When Doug Kelly stepped to the podium at a Friday afternoon session at NACE this past November, his goal was to help an audience consisting primarily of paint, body and equipment (PBE) jobbers understand how to grow their businesses.
But his key message—grow your own business by helping your customers grow theirs—may be equally applicable to any number of segments of the collision industry, including repairers themselves.
Kelly certainly has first-hand experience inside several of those segments. Beginning in 1987, he spent 13 years with DuPont Performance Coatings, working with distributors in the U.S. and Canada. He later spent five years as president of the Fix Auto network of shops, and now serves as president and CEO of CynCast, a technology firm spun-off from Fix that develops software and systems designed to improve communication of data between shops, insurers and vendors.
Kelly said his #1 message to jobbers is understand their customers’ businesses.
“If you want to build a successful PBE business in the future, your job is to understand your customers and who your customers’ customers are,” Kelly said. “It’s not good enough to know who’s working inside each of the shops. You need to know who is buying from your customers and why. You can be doing an outstanding job, but if your customers fail, you will fail. So you have to understand where their business is coming from.”
Finding out which insurance companies have chosen your customers’ shops to participate in a direct repair program, and why. Which dealerships have referral agreements with that shop?
“Understanding the buying decisions of your customers’ customers is really important,” Kelly said. “Your livelihood depends on knowing these answers. So if you don’t understand who is buying from your customers, that’s the first place to start.”
Beyond that, he said, it’s important to gauge how a particular customer’s business is doing. Your sales force is not always the best source of this information, Kelly told jobbers at NACE.
“Typically, salespeople look on the very positive side: They buy a lot of paint, or, They fix a lot of cars. How many times have you heard that?” Kelly said. “There are a lot of businesses, including Fox Collision which fixed $28 million worth of cars a year before closing, that are susceptible to the same financial challenges that any other repairer is susceptible to. So when I say understand your customer’s business by the numbers, what I mean is not just how many locations and how much (paint) they buy. It’s understanding deeper inside that organization, how they’re actually performing.”
Getting that information requires building a deeper relationship with the customer, Kelly said. Some jobbers offer guaranteed levels of gross profits on materials to some shops, requiring that the jobber have access to and a good understanding of the shop’s numbers. As more shops and insurers move toward the use of specific KPIs and “dashboards,” Kelly said, shops will increasingly seek out help to meet the numbers their customer’s expect, giving jobbers more opportunity to understand their customers’ businesses—and offer help.
Understand your market
Beyond knowing what’s happening in your customers’ shops, Kelly told jobbers to know your market. Which shops are gaining market share—and which are losing? Which insurers are gaining ground—which likely means the shops they work with are as well—and which are losing?
All of that information about your customers and your market will help jobbers accomplish Kelly’s next suggestion: identifying the longer-term winners and the losers. It’s clear that not all shops are going to survive the current changes occurring in the industry, he said. Successful jobbers will be those who can identify those shops most likely to “win.”
They can do that by tracking trends in a shop’s buying, Kelly said. Has a shop’s purchases slumped (or increased) when much of the rest of the market is headed in the other direction? Does a shop’s account show a lengthening payment schedule? What does the shop’s credit report indicate (and how long has it been since you ran one)?
Unfortunately, Kelly said, even some hard-working shop operators who have been in the industry for years and who produce good quality work may not be among the survivors. They may be undercapitalized, or lack the right tools, equipment or staff. And some of those who do poor quality work may be among the survivors “because there’s a segment of the market that doesn’t care about a quality repair,” he said, but they might not be the “sort of winners you and I want to associate with.”
The bottom line, he said, is knowing who the winners and losers will be, because “trying to win with losers is a losing strategy.”
Invest in the winners
Some jobbers, Kelly said, continue to offer “fantastic” and “ridiculous” deals to repair shops, which in some cases is the only thing propping some poor-performing repair businesses up.
“The natural laws of supply and demand are not taking place. If they were, some of the shops would be going out of business,” Kelly said, strangely echoing the complaint many shops have about deals offered to insurers by some shops.
If jobbers are going to make such investments in shops, Kelly said, it should be in shops that are ultimately going to be among the winners, rather than just helping stave off the demise of a losing shop for a year or two. Jobbers should seek out the shop owners clearly reinvesting in their business rather than those focused more on investing in their own “lifestyle.”
“You must have the mind-set that you will favor some shops over others because you can’t give the discount to everybody,” Kelly said. “In some cases tell yourself: I clearly can’t count on this shop to do something good with that discount.”
Kelly said too often jobbers make such investment in shops they’ve never done business with in order to land a new account. Even an often significantly lower investment in an existing, long-time “winning” customer can help a jobber grow its business by helping its customers grow.
Such an investment might include helping the shop with its website or marketing materials, Kelly said. He also cited as another example the fact that of DRP assignments received by a shop, only about 70 percent of those customers will actually come to the shop for an estimate, and only about 70 percent of those will actually have the car fixed at that shop.
“That means 49 percent of people who have an accident will actually go to that repair shop and have it fixed there under a DRP scenario,” Kelly said.
A shop can improve that percentage if it makes more effort to reach and follow-up with those consumers in the evening rather than during the typical work day.
“It takes over 4.5 attempts to reach people during business hours,” Kelly said. “It takes 1.5 attempts to reach them after business hours, defined as 6 p.m. to 8 p.m. How many shops do you know that are taking assignments home at night and calling their customers?”
Helping shops use a call center or other system to increase the percentage of DRP assignments they close can have a major impact on that shop’s and the jobber’s business, Kelly explained at NACE.
“Firing” the others
Part of a jobber investing in and helping the “winners,” Kelly said, may include “firing” the rest.
“I’m not suggesting any of you go out and terminate a relationship. That would be absolutely reckless,” Kelly said.
Rather, he said, “firing them” is a state of mind, a realization that based on everything you know about their business, their customers and the market, that you are going to put your priorities elsewhere, applying your resources to those who more clearly “get it.”
That doesn’t necessarily mean you say “No” to that customer the next time they ask for something, Kelly cautioned.
I always say: Never say no; just ask for more,” he said. “Say, ‘I’m willing to help you if you help yourself: if you send your painter to a training course, if you pay me on time, if you clean up your mix machine,’ or whatever it might be they aren’t doing.
“They may tell you to go jump in a lake, but you just may be surprised. It may be the kick in the rear they’re looking for. Ask them to give you something in return before you actually spend more time and effort and money on these folks.”
Kelly’s last piece of advice for jobbers is also one that is equally applicable to those in any segment of the collision industry: Spend time with others in your industry who “get it.” Whether through those you meet at industry events or elsewhere, make sure your contact list includes others in your industry (locally or around the country) who are smart and succeeding and who, by contacting them regularly, can help you understand what’s happening in the industry.
John Yoswick