The era of the single store, generalist body shop is coming to an end, said Cole Strandberg, Focus Investment Banking managing director, during a Society of Collision Repair Specialists (SCRS) IDEAS Collide presentation. 

“It’s all the reasons you guys know about and think about and deal with every day,” Strandberg said.

He said this includes increasing vehicle complexity, the technician shortage, and continued challenges with insurance relationships. 

“There’s a lot of headwinds facing us but the beauty is these challenges create some really compelling and unique opportunities,” Strandberg said. 

The industry has three options for the future: specialize, scale, and sell, he said.

“We can combine some of these three as well into a really compelling growth strategy,” Strandberg said.  “What do I mean when I say specialized? It could be what comes to mind. It could be high-end luxury and exotic. It could be trucks. It could be EVs. It can also be a little bit more subtle than that, a little simpler. What are your OE certifications? What’s in your market? What are you good at fixing? Double down on what you’re good at.” 

Strandberg said specializing creates efficiencies in the supply chain. He said it also helps technicians complete jobs faster because they become an expert of the job. 

“It turns them into that NASCAR pit crew,” Strandberg said. 

Collision repair shops that specialize are more profitable than generalized shops, he said. He said in most cases they are 50-100% more profitable.

“At the end of the day, the industry is in sort of a David versus Goliath battle,” Strandberg said. “David obviously can defeat Goliath but he’s probably not going to do it if he fights the battle the exact same way.”

Another way to differentiate is to scale, Strandberg said. 

“The industry has a lot to love and they are crazy about it,” Strandberg said. “But a big one is something called multiple arbitrage, which essentially means when you’re buying a company, you want to make sure that one plus one equals more than two.” 

The “magic” of scale is that it can be replicated at a smaller but growing regional player level, he said. 

Strandberg said finances are often a worry for shops considering scaling. He said funding is available through private equity and programs provided by the Small Business Administration (SBA). 

“There’s a lot of private equity interest out here,” Strandberg said. “Full disclosure: they’re typically looking for some pretty substantially-sized organizations.” 

Private investors are looking for five-plus stores and more than $2 million EBITDA, he said. He also added that private equity is looking for partners. 

“It comes down for them to a pretty simple equation,” Strandberg said. “Do I want to own 100% of a grape or would I be OK with owning 30% to 40% of a watermelon?”

The SBA also has two programs targeted at small businesses and aspiring entrepreneurs: the 7A and 504 programs, he said. 

“Essentially, it’s designed to promote small business ownership and growth,” Strandberg said. 

SBA options require good credit and a down payment, he said. 

“It’s an amazing resource that we’re seeing used left and right in all sorts of industries,” Strandberg said. “I think we’re underutilizing that here in the collision industry.” 

Strandberg said not everybody wants to scale. 

“If it’s not your skill set, you’re not in the right market, or it’s not in your goals and dreams for your business, that’s fine,” Strandberg said. “But I do want to be very clear: access to capital should not be a reason to not scale.” 

The single-store generalist body shop is not dying tomorrow, he said. The situation is not dire. 

“There is an extremely unique opportunity here to take advantage and build something special,” Strandberg said. “For that reason, I believe there has never been a better time to be in the collision repair industry than right now.”

Bill Park, Crunchfit Financial Services founder, told the crowd during his IDEAS Collide Showcase that there’s a movement in the collision industry to merge blue and white-collar thinking. 

“I think shop owners get stuck and they feel scared that they go to that de facto thinking of, ‘Oh, the evil corporation,’” Park said. “’How can you possibly think we can have an environment with blue-collar ideas and white-collar ideas actually coexisting?’” 

The industry is no longer about fixing cars, Park said. He said it is about building empires. 

Park said the industry can use its blue-collar roots and embrace other skill sets to move the needle. 

“How do you take what you know — that blue-collar skill, that hustle, that grit — and find those white-collar strategies like Cole was talking about and marry those things together to build a version 3.0 body shop?” 

Repair shops are competing with corporations in today’s industry, he said. 

“We’re competing with companies that have installed processes and procedures,” Park said. “They use data, they use analytics, they have systems in place, they have scalability. So how can you bring that into your single shop, your two shops, or your mini-MSO?” 

Park said he abandoned thinking of his business as a body shop. He said his company has two body shops that fall underneath the holding company. It has a software company, a financial services business, a real estate business, and an angel investing company. 

“We actually built systems, processes, and financial systems,” Park said. “We know where every penny is every single day, seven days a week, 365 days a year. We communicate internally with our staff.” 

Park said businesses shouldn’t be afraid of the corporate idea. 

“As the blue-collar, we do a great job,” Park said. “How do we put that together into a package?”

IMAGES

Feature image of Cole Strandberg presenting at 2024 IDEAS Collide/Lurah Lowery.

Embedded photo of Bill Park presenting at 2024 IDEAS Collide/Lurah Lowery.