The aim of this article, and the subsequent follow ups I will be writing, is to share with the customers what we hope will likely be valuable information in not only starting but using a successful collision repair facility.
When someone decides they may start a business, it usually derives from the thought that “Hey… besides can I do that… but I am able to do it better than additional guy…. AND I can make some profit doing it. ” As like, the entrepreneurial spirit in you kicks in. We put together a profitable business plan, we weigh the options connected with cost/loss versus profit and we attempt to roll the dice, as the item were, because we know we can easily build a better mouse pitfall. It is this spirit that drives us all in business.
In starting some sort of collision repair facility, there usually are essentially two schools of idea. The first being the “corporate” path where one looks to make large scale, borrowing heavily often from banks or investors to help finance the designing, building, staffing and managing of any larger facility. The second, and considerably more common is the “mom in addition to pop” approach. Now arguments is usually made as to which is better for the ROI on the investment, but I tend to think that the smaller shop is usually a better investment, long term with the ownership. I recently spoke that has a long-time customer of mine about his ideas on a start up body retail outlet. He had successfully expanded in addition to maintained a very large facility during the last 20 years. His annual low numbers are well above 3 million. When I asked him his opinion using a best case scenario for starting off a body shop, I was surprised to find out that his views are similar to mine considering he chose the “corporate” method there are done extremely well for them.
When my friend Robert traveled to the bank 8 years before, he was asking to acquire about one million dollars to make his new shop. He was looking at increasing the length of his operation by over some times its current state. Expanding his operation at a 4200 square feet facility into a building well over 22, 000 block feet was a mammoth commencing. He rolled the dice, borrowed heavily and has since made an amazing living for himself as very well as his employees. Yet when asked if yet recommend doing the “corporate” initial, he said he would not and this the “mom & pop” approach was an obviously better decision for a new retail outlet owner. As we discussed the challenge over a few phone message or calls, these were some of the true secret points we agreed upon.
1. You can’t start any business without a business plan and you should not borrow money from a bank for just a new business without a small business plan, period. My advice is usually to seek professional help on that. Look to the Small Business Administration to assist you to with establishing your plan. They’ve already a large library of “how do I’s” with the small business starter. They can recommend advisors, give ideas about money management and using some case help you secure some funding sources that can help in the startup process. Also, with the current economy acquiring banks scared of lending money to anyone no matter what your credit score, borrowing history or profit, they can help you solidify your smaller business plan. Also getting a bank to lend you a reduced amount of money maybe a little easier in case you have a well thought out and structured business plan given that they feel comfortable with the amounts along with the diligence you have put into your research of the plan. You’ll want to include studies of the encompassing marketplace. How many other shops are usually in an immediate proximity to ones proposed location? Is there sufficient egress towards property via main intersections or other businesses in the community that can generate potential “drive by” advertising available for you? Do you plan to build as well as lease an existing building?
Maybe you’ve made any contacts with prospective clients such as rental companies, distribution companies, cab companies, or most likely municipalities for bid work? Having secured, contracted work will add financial well being receivables to your business that banks choose to see. Be sure to approach suppliers and determine some soft numbers for reductions on parts and materials so that you know your margins based with percentages. As you are looking for a location or perhaps looking to make, remember that you can always expand should the business calls for it. Avoid going into “building” debt and not the ability to afford to install the necessary tools you would like for opening day. Try not to ever over extend your business with Day 1 by over funding. Establish the track record while using the lender by borrowing things to get your shop up and running and possibly a small operating cushion. Sell them on the fact you happen to be profitable quickly.
2. You must further decide how your business plan will likely be incorporated into a complete business structure for your shop. A popular misconception is that “bigger helps make more money”. This can be true as we see in the larger consolidators. This would mean, however, as we are opening more cost, higher risk in addition to an inability, far too typically, to survive. Start with whatever you know. Perhaps you are a superb painter/body man. You have a superb body man ready to can occur board. Perhaps another fellow is usually a frame man. All you need is usually a small space, perhaps three bays, a compact Chief rack and a paint booth for making it all happen. It is usually as simple as that. Start modest and grow. Do not over commit if you have something you can slip back on. In Robert’s event, he was maintaining his first shop while he expanded in addition to built his new shop. Since you establish your business, your customer base whilst your reputation, you will see opportunities to expand as your financial well being grows.
3. Pay “cash” if you can , until you have established your cash flow patterns. Many shops I have talked to in recent times get strangled in a profit net. It is easy to do style and color . industry but in our wreck repair industry, it happens more than most a result of the nature of the business. Fronting mend costs of parts and toil, awaiting payment for past maintenance tasks, fleet accounts that pay with 30 or 60 notes or maybe getting stuck with abandoned vehicles are only some of the problems shops face. These and many other lead to faster cash out and slower make the most. So do what you can to reduce credit exposure. Pay cash intended for parts when possible. Try not to ever give away profits by “financing” deductibles when you can. As you establish your profit margins, you could consider this for alternate revenue source but I caution against it within a start up shop.
4. Attempt not to bog your shop down with “stall sitters” like severe hits or restoration initiatives. If you have the real space to store them or move them easily on the work areas, it isn’t a lrage benefit but remember, we are thinking about a small shop scenario. The longer a motor vehicle sits on the frame rack or within a tear down stall waiting on another car in to the future out means higher turn time period and less flow through ones shop. Try to establish a simple fix mentality. “Hang and Paint” maintenance tasks, while considerably less dollar volumes, tend to be as high or more profit percentage than heavy gets. The turn time for fender benders is obviously less and may result in attracting clients such as hire companies or service companies that need their vehicles on your way. A faster turn time for repairs using a rental car equates to more cash for the rental company. This tends to obviously lead to more work in volume on the rental company to your retail outlet. So consider keeping a streamlined process to manage smaller hits more efficiently for being more profitable. I am not suggesting you turn work away but instead be a little selective on the scheduling whenever you can.