Why Winter Won’t Help.

January 28, 2004 by
Filed under: Uncategorized 

All over the eastern half of the United States snow storms are causing thousands of automobile accidents. And all over the eastern half of the United States collision repair shops are filling up with the wrecks. Rental companies are running out of cars, shop managers are getting stressed out, their techs are working too many hours and customers are screaming that they want their cars back.

Sounds like auto body bliss, doesn?t it? Guess again. For all the stress, and all the extra hours worked, 99.9999999999999% of the shops will not make any more money than if things were normal. Yeah, they may increase gross sales per week slightly, but they really won?t make any more money. ?Huh??, you say? ?That doesn?t make any sense.?

You?re right. It doesn?t make sense. Nearly every other industry would take advantage of this huge demand for their product and raise their prices. Unfortunately for the collision repair industry, collision repair prices will remain static. All but a handful of shops will continue to under charge for their services, and the insurance companies will be more than happy to oblige.

The collision repair industry sells a product. That product is repair hours. Paint and parts are simply extras, like the candy and soda gas stations sell. And as any shop manager will tell you, there are only so many hours their shop can produce each week. If they want to produce more, they have to extend working hours or hire more people. Most shops don?t have space for more people, and if they did they couldn?t find more people.

So here are all these shops blessed with all this work, but they still can?t produce much more than they could during normal times, and they aren?t going to make much more money than they would in normal times. Demand is far higher than supply, yet few of these shops will take advantage of their circumstance.

Why is this? Are collision repair shops non-profit organizations? Many are, but not by choice. Are collision repairers just so damn honest, helpful and charitable that they would never consider taking advantage of the most important economic factor in a capitalistic society? Yeah, right, the collision industry has such a squeaky clean reputation.

The truth is most shop owners would never think to raise their prices when they are very busy. Most have little or no understanding of basic economics. And if they did understand the concept of supply and demand, they?d be afraid to ruffle the insurance industry?s feathers and take advantage of it. We?ve been preening the insurance companies? feathers for way too long now.

The northeast part of the country has been in deep freeze for the past month. The demand for fuel oil is way up. Since fuel oil is the same as diesel fuel, diesel is now up 30 cents in two weeks. Natural gas is up about 50%. People are buying the stuff like crazy, so those who sell natural gas and diesel fuel are adjusting their prices to the demand.

If you have a lot full of wrecked cars, an ulcer brewing, tired techs and customers complaining because it will take a month to get their car back, the demand for your product outweighs your supply. Take advantage of this demand and raise your prices. When things slow down again you can always lower your prices to capture more work. You will lose some of the work that?s sitting in your lot, but you can?t fix it now anyway.

With only a fixed amount of repair hours available for sale every week, you need to make the most money possible for every one of those hours. Will there be a fight with the insurance companies? You better believe it. Will you ever see your labor rates on par with mechanical rates without a fight? Not on your life.

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One Comment on Why Winter Won’t Help.

  1. IT COULD BE THE OTHER WAY - COUNT YOUR BLESSINGS on Thu, 12th Feb 2004 12:53 pm
  2. NOW STOP AND THINK FOR A MOMENT UP IN OUR NECK OF THE WOODS WE WOULD RELISH YOUR PROBLEM. THE BIG SHOPS DOWN TO THE LITTLE 1 & 2 MAN SHOPS DON’T HAVE ANY WORK. TRY PAY YOUR EVERYDAY OVERHEAD AND THE EMPLOYEES WAGES ON HALF YOUR REQUIRED INCOME. YOUR SAVINGS ACCOUNT GETS DEPLETED RATHER QUICKLY. DO YOU REALLY HAVE A PROBLEM OR DO YOU NEED TO WRITE YOUR ESTIMATES MORE ACURATELY? GET PAID FOR WHAT YOU ARE DOING AND DON’T ACCEPT WHAT THE INS. CO. OR ADJUSTS PUT DOWN. IN OUR AREA SOME ALWAYS RAISES THEIR RATE IN THE BEGINNING OF THE YEAR AND EVERYONE ELSE JUMPS ON THE BANDWAGON. WE ARE AT 48.00 AND 28.00 AND ARE GETTING PAID. STICK TOGETHER WHEN YOU ARE BUSY THEY DON’T HAVE A CHOICE. IF YOU ARE DOING THE JOB DOCUMENT AND GET PAID FOR IT!

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