Like many businesses during this unprecedented time, National AutoBody Research is increasing communication with our collision center customers to remind them we are open for business and are here to support them every way we can.
We're also accelerating the development of certain product features to make our online software even easier to use and faster to get the data our customers need to collect more billable hours and better rates.
Internally, we're following the CDC’s social distancing guidelines. Because we are an internet-based company and highly technology-driven, we were already well-positioned to work remotely without any disruption to the business and, very importantly, to stay up and running for customers.
We see three main effects to the collision repair industry as a result of the pandemic.
First, the obvious one---there will be an initial slowdown in collision work as consumers stay home and drive less, and some choose to cash the checks from their insurers and pocket the money instead of repairing their vehicle.
The big question of course is how deep the dip will be and for how long. I'm more optimistic than pessimistic on that topic and think the dip is manageable.
Second, we might see a thinning out of the number of shops in the industry, as some won't be able to make it through or recover from the downturn. For example, it may be tougher for shops that have been discounting their price to get work, or have not been collecting for enough of their work at an adequate rate, only to find their profit margins are too small to sustain the business.
Objectively speaking, I think it could be a good thing for the industry overall to have some reduction in collision repair capacity, especially among lower-quality shops not producing quality work or undermining pricing. This would help reach a more optimum balance of supply and demand, swing the pendulum of market power back toward the shops somewhat, and bring more rationality to labor rate prices for a given unit volume.
Third, some shops---we hope many---will emerge from the downturn even stronger than before. They'll recognize the opportunity this time provides them to focus on fixing and optimizing the elements of their business that need it, especially related to profitability.
In addition to staying positive and finding creative solutions to business challenges, they will position and prepare themselves to be ready to play. As the volume starts coming back, they will be running smoother and more profitably. This means a stronger focus on quality repairs, billable hours and labor rates, ensuring they get paid for all of their work at a profitable price.
It is now more important than ever to get the most out of every repair and every opportunity. That means charging for every bit of your time, collecting for every billable hour and getting every dollar of labor rate possible.
The opportunity is now, and if the vehicle volume is down, there may not be as many opportunities coming your way.
Remember a business cannot cut its way to profitability. Focus on maximizing revenue and gross profit on every repair.
Cutting a minor expense or service to save $100 a month isn't going to make or break the shop. Instead, go in the opposite direction: invest in and really use those tools that enable greater revenue and profitability. Good data makes all the difference now, and there are available tools that provide shops the data they need to justify their work, their charges and their prices. Most importantly, they help drive profits.
Pause a moment to find the lessons this crisis is teaching us. For collision repair, I see two big lessons of quality and profitability.
Shops that do quality work and run a tight ship are better positioned to survive this downturn and thrive on the upswing. Quality is the name of the game moving forward.
As these vehicles continue to advance in technology, materials and construction, a quality repair will be the requirement. Exceptions will be fewer and anything less puts customers, shops and other stakeholders at risk.
I hope these times teach us all the repair business cannot keep running on razor-thin profit margins and expect to thrive. Shops cannot be expected to be barely profitable yet keep up with the rapid pace of automotive technology advancements and produce quality repairs.
Many people already know this, but it has really come to light now. We hope shops take these lessons to heart and move swiftly and certainly to address them.
As told to Stacey Phillips.
Stacey Phillips Ronak