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Tag Archives: automotive body repair

Collision repair management 101: Part 4 – Invest smart.

In this post, I will try to address a very important issue for every bodyshop, regardless of its size or location – the issue of investment. In “Collision repair management 101” series I have stressed my vision that any collision repair workshop must follow general rules of business management. It is a big mistake to think that spraying cars is kind of special and unique trade, which has nothing in common with the rest of the business world. As it was discussed in the previous posts, whether we talk about fixed or variable costs and cash flow, a bodyshop manager should apply the same methods of management as bank or travel agency. This is why, when it comes to growth of a given bodyshop, its owner will come up with a question when to invest hard earned bucks into equipment, relocation or human resources, and, most importantly, why to invest.

Types of investments in a collision repair shop.

The first thing that might come up to your mind when thinking about investment in a collision repair industry would be a new spray booth or other equipment. While investing in equipment and tools is definitely a significant issue, it is not the only area where your money can be invested. For example, moving to a new or bigger location or the renovation of the existing place, is, no doubts, a wise investment. Another very important aspect I would like to refer is training of personnel. With new car body materials, VOC regulations, innovative materials and tools, training of your staff can hardly be overestimated.

return-on-investment

Return on investment

Perhaps many of you associate return on investment (ROI) as a term for stocks or bonds market. However, in plain English, return on investment is a number, which in measurable way shows us what will be the benefit per each dollar spent on it. Let me bring you some examples.

Imagine a medium-size bodyshop with one painter and two prep guys. The shop is very busy and the owner estimates that he loses about 25% of extra revenue due to the limited capacity. Therefore, he is considering investing in a second spray booth. Sounds logical up to now. Now let’s consider the costs of the investment as total. The cost of a spray booth with installation is 35.000 Euro (or USD), then at least one painter and one prep person must be hired with a total yearly cost of about 40.000 Euro. Now the bodyshop’s turnover is 500.000 Euro and expected additional business due to higher capacity is expected to be 125.000 Euro annually. With an average operating profit of 35%, the investment will bring about 43.750 Euro net profit.  It may look attractive in the beginning, if we do not consider additional salary costs. Yet, if we take into consideration that every year the additional business of 125.000 Euro will need also 40.000 Euro salary expenses, the pay off period for the investment will be about 7 years. It is crucial to calculate all the related costs. Is the period of 7 years good enough? Can we increase the turnover with other means (infrared lamps, for example)? Is our prediction of increase in turnover by 25% well justified?

Let me bring to your attention another investment example, of a much smaller case. For example, a painter in bodyshop X wants to buy a new model of premium quality spray gun for basecoat application. He expects that the new spray gun will save about on average 15% of a material sprayed. The cost for this spray gun is 450 Euro. On average, the painter is spraying 2 liters of paint every day with the cost on 1L about 45 Euro. The new spray gun will save to the painter 13.5 Euro from the cost of the paint each day (2L x 45 Euro x 15%), therefore in a month of 23 working days the bodyshop will save 310.5 Euro, meaning that in about 45 days the cost of the purchase will fully covered by the savings in paint. Not bad at all, taking into account that the new spray gun will also improve colour matching and overall quality of spraying. From my experience, investing in the new spraying equipment usually has the highest and quickest return on investment in any bodyshop.

I hope that it is vital for car body repair professionals to invest their time for budgeting, planning and management tasks. Office work is as important as repairing cars. Benjamin Franklin once said: “An investment in knowledge pays the best interest.” I couldn’t agree more.

 

 

 

6+1 reasons to put a paint mixer in a bodyshop

If we leave aside the size of each bodyshop, we could divide them into two categories: these with paint mix system installed and those without. The latter are using paint mixing services from their main consumables supplier. The percentage of bodyshops with a paint mixing machine in store varies from country to country; while in some markets a mixer in a bodyshop is considered a luxury, in some others it is a must.  After visiting literally hundreds of bodyshops around the globe, I have concluded that every bodyshop owner, regardless of the workshop’s size, will benefit from installing a paint mixer in his premises. Below I bring to your attention some of those benefits, as I see them:

  1. A bodyshop with a paint mixer installed will benefit from lower cost of the materials. Let’s face it, nothing comes for free, and if you use colour-matching services from a paint supplier, then you will be charged for it. Sometimes the difference between the costs per litre of paint can be as high as 30%. Too big percentage to be ingnored.
  2. Much faster vehicles’ delivery. The logic is simple; you do not need to drive to your supplier’s place in order to order the needed colour codes.
  3. Less material waste. If you have paint system within your grasp, you do not have to prepare more paint than you might need (just to avoid another trip to the supplier). If your shelves are full of cans with paint leftovers, than you should really consider how much paint is just sitting idle with slim chance to be used in the near future. Waste of money indeed.
  4. Better colour matching. If you prepare the colour yourself, the quality of colour matching will be much better. Of course, additional training will be needed (in fact all major paint manufacturers have colour matching trainings on a regular basis), but it is worth the time invested.
  5. You will enjoy better customer support from paint manufacturers. Paint mixer is a ticket for a direct contact and support from the paint manufacturer, including direct customer service line. In addition, you can count on regular visits and advice from the experienced technicians with a great baggage of knowledge.
  6. A bodyshop with installed mixer is perceived as more professional by the customers and, very importantly, by insurance companies. For fact.
  7. With paint mixer installation, you can expect some kind of gifts from your supplier. It is very common, when paint companies give freebies like spray guns, gun washing machine, infrared lamps, and free first toners loading up, scales or mixer itself. While it is not a rule, I have seen these kinds of “presents” quite often.

And what is your opinion?

mixing-system

9 things car refinishing and boxing have in common.

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Collision repair management 101: You can’t manage what you don’t measure. Fixed costs.

For those of you, dear readers, who follow Etalon Refinish blog, it is probably clear that throughout the articles I try to convey a simple, but, from my point of view, very important idea. Collision repair workshop is first of all a Business, which was set up to make profits. Therefore, as every Business, regardless of size, type or location, the bodyshop must be managed as Business. All rules and axioms apply just as for a supermarket, a hotel or an airline. It is not enough to be a skilled craftsman. Period. The good thing though that business school is not necessary (though wouldn’t heart at all). It is never late to learn basics, which are applicable to collision repair workshop just as to any other enterprise. This blog post will be split onto parts, since it is rather difficult to analyze in depth all the vital aspects within the narrow frame of one post. I will try to bring examples from real life of an average bodyshop so it would be easier to relate business terms to existing everyday problems of an average collision repair facility.

Part 1. Costs

I strongly believe that a profound knowledge of your costs and expenses is fundamental for success. Throughout my career as entrepreneur and supplier I have seen a great number of bodyshop owners who had no clue about their costs level, their segmentation and behavior throughout the year. Remember, you can manage something only if you can measure it.

In the beginning, I would like to specify that we are talking about costs incurred during the workshop operations. Only business oriented costs. One of the biggest mistakes would be to mix business costs and personal expenses. Even if you are a sole owner without partners and employees, keep your two lives, business and personal, apart. Numerous companies have been shut down not because of business failure, but because of private financial mistakes. So, in all businesses and industries , two major costs categories are distinguished: fixed costs and variable costs.

Money

Fixed costs

If you google the term of fixed cost, you will find plenty of definitions, yet I prefer a rather simplistic one: “Fixed costs are costs, which a business pays regardless of the amount of sold products or services provided”. In other words, fixed costs will incur even if a bodyshop doesn’t repair a single vehicle. Usually those costs are not elastic and hard to reduce. The main examples of workshop’s fixed costs:

– Rental costs. If you rent the space, where your bodyshop is located, then it is a fixed cost.

– Mortgage interest rates (when a facility was purchased with mortgage)

– Salaries or fixed part of wages. Sometimes the compensation of an employee consists of a fixed part and bonus based on productivity, profit or achieved targets. Sometimes such costs are called mixed costs, yet for simplicity sake I will put them in fixed costs category. If your painter is working on commission base only, than assign this cost to variables.

– Loan interest rates in case equipment, for example a spraybooth, has been purchased on credit.

– Electricity/natural gas costs and other utilities. Electricity can also be viewed as mixed cost, because the more work is performed in a workshop, the more electricity will be confused, however, to simplify your analysis, you can consider the electricity and similar bills (gas, phones, water etc) as fixed costs for your bodyshop.

– Insurance. Be it insurance against natural disasters, health or occupational insurance, those must be put in fixed cost column of your list.

– Licenses and other legal permits expenses necessary for the bodyshop operation.

– Fixed taxes, be it property tax, local community tax or local chamber of commerce fees.

– Courtesy cars maintenance costs.

– Equipment depreciation. When a new piece of equipment is purchased, it is not put as a whole amount into the fixed costs column. Usually the expense is charged gradually over the useful life of it. For example, if a spray fun costs 360$, and you expect it to work for 18 months, then you should list 20$ every month to your fixed costs.

 

Note: The higher are the fixed costs, the riskier is the bodyshop’s position in case of significant drop of work load. Such a drop could be seasonal, like in some countries; also it can be due to the financial crisis in a given market or worldwide, as well as due to the increased competition. Keeping fixed costs as low as possible is a must for small business long-term survival.

Tip 9. How to grow Bodyshop revenues by providing vehicle undercarriage protection ?

I have to admit that these tips series for Etalon Refinish Blog is my favorite. I am happy with idea that a bodyshop somewhere could earn extra buck by offering profitable and beneficial to customers services. The key is to identify untapped demand for additional services, other than common auto body refinishing jobs. In this post I suggest yet another potential earner – application of anticorrosive and sound-deadening coatings.

Who needs undercarriage protection?

In fact, most of the car owners need this service, depending on the climate, vehicle age and road conditions in the area. I would identify the following vehicles as potential market for underbody treatment:

– All vehicles in areas with harsh winters.

Snowy weather

If your bodyshop is located in the climate zone with heavy snowfalls and low temperatures, most certainly the roads in the region will be treated with special snow-melting agents or salt. Those agents and salt virtually ruin underbody surfaces exposing them to air-induced corrosion.

– All vehicles in the areas close to the sea.

In the regions close to the sea or ocean, the air is very humid and enriched with salty water, which corrode even well-protected new vehicles within a few months.

– Vehicles, which are driven in the rural areas and regions with poor road conditions. Most common problem in such areas is rust starting from stone chips.

– Older vehicles (five years and older) with high mileage usually incur rust spots on undercarriage surfaces

– Vehicles for resale. It is a well-known fact that a potential buyer most probably would like to check the vehicle’s underbody condition. Rust will be a big turn off, and, therefore, the value of the vehicle will be significantly lower.

– Old-timers. Vintage vehicles are subject of pride for its owners. However, those cars are in need of frequent inspection for corrosion, and underbody protection is necessary for those vehicles.

 Salt on the road

What about OEM anti-corrosion warranty?

The common misconception about the newly acquired vehicles is that they are fully protected and covered by anti-corrosion warranty. Unfortunately, most of the car owners do not pay attention to the warranty exemptions and terms. In fact, most of the OEMs refer to anti-perforation warranty, which covers in reality only, holes caused from corrosion inside out the part, and strictly under the condition that a yearly anti-corrosion inspection is performed by authorized repairer. The cost of the inspection will be chargeable to the vehicle owner.  So, if you forgot to take your car for such an inspection, forget about warranty. In addition, the rust caused by outside parameters like salt or stone chips will not be covered. Below you can find a typical exclusion case from a big car brand:

“The exhaust system, petrol tank, mechanical components or corrosion on or originating from exterior surfaces, including seam corrosion or damage caused by stone chipping, scratches, abrasion or paint failure. Exterior paintwork damage is readily visible and should immediately be rectified by the user”

 

What type of materials to choose?

I would distinguish to main categories of underbody coatings: stone chip protection and sound-deadening.

ETUC-1000BSound-deadening Etalon

Stone chip protective coatings could be water-based or solvent-based. These coatings are usually sprayed with UBC gun, but you can also find them in aerosol sprays. Typically black, grey and white colours are available.

Sound-deadening coatings are of higher viscosity. Usually this coating is applied by brush or roll in thicker layers to achieve better sound-deadening properties. Also, if diluted, sound-deadener can be sprayed.

What is very important in every type of underbody jobs – proper surface cleaning. It is strongly recommended to follow the material’s technical data sheets for proper application techniques.

 underbody coating

How to market your offering?

First of all, you need to identify the target market. Owners of the relatively new vehicles are less inclined to pay for extra protection of their vehicles. It would be wise to prepare a short informative leaflet explaining all the pitfalls of OEM anti-corrosion warranty.

Secondly, if the you have the vehicle for a body repair paint job, take time to examine the vehicles places prone to be affected by rust. In case you spot rust or paint bubbles, take pictures. Nothing will be the better argument than a visual proof of the undercarriage poor condition.

Third, ask a customer if he is happy with his vehicle’s sound proof condition? Apparently, there are many vehicles, especially in smaller categories, which have very poor soundproofing.

Finally, have some photos or even better videos of the application process and treated surfaces conditions before and after underbody coating has been applied.

 

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