I want every dealer who has a body shop to listen up. Your body shop should be a major focal point in 2011. Body shops can and should be a significant contributor to fixed absorption. According to a recent survey shared with me by a GM source, 65% of your customers want you to fix their crashed car. Some brands report even higher predisposition to buy from you.
As you may know, dealer shops account for as little as 30% of the body repairs taking place in the market today. According to Randy Profetta, formerly with Toyota, ???dealers should call their collision repair sales process a ???sales prevention program???. In essence if your buyer is 65% predisposed to do business with you and you only capture 65% of the opportunity, something is wrong.
When we help dealers start keeping track of their individual batting average relating to opportunity verses new sales, we see the average dealer shop only capturing 50% of their estimates written. Most crash repairs are done by independent shops, and they end up capturing a significantly higher percentage of written estimates than dealers do.
Why are the independents kicking your tail?
For starters, independents focus on one thing, the crash business. You, the dealer, have primary focus on new and used car sales. I was talking with retired Buick dealer Bob Weaver yesterday and he told me he considered the crash business inconsequential. He cited that 75% of his gross profit came from car sales. You and I both know that times are a changing. Many dealers have been able to create fixed absorption equal to or near 100%. The body shop can and should be a main contributor.
Last month I had three guys from Jim Keras Chevrolet in Memphis attend the body shop management essentials class. Jim and Ben Keras stepped up and sent the body shop manager, fixed operations director and the parts manager. Don the fixed operations director said they see the body shop as having HUGE untapped potential. They already run a good show, why not make it great.
You can call the boys at Jim Keras and asked them how revved up they are about the body shop. Essentially they are creating a synergy between parts, body shop and service and will reap exponential rewards. When the body shop learns the value of parts sales and how controllable parts sales can be, they create a positive domino of profitability effect. As parts sales increase so do paint and material sales. Interestingly as parts sales increase, paint and materials ???costs??? plummet. They will see a dramatic increase in paint and material profitability when most dealers see the paint and material account as a breakeven at best scenario.
Another issue we see with regularity is the lack of cooperation between parts and body shop departments. In fact sometimes it can be all out war. The approach Jim Keras Chevrolet is taking will create a virtual love affair between those two departments. In all fairness Keras already had good people in these positions; however, most dealers don???t enjoy that internal warm and fuzzy feeling.
One of the reasons that relations are strained in the typical dealership is because of ignorance. Each department chases certain KPIs only to the detriment of the big picture. Once all parties become aligned the cooperation and profit picture improves dramatically.
I ran into Charley Smith of Porter Chevrolet at The NACE show this year. He told me that fixed absorption was around 90% and that then body shop was a major contributor toward that number.
The dealer Cory Porter understands and supports the body shop. Hence Porter Chevrolet is a model dealership with a model body shop operation. The thing is, your body shop can be a model operation too.
What you need to do:
1. The starting point is simple, you need to first create departmental and inter-departmental synergy. Get parts, body shop and service together and help then each to see how much they need each other.
2. Keep score. The body shop almost certainly has some ???untapped??? potential. Keep a sales log and install a visible sales scoreboard for all to see. Track estimates written and estimates sold and calculate a batting average. You will be amazed at how just being confronted with some basic sales numbers will impact performance.
Next time I see you at NADA or elsewhere, let me know how it is going.
Dave Dunn owns and operates Masters School of Autobody Management in Galesburg, IL. Masters consults with dealerships worldwide. Dunn is also a body shop owner and the author of Liquid Amalgam, a guide to managing service companies. You can reach Dave at: firstname.lastname@example.org.