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Recently one of our customers hired a consultant to spend three
days observing their operation to determine why they were not
making money. Thousands of dollars later, the consultant said
they couldn’t make any recommendations that would make a
significant change with the downward trend of the collision
industry.
VisionPLUS® OnLine has many success stories. One of our
customers cut material costs by almost $10.00 per paint hour
using VisionPLUS® OnLine. This resulted in a $14,000 per month
profit! Prior to measuring, this profit was poured into a waste
drum. Another BASF customer cut cycle time by 1.5 days and
landed an additional DRP because of it. We’re talking about an
additional $200,000 business in a shrinking market! Another shop
improved their average paint hours per repair order by half an
hour. Most might think .5 isn’t enough to get excited about, but
to someone painting 170 cars a month, this amounts to $61,000
added to the bottom line. One shop owner who complained about
the price of paint found that his paint cost was less than $8.50
per hour. In a shop that has a $26.00 door rate; it’s hard to
argue that this shop isn’t profitable with BASF—regardless of
the cost to buy paint.
VisionPLUS® OnLine has been provided to BASF repair centers with
hopes of providing sustainable value. We want to be more than
just a paint supplier. This site is like having your own
personal consultant. There is no need to spend thousands to find
how to make more money. The answers are in the numbers…all you
need to do is look!
The other day Ray and Bob were in the paint shop talking about
their favorite football teams’ previous loss. Ray says, “The
reason our team lost was because they had an average starting
field position on the 22nd yard line. Special teams should’ve
done a better job returning kicks and avoiding penalties during
runbacks.” Bob replied, “The problem is that we ran the ball on
first down 87% of the time. Because of this predictability, the
other team played the run on every first down. This left us
second and long or third and long on every series and put us in
a predicable pass play that allowed the other team to blitz
every third down.” That’s why Ray and Bob’s team only converted
12% of their third downs, and without first downs, a team is
done.
All professional sport teams measure, analyze and manage by
objective to improve. Basketball measures everything from points
in the paint to forced turnovers, points on turnovers,
transition points, and blocked shots. Baseball measures from
batting averages to stranded runners in scoring position. Hockey
…from penalty minutes to shots on goal.
Simply put, professionals measure everything and then make
adjustments to areas that need improvement. If your quarterback
is sacked eight times a game, your focus is to improve the
offensive line. Just imagine if a professional team simply
measured points scored. That would be like managing a shop
simply by looking at how much money is left after all the bills
are paid. How will you get to the Super Bowl? This method of
reactive management stagnates growth and places all the emphasis
on cost cutting to increase revenue. Any shop relying on cost
reduction to grow is in trouble, as cutting costs alone will not
sustain growth. The one constant in business is everything goes
up. Just look at the escalating cost of gas, insurance, tools,
salaries, materials, electricity and taxes. Unless a shop
focuses on growing business and adding revenue they are destined
to fail. BASF has the mechanism needed to measure, analyze and
find the areas to improve and grow in today’s market, VisionPLUS®
OnLine!
Meet Mr. Skeptic. He was reluctant to use VisionPLUS® OnLine.
For the longest time he said, “I am just too busy to use
VisionPLUS® OnLine. My day is spent dealing with deadlines,
adjusters, customers, spoiled technicians and an owner that is
never happy.” At the end of the month, I am just trying to make
a “good month.”
Mr. Skeptic’s story takes a complete turn around when he finally
decided to use VisionPLUS® OnLine. What we saw in Mr. Skeptic’s
numbers were just what we see in most shops. He did some things
very well, but there were some things that needed improvement.
One of Mr. Skeptic’s problems was just keeping up with
production. His “just in time” or “your car won’t be ready
today” management style increased the number of customer
interruptions, added pressure to employee relations, and
resulted in negative insurer relations because of high cycle
times. In fact, one insurance company dropped his shop from
their DRP program. That’s when Mr. Skeptic decided he needed
help.
After Mr. Skeptic loaded his numbers, he noticed that he only
painted 3.1 cars a day. Upon further investigation, he also
found that booth cycle time was 3.2 hours and his painters were
only 95% efficient. “No wonder nothing gets done,” he said.
That’s when management by objective became clear. Tell a painter
to go in the back and “paint cars,” and he will work all day
doing so. Tell a painter to paint five cars and he will be done
by 3:30 pm.
So, Mr. Skeptic set clear goals for his paint shop. He told his
paint crew that he needed at least 35 paint hours or six cars
painted per day. (This is management by objective.) He then
began to watch for things that negatively impacted his booth
cycle time like waiting for the next vehicle to be prepped,
solving prep and color problems in the booth, or not painting
the first car each day until 9 or 9.30 am. Mr. Skeptic began to
insist that his painters correct the problems that slowed
production. He also initiated the following paint shop rules: a
car is sprayed before departing each day, a car must be ready to
go in to the booth by 8:15 am, painters don’t go to lunch
together, painters and prep teams don’t go to lunch together,
and painters go to lunch while their booth is set to bake.
Mr. Skeptic says, “These were simple changes that in just three
months have paid big dividends. Booth cycle times are down to
1.6 hour (that’s 6.4 cars a day), painter efficiencies are up to
150%, cycle times are lower, and I have less stress during the
day. There is no question what needs to get done and everyone is
making more money. I don’t know why I waited so long to use my
VisionPLUS® OnLine.”
Meet Mr. Alwaysright, who manages an average size shop in town.
Mr. Alwaysright’s hesitation to use VisionPLUS® OnLine comes
from having little business. “I don’t see a value measuring
efficiencies and stuff when I can’t keep my stalls full.” He
says, “If I had more work I would measure.”
Who can blame Mr. Alwaysright for not measuring? He barley has
enough work to keep his doors open. Well, there are two very
good reasons to measure when a shop is slow. First, there is one
constant in running a body shop and that is paying for overhead.
This includes rent, equipment, salaries and fixed expenses. Even
when the shop is slow, these debts must be paid at the end of
the month. So, doesn’t it make sense to squeeze in the most
money possible from every repair? Doesn’t the slowest time
provide the most opportunity, as well as the need for measuring
and focusing on improvement?
With this slowdown in work, material cost has surfaced as a
priority. Mr. Alwaysright has complained about not making money
on materials and because he feels his current paint cost is too
high, he is considering a cheaper line that would save 10%.
Although his shop was operating under capacity and he saw no
value in measuring, he agreed to analyze three months worth of
his KPI’s before he switched paint lines.
When we looked at his numbers there was no surprise the
painter’s efficiencies were low. But most disturbing was his 8%
profit on paint material. Who could blame Mr. Alwaysright for
wanting to switch paints? As we took a closer look at his
numbers, we saw his paint hours were only at 4.2 hours per
repair order. With the national benchmark at 7.5, there was much
room for improvement. Just one more hour per repair order on his
50 cars a month would add $1,200 to his material account, and
$1,800 to his collected labor. For Mr. Alwaysright, this changes
an 8% profit to a 25% profit. Add two hours per repair order and
his profits reach almost 40%. More importantly, in Mr.
Alwaysright’s shop, he has a collected door rate of $18.79.
That’s more than $6.00 off his posted door rate of $26.00,
resulting in a loss of $1,300.00 a month. Because of insurance
caps and rental car work, he has not been able to charge or
collect effectively.
After looking at his business on paper, Mr. Alwaysright
concluded that changing paint lines presented an opportunity to
add about $350 a month to the bottom line, while improving paint
hours and his collected door rate would increase his revenue by
$3,700 or more a month! Mr. Alwaysright says, “I guess I am
focusing on the wrong end of my business. I would be a fool to
switch paint lines for 10% when the big money is in improving
the way I run my shop.”
Secondly, when a shop is slow, management is either trying to
grow by driving more business to the door, or they’re preparing
to close. The latter should be avoided, so the first step in
growing business is to find out what the shop’s capacity is and
develop a marketing plan to reach it. The math behind capacity
can be a bit overwhelming, but by utilizing the Capacity
Calculator and Business Management sections of VisionPLUS®
OnLine, the first steps toward building a strong business plan
have already been taken.
One of the worst things that can happen is to develop a shop
portfolio seeking additional work, and then not being able to
deliver on promises. VisionPLUS® OnLine can report and track
necessary numbers such as cycle times, efficiencies,
productivity and capacity which help manage additional business
and ensure vehicles are ready on time.
Meet Mr. Dealer. He is a general manager for a large dealership.
When he first looked at VisionPLUS® OnLine, his response was “My
shop measures. I get my numbers every month from a profit and
loss statement. In addition, I have a shop management system
that also prints reports.” Mr. Dealer was right; he has
numbers—six pages worth. But there is a difference between just
having numbers and analyzing them. A profit and loss statement
does not compare, forecast, set goals or suggest improvements.
With all the pages in Mr. Dealer’s reports he overlooked his
34/66% parts to labor ratio. The reason his labor ratio is
higher than most is because the shop manager is paid a bonus on
labor sales. Anytime a part can be repaired rather than
replaced, the manager will elect to repair. The manager even
shorts the repair time just to make sure the insurance company
will not replace the part. Yes, the body shop manager was making
a bonus on labor, but his decisions were effecting the
operations and profits throughout the entire body shop.
For example, the painters were 96% efficient (because it takes
longer to paint a fender that has to be primed and blocked than
one that doesn’t), paint and material cost per paint hour was at
$17.35 (because it costs more to bondo, prime, and paint a
damaged fender than it does to paint a new one), and paint hours
per repair order were only at 5.6 (because there is not as much
blend time on existing panels as there is on a new panel). In
addition, cycle times were higher than most, and the body tech’s
efficiencies were lower than benchmarks (because it takes longer
to straighten a fender than it does to replace it.)
Now there are two different opinions on replacing parts rather
than repairing them. When a shop is slow, repairing may make
more sense to help pay employees; however, when the shop is
busy, it makes more sense to replace. Repairing parts increases
gross profit percentages, while replacing parts increases net
profit dollars. Simply put, even though repairing parts pays
more per job, you can replace more parts and do more jobs in the
same amount of time, thus you make more money.
Mr. Dealer had numbers everyway imaginable and found out that
there is a difference between just having reports and analyzing
data. His reports did not help him interpret, compare, set
goals, measure improvement or make more money. VisionPLUS®
OnLine is the tool needed to make sense of “numbers” and make
more profit.
We all fix vehicles about the same way. We all remove and
replace trim, we all mask door jams, color-sand and buff, use
car covers, blend, restore corrosion protection and countless
other tasks to ensure a quality repair. In most markets we even
share the same customer base. That is we all service the same
insurance companies and the same demographics. With so many
similarities, why is it that one shop can average 9.2 (or more)
hours per repair order and another only averages 5.5 (or less)?
The answer is we don’t all get paid for what we do and some of
us do a better job negotiating then others. During one of our
VisionPLUS® University classes; Estimating for Profit, we ask
the shops attending who gets paid for different operations such
as color matching, block sanding, clean-up on used parts and
other “not included” items. Amazingly every shop is different.
How can shops within 25 miles of each other not be paid the same
by the same insurers? Pick up an Insight magazine and see “Who
pays for what” and you’ll learn that every insurance company
pays differently. How can that be?
The other day Mr. Manager was talking to an insurance adjuster
regarding a supplement. Part of the conversation was about
paying for additional blend time (an extra 5.7) on a three-stage
finish. Mr. Manager was shouting over the phone about the
adjuster’s inability to see the light with his head positioned
so far behind him. Surely such masterful negotiations would
favor the shop once the manager explained just how much the
adjuster didn’t know. Better yet, imagine how future
negotiations will go when this shop needs a supplement. Mr.
Manager says there is no need to measure since there’s no way he
can improve paint hours when insurance companies won’t pay
“extra.” Who can argue with him?
Across town Mr. Shop Owner was talking to an insurance adjuster
regarding a supplement. Part of the conversation was about
paying for additional blend time (an extra 5.7), on a
three-stage finish. Mr. Shop Owner calmly explained that the
additional time was needed to insure the customer would be happy
with the repair. At first the adjuster said, “Sorry we just
don’t pay for extra panels when there is room to blend within.”
Mr. Shop Owner said, “I understand, and normally we would be
able to provide the repair you desire. However, there just
wasn’t enough room to blend after the primer was applied. If you
would like a photo or to re-inspect the car, I am sure you will
agree that additional blending is necessary for an invisible
repair and customer satisfaction.” The shop and adjuster
compromised for 3.5 additional hours.
So what’s the difference between these shops? Attitude. Mr.
Manager has already convinced himself the insurance company is
out to cheat him and there isn’t anything he can do about it.
Mr. Shop Owner understands that the relationship between shop
and insurer is not a personal one. He also understands a “no”
from an insurance company today doesn’t necessarily mean “no”
tomorrow. How many of us recall asking for time to blend or buff
for the first time?
So while one shop continues to average only 5.5 hours per repair
order, another averages 9.2. Before you decide which type of
shop you manage, remember for every additional paint hour sold,
a shop adds about $60 in revenue. Fix 100 cars a month and
that’s $6,000! In order to make these improvements, a shop must
measure, set goals and manage by objective…VisionPLUS® OnLine is
just the tool needed to accomplish this!
Meet Mr. Scaredycat. He was afraid to start measuring because he
would be embarrassed to see how poorly his business was running.
He said, “I started in this industry as a body man—I know
everything about fixing cars. Because of my people skills, I was
promoted to manager and even bought the shop. It’s easy dealing
with adjusters, customers and technicians because they can’t
fool me. However, I am weak in business skills—I know that. I
also know that my business is in trouble and it’s time I put my
pride aside. VisionPLUS® OnLine is exactly what I need to find
out how my business is running and fix what needs to be fixed.”
Don’t let obstacles like I am too busy, I am not busy enough, I
don’t know how to measure, I am afraid what I will find, or the
insurance companies not paying extra keep you from growing
profits
While there are hundreds of reasons why we procrastinate or just
don’t measure, measuring is the only way to improve and with
VisionPLUS® OnLine it’s never been easier to increase profits!
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