The Cost Conundrum
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I just read this article in the New Yorker entitled “The Cost Conundrum” which I will post a link to so you all can read it if you feel so inclined. It compares similar towns that have various and widr spread average medicare costs. The reason I bring this to your attention is we have the same thing going on in the collision repair industry.
The cheapest guy is not always the worst any more than the most expensive guy is the best, in fact many times just the opposite is the way things really are. The hope is that in the end we end up with a good product or service at a fair price. But it seems that in this day and age we all need to hede to the latin words “caveat emptor”—Let the buyer beware.
I see a lot of shops charge all kinds of prices for their wares and services, and that is how it should be. The free market works pretty well if you let it. But because we have this outside influence of a third party ( the insurance co.) paying for these repairs, customers no longer ask what they are getting for their money. Of course they expect the best repairs and ignore the costs. Their focus is primarily on the Quality end of things. The insurance companies want the best repair and at the cheapest cost. Of course their primary concern is not the quality of repairs, but the cost. Because neither side wants to come off of their primary focus, it creates a large divide between the two with shop owners caught in the middle.
Here is the baffling part. Just like in the article, I have visited shops that not only produce a good job at a fair price, but shops that produce a great job at an even cheaper price. And they are making money doing it. They have modern equipment, pay their help an above average wage, and seem to be doing better than those who charge much more and have not invested in their businesses.
It seems strange to me that in this age where we have perfected business models like McDonalds and hundreds of other franchise businesses, that no one has come up with a cookie cutter model for this industry. Even most of the franchises and consolidators that do exist in this business are a mess. I would really like your thoughts on this matter.
Gentlemen as always: Opinions please!
Brad Larsen
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?printable=true
MAACO :whistle:
All too often any more when I have the opportunity to check out other shops whether it be an auto body shop or mechanical shop even dealer ships I find Butchers that dont know there front from there rear! and there charging Big bucks for service of any kind and yet the shop around the corner who doesn’t get the heavy traffic charges less does better work and has a better knowledge about things yet he’s starving for business. :blink:
Honestly most individuals wouldn’t know good work from bad work even when its was pointed out too them! even the guy doing the work these days more often than not!! : :blink:
A NATION WIDE Warranty repair centers for all of the MFG is coming!
The days coming when it wont matter what the car make is you take it too one of two or three diffrent name brand repair centers and they will bill the mfg for the warranty repair work. especially Now that all the dealerships are going away its inevitable.ta be honest brad i think alot of how profitable a shop is is in the management of the shop!it dont matter on the size but the ability of the owner ta manage his or her buiss.. doesnt even matter what buissness your in. a guy running a lean an mean operation can always retain more profit than a poorly run buiss anyway thats how i see it 🙂 good question though 😉
[b]bondomerchant wrote:[/b]
[quote]ta be honest brad i think alot of how profitable a shop is is in the management of the shop!it dont matter on the size but the ability of the owner ta manage his or her buiss.. doesnt even matter what buissness your in. a guy running a lean an mean operation can always retain more profit than a poorly run buiss anyway thats how i see it 🙂 good question though ;)[/quote]Bondo,
Seems odd to me though that someone has not perfected and duplicated the model that they found works. I worked for a consolidator for a time and he ran every shop different. The basics on paper were the same for all, but each shop was vastly different as far as demographics, building size,location, equipment, number of techs and a lot of other things. Of course they figured how many techs you could have in a shop your size and how much each tech had to make per month, but it was still like fitting a round peg into a square hole.
I think it would be much easier to find or build a shop a certain size, with room for expansion for a phase two, and them run them all the same. I know most franchises do a demographics study on a new location and they look at drive by traffic, number of people living in your backyard, area growth, average income, etc. etc. I saw none of that and actually took it upon my self to do. I walked into my office one day and our marketing director was going over a bunch of demographic stuff I had on my desk and asked where the hell I was able to get it from. Most came from the local chamber of commerce and local realtors who have a ton of demographic data. The trickest part was personal intel on insurance agents in our area. I got background, education, marital status, hobbies, criminal records, everything. We were even able to get local police logs so we knew who just got in a wreck locally on a daily basis if I wanted it. All was obtained legally and honestly, but at a cost.
I sit and watch a lot of shop owners who are a lot smarter than me sit and struggle and I can not figure them out. If I was a little younger I would definitely give her a go. I think in a ten to twenty year run a guy could do really well.
Gentlemen as always: Opinions Please!
Brad Larsen
no two shops are the same ,,ideas are different..tech abilities and attitudes toward repairs and procedures..different areas have different work to draw from ..not every one has the same working capital as the shop down the street..there are people out there that have got it figured out ,as to what makes there shop operate and remain profitable . some of them have went as far as putting it in to a markable business plan that can and is being purchased by collision centers nation wide .check with your local and state associations..the deal is to keep working and striving to do your best and increase your business ..make every day better than the last ..learn from your mistakes and your victories ..it does seem at times that we are up against it with the insurance companies.but i have to keep reminding myself that they also have a job to do .and that is saving their companies money.. Our job is to remain profitable.. and to do that we must arm our selves with the knowledge of our business and our estimating systems [ get to know your p-pages ]..with this information in your hand the insurance companies will see you are serious about your business and that you want and expect to be treated fairly.. get to know your local adjusters ask them what they like to see on your estimates and what they would like to have documented ..rather than turning these meeting into a negative lets keep them on the positive side and turn them into more dollars for our shop….. 😉 😉 😉 😉 😉 😉
[b]lowder wrote:[/b]
[quote]no two shops are the same ,,ideas are different..tech abilities and attitudes toward repairs and procedures..different areas have different work to draw from ..not every one has the same working capital as the shop down the street..there are people out there that have got it figured out ,as to what makes there shop operate and remain profitable . some of them have went as far as putting it in to a markable business plan that can and is being purchased by collision centers nation wide .check with your local and state associations..the deal is to keep working and striving to do your best and increase your business ..make every day better than the last ..learn from your mistakes and your victories ..it does seem at times that we are up against it with the insurance companies.but i have to keep reminding myself that they also have a job to do .and that is saving their companies money.. Our job is to remain profitable.. and to do that we must arm our selves with the knowledge of our business and our estimating systems [ get to know your p-pages ]..with this information in your hand the insurance companies will see you are serious about your business and that you want and expect to be treated fairly.. get to know your local adjusters ask them what they like to see on your estimates and what they would like to have documented ..rather than turning these meeting into a negative lets keep them on the positive side and turn them into more dollars for our shop….. 😉 😉 😉 😉 😉 ;)[/quote]Lowder, but don’t you think if shops were a little bit more alike that insurers and the customer at large would tend to do business with those shops? McDonalds is not in the hamburger business. They are in the real estate and commodities business. If they were in the hamburger business they would learn how to make a great hamburger. But they still do very well because their business’ are all based on the same model. People know when they go into McDonalds they are going to get a good product at a fair price. They may not be the best at what they do, but they are one of the best at how they do it. I see no reason why body shops could not do the same thing. Most consolidators are running their businesses extremely top heavy and hardly any two of them look alike because they started out buying existing shops that had no commonality among them. All of them are different sizes and have completely different equipment. Despite having an SOP manual, no two of them are run alike. So they are a cross between the old and the new, but still going rogue. Of course it would help if insurers did the same. Every one of them want to do things in their own way and want you to use their data base of choice, all adding to the overhead or chiseling away at your bottom line.
Gentlemen as Always: opinions please!
Brad Larsen
nope won’t work cause burgers are burgers and auto body and painting is like snowflakes everyone different.
marketing is a big thing though and if you can do as McD. did (return customers using coupons) you may incorperate some of the marketing stratagey of The big Mac.
worked at a shop once advertised a $199.00 paint job. We never did one but it got people to the door where the sales man was. :pcorn:
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