In my 15 years as a body shop broker, I have visited many hundreds of body shops across the state. Almost 100% of the owners complain, if they are being honest with me that they work too hard for two little money. We talk about them wanting to sell the business to some other poor sucker who will then also complain about not making enough money.
When we start talking about the reasons they include:
1) The market prices are too low to make a profit.
2) They do not have enough volume of business.
3) They need to get some DRP contracts; then they would be doing great,
4) They have no time to go out and look for business.
5) Rents are too high.
6) Labor is too high.
7) I cannot find good body men and painters.
When we talk about, why they want to get out of the business? They give me these explanations:
§ I am sick of the business.
§ I am loosing money.
§ I am burned out.
When we take all of this into account and get to the bottom of the problem of all the complaints we come down to the real problem:
The insurance companies have controlled the prices paid to body shops be intimidating the owners to take the business–on the insurance company's terms, or there are 10 other shops that will.
This makes sense when we are referring to shops that have DRP contracts with the insurance companies but what about the shops that do not?
The problem they are having is:
Non DRP shops keep their prices low because they think their next door neighbor will take the business for less and that the insurance companies will be unhappy with them and never send them business or give them a DRP contract, in the future.
These situations results in: no one making money. Not the DRP shops or the non-DRP shops. Even when the insurance companies tried owning their own body shop they could not make a profit, at the prices they force the body shops to take.
I hope I have summed up the problem, distinctly enough.
The industry is in fear of the insurance companies, but in truth the insurance companies' power rests with the body shop owners not the insurance companies. The power is not with the large DRP body shops as all small owners believe but it belongs with the non-DRP body shop owners who are not bound to any agreements with the insurance companies. It is the medium and small body shops with no DRP agreements that can change the industry for everyone.
GIVE ME LIBERTY OR GIVE ME DEATH!
Over 200 years ago, a third of our nation, said that they were tired of taxation without representation, and they went to war against the strongest nation in the world, England.
They risked their lives and their property for what they believed. To fight the strongest power in the auto industry you do not have to risk your lives and you will not even be risking your fortune. It only requires that you stand up and say, “Enough is enough,” If what I say excites you, please read on. I have a plan.
If not, please stop reading; put this article down. Tomorrow when you go to work pull out your most recent profit and loss statement, and read it very closely. Calculate what will happens to any profit that is shown, when your costs, including rent, go up another 10%, in the next year or two. Then make an estimate as to how rapidly the insurance companies are going to respond to your request that they let you raise your rates. Then go tell your wife and kids that they had all better get a job and support dear old dad.
“I AM MAD AS HELL, AND I AM NOT GOING TO TAKE IT ANY MORE!”
Any plan has to workable. By that I mean that if you expect everyone in the industry to work together in trust, against the common enemy, you're dreaming: it will not work. There will always a Benedict Arnold, who will take the opportunity to steal the business away from his “friends” while they are working to raise the industry rates. This plan does not rely on trust, but it does take co-operation. No company puts the businesses they already have at risk, in order to forward the goal of the group to raise rates.
THE BATTLE PLAN
The big body shop owners are the leaders of the association and industry. They are the generals in this war. They can participate in some of the encounters but must depend on the independents for the direct attacks. The big boys must organize and instruct the troops.
This can be started anywhere. It can be done in one area at a time or preferably it will be done in multiple areas, at the same time. Here is the plan:
1 All the local body shop owners are invited to an association meeting or a meeting at one of the bigger body shops. All attendees are asked to participate and to encourage others to do the same.
2 Everyone raises his or her posted rate to something above $50.00. We do not want everyone to raise the rates to the same price; this is collusion and price fixing. Each shop can pick their price. It should not make sense to be below $50.00 per hour
3 The posted rate is only charged for non-DRP work, which helps the little shops a lot and the big boys on some jobs. It doesn't change any prices for clients under DRP contracts but it sure makes a difference on any other work that comes in the door.
4 When the insurance companies do their survey of posted rates, in an area, they will find them at above the $50.00 benchmark.
5 When a non-DRP shop has a client with insurance, he can demand and force the insurance company to pay the posted rate for that area. The adjusters can kick and scream but they legally must pay the average posted rate for that area. That is why it is critical to get everyone, large and small, to change their posted rate.
6 The little body shops can continue to charge what ever they want below the posted rate, but they must at least raise the posted rate. This is the only action required of every body shop. Just change their posted rate. No other agreements are required.
7 Over a period of time, everyone will start demanding the posted rates from the insurance companies. This will happen while the DRP contracts are still sitting at lower rates. The next thing that will happen without any agreement from body shop members is that some will drop their DRP contracts so as to be able to collect the posted rate. The remaining will start complaining to the insurance companies and threaten to quit.
8 At some point the insurance companies will raise the DRP rate, and everyone will be better off.
9 The following year, the association members can discuss the need to raise the posted rate again. Of course each person must make their own decision as to how much they want to raise the posted rate to. Collusion is a crime.
Well I have laid out the whole plan. It will work. The insurance companies will bring in the German Hessians troops* under some other name, as they did in the revolutionary war, but if we remember the battle cry we will win. “I am mad as hell, and I am not going to take it any more!”
HessiansAmerican Revolutionary War, Landgrave Frederick II of Hesse-Kassel (a principality in northern Hesse) and other German leaders hired out thousands of conscripted subjects as auxiliaries to Great Britain to fight against the American revolutionaries. About 30,000 of these mercenaries were hired, and they came to be called Hessians, because 16,992 of the total 30,067 men came from Hesse-Kassel. Some were direct subjects of King George III; he ruled them as the Elector of Hanover. Other soldiers were sent by Count William of Hesse-Hanau; Duke Charles I of Brunswick-LĂĽneburg; Prince Frederick of Waldeck; Margrave Karl Alexander of Ansbach; and Prince Frederick Augustus of Anhalt-Zerbst.”
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