If you’re measuring the success of your business on gross dollars earned you’re giving yourself a false sense of security, according to Mike Anderson, Collision Advice president and owner.

Anderson held a class May 17 during the Southeast Collision Conference in Greensboro, North Carolina where he shared some tips for better business operations and his predictions of how the industry will change based on current trends.

“Lots of sales cover lots of sins,” Anderson said, including poor parts management and repair planning, starting repairs without insurer authorization, not 100% disassembling vehicles, and closing repair orders as vehicles leave the shop. All of this leads to bad habits, he said.

“We’ve got to get back to writing an accurate estimate/repair plan/blueprint,” Anderson said. “We have to be mindful, and I didn’t say fix things cheap… filing documentation is more critical than ever before.”

Market trends have also contributed to shops becoming too comfortable in how well they’re doing with increases in severity, number of parts replaced per vehicle, and labor rates plus a backlog of work and charges added for calibrations, Anderson added.

“Let’s say that labor is 50% of your sales and you raise your labor rate from $50 to $57,” he said. “That’s a 12% increase on something that’s 50% of your revenue. And let’s say you add another $500 per RO, on average, for calibrations. If parts prices went up 18%, parts are 40% of the RO, and I took all that away, your average severity would only be $3,500. That’s less than what it was in 2022; less than what it was in 2021.”

For example, in North Carolina, average severity went up almost $500, but the average labor hours only went up an hour, according to Collision Advice.

Shops are replacing more parts and repairing less, Anderson said. Due to the increasing complexity of vehicles shops would expect average labor hours to go up but that hasn’t happened, he added.

Practices shops can slip into that turn a winner into a loser are greed, irrational thinking, ignoring strategy, and exposure to unnecessary risk, according to Anderson.

Anderson said shops can increase monthly sales by:

• • Improving estimate quality
  • Removing and/or preventing administrative approval bottlenecks
  • Setting up your technicians
  • Having the appropriate number of employees — is your shop overstaffed with more people than the work that’s coming in?
  • Benchmarking

Anderson also covered important steps shops should never ignore, and why getting on board with new technologies sooner rather than later will be beneficial.

He emphasized the importance of post-collision inspections of safety systems and other components that could be damaged but not seen without some disassembly.

“Every single OEM manufacturer says that when a vehicle is in a collision, you must do some type of safety inspection whether it’s steering columns, seat belts, looking at the pedal cluster, the seat backs, et cetera,” Anderson said.

He shared two examples of what wouldn’t have been found and replaced or repaired if the shops hadn’t followed OEM procedures.

One example he gave was a safety inspection conducted on a 2018 Chevrolet Silverado in which the steering column was found to be collapsed.

I-CAR is also compiling a list of the types of damages that are found during inspections of collision-damaged vehicles with or without an SRS deployment. The form is available here.

In a recent study conducted by Collision Advice, Anderson said steering columns were removed from 43 wrecked Subaru vehicles. Twenty-six percent were collapsed, and they’re one-time-use parts. More than 500 Subaru dealerships told Collision Advice they hadn’t sold any steering columns, according to Anderson.

“We have an obligation to the consumer to perform these safety inspections,” Anderson said. “If we want change in our industry, we have got to show up. You’ve got to show up at CIC. You’ve got to show up at SCRS. You’ve got to show up at these trade association meetings like this. You’ve got to show up at the board meetings.”

Technology trends

“I will tell you that I believe that our industry is more right for disruption in a good way through the use of technology than at any time I’ve ever been in this industry,” Anderson said. “I believe that 18 months to two years from now, the way we order and receive parts is going to be 100% different than the way we do it today.”

Ordering will be digitized with assistance from artificial intelligence, he said.

AI equals an intelligent customer experience by using it to respond to online reviews, answer phones, and write payment negotiation letters to insurers, Anderson said.

Anderson predicts vehicle ownership subscriptions and software-as-a-service through mobile apps will lead to an uptick in certified shop business because post-collision, drivers will go to their app and be given a list of OE-certified shops.

Also, if the move to electric vehicles continues, OEMs will bring in less revenue from oil filters and brake pads, and sell fewer parts so they’ll replace those revenue streams by building vehicles with subscription-based features, like heated seats, Anderson said.

When it comes to vehicle ownership, Anderson predicts a rise in personalized experience because it’s what customers now expect in all industries — think Amazon delivery and ordering ahead on the Starbucks app.

In the automotive industry, this could mean paying a flat monthly fee to be able to switch out your car for your needs or wants and each time you switch your insurance, repairs, and maintenance records go with you, he said.

This will also mean fewer customers waiting on vehicle repairs because their subscription, such as Volvo’s all-inclusive option, will replace the vehicle.

Those in doubt about whether people will pay for vehicle subscriptions should consider how popular TV streaming services have become in the last decade, Anderson said.

According to General Motors, software-as-a-service will generate $30 billion in revenue by 2030.

Also by 2030, digital services could generate $1.5 trillion in revenue for the global industry, rising to $3.5 trillion and 40% of automotive industry revenue by 2040, according to Accenture.

The market for over-the-air features and subscriptions is expected to reach $14 billion by 2030, up from $3.3 billion last year, according to Deloitte.

Telematics

At the end of 2023, 73.6% of cars on the road in the U.S. were connected to the internet, according to Statistica and CCC Intelligent Solutions.

Eight out of 10 drivers today want telematics, Anderson said.

Connected cars notify OEMs when they’re involved in a collision and the driver will be referred to an OE-certified shop, which is an advantage for certified shops, Anderson said.

He sees both positives and negatives in the rise of telematics. Positives include vehicle repossession and cutting off services (AC, power windows, etc.) when payments aren’t made, speed limiters for teenage drivers, and sending emergency services to the GPS location of collisions.

Negatives include domestic violence victim tracking, customer overinvolvement in the repair process when vehicles aren’t placed in service mode, and police showing up thinking there is a car break-in happening when some components are disabled and/or removed from vehicles.

“As more cars are connected, our job is going to change during the repair plan process,” Anderson said. “We’ve got to know if the car is connected and know how to place it in service mode.

Insurance and claims trends

According to Anderson and several other sources, accident frequency is down, mostly due to advanced driver assistance system (ADAS) use, more miles are being driven, and more registered drivers are on the road including elderly and teenagers.

In March, claims were down by 9% nationwide, and are expected to be in the double digits when numbers from April come in, Anderson said. Average shop backlogs have also decreased from months or weeks to a week or less.

“We must get back to the basics, looking at and monitoring RO count month to month and month compared to the prior year,” Anderson said.

Other factors contributing to claim counts decreasing, according to Anderson’s research, are:

• • A 2023-2024 mild winter
  • Insurance premiums up an average of 12-20 % in most states, some as much as 30%
  • Premium increases have created a reluctancy for consumers to file claim
  • ADAS
  • The COVID-19 pandemic backlog has gone away
  • The supply chain has improved
  • The economy is good but the narrative that people are hearing in the media is negative so it’s impacting spending habits

“The insurance companies are not freaking losing money,” Anderson said. “They’re making billions of dollars… The more they charge for insurance, the less they lose market share to [other] insurance companies. Then, they [shops] had all these labor rate increases, the shops were booked out for weeks and months, and the leverage was on their side.

“Now, the shops are slowing down… Now, the insurance companies are going to start playing hardball again… You look at that as doom and gloom, or you can look at that as, ‘I’m going to be educated and all I’m going to do is prepare myself more for the negotiations or discussions.'”

Average car insurance is expected to increase another 13% this year, Anderson said.

The customer and employee experience

Anderson said online reviews are the Customer Service Index (CSI) of the future.

“If somebody wants to find a body shop, they’re going to ask their car,” he said. “Your car is going to be like your personal butler or concierge… and it will make choices and recommendations for the vehicle owner based on online reviews.”

Because of this, Anderson recommends shops dominate their local online review space, which includes quick response time, even after hours.

For example, a shop that added an after-hours feature to schedule an appointment or send a chat captured $20,000 of work during the first month, Anderson said.

“It is not enough to just do quality repairs anymore,” he said. “You must provide an extraordinary customer experience because people are going to spend money based on the experience… people want an experience worth paying for.”

Other tips Anderson provided to strengthen shop operations were:

• • Offering employee benefits, specifically health insurance and retirement plans.
  • Having a vision for the business/company and sharing it with your team. Research shows that only 22% of employees believe that their leaders have a clear direction for the organization, Anderson said.
  • Have an environmental, Social and Governance (ESG) plan
  • Benchmark your business against others. According to Anderson, those who do improve their total gross output by 5-15%.
  • Embrace technology, including AI to schedule appointments — those that fight technology are going to be left behind, Anderson said.
  • Know how to get work through the door without sacrificing quality.
  • Focus on customer pay.

“The shop of tomorrow that’s going to be successful will know how to innovate,” Anderson said. “You’ve always heard that saying, ‘If it’s not broke, don’t fix it.’ I’m telling you to break it and blow it up. Encourage creativity in your staff. Don’t beat people down when they try something that doesn’t work… Also understand that employee expectations are going to change. Shops that are going to be successful tomorrow are going to understand how to deliver an extraordinary customer experience as well as an extraordinary culture.”

Images

Featured image: Collision Advice President/owner Mike Anderson speakers on May 17, 2024 during the Southeast Collision Conference in Greensboro, North Carolina. (Lurah Lowery/Repairer Driven News)