew a little bit about cars but a lot about people management.

“He’s an absolutely fabulous employee,” Silver said. “He’s had to learn estimating from the beginning. But he has unbelievable management and people skills.”

Erick Bickett, who owns nine Fix Auto shops in California, has a similar success story, having last year hired an employee who had been working as the manager of a retail pet store. Bickett said he put the new hire on a two-year training program within one of his shops to become an estimator.

“He’s already way ahead of where we thought he’d be,” Bickett said.

Retain employees by offering more perks

You don’t have to be a large MSO to offer appealing employee benefits. A company called AnyPerk says it is helping businesses provide the type of benefits often thought reserved for Silicon Valley high-tech companies.

AnyPerk (www.anyperk.com) essentially allows you to offer employees hundreds of special deals and discounts on movie passes, sporting events, restaurants, gym membership, theme parks, home services, travel and more. You can add your own pre-negotiated perks to the system or delete those that aren’t of interest to your employees, and get reports on what deals your employees are using. You can also use the system to reward employee achievements or milestones with credits they can use toward the gift of their choice through the system.

Join a 20 group

MSOs have the luxury of being able to compare how one location’s numbers stack up against their others. A single-location collision repair business can similarly gauge how it is performing by joining a “20 group.” Such groups bring together as many as 20 shops, all from different markets, to share ideas and compare financial and other performance metrics. They can be a great source of ideas, and members tend to hold each accountable for the business goals that members are regularly required to set for themselves.

“Not everything that works in other markets works as well here, but other solutions are so simple you kind of want to kick yourself for not thinking of it,” Dan Stander of Fix Auto Highlands Ranch in Littleton, Colo., said of his 20 group involvement.

Many of the paint companies sponsor 20 groups, and there are independent consultants who moderate groups as well. Checking with your paint jobber may be a good first step to finding a group.  •

John Yoswick, a freelance writer based in Portland, Ore., who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for more state-by-state numbers or a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@SpiritOne.com.