The MSO Project - June 2018 by EndeavorBusinessMedia-VehicleRepairGroup

RETHINK

TRADITIONAL WORKFLOW PAGE 8

HOW TO

TOP TIPS TO

COMPETE AMID CONSOLIDATION

CUT MATERIAL WASTE

PAGE 13

PAGE 23

S T R AT E G I E S A N D I N S P I R AT I O N F O R M S O S U C C E S S

GROOM TOP MANAGEMENT Find quality candidates within your shop and ensure long-term success PAGE 29

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An award-winning MSO shares how it was able to cut down on material waste. By allowing for mistakes, this CARSTAR operator has earned his staff’s trust.

29 | Keys to Internal Promotion

If you groom your employees all along, you’ll have no problem when it comes to filling leadership positions.

THE MSO PROJECT

ACQUISITIONS FE BRUARY

CARSTAR ADDS FOUR-STORE MSO TO NETWORK Legacy Autobody Group’s four locations in Pennsylvania have joined the CARSTAR network. The four facilities are CARSTAR Easton-Scott’s Collision, CARSTAR Stroudsburg-Scott’s Collision, CARSTAR AllenDuncan Autobody, CARSTAR Quakertown-Duncan Autobody. Legacy Autobody was formed when Duncan Autobody, with two locations in Allentown and Quakertown, Pa., and Scott’s Collision Centers, with two locations in Easton and Stroudsburg, merged in June 2017. The combined organization has over $11 million in annual sales and 70-plus teammates at its four locations. Legacy Autobody Group owner, Matt Dewalt, was featured in FenderBender magazine in October. Joining the CARSTAR network is the next step for the two family-owned multipleshop operations in its plan to expand its collision repair services in Eastern Pennsylvania and Western New Jersey. “We named our new venture Legacy Auto Body Group to honor the legacies of our parents’ efforts to build their collision repair businesses built upon high quality repairs and customer satisfaction,” said Dewalt. “Family, integrity, quality and service are the core values that both our fathers instilled in us. We have both maintained those core values separately 6

THE MSO PROJECT

for two generations and now we are very excited to continue to provide those things to our customers for years to come.” said Mike Horvath, owner of Legacy Autobody Group. “The partnership that created these four new CARSTAR locations in Pennsylvania is an excellent example of our accelerated growth initiative,” said Michael Macaluso, president, CARSTAR North America. “The families that comprise Legacy Autobody have a long history in this region, a tremendous reputation and excellent experience. With them, we look forward to continuing to provide the highest-quality collision repairs and excellent customer service for drivers in the region.”

SERVICE KING OPENS 43RD CALIFORNIA REPAIR CENTER Service King Collision Repair Centers, announced the company has officially opened its 43rd California location. The announcement comes as the organization finalized a deal to partner with Izzie’s Body and Frame in West Sacramento.

SERVICE KING OPENS NINTH GEORGIA REPAIR CENTER Service King Collision Repair Centers, announced the company has officially opened its ninth Georgia repair center. Service King now provides customers with a network of 338 repair centers in 24 states across the U.S. The new Cumming, Ga., Service King location has

15,500 square feet of overall production space. MARCH

GERBER ACQUIRES THREE TEXAS CENTERS The Boyd Group announced the acquisition of three collision repair centers in Dallas and its neighbouring suburbs. These centers were previously operated as Earth Collision Center.

CARSTAR NESCAR GARAGE OPENS IN MD. CARSTAR announced the opening of CARSTAR Nescar Garage in Md. The shop is owned by Nestor Montoya. CARSTAR Nescar Garage has operated as Nescar Garage Body Shop since 2009. The certified technicians are trained to work on all makes and models.

CAR GUYS COLLISION REPAIR ACQUIRES 14TH FLA. LOCATION Car Guys Collision Repair opened its 14th location in Inverness, Florida. The shop acquired Collision Tech of Citrus County. Collision Tech of Citrus County was owned by Bob and Bonnie Alexander.

Consolidation and Your Operation’s Course You hear about it constantly: The collision

repair industry is in the midst of mass consolidation. Small- to mid-sized operations are selling. Large operations are buying. And who knows? A large operation could sell to another large operation. As businesses shift to gain market strength, it’s inevitable for consolidation to occur in any industry. But as our main feature (“Consolidation,” p. 13) points out, there are pathways for MSOs of all shapes and sizes to thrive in the years ahead. The key, as our panel of industry leaders allude to, is finding what differentiates you in your market, what gives you a leg up on competition. The opportunity is there, and hopefully the stories in this issue of The MSO Project help you find it.

APRIL

CARSTAR HAS ADDED 30 NEW STORES IN 2018 CARSTAR has expanded across North America with more than 30 new store openings in 2018. CARSTAR expanded in the U.S in states including California, Arizona, Ohio, Wisconsin, Maryland, Florida and Indiana.

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TRENDS+ANALYSIS

The Reintroduction of the Assembly Line DAVID CAULFIELD’S FRESH APPROACH TO HOW COLLISION REPAIR IS DONE WILL LOWER CYCLE TIME

DAVID CAULFIELD OWNER FIX AUTO ANAHEIM NORTH

THE MSO PROJECT

David Caulfield likes looking outside of the collision repair industry for inspiration. Take Starbucks, for example. It’s a company that’s known for its coffee, but there are customers that go to Starbucks to eat food. Starbucks has to take care of all of its customers, but trying to take on food would slow everything down, so the company outsources its food. This got Caulfield thinking: Why not take this model and make it work for collision repair? “Let’s say that 85 out of 100 Starbucks customers only want coffee; 15 want a sandwich or pastry to go along with their coffee,” Caulfield explains. “That’s the same for collision repair. Eighty-five jobs that come in don’t need any structural work. They don’t need welding.” However, the 15 that do slow the rest of the repairs down. So, Caulfield had the idea to outsource those repairs. That was the thought processes behind Fix Auto Anaheim North, a specialized collision service center and the first of its kind for Fix Auto. Caulfield, who used to own three Fix Auto locations with his partner, Erick Bickett, sold those locations and decided to focus solely on this new way of thinking about collision repair. Caulfield has envisioned a future where the heaviest repairs—those requiring $7,000 worth of work and up—will be outsourced to specialized collision centers like his and that the majority of shops will service jobs that should take, at the most, three days of work, creating a sort of hub-and-spoke system. “It doesn’t make sense to do both of these jobs under the same roof,” Caulfield says. In February, Caulfield launched his vision with the opening of Fix Auto Anaheim North, a specialized collision center that only works on the most extensive repairs. Caulfield explained to FenderBender how he envisions this working and why the industry needs to start thinking this way.

COURTESY FIX AUTO

BY TESS COLLINS

encouraging shops to be the best that they can be. With Fix’s model and their reputation and relationship with insurers, we felt like we could go ahead and get this started and get people educated on the process. How exactly does this new shop work? How is it different than a traditional facility?

Trendsetter David Caulfield has a new vision for the collision repair industry—one that seperates the heaviest repairs from the rest.

Our facility only accepts jobs that require structural and/or welded panels and/or any mechanical work from the collision. We have 13 employees, 14 if I include myself, and each one has a speciality. We have a plant manager, CFO and myself. From there, we have someone in disassembly; reassembly; mechanical, structural; cut, fit and weld; metal smithing; a painter and a painter’s helper; detailer, shop runner; and a property and equipment upkeep manager. When the vehicles come in, they are moved through the assembly line. Visually, how is the shop different?

How did you come up with the concept?

I’ve been doing research on this for years. I looked at repair orders and started breaking them up and finding common denominators. What I found was that for every 100 jobs, 15 needed structural, and/or welding, and/or mechanical work related to a collision. These jobs were taking 15–22 days. The other 85 jobs that required no structural, mechanical or welding, averaged about $1,600 in repairs. These jobs took 5–7 days. The other 85 jobs, those $1,600 jobs, don’t need to be here longer than three days. We can bring the production line back to the business. I’m a huge fan of Fix Auto. I’ve been with them since 1998. They have been steadfast at getting their brand name out there, touching on innovation and

When you look in, it’s like looking at an assembly line. Each employee is responsible for his or her own speciality. The facility is 20,350 square feet. We had to purchase top-notch and compliant equipment for most OEs for frame and mechanical work. We don’t have traditional stalls. The car drives in and then slides on tracks—we never turn the steering wheel. We have escape lines in case the car is delayed. How did you hire for this shop?

In order to pick techs, we held meetings over a four-month period on the weekends. We were looking for techs that were open-minded and were looking to do something different. The first meeting, I had one tech show up. I pitched to him for hours straight. Three people were at the next one. At the end of four months, we had 13 people. We were fortunate, we didn’t lose anyone during that time period. We told them that we were go-

ing to go ahead and abandon the keyto-key method and that they could each pick their own skillset. When we opened, we had every position filled. However, that’s the last time that we’re going to hire like that. Everyone that was hired understands that part of his or her commitment is to bring the next generation of techs in. The next hires we make will not be generally trained like the current staff is. They’ll be specialized. Each employee will bring on an apprentice and will go through 8–12 months of training. It’s going to be like a speciality in a hospital. This is a brand new way of approaching collision repair. How are you getting work?

We have a couple of DRPs that are sending us the heavier work. We’re working with insurers; they’re intrigued by what we’re doing. We also get walk-in customers. If we get smaller jobs, we outsource them and local stores will load level to us. We’re having a lot of shops tour the facility so they can see what we’re about. For our first nine weeks, we did two cars per day at average repair of $3,800. Those vehicles resulted in a cycle time of 3.8 days, on average. We think that six per day at $5,500 is realistic. Depending on the amount of damage, we should be able to see 6-8 cars per day. What advice do you have for a fellow shop owner that’s interested in doing something like this?

My advice would be to get with someone that’s doing it and observe. An owner that has f ive locations within 7–10 miles of each other could take one of those locations and use it as the location that houses the 15 out of 100 jobs. That could be converted in 30–60 days. Someone that has a couple of shops, they could align themselves with someone that can take on that heavier-duty work. Shops should f ind ways to specialize in either the 85 jobs or the 15. THE MSO PROJECT

TRENDS+ANALYSIS

Fix Auto Anaheim North AN INSIDE LOOK AT A SPECIALIZED COLLISION CENTER

BY TESS COLLINS P H O T O G R A P H Y C O U R T E S Y O F F I X AU T O

1 In February, David Caulfield opened Fix Auto Anaheim North, a specialized collision center that works only on vehicles with the most extensive damage. This is the first center of its kind for Fix Auto and a new way of looking at the collision repair process. Caulfield says that by separating repairs into heavy and light, collision shops will be able to reduce cycle time for both.

1 //

CUSTOMER CARE

The customer care check-in area serves as the face of the company and the brand. This location is the sole point of contact between the center and customers. Working in the customer care check-in area are the customer care manager and customer care hostesses. The customer care center operates separately from the plant. Caulfield views the customer care area and the repair plant as separate entities because his goal is to eventually house customer care separately from the plant and have centers in public areas, like malls. 10

THE MSO PROJECT

2 //

THE PLANT

The repair plant, which is what Caulfield calls the area some refer to as the â&#x20AC;&#x153;body shop,â&#x20AC;? was designed to reduce the risks and liabilities associated with repairs and to accommodate the specialized skill set model that the specialized collision center utilizes. By building a less complex environment that features a unique track system and booths with roll-up doors, the plant is able to move vehicles in an efficient and cost effective way.

3 //

SPECIALIZED SKILLS

In order to staff the specialized collision center, Caulfield approached hiring in a unique way. For the specialized collision center, the key-to-key method has been abandoned and each member of the staff is responsible for a unique skill set. The shop has experts in the field of disassembly, structural, welding, metal smith and reassembly.

4 //

TRACK VIEW

The repair plant uses a track system to slide vehicles one skill set to the next. As soon as the car enters the repair plant, the vehicle slides along the track. If a car is ever delayed for any reason, there are escape lines to keep the process as efficient as possible. THE MSO PROJECT

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ONE SIZE DOES NOT FIT ALL

CONSOLIDATION:

CASE STUDY

T HE FU T UR E OF CONSOLIDAT ION IS MUR K Y, MAK ING I T DIFFICULT F OR S HOP OWNER S TO FIGUR E OU T T HE NE X T S T EP BY TESS COLLINS

THE MSO PROJECT

CASE STUDY

business value or even failure.” That sentiment might keep you up at night. But it doesn’t have to. That’s exactly why your small MSO needs to find a way to better position itself. The Romans Group’s most recent report of the collision marketplace, which takes a look at some of the industry’s top trends, states that consolidation continues to be a trend, but has slowed since 2012. The report also states that the top four MSO consolidators today—Caliber, Service King, ABRA and The Boyd Group (owner of Gerber Collision & Glass)—represent 14 percent of the industry’s marketplace (information is for 2016), which represents the largest market share of the MSOs. So, what exactly does this mean for the future of MSOs? Is joining forces with the Big 4 the only way to go? Or is there still room for small MSOs to compete? In five, 10 years, what will the landscape of collision repair look like? In order to survive in the competitive marketplace that is the collision repair industry, it’s time to start making a plan for the future. 14

THE MSO PROJECT

PEXELS

f you, like most shop owners, have paid attention to the state of consolidation and are concerned with the Big 4 and its market share (and if you haven’t paid attention, now’s the time to start), Vincent Romans, founder and managing partner of the Romans Group, has a message for you: “History can repeat itself. We can see this from other industries, such as the drug store and hardware store industries. When private equity consolidates, collision repair businesses only have a certain future—grow and thrive, grow and sell, or maintain and lose revenue and risk decreasing

Y O U R C O N S O L I D AT I O N G U I D E S

DAVE MITCHELL

DEAN FISHER

MATT EBERT

MICHAEL MACALUSO

VINCENT ROMANS

OWNER

COO

PRESIDENT

FOUNDER

CAR GUYS COLLISION REPAIR

CARSTAR

CRASH CHAMPIONS

CARSTAR NORTH AMERICA

THE ROMANS GROUP

COURTESY VILLAGE PHOTOGRAPHERS, DEAN FISHER, MATT EBERT, MICHAEL MACALUSO, MIKE WHEALAN

THE FUTURE FORECAST

The Romans Group says that the Big 4 will consolidate at a larger rate than other segments of the market. Will that lead to the death of smaller and midsize MSOs? Romans doesn’t think so. “The industry is growing and is large enough today that there is a long runway where there remains potential for success for many smaller single independent repairers, single and MLO (multiple location operators) franchise businesses and various size MSOs,” Romans says. However, the road will not be easy. “It will be challenging as the Big 4 continue to grow their footprint and their diversified service offerings with their single point of contact, large and growing network of locations across a growing number of states and their ability to negotiate customized service and pricing programs with insurers, OEMs and suppliers,” he says. Michael Macaluso, president, CARSTAR North America, says that in the next 10 years, he believes that larger players will consolidate with larger players— not just collision shops, but in the industry in general. This could have a major impact on the collision industry as a whole. Romans says that future success depends on so many variables that it needs to be looked at on a case-by-case basis. “When analyzing and deciding the future success of any one collision repair segment, one size does not fit all,” Romans says.

The marketplace of the MSO, the degree of competition, how the business is run and personal interest of the owner all play a role in determining the best course for an MSO’s future. Romans says that MSO owners need to determine what their strategic competencies are, set a competitive direction and formulate a plan that will leverage them. So, how do you know what route is best? Romans says that it is in all businesses’ best interests to form strategic alliances or partnerships with organizations and/or business advisors or consultants. His advice? “Hiring someone that can assist [shop owners] in understanding the broader inf luence and impact of all the various segment dynamics of their business and help develop a plan to deal effectively and successfully with them.” For example, body shops are not the only ones consolidating. The paint companies have also started to do this. This trend will affect the industry as a whole. “There’s no single point of reference; it’s a complex map,” Romans says. “If you are a singularly focused company, you run the risk of becoming irrelevant in the near and moderate term. It’s not just one trend or event that could somehow impact one’s business but a confluence of simultaneous, dynamic and ever present events or trends that can impact a shop’s business.”

COMPETING ALONGSIDE THE BIG 4

“It’s tough to outperform a good local operator,” says Dave Mitchell, owner of the Florida-based Car Guys. “As long as you take care of business and you’re doing what you should do, there’s no reason you can’t compete against the Big 4.” Both Mitchell and Matt Ebert, president of Crash Champions, have made a big splash in a short amount of time. In five years, Mitchell has gone from zero to 14 locations and Ebert has gone from being a part-owner of a shop to being the sole owner of seven locations in the competitive Chicago marketplace. How have the two been able to find success in such a competitive market? Finding ways to make their respective businesses stand out. 1. Location is Key “We looked at markets that didn’t have a lot of competition and had potential for growth,” Mitchell says. “We were able to create a market where a market didn’t exist.” For Ebert, the situation was different, but the solution was the same. The Chicago area is a saturated market, but by finding ideal locations for his shops—whether it was an acquisition or a greenfield—he was able to grow quickly. “I’ve tried to pick locations in a place that customers would want to come and insurers would want to send their people to THE MSO PROJECT

CASE STUDY

and employees would want to work,” Ebert says. “I’ve invested a lot in locations as a way to compete. I can’t compete on a national level, but I wanted to stand out as a local.”

3. Find a Speciality A broad customer base isn’t for everyone. Another way to differentiate is to find a speciality. Romans says that shops that are having a difficult time competing, specializing in one type of repair, such as heavy hits, express repair, high-end certifications, might be a good option to provide a competitive edge. 4. Power in Numbers “The Big 4 have unlimited funds, resources and relationships at the highest level,” Mitchell says. This is a huge advantage when it comes to training and certifications. With a push for OE certifications and many speculating that this could be the way of the future, this could give the Big 4 a competitive edge. Dean Fisher, COO of CARSTAR, says that the franchise option can provide local shop owners the type of resources that insurers are looking for, such as centralized call centers, that smaller MSOs wouldn’t be able to produce on their own. 16

THE MSO PROJECT

Standing Out For smaller MSOs, like Dave Mitchell’s Car Guys, finding a speciality, such as heavy hits, is a way to differentiate and compete with the Big 4.

BUY, SELL OR FRANCHISE

Macaluso believes consolidation, which has hit a bit of a lull right now, will pick back up again close to 2020. If this happens, market share will become a critical feature of success. Macaluso has seen this happen in Canada. “The Canadian market is about 5–7 years ahead of the U.S. market,” Macaluso says. “The franchise model is the ‘stronger model.’ Franchise groups are larger and insurance partners embrace it sooner.” Fisher says CARSTAR’s presence in Canada has been an advantage for its U.S. market because they’ve been able to look to the north to see what management will look like. Because of this, both Fisher and Macaluso have confidence that the franchise model is a stronger model than the purchase model. Romans again stresses the case-bycase basis and that what works for one shop owner may not necessarily work for the next. MSO owners should consider their future. Shop owners that have health issues or are exploring retirement

options and would like some financial stability may find the best option is to sell. This could also be a good option for a shop owner that is in an area where the Big 4 have limited market coverage and want to enter or expand that marketplace. For shop owners like Mitchell or Ebert, who have established a string of successful shops but aren’t ready to retire, might find a franchise model, like CARSTAR, more appealing. At the same time, shop owners in this position, who have established a good operation, may be able to continue to grow at a rapid pace. The best option for the future of a particular MSO depends on a number of different factors and has no simple answer. “For the foreseeable future, I’m not going to sell,” Ebert says. “All I’ve done is build. I haven’t had years of making money.” Mitchell is happy where he is now, but he’s not counting anything out. “We would entertain anything that made good business sense. Would we sell? Sure. Would we continue to buy? Sure. Run for many years? Absolutely.”

VILLAGE PHOTOGRAPHERS

2. Use Size to Your Advantage Mitchell also points out that the small size of his MSO allows him to quickly switch directions when there’s a new trend in the industry—something that’s difficult for larger companies to do. “Think about it: which can turn quicker, a speedboat or a barge?” Mitchell says. Another way that the smaller MSOs have found a way to compete is by differentiating themselves to their employees. “People still like to work for people,” Mitchell says. “With the larger corporations, it’s hard to feel like that.” Ebert agrees. Both Ebert and Mitchell are in and out of each of their locations on a regular basis and make it a point to get to know their employees. With the technician shortage, finding ways to appeal to potential employees is key.

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BUSINESS BUILDING

a location that has the support that he or she will need. Because of the number of shops, each area has at least one location that is used as a training shop. Because of this, new hires shouldn’t have to drive too far out of their way—even if he or she does require training.

Matching Candidates to a Location WITH 16 LOCATIONS, NU-LOOK COLLISION CAN FIND THE RIGHT FIT FOR ITS EMPLOYEES BY TESS COLLINS

With 14 locations in and around the Rochester, N.Y., area and two locations in Syracuse, Nu-Look Collision Center has become the go-to collision repairer in the area. It’s more than just a destination for its customers, though. With so many locations to choose from, people who apply to work for the MSO are able to find a location that fits his or her needs—from training capacity to proximity to his or her home. Jason Deats, general manager, oversees hiring and training for Nu-Look. Deats says that since the company has grown, offering employees options on which location to work at has become a lot easier. Nu-Look now leaves its job postings open-ended as to which location the position will be assigned. “Very rarely do we hire for a specific location,” Deats says. “We have enough stores that we can keep it geographically convenient.” Nu-Look has created a culture that holds up from location to location, meaning any of the 260 employees would work well with the staff at any shop. Deats says that for Nu-Look, it’s been relatively easy for him to match candidates with locations because of the strength of each location and the family-like culture the MSO has created. “Anyone that we hire should fit in in any location,” Deats says. Deats shares how Nu-Look has been able to find the best candidates and match them with the right location.

COURTESY JASON DEATS, THINKSTOCK

ALWAYS BE ON THE LOOKOUT. Deats says that even if Nu-Look is fully staffed, it’s not uncommon for job postings—especially for certain positions, like body tech and estimator—to remain up year round. “Even if we’re fully staffed, we’re always looking for the right candidate that we can train up,” Deats says. “We do a very good job of training.” Deats says Nu-Look always anticipates growth. For example, detailers are a position that it is always on the lookout for, but it’s hard to find the right candidate.

BE MINDFUL OF THE POSITION. Deats also advises that the common traits of the position being filled are taken into consideration when matching with a location. For example, any entry-level position, Deats is sure to put that person as close to his or her home as possible to make it convenient, since that person may not have as much passion for the job or may just be doing it part-time.

OFFER CANDIDATES A CHOICE.

JASON DEATS GENERAL MANAGER NU-LOOK COLLISION CENTER

Because of that, Deats says they will hire a candidate that has the potential and use the time to train them up for future need. Another position that the shop does this for is writers. Currently, Nu-Look has three appraisers that are being “trained up” for this position.

KNOW YOUR LOCATION’S STRENGTHS. “Some shops are better at training than others,” Deats says. “The busiest location wouldn’t be ideal for training writers.” When a person is hired who needs training, Deats is sure to match them with

One way that Nu-Look is able to attract the top talent is by offering incentives for its candidates, including a choice of where to work. Deats says that he won’t necessarily allow the new hire to pick the exact location, but he will ask which side of time he or she prefers. “I feel like 30 minutes or under is a reasonable commute,” Deats says. “We have a very solid grasp on which stores train which positions the best—it makes my life so much easier. We have three locations on both the west and east side that can each train one of the roles effectively.”

BE FLEXIBLE AFTER THE FACT. Once a staff member is placed at a location, that doesn’t mean he or she has to stay there. Deats says that most employees remain happy where they are, but if someone relocates, Nu-Look is happy to transfer that person to a new location that’s more convenient. “Our Syracuse shop is an hour away from our other locations,” Deats says. “We needed a body guy to tech to fill in so we sent someone from Rochester. He liked it so much, he asked to stay.” Since Nu-Look has a steady stream of talent coming in, it’s easy to be able to accommodate such requests. THE MSO PROJECT

THE MSO PROJECT

BUSINESS BUILDING

Top Honors ProCare (which includes Ellis & Salazar) took home top awards from Axalta for material management.

Taking Inventory

BY CREATING A STREAMLINED SYSTEM, PROCARE AUTOMOTIVE TOOK HOME TOP HONORS FOR MATERIALS MANAGEMENT BY TESS COLLINS

In 2017, ProCare Automotive swept the competition away when it came to materials usage. The Texas-based MSO took home first, second, and third place from Axalta for Excellence in Material Management. Joe Lewright, COO of ProCare, says the goal for all of his shops is for materials costs to be less than 5 percent of total sales. The winning location, South Congress, finished the year with a 4.68 percent average. To put that in perspective, Steve Trapp of Axalta Coating Systems says that the industry average is 6.5 percent. Success like this doesn’t come overnight. Lewright has always been a stickler for tracking material usage, but when the MSO grew, he realized that not all of the shops had the same ideas about material management that he did.

THE BACKSTORY Lewright, owner of Ellis & Salazar, saw an opportunity to expand his shops’ presence by partnering with Clay Fallis and Vince Brock of ProCare Collision. So, in 2015, the two MSOs merged to form the ProCare family, which now has 16 locations.

COURTESY PROCARE AUTOMOTIVE

THE PROBLEM When the shops merged, Lewright noticed that all of the locations didn’t track materials the way he did. The ProCare Collision shops let the techs determine the materials that were used, which often resulted in multiple different vendors used for the same material. In essence, the technicians were able to select the sandpaper or tape they preferred and order those materials

JOE LEWRIGHT COO PROCARE AUTOMOTIVE

on an individual basis. This practice made little sense to Lewright. Looking at the numbers, some of the locations spent close to 8 percent of total sales on materials. Numbers like that don’t leave a lot of room for profit, so, Lewright began implementing his strategy in all of the locations right away.

THE SOLUTION Lewright has always focused on profitability and has used a number of different strategies throughout his career to keep material costs down, but the most effective has been implementing a standardized inventory. The first thing that Lewright did with the new locations was to eliminate duplicate products.

“So many vendors come through and try to sell us stuff,” Lewright says. “If you let your techs pick what they want, you’re duplicating that throughout the shop over and over.” Now, instead of vendors being able to go to whatever location they want and sell, they have to go through Lewright first. If he decides to test a product out, it’s put in ProCare’s most successful shop for about three months to test whether or not it has an impact on profitability. Lewright adds that it’s not always the cheapest product that the shop ends up using. Some could cost more, but last longer, which ends up being more cost effective. Because of this, ProCare is always testing out new materials and getting feedback from it staff. “We’re not going to make someone use something they don’t like, but he better have a solution,” Lewright says. Lewright adds that the painter’s roundtables hosted by Axalta have been a great platform for his staff to voice their opinions. It also helped to eliminate any type of opposition when the standardized inventory was implemented because it gave the staff an outlet to express their concerns.

THE AFTERMATH With materials management, it’s always fluctuating. “You’re never done,” Lewright says. However, implementing a standardized inventory has lowered the percentage of total sales spent on profits in all of the locations that did not have one before and was a key factor in winning the Grand Prize for Excellence in Materials Management.

THE TAKEAWAY From a profitability standpoint, it makes sense to pay close attention to materials costs because, as Lewright points out, it’s the only profit center that can be controlled on both the cost and sales side. “Everything else has a profit margin that’s already set. I don’t get to control the cost of a replacement part and no matter how efficient I am, I can’t use less of a part,” Lewright says. THE MSO PROJECT

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BUSINESS BUILDING

My staff can run the shop on its own

That’s what allowed me to purchase the Troy store in 2013 and what has allowed me to add a third location. The Troy store is 18 miles from the Sidney location, and the new location, which I hope to open in April, is right in the middle of the two.

SHOPS: SIDNEY BODY CARSTAR, TROY CARSTAR AND PIQUA CARSTAR OWNER: TOM MARTIN AVERAGE MONTHLY CAR COUNT: 146 SHOP SIZE: 45,000 SQUARE FEET ANNUAL REVENUE: $7 MILLION

I believe in empowering my staff, which is what has allowed them to function on their own. CARSTAR has a lot of meetings. I attend 3-4 per year. Leaving for those allowed my second in command to grow as a leader. It’s natural that people make mistakes, so whenever I come back from a trip, we discuss any problems that came up and come up with a solution. I want them to be able to make a decision. They shouldn’t be afraid of failing. I’ve found that a coaching approach to leadership has been what works best

for me. Leading like this has been great. The hardest thing for a manager to do is to sit back and watch someone fail, but people have to fail. It’s how they grow. We have SOPs in place for everything,

How I Work: Tom Martin

COURTESY TOM MARTIN, THINKSTOCK

BY PLACING TRUST IN HIS STAFF AND ALLOWING FOR MISTAKES, TOM MARTIN HAS BEEN ABLE TO EXPAND THREE LOCATIONS Tom Martin, owner of Sidney Body CARSTAR and Troy CARSTAR in Ohio already has two successful businesses under his belt and is about to open his third—Piqua CARSTAR. With two (soon to be three) locations to manage, Martin has had to find a way to balance all of his responsibilities in order to make it home by a reasonable hour to his wife—for whom he promised to always make time. The main way that he’s done this is by placing trust in his staff. By leaving the shop for short periods of time, he’s been able to see how the staff performs on its own and he’s learned to lean on key people in the shop. Martin gives his staff all of the credit for his ability to run three locations. AS TOLD TO TESS COLLINS

but a lot of what has allowed me to leave the shop and not worry about it is working with my key people. In the early days, I felt like I needed to check in all the time. Now I don’t. They know that I’m just a phone call away. I feel totally comfortable leaving them and I know they’ll do what’s right. I get up every morning at 4:15 a.m. and go to Crossfit at 5. That’s my stress re-

liever and my personal commitment to myself. After all, if I can’t take care of myself, I can’t take care of other people. Each location has a production meeting every morning at 7:30. My house is less than five minutes away from the Sidney store, but I switch off between the two locations as to which meeting I attend. As a personal goal, I try not to be too predictable. If a manager has something that they want to discuss, I’ll go to that THE MSO PROJECT

BUSINESS BUILDING

location. Whichever location I start at, I go to the other in the afternoon.

comes into the shop is split between my existing locations.

I unwind for the day. I make sure I didn’t drop the ball on anything.

I’m usually in each story daily, but I play

We’re a lean shop. We’re lean in the of-

I am still able to take time for myself. When

it by ear. I recently took my office out of the Sidney store to allow for growth in that location. Now, if I have to meet with someone in my office, it’s at the Troy location.

fice and in production. We try not to waste steps and utilize people to the best of their abilities. In order for it to work, you need to get your people to buy in. Get their feedback. They’re the ones in the trenches that see everything. It’s become a part of our culture. We’ve done it for so long that I don’t even notice we’re doing it. People come in to our shop and they’ll ask me how we’ve been able to do it—I just say we started to do it and stuck with it.

I opened my second location, I had to make a promise to my wife that I would still have time for her. I’m a very competitive person; I’ll kill myself trying not to fail, which she knows. So, when I said I wanted to open a new location, I had to promise that I would be gone from home no longer than I was with the one store. Twelve hours per day is the most I’ll do. If I leave the Troy location at 6, it gets me home by 6:30 p.m.

When you open a new store, your first

store starts to feel like the stepchild. You have to make sure that they both feel equally loved. That’s going to be even more difficult with the third shop opening. The third shop was an existing facility that I bought from a 65-year-old who wanted to get out of the business. At the end, he was doing 3–4 vehicles per week. Right now, the shop is maintaining that customer base. We have an estimator currently working there. The work that

I have a list that I carry around with me throughout the day of things that need

to get accomplished. I check off what I finished and I prioritize the things that I didn’t for the next morning. That’s how

My goals for 2018 are to get the new loca-

tion up and running. I have a sales goal that I want to reach by the end of the year. It’s a little aggressive, but I think I can do it. We started working with a fleet account at the Troy location, so we’re working on an expansion there.

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BUSINESS BUILDING

The Keys to Internal Promotion

Upward Mobility For leadership positions, 45 percent of the time, John Cole will hire someone already employed with the company.

HIRING INTERNALLY FOR A MANAGEMENT POSITION IS IDEAL—IF YOU’VE BEEN GROOMING ALL ALONG BY TESS COLLINS

DEXTER DAVIS

“We want someone that fits our mold,” says John Cole, owner of Cole’s Collision Center, a five-location MSO in the Eastern New York area, when speaking about managerial candidates. So, someone that’s already familiar with the company, with its value system and processes, is ideal. That’s why Cole prefers to promote from within and grow his employees versus hiring an external candidate. That doesn’t mean he won’t do it though. “If I don’t have someone that’s a good fit, I’ll look elsewhere,” he says. With a manager and an assistant manager at each of his shops, Cole estimates that 45 percent of the time, those positions have gone to people who are already employed within the company. In fact, when he hires people, he has his or her future in mind. Cole shares his secrets to finding the right person to promote to management and how shop owners can make the process easier on themselves by preparing for that eventual hire that position ahead of time.

HIRE THE PLAYER, NOT THE POSITION.

GROOM FOR UPWARD MOBILITY.

In order to make a successful internal promotion of a candidate, that person has to already be a quality employee— and that starts at the initial hiring process. When Cole makes a hire, he makes sure that person is ethical and honest. “I can train a person to fit the position if they have the right personality traits, but I can’t train them to have those personality traits,” Cole says. “Employee traits outweigh experience. I’d rather have someone with a great attitude that’s willing to learn and lead.”

“When I hire estimators, I’m often looking for people that have the qualifications that I look for in a manager,” Cole says. By hiring people with the necessary skills, Cole can groom them for a management position down the line. If an estimator shows potential, he or she is paired with a current manager to learn the ropes. “We identify things that individuals can do well and then they’re mentored [by someone in that position]” Cole says. This is a tactic that he applies on the

JOHN COLE OWNER COLE’S COLLISION CENTER

shop floor, as well. Cole’s Collision Center has a mentorship program where people who are interested in the field are paired up with a technician. By doing this, Cole is creating a pipeline of talent for his shop.

IDENTIFY KEY QUALITIES—THEN BRING THEM OUT. There may be someone that has all of the qualities and capabilities of a manager, but he or she has never thought of it or doesn’t feel capable, Cole says. “Give them certain responsibilities THE MSO PROJECT

BUSINESS BUILDING

without letting them know your intentions,” he says. Once the person has completed the tasks, let him or her know that he or she is already performing the duties of the manager, Cole says. “It will give them confidence,” he says.

REWARD LOYALTY.

IDENTIFY THOSE THAT WANT IT. “I have a couple of very strong employees that do not want to be managers,” Cole says. “Some people are satisfied with where they are.” That’s why communication is so important. Cole talks with all of his employees about their goals, and because of that, he’s able to learn who is interested in becoming a manager and who is not. “Some of them just don’t want that responsibility, even if it comes with a pay bump,” he says. “I can’t make them want to move up.” Cole not only tries to find the right candidates for the job, but also the right job for the person who wants it.

KNOW WHAT YOU HAVE. When Cole hires a manager internally, he already knows what he or she is capable of because he’s been testing him or her out all along. If he’s considering someone for management, he observes how he or she handles themself in certain situations and how that person interacts with the rest of the staff, so he already has a pretty good idea of how that employee will perform once promoted. 30

THE MSO PROJECT

Identifying Future Leaders By hiring people with the necessary skills, John Cole can groom them for a management position down the line.

MAKE INTENTIONS CLEAR. Cole says that the announcement to promote an internal candidate shouldn’t come as a shock to anyone—if you’ve gone about it the right way. “The staff can see the writing on the wall, they know what’s coming,” Cole says. From the beginning, a path to management should be discussed between the owner and the candidate, and the rest of the staff should also know based on the actions that you’re taking with that employee. “We’re looking at a person from the start,” Cole says. “We’re a tight-knit group, so we get feedback on how they work.” Cole says that by discussing his choice with the rest of the staff and making his intentions clear, he doesn’t see any resentment from others when a staff member is promoted to management.

is being measured all of the time based off of that data. “If there’s an issue, we know about it and we’re talking to them weekly or biweekly,” Cole says. Cole says that new managers are monitored closely for a couple of months. Usually, Cole says, it just takes some training or a push in the right direction to get them back on track. The reason for that? Before promoting the person to manager, Cole tests that employee out and has him or her perform the majority of the responsibilities that he or she will take on as manager. “If you have a winner and the employee is willing to try, it’s just a matter of coaching them a little bit and then weaning yourself off,” Cole says.

MONITOR PROGRESS.

However, that doesn’t always work. If, after a few weeks of additional support and training, the new manager still isn’t catching on, it’s OK to admit that he or she was not the right choice. Cole says a few of his managers have been moved back down, and they’re very happy in the positions that they’re currently in. If it’s not the right fit, you’ll know, Cole says.

Once the decision has been made to move an employee into a management position, Cole says it’s important to make his or her duties and the benchmarks that need to be hit very clear. Cole’s managers are responsible for the entire store, which includes KPIs, sales, and the employees. That manager

WHEN IT’S NOT RIGHT, MAKE A CHANGE.

DEXTER DAVIS

Another reason that Cole prefers to promote internally is because it is a way to thank those employees that have been with him for a period of time. “An an employee that comes to work every day on time and gives 100 percent, they absolutely deserved to be moved up,” Cole says. Also, an employee that’s grown with the company is more likely to stay long term than an external candidate, Cole says.

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THE MSO PROJECT

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