Comment

Comment by Bob Smith on August 24, 2009 at 1:54pm

At the risk of getting a lynch party formed to stretch my neck I would say that to date valid points have
been made both by “Dairy” and by Bill Fowler in their comments.

What has been stated is “Economics 101” where it is called the Law of Supply and Demand. I was one of those who fought admitting that we have more supply [collision repair facilities] than we do demand for our services [damaged vehicles]. Stating the obvious this will work itself out. The most unfortunate part of this is that the “working out” part is going to hit the hardest at a segment of our industry that we really cannot afford to have take the hit, the small to medium size collision repair facility. I would ask, is this progress? I would hope not.

There is no doubt that we have to much intrusion into our businesses from other parties. The first question is why. I will state this as simply as I can, because we let them. Call it a business decision, call it survival, call it what you want, but the bottom line is they have achieved this penetration because good business people have been lulled to sleep in their decision making. Nobody but yourself is going to make your business grow or improve. When you put the sign up over the front of your business, you took the weight of either a profit or loss and on your shoulders, no one else’s.

We can stipulate these things are happening are in one form and are very true. We let our expectations that the other party would do all type of good things for us without asking for any commitments from them. Now whose fault is that?

Obviously everyone is talking about the insurer. Now for a few moments allow yourself to switch chairs and put yourself in their position, would you not do exactly the same thing? Their management’s responsibility is to run a business and make as large of profit as possible with given resources. We just happen to be one of those things that eat up their resources and they don’t like that. Now back to reality and your business, you are doing the same thing except the positions are reversed.

Every business has to make some very difficult decisions in how they wish to do business. It is easy to sit on the side lines and say do this or do that but when you’re in the chair and your business and those who work for you depend on that decision it becomes very difficult. BUT they can only intrude if you make a business decision which allows it.

Are DRP’s good or bad? It depends on many factors, many of which are ignored by those who enter into those agreements. Many facilities enter into agreements which they do not fully understand or have not fully read. The old “well I know the local people and they will take care of me” thought is just one step from buying the bridge over the river. They may or may not be there and may or may not be able (or willing) to help. It is a guarantee though it will be a decision in their favor.

As far as micro managing and auditing estimates [it is happening] this is where I start to draw the line in the sand. Only I, as a business owner, have that right. That micro management needs and can be put into our sources for preparation of estimates in such a way that we are the ones in control of the management of it. It should be an integral part of the information system and at no extra cost.

Do we need to manage our sheets…very definitely I would hazard a guess that on the average a good estimator leaves a minimum of over $250.00 on the table on every sheet he writes. Would that multiplied by the number of cars you repair pay for the electrical bill on your facility…I would also guess that would also be true. Do some people over charge or charge for things that they don’t do, definitely. Unfortunately we have bad apples in our barrel just as well as the insurers. This is a part of the industry that licensing would help make a dent in.

So as far as DRP’s and dealing with insurers are concerned use good business sense, if they work fine. If they cease to work as Bill says “kick them to the curb”. What I would like to see is a true bilateral agreement, “if I [insurer] give you this you [repairer] will do that”. CSI & Cycle Time used properly can be good indicators but when used as a grading device they fall way short. Economics 101 should more than handle conditions that these are designed to cover.

It is okay to operate your facility as a business and make decisions which are best for it. It is okay to say no to concessions, discounts, and other demands if they affect your profit centers or adversely affect your business. Profit centers can be relative too. In the past [when there was more work than facilities] small things could go unnoticed and not have a large influence on our bottom line. Now with every penny being watched, margins cut, and direct interference by those outside our business everything has become relevant. We need to find and get paid for all the small things we do that are not included [which we have not worried about before] and also look for new profit centers in areas we have not charged for before. Point on interest - In the past did you have to worry about adjusting the claim, I doubt it but now you most likely are doing it for free. Do the arithmetic, can you really afford to do that? Who would have thought as recent as 5 years ago about dye checking cast parts or magna fluxing suspension parts for integrity, are you willing to put your business on the line on “the luck” that the part is good? If you are I have a bridge over the Missouri River we can talk about.

Quality to me should be a given (Unfortunately it is not always) when providing a service and that people spending their [or the insurers] money should naturally gravitate to that. To some extent that is true but not as much as it should be. So should we do less quality work? If you think we should then let’s get back to that bridge we were talking about. As stated quality should be a given.

Unfortunately are some insurers are not worried about quality but many consumers are not also. They only pretend to be. At the risk of telling “war stories” I will relate one instance I found in my wonderings in my past life as an adjuster. I went to inspect a vehicle at a “smaller less known” shop in a only “salvage row”. The shop’s business card advertised they “would take care of your deductible”. Needless to say it was not one of the “front line” shops of the area. But out of curiosity I walked the floor and the storage lot. If you guessed that the work would be from some of the more economically challenged areas of the city you would be wrong. With only one or two exceptions the vehicles were from one of the most affluent sections of the city miles away and ranged from high end Chevrolets to Mercedes and Porches.

Leaves one to wonder what the answer is.

Being or not being a DRP is not a pre-requisite to doing quality work. You will see both ends of the spectrum come from both sides. Quality has to stand on its own and should be first on any repairer’s agenda.

Working for less and doing more to make the same money has not made sense to this old country boy since its beginning. The arithmetic even to a cowboy does not work out to a profit, “I only lost a $100.00 on the job but “they” will send me enough of the same kind so I make it up on volume”. [????] “If it walks like a duck and talks like a duck, IT HAS to be Duck”.
The last point I would like to offer is the comparison to the health care industry. Being a frequent visitor at medical facilities I can tell you that everything said above about our industry is seen by them. The one thing we haven’t seen in this industry is the “co-payment” (by the way which is due up front in most cases). Now I have a philosophy [Cowboy style] that some insurers would like to push us to the point of having to charge the customer for a portion of the repair that they won’t pay. If they [insurer] come up with such a policy then the public relations thing is a nightmare for them but if we are forced to charge the consumer for needed operations we have effectively developed the “co-payment plan” for them and we are the ones that will take the public relations hit. Just a thought.

As a beginning adjuster the first thing I was taught was if I could “reduce each claim by just $5.00, think what it would mean to our book of business”. Well let’s take this and turn it around and you do the arithmetic. Take the number of vehicles you repair per year and multiply just $25.00 per R.O. and look at the figure you come up with. If you want to take it further multiply that amount by the number of shops in the country.

Last thought and it is a given. The vehicle owner is your only customer. You are the one responsible to them for the quality of work you do and the one that the courts would look to in case of failure. Also it has been stated by the insurance industry spokesperson “that the collision repairer is the final authority and expert in the selection of parts and procedures in the repair of the vehicle”. Anything that you do thinking this isn’t a fact puts your business and those you employ in jeopardy.

Comment by Bill Fowler on August 22, 2009 at 4:41pm

Obviously, my observations where DRP shops are concerned are limited for the most part to my own market area and it is not a suggestion that the cheapest get the most referrals, it is a fact. One chain operation here offered ridiculous discounts to a major insurance company and any shop within 50 miles of here can tell you who it is because customers tell us the insurance company strongly suggested them when customers report their claims. They are not a shop that a customer is likely to ever go back to, but there doesn't seem to be any problem because of the poor quality of their work as far as the referring insurance company is concerned. The referrals continue and they will only be reduced when informed customers don't buy into the suggestive word tracks they are subjected to and refuse to go there. Customers are beginning to catch on that deals negotiated between the shop and their insurance company, the terms of which they are not privvy to, are not necessarily to their advantage.
I cannot argue that some shops that do excellent work participate in DRP programs, I argue that they will get the work anyway because of the quality of their work and a good reputation. I used to participate in some DRP programs, but over time figured out that I was needlessly giving away my time and my money processing work to the benefit of an insurance company with no tangible benefit to myself; I would get the work anyway without DRP concessions.
When I saw profit margins begin to deteriorate because of the proliferation of material caps, database manipulation, labor rate suppression, refusal by some insurance companies to allow mark-up on sublet operations, refusal to pay for seam sealers, structural adhesives, and many necessary materials and labor operations, I rethought my position in the market place. If I could not be paid for many of these things, either because of the DRP agreements I had entered into, or simply because of bully tactics, more profit had to come from somewhere or my business would fail.
I dropped my DRP deals, with no noticable decline in traffic and began to be paid again for storage and I don't pay my managers to process total losses or handle other administrative work for free. I reject any work with an arbitrary limit for materials or involvement of an estimate reduction company. I alert the customer when there is refusal to pay for structural adhesives, seam sealers, etc. I boot less profitable work from belligerent insurance companies off my lot and generate revenue from admin fees and storage charges. You would be amazed what that will add to your bottom line and you haven't provided any product or service for free or at a seriously compromised margin of profit.
Too many shops lost their ability to market and sacrificed their reputations simply to process more volume and a reduced margin, with the silly idea that working more and harder for less profit would somehow lead to success. We hear all this talk about "working smarter" and "you'll make it up in volume", which involves doing more and more for less and less, with the theory that "working smarter" will make it all better in the end. Getting paid fairly for what you do is working smarter, too and it is a hell of a lot less stressful.
The comparison you make of our business to the healthcare industry further supports my point. You are right, they are very similar. Our industry just hasn't hit the wall yet like the healthcare industry, but staying on the track we are now on insures that it will.

Comment by Body Shop Diary on August 22, 2009 at 11:52am

Discussion is healthy and we can agree to disagree so here we go. You state

you are competing to see who can do the work the cheapest and the fastest. >>

There are many shops that have drp relationships and do not compete to do work the cheapest or fastest. To imply that because you have a drp relationship you forego quality is just not true. In speaking with many drp shops, they choose the relationships that work and drop those that do not.

You state:

Unless you happen to be one of the cheapest DRP shops, you are only getting what the insurance company cannot persuade to go to the "preferred", or cheapest shop anyway,>>

Any body shop drp or not that relies on an insurer to send work their way is living in a fantasy land. Insurers will attempt to persuade consumers to use their drp shops, but it is up to a shop to teach each of "its" customers to come back when the need arises, and to be advocates for their businesses. Shops need to clean up their acts, their premises, and their quality, both drp and non. There are good body shops, and there are the best in class. Those will market their excellence and use it as a selling tool. A smart shop will know where its business is coming from and it should be from their own efforts at education and marketing not from insurance referrals.

You have a right to run your business the way you choose, but I have yet to see a drp shop come out and criticize you for the way you do. Every shop must be accountable for the work they do and the ones that make poor choices will suffer the consequences. And think about it, there are back alley substandard shops that don't have drp agreements either. Where do they fit in?

Comment by Bill Fowler on August 21, 2009 at 4:05pm

There is a factor where DRP relationships are concerned that very few shop owners ever stop to consider. Even though you may participate in a DRP program, there is absolutely no exclusivity in the realtionship; you are still competing. Instead of being in competition to determine who can do the work the best, you are competing to see who can do the work the cheapest and the fastest. Run that concept by one of your customers to see if they agree that either of those determining criteria are to their advantage. If you are dependent on competing for that DRP referrral and there are fewer referrals to go around, where do you turn? Unless you happen to be one of the cheapest DRP shops, you are only getting what the insurance company cannot persuade to go to the "preferred", or cheapest shop anyway, so why would anyone in their right mind compete to become the cheapest? The reward will eventually be to put yourself out of business.
I compete too but I compete the old way, to see if I can do a better job than the next guy. The funny part of it is, I make no pretense to be the cheapest or the fastest. "Thorough" many times takes longer and costs more so I am not competeing to be part of the rush to jump off the DRP cliff.
All of us are experiencing a downturn in our businesses and I would pose the question," If my net margin of profit is double yours and both of us are experiencing a 40% reduction in traffic, who will last the longest?" I will not compromise the quality of my work for anyone, for any reason and I will not subsidize it. If a job is not profitable, I will kick it to the curb with a swiftness and never look back. "Weak" is not having the courage to stand your ground when you need to.
I rest my case.

• ‹ Previous
• 1
• 2
• Next ›
• Page