Auto Body Shop Veteran Says DRPs Can Be Profitable If Done Right
Autobody News recently sat down with Jim Huard to talk about what’s important to him and the current state of the collision repair industry.
Jim and Kelly Huard are the co-owners of Painters Collision Centers with two locations in Queen Creek and Chandler, AZ. Their goal is 10 locations within the next two years through smart and strategic expansion.
As a body shop owner, what are your top concerns?
Hiring and retaining skilled labor is our No. 1 concern.
A shop owner told me one time the tug-of-war between body shops and insurance companies will never cease, although it will change and evolve. Do you agree, and how and why have your relationships with your insurers changed?
I respectfully disagree; I am different in how I view this. All repairers can work effectively with carriers if they know how to navigate through the process. It’s not always just about being right. But instead of having the facts, the correct documentation and the right attitude about the relationship is what is truly important.
Another body shop owner told me the main problem in this industry is the simple fact the insurance companies, in general, don’t pay enough for repairs. Do you agree?
I again respectfully disagree, because from my experience, all insurers will pay to repair the vehicle correctly. I also believe it is a choice to repair a car correctly. Scans, calibrations and the like will be reimbursed as long as they are properly documented.
I am a DRP work flow guy. I am fanatical about quality repairs, and we are super picky about what we repair. The insurance companies are always watching the bottom line and there is nothing wrong with that. But I don’t think they ever want us to do sub-par repairs or compromise our quality to save money.
Are most of your DRPs profitable and are you satisfied with them?
I believe that all DRPs are profitable for all shops. How do you repair a car? And how do you write the estimate? Are you focused on the sales mix and writing a complete estimate? Are you complacent and write poor estimates and what does your throughput model look like?
Profitability is predicated on good quality estimates and throughput. This is a proven fact. A shop that produces 1.5 HPD will put 1.8% to the bottom line, give or take. A shop producing six HPD will put 18% to 20% to the bottom line or better.
How has all of the new technology impacted your productivity? Customer service? Marketing? Online?
We have had to adapt several times over. We created processes to repair higher level technology vehicles effectively while positively impacting our CSI. We also work with a stellar marketing company, Stratosphere Studio, that is engaged, in tune and really knows the collision repair industry.
Are you ever worried you’re too dependent on your DRPs?
I am not, because we are very strategic on how we operate. We do not put all of our eggs in one basket. One of our DRPs generates 37% of our revenue, and another one is at 21%, for example. I work with five partners in total and will not add any more. This is how we are able to provide top level KPIs with compliance and overall stellar performance for each partner.
Do your insurance partners constantly ask you to incorporate more aftermarket and recycled/remanufactured parts into your repairs? Are some of these parts OK to use, or would you want to use OE parts on every repair if you could?
I will answer this carefully. In a perfect world, we would use all OE. This frankly would improve the carrier’s profit. We did a case study on this topic. What we discovered is that with the downtime of getting a used part, and the fact that most come damaged or not useable, we often have to return and wait for another. It’s incredibly time-consuming and costs the carriers thousands of dollars per day in rental costs.
This does apply to some aftermarket and reconditioned parts. The carriers put a ton of pressure on the rentals and cycle time. Most carriers spend $5 million per day on rental replacements while vehicles are being repaired.
I also believe that if a consumer purchases a policy that requires aftermarket parts, that is on the consumer. Most aftermarket parts today fit well and are crash tested. Depending on what it is, a reconditioned part is more than acceptable, in my opinion. But as I stated, in an all-OEM world, all parties involved will gain throughput and profit.
From your experience, is it better to pay techs salary/hourly or flat rate?
I have many opinions here. But from my experience, hourly you will realize low profits, lack of productivity, poor cycle times and usually a sub-tribe of people who are not truly genuine in their efforts.
Salary with a bonus incentive again creates a comfort zone for most. A person will learn to live on their salary and can become complacent in regard to the bonus. The bonus becomes meaningless this way.
Commission or flat rate works for us. I pay flat rates to my techs and commission sales plans with KPI drivers to my repair planners and GMs. Your sales commission percentages are based on the KPIs you provide. These percentages range from 3% to 4.5% of the repair planners top line sale.
So, for example: If a repair planner does $150,000 in sales, provides a five-day cycle time, a 97% CSI and a repair ratio of 77% or higher, they yield the highest percentage. So driven writers that get it love this plan. I have writers stacking cash monthly doing it this way.
Imagine this industry in 20 years and share your vision.
I see very advanced technologies, but in many cases, this technology creates accidents; there is just too much going on in the vehicle's cockpit. It distracts people from being able to focus, hence causing an accident.
I also do not see the EVs taking the roads over. Frankly, I believe that will never occur.
I see many shops dropping out because they cannot afford to purchase what it takes to stay up with current times. This happens because many owner operators are marginal at what they do. MSOs and consolidators take a very interesting approach to this as well.
Do you have problems finding top techs, estimators, painters and office people in your region?
This is difficult in any region or market in the U.S. I have created mentor programs that have yielded several quality techs. We have exceptional pay plans, incentives and provide a quality work environment. We upgrade our equipment regularly to ensure happy tech teams. Happy people are good producers. We work hard to attract and retain top people.
MSOs are eating up small independent shops throughout the country. Is this also true in your state?
Yes, but it’s not at the same pace here in Arizona as compared to some other states. I frankly like having consolidators/MSOs on the same street because the majority of them cannot perform. So, we gain in a big way as a result. Carriers have become increasingly frustrated with MSOs and their poor performance.
Scale will be the death of these companies due to the lack of control and the lack of care. Many of them are in it for a paycheck and nothing more. I talk to hundreds of people each year from these companies, and the good ones want to run because they see the demise of the MSOs coming.