Body Shop Business 2007 Industry Profile: An Analysis

May 31, 2007 by
Filed under: Collision Repair Industry 

Has every one read their May issue of Body Shop Business? Yeah, right! I bet half of them are buried under piles of paperwork, still in their plastic wrappers. Those of you more savvy business professionals who read it carefully every month have seen, and hopefully read, their 2007 Industry Profile. If you haven’t, stop reading this and click here to read it online. To some it may seem like a bunch of boring numbers and useless facts, but when analyzed it reveals some very interesting facts about our industry

If you read the Editor’s Notes on the first page you should have been left shaking your head in disgust. The Industry Profile consisted of six different questionnaires distributed among 1200 randomly chosen body shops. Of those 1200 who received the survey only 84 responded. That’s a lousy seven friggin percent of those given an opportunity to voice their opinion who took the five minutes needed to fill out the survey. And you wonder why you are in the position you are in! Bitch, moan and complain, that’s what we’re good at. That’s about it. What’s the problem? Out of 1200 shops were there only 84 people who could read or write? I know we are one helluva bunch of ignorant SOB’s but this is ridiculous. Were these 1116 other people that busy? Busy doing what? Working for nothing? Working themselves right out of business? Sometimes I’m so ashamed to be part of this industry. This is one of those times.

Because only 84 people took the precious 5 minutes of their lives to give their input about the industry that sustains them and their families, we have no idea whether the survey results are accurate. The folks at Body Shop Business feel it is, but they have a lot of time and money invested in this. They sure aren’t going to scrap it. There are what, 40- 50,000 collision repair shops in this country, and we have to rely on 84 people to tell us where we are and where are industry is going? The people at BSB did everything right.  They randomly chose a statistical industry standard of 1200 subjects. And they got back 84 responses. These industry surveys are some of the most important contributions our trade publications make to our future success. BSB hasn’t conducted one of these surveys in several years. Now I can see why. And I wouldn’t blame them one bit if they never did another one. We don’t deserve their efforts.

OK, enough ranting. We do have some data to look at. Not much, but since it’s all we have we’ll have to give it some credence and make some good use of it.

One of the most telling trends is the growing distaste the majority of shop owners have toward the DRP culture. Even shops whoring like a 40 year old skank think DRP’s are bad for the industry. In fact, 64% of all DRP think DRP’s are hurting us. That’s some damn good news people. The guilt is sinking in as more and more people are waking from this nightmare. Overall, DRP participation is down to 46%, that’s compared to a high of 51% just a few years ago. But this could be due to State Farm’s new program where they eliminated many shops.

Steering is hurting DRP’s almost as much as non DRP shops. 78% of DRP shops complained of losing work to steering. Poor babies. 87% of non DRP shops complained of lost work due to insurer steering. It was one of most mentioned challenges shops are facing. Unless you have every DRP there is, you are suffering from the effects of steering. You’re stealing work from shops and other shops are stealing work from you. All of this work is suffering from the constraints of the DRP system.

If you are doing more than 1 million per year in sales there is a 90% chance you are involved in the DRP culture. Only one quarter of shops operating are doing more than a million in sales, with the average at just over half a million. In fact, the average DRP shop sales are 2.5 times that of non DRP shops. There was plenty of talk about sales but little or no talk about profit. The little mentioned about profit was that profiting from DRP work was one of the industry’s biggest challenges. Well, duh!

There is a psychological phenomenon called self-justification that is a result of what psychologists call cognitive dissonance. Cognitive dissonance is when a person has two or more beliefs that conflict with one another. For instance, chocolate makes me feel good and chocolate makes me fat, which makes me feel like crap. This tension between these two beliefs is what causes the self-justification, or the little tricks our minds play to convince us that even though a decision we made is harmful, it was a good decision. This psychological phenomenon is evident in the BSB survey results, and in much of the overall behavior of our industry.

So while 64% of DRP shop owners think DRP’s are bad, 65% say they are better off because they are a DRP shop. While that may sound bad, that figure is down from 92% in 2002. A little self-justification going on there, especially since “making a profit on DRP’s” was the second biggest challenge mentioned by respondents. Also, twice as many DRP shop owners think they will be better off in 5 years than non DRP shop owners. The majority of DRP shop owners have also convinced themselves that they do not give concessions. LMAO! Only 14% of DRP’s admitted to giving concessions. Yeah, OK, you keep telling yourselves that. Even if you aren’t actually agreeing to parts discounts, labor rate discounts or omitting necessary procedures, you aren’t fighting for every penny you could get on a repair. And if you are not fighting for it you are not getting it. What insurance company is going to put up with you battling for money while you are on their program? So you have convinced yourself you are not giving concessions to make you feel better about conspiring with the insurer to deprive other shops of work through steering.

One statistic that could be confusing is that the average repair order for DRP shops was higher than that of non DRP shops. This is something that should give insurers pause. Maybe you insurers are spending too much money with your DRP addicts. Maybe they are taking you insurers for a ride. Nope! That’s not it. Because DRP shops are getting more work, they are getting more of the bigger hits. It’s only natural that their average ticket is higher than the shops you are stealing work from.

Oh, you’re not stealing work? Then how come DRP shops are only getting 24% of their work from word-of-mouth referrals while non DRP shops are getting 59% of their work that way? Word-of-mouth referrals have been the back bone of our industry for a hundred years. Your insurance “partners” word-of-mouth is making up for the lack of your customers’ word-of-mouth referrals.

The survey also shows that DRP’s are relying on insurer steering for 50% of their work. Oops! That’s one bad addiction. What happens once your loyal “partner” gives you the boot? With all the battles going on around the country in the fight against steering, I sure wouldn’t want 50% of my source of revenue to come from steering. But then, whenever a city has a serial killer targeting hookers, you can still find plenty of hookers on the street corners. Sometimes people just don’t see what the rest of us see.

Another interesting fact that should give insurers something to think about is that almost one third of all CAPA parts were returned, while an incredible 49% of non CRAPA parts were returned. That’s a tremendous waste of time and money. Add two to three days of rental costs to each returned part and the savings is long gone. Just the lost productivity is costing millions each year. Who is paying for this? Are the shops passing it on to the insurer? Are DRP contracts forcing shops to eat these losses? If all these parts are being returned because they are not suitable for use, why are insurers so dead set on using them? One can only conclude that most body shops are absorbing these costs. If insurers were paying for these losses their bean counters would be putting the brakes on the push for aftermarket parts. As long as insurers save some money, the slightest amount even, they are going to be pushing this junk. Only after collision repairers start passing along the cost of returning parts will the insurers take notice. If all these aftermarket parts are being returned, just think of how many are being forced to fit just so the shop doesn’t have to return them and face delays and the associated costs.

According to the survey only 14% of body shop owners are college graduates. While I’m not entirely impressed with a college degree, I am fully aware of the lack of education in our ranks. Business education can be an important key to our industry’s future. One doesn’t need a college degree, though, to get a some business education. We are losing our industry due to a lack of brain power. That needs to change. 

What also needs to change is our sense of responsibility. So many have ceded the responsibility for their product to the insurance industry, while at the same time the insurers have ceded any liabilities they have to the repairers. Shockingly, 19% of us think it is the insurance company’s responsibility to determine what type of parts to use in a repair. These are probably the same people who think the government should supply them with health care, housing and employment. What happened to our independence?

It appears insurers have pushed about as far as they can….for now. The discontent continues to rise and it’s only a matter of time before even the biggest DRP whores start reexamining their business models. Now is a good time for everyone to keep up the push to educate your fellow shop owner, strengthen your associations’ memberships and improve your industry’s image. Don’t fight fair. Fight to win. 

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4 Comments on Body Shop Business 2007 Industry Profile: An Analysis

  1. Jason Weller on Sat, 2nd Jun 2007 5:47 am
  2. Wouldn’t it be better to do an online survey for bussiness owners. I would think the response would be far greater than 84 and a lot cheaper than sending snail mail surveys. I think the comments are great but I am also torn between the DRP and non DRP they both have thier ups and downs. I don’t think anyone should sign a contract with restriction on pay and products used for repair. This proccess does nothing for the consumer and everything for the insurance companies. If an owner feels they need to give away consession to the insurance companies that is a right they have but they should not complain about the shrinking profit margins. One only needs to look at Progressive and thier concierge service to see the bad direction some insurance companies are trying to go.

  3. mark chase on Sat, 17th Nov 2007 6:42 am
  4. Very intereting commentrative you did. Too bad not many will see it. But keep it up anyway.

  5. Darren Gilling on Fri, 13th Jun 2008 7:55 am
  6. I enjoyed reading your article , we certainly have the same problem here in the U.K.

    We work with the industry to help repairers generate new business without relying on Insurer work, its certainly more profitable.


    Darren Gilling
    Call Zebra uk

  7. Jeremy Baltzer on Thu, 24th Jul 2008 11:23 am
  8. I feel your frustration when there isn’t enough participation for more shops, but there is another side. There are shops and people like myself that get involved as much as possible; doing the surveys, subscribing to all the magazines, going to CAA meetings, participating in 20 groups and reading the same articles over and over again telling me about things I all ready know and telling me that they feel our pain when they have never even owned a body shop. Sometimes I feel I would be better off just focusing more time on my business and forget about being involved. But I won’t; I’ll keep doing my best fighting the good fight in hopes of on day something will come of it. It just gets tiresome putting out all the effort and never seeing results and I believe that’s where a lot of shops are now. I’ve been in the business for the last 14 years and we’ve been fighting for the same things since I’ve started and nothing has changed. I know there’s no magic wand that we can wave to make it all better but it would be nice to hear more solutions to the problem then just the problem itself. We know what we need to fight for we just need better artillery.

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