Everything You Didn't Want To Know About Running a Profitable Body Shop

Many body shop owners and managers have an ambition to own a modern "state of the art" collision repair facility, loaded with the very latest hi-tech equipment, and laid out for maximum production performance and efficiency. Indeed the level of investment now being considered for upgrading the collision repair industry has gone far beyond the purchase of a new downdraft spray booth or frame machine. An investment of up to $250,000 for the remodeling and re-equipping of even a modest size collision repair facility is becoming almost a weekly occurrence, and investments of between $1 million and $2 million are certainly not rare. With investment becoming increasingly more essential just to remain in the business, accurate decision making is essential if investments are to be protected and profitability assured. But the question is, "How qualified are we, as collision repair professionals, to make such decisions?"

It doesn't take long to realize that most owners and managers in the collision repair industry today were yesterday's technicians. In fact, that is probably true of a lot of small businesses. Harriet was a very good hairdresser so she decided to open her own beauty salon. Cathy baked great cakes and was persuaded by her friends to open her own little pie shop. And it was pretty much the same story for Chris the carpenter, Peter the plumber, and of course our dear friend, Bob the body man.

In Michael E. Gerber's book, "The 'E' Myth," he describes the fatal assumption made by many want-to-be business owners and entrepreneurs: "...if you understand the technical work of a business, you understand a business that does that technical work. And the reason it's fatal is that it just isn't true."

Up until the time we decided to start our own collision repair business or be a body shop manager, our training was mostly technical. In fairness, U.S. body shops have come a long way in the last 10 years and have made a significant effort to have employees who are better educated and informed about business and management issues; but we still have a long way to go.

For the many shop owners and managers who strive to be better businesspeople, the passion to be involved in the technical aspects of fixing cars lurks in the wings, just waiting for an excuse to leap into action. Evidence of this can be seen every day in hundreds of body shops all over the country when there's a problem-job in the shop. "Hey boss, can you come and take a look at this Honda? I've got it up on the frame machine and have been taking some measurements, and I think there are a couple of ways we could approach this repair. Can you tell me what you think?" What comes next is like the scene from "Superman" when Clark Kent runs into the phone booth and emerges as a super hero, rushing to save the world. The opportunity for the manager to dust off his technician's hat, roll out his tool box and rush to the rescue is just too much to resist. He just loves being back in familiar territory and being the guy that all the other technicians look to for advice.

Lurking deep inside all of us who came up through the ranks is a natural attachment to the technical side of the business. Confronting the "technician within" will be vital to continued growth and success in the body shop business. It's not that we can or should forget our roots in this business, but confronting rather than denying the presence of our technical instincts will make us more aware of how it can adversely influence some of the important decisions we make.

Problems regarding production or the need to increase productivity are those for which we are most likely to subpoena the "technician within" to make the decisions for us. In this event, the technical decision will often be: build a new shop; add on to the existing facility; improve the layout and design of the current space; add some new, often expensive equipment; or get a new paint supplier! Addressing production solely from this direction is ignoring the foundation on which production is built.

In order to produce, various resources are necessary, including parts and materials; tools and equipment; a building; technicians; etc. While all of these resources are essential to production, their level of importance can best be illustrated by the Production Pyramid.


Equipmemt Resources
Having the right tools and equipment to do the job is more important today than at any point in the history of the collision repair business. However, the "technician within" seems to be on a lifelong mission to find the latest and greatest gizmo that will cure all ills. He is on a never-ending search for a magic solution to his production problems. Unfortunately, this often results in that age-old art of throwing money at the problem. There is a tendency to expect the tools and equipment that we buy to fix more production problems than they were ever designed to fix, or are capable of fixing.

Facility Resources
The facility resources are the buildings within which the production process is accommodated. Over the last decade, we have come to realize that an efficient layout and design is essential to efficient production. Equipment locations, traffic flow patterns and careful attention to the production environment (i.e. space organization, lighting, air quality and noise control) are just some of the important layout and design considerations. Nevertheless, as with equipment resources, facility resources and the expectations of the layout and design are often seriously overrated. There exists a strong belief that equipment and facilities hold the key to efficient production. Despite spending vast sums of money here at the top end of the Production Pyramid, we eventually realize that this isn't true. But this is not what the "technician within" wants to hear.

Materials Resources
We can't fix cars without having the right parts and materials at our disposal. There is no argument about the correlation between having access to the right parts and materials and efficient production. But once again, there is a tendency for the technical issues to overwhelm the decision-making process. This is especially true of paint materials, which often get blamed for efficiency and profitability shortfalls. The real answers to the majority of production problems are, more often than not, much closer to the foundation of the Production Pyramid.

Manpower Resources
The manpower resources are the technicians deployed in the production process. Nothing happens without manpower resources, although despite our kinship and sensitivity to the technicians' dominion (after all, we've been there, done that), we most often go about getting more production out of them simply the wrong way. Wrong way No. 1 is increasing the size of the carrot on the end of the stick. We must pay competitive wages, but assuming we'll get more if we pay more is, as most experts agree, just not true. Wrong way No. 2 is throwing even more money at the resources at the upper end of the pyramid. As important as we have already identified these resources to be, adding more space and spending more on equipment will not necessarily result in increased output from our manpower resources.

Management Resources
The management resources are at the foundation of the Production Pyramid and at the foundation of consistent, profitable production. Without a clear understanding of this resource, the time, attention and money that we apply to all the other resources that make up the Production Pyramid will, at best, be watered down, or at worst, canceled out. Management resources relate to the level of organization, administration, discipline and control applied to the business of fixing cars. As much as we know such things exist, our lack of knowledge and understanding about the essential management resources often leads to a denial of their importance. Hence, we hang onto the technical issues that reside in the upper floors of the pyramid and the "technician within" retreats to more familiar territory in the search for answers.

Just some of the areas where management resources must be effectively utilized are: cost analysis and a clear understanding of the financial structure in a collision repair business; ongoing performance measurement; clearly defined goals and objectives; a clearly defined management philosophy; systems and procedures applied to the administrative and production management process; the hiring, motivating and retaining of employees; delegation of responsibilities; and clearly defined accountabilities.

Here, at the foundation of the pyramid, are all the things you didn't want to know about running a profitable body shop.

At some time or another, when there is an important job to be done, the "technician within" takes over and we gravitate toward the technical solutions that technicians know best. That is probably why there will often be comments like, "I spent six months researching every single downdraft spray booth on the market before I chose this one," or maybe, "I visited body shops all over the world before I designed mine."

As important as those things are, it's rare to hear anyone say that they spent an equal amount of time and energy on the management resources that form the foundation of the Production Pyramid.

A hammer, shady tree and all the car fixing skills in the universe alone will not make it any more. Many body shops can fix cars. Not so many can fix them accurately and get them back to a safe pre-accident condition. None can do all of the above and maintain an acceptable level of productivity and profitability without a clear understanding of all the resources that must be applied to production.