Sunday, 31 July 2005 10:00

Things not always as they might first appear

Written by Dick Strom

My first impression of Dr. Barnard was of an ancient, sinister ogre on this, my first trip to a dentist. Mom had done her best to assure my five-year-young mind that Dr. Barnard just wanted to take a quick peek inside my mouth. While I was not yet too proud to disbelieve Mom, apprehensions grew as, hand in hers, I mustered courage to climb the long, dark, musty wooden hallway toward the single light bulb dangling from spindly wires in the ceiling leading to - the dentist. 

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At the top to the right, the sight of his office introduced a whole new set of horrors, for the dismal-lit interior, covered with a light coat of chalky dust, contained shelves here and there upon which sat sets of perfectly formed teeth in what I assumed to be their original gums.

Scared nearly witless, I clung tightly to Mom's housedress-covered leg, as Dr. Barnard instructed me to sit in his curious ancient chair and let him have a look around in my mouth. Eventually able to coax my mouth open, he produced a flashlight and began probing my gums and teeth, as my terror-stricken mind, alternately fixating on those sets of dust-covered teeth, and Mom's reassuring smile, wondered how many cadavers Dr. Barnard had plundered to supply his collection… and wondering what he found so interesting inside my mouth.

Later I learned that Dr. Barnard, though not the most conventional of dentists, was considered by many to be the best denture maker in the state, explaining the chalky dust and perfectly formed sets of teeth. Long before seatbelts and airbags, Mom lost most of her teeth, and nearly her life and subsequently mine, from hitting a bridge abutment while overcome by carbon monoxide poisoning from a Model A exhaust manifold heater (not one of Ford's "better ideas"). The ogre of my imagination was in reality the man many considered the best denture maker of the state. Things are not always as they might appear.

Non-DRP shops may sell better

The often-bizarre relationship be-tween perception and reality also affects something most of us have done much to enhance - the sale of our collision shop. The article, Is This A Good Time To Sell Your Body Shop? written by investor, accountant, and financial distress consultant, Willard Michlin, would lead one to believe that being DRP-dependent is not necessarily an asset, especially when it comes time to sell your shop. Michlin has found that the best deal for a prospective buyer's money isn't always the biggest, most fancy shop with the most DRP agreements.

Insurers have done a good job impressing on the minds of shop owners that Direct Repair is the only path to shop profitability. But Michlin points out in his article that DRP-agreements aren't necessarily profitable when it comes time to sell your business, at least not with all buyers. Michlin states, "The perfect shop in the eyes of (prospective) buyers is one that has a customer base and a revenue stream that is reliable, and isn't dependent on the owner being there to retain each individual customer, and (is one that is) doing a volume of at least $100,000 per month, but really much more. Large volume sellers think that if they have DRP contracts, they have what buyers want… but DRP contracts aren't automatically transferable, and a buyer will be very unhappy if the DRP leaves after (the buyer's) paying money for this 'reliable revenue stream'."

Due in large part to the fickleness of insurers and their DRP-fed customers, what many shops will find, when they eventually do try to sell out, is that the golden fruit on which they were planning to retire will have been devalued to that of culls.

End of one-stop shop concept?

An article by columnist Jay Hancock (5/19/05) in The Baltimore Sun, entitled Good Riddance To The Financial Supermarket, is also food for thought for large collision conglomerates and insurers. In short, what Hancock states is: "One of the dumbest business ideas of the 1990s is headed for the same junkyard as industrial conglomerates, Internet pet stores, the Sony Betamax and The Adventures of Pluto Nash. Along with Bank of America, Citigroup was the model of the one-stop money shop. These kinds of companies were going to sell stocks, bonds, mutual funds, checking, savings, credit cards, traveler's checks, insurance and mortgages all at the same time. They were going to turn bank tellers into salesmen and stockbrokers into insurance agents, and cram everything into your wallet and make you ask for more."

But as Bob Dylan drawled, "The times, they are a-changing." Many such large conglomerates are changing course, divesting many of the extensions to their core-businesses. Hancock continues, "One reason for the divestitures is ethics. Given the recent unpleasantness with New York Attorney General Eliot Spitzer, financial firms are nervous about pushing proprietary mutual funds, annuities and other products through financial advisers who often hold a legal duty to sell clients the best products available - not necessarily house brands.

"But (another) force breaking up the financial supermarket (is) the old core competence phenomenon. Even good companies do only a few things well and often err when they branch out. Changing consumer buying patterns may exert even greater centrifugal force. As the 1990s progressed and financial firms built supermarkets and opportunities for cross-selling, the Internet and growing consumer sophistication were destroying the foundations beneath them.

Thanks to the Web, the main reasons to buy a dozen kinds of products from under one roof - inertia and the hassle of shopping around - have shrunk. Many households are expanding the number of companies from which they buy, not reducing them. It's one-stop shopping, but the stop is your computer - and each product can come from a different vendor.

"Today's winning financial model is (that which) sells one product. They sell directly to the consumer. They make sure it's the best. They don't waste time on diversification. And they tell investment bankers and consultants who contend they should diversify to jump in a lake."

What seems the wide and popular road to profit isn't always so. It just may be that some within the collision and insurance industries might profit from getting back strictly to doing well only the few things they do well.


Bullying the Bully

In her Editor's Notes column (6/05), BodyShop Business editor, Georgina Carson highlighted a great way one shop is dealing with unreasonable insurers - posting in his shop a sign stating… well, lets let Carson tell it. Following is a compressed form of her Notes.

"When it comes to trying to strong-arm consumers into having their car repaired at a direct-repair shop, insurers have no shame. If you survived the accident, you're fair game. Forget the long arm of the law. It's the strong arm of the insurance industry that no one can seem to outrun. "It's no surprise that insurers try to push around grandmas, your neighbor and the general public. And because insurance companies have found something that works, they're going to continue to push the envelope to see just how far they can go - until they meet with some resistance… And they finally are.

"It appears that many shop owners are running out of patience. The industry's infamous indifference and incessant whining are slowly morphing into anger and attitude. Shop owners - through their state associations - are working harder than ever to get legislation passed that helps to, at the least, make it more difficult for insurers to steer."

Additionally, some shop owners on an individual basis are taking their campaign a large step farther… in some cases, using the insurance industry's own tactics against them.

Says Mississippi shop owner Bill Fowler, "My sales are steady, my margin of profit has increased and I spend considerably less time spinning my wheels." So, what's his secret, you ask? More DRP relationships? More brown-nosing? More golfing with insurers? Giving insurers greater discounts?

Actually, none of the above. Fowler's secret is really no secret at all. In fact, it's so out in the open and honest that everyone, insurer reps, consumers, everyone, can't miss it. It's the sign Fowler has conspicuously hanging in his shop, which reads, "We have found these insurance companies difficult to deal with: (difficult insurance companies listed). We do not care to negotiate repair procedure or cost with these companies as there are many other companies we do work well with."

Continues Fowler, "(Since the sign went up) we no longer have to argue with the offending insurers, and have freed up our time to pursue more profitable work. But there's also been a couple of side effects we couldn't have predicted."

First, many of Fowler's customers who are insured with these companies are changing carriers.

Second, claimants with these companies are using their own coverage, paying their deductible and letting their carrier subrogate damages.

Third, some adjusters are saying they'll do whatever it takes not to have the name of their company appear on Fowler's list. He states, "They know we're not bluffing and know that the first two side effects are happening."

So, what prompted Fowler to hang the sign in the first place?

"I got sick of the 'We're big and you're little' mentality and the belligerent treatment that I was getting from some insurers. I also realized that the more reasonable insurance companies and their customers didn't deserve progress on their work impeded because of the time that was being devoted to arguing. That sign is one of the best business decisions I ever made."

Shop rates insurers

Fowler isn't the only shop owner who has taken the insurer-bull by the horns. For years Bob Isham of New Image Paint and Body Shop, Inc. in Tempe, Arizona has displayed a large, very conspicuous, professional sign in his office that rates the 44 insurers he deals with. The top of Isham's board is titled: "New Image Rates The Following Insurance Companies," followed by the name of each of the 44 insurers New Image works with, followed by a number (1 to 100, 100 being the highest rating), which number Isham arbitrarily chooses and arbitrarily updates in response to how each insurer treats his consumers and New Image.

"The ratings of the insurers listed on our board are based on our past experience with these insurers, and are subject to change at any time, at our discretion. We score insurers on attitude, promptness, quickness of getting their check to us, and fairness, among other things. The score we give each insurer takes into account that some insurers intentionally or otherwise write lousy estimates, and yet have no problem paying our supplemental actual costs of repair, without hassling us. We also take into consideration the willingness of insurers to use new OEM parts, and give black marks to those trying to peddle bogus imitations and/or failing to pay for essential procedures.

"We don't agree with insurers' tactics in writing initially deficient sheets in the hope the insured won't get the car fixed, or that the shop will cut corners to meet the lowball amount. But our board definitely gets peoples' attention more than all the other plaques and awards hanging on our office wall. We're often asked by consumers, 'Which insurer do you think is best, and why?'… allowing us to discuss the good and bad points of insurers from our shop's standpoint.

"Our board has also caught the interest of the insurers listed on it, wanting to know what they can do to get a higher rating. Presently, our best ratings go to Chubb, Metropolitan, 21st Century, and Amex, in that order. We're happy to honor with a good rating those insurers who do a good job, and treat us fairly, with respect."

Powerful industry

Concludes Carson, "This industry is a lot more powerful than it gives itself credit for. If more shop owners started turning the tables on insurers, stopped stabbing each other in the back and refused to accept any and all work no matter how insulting and unprofitable, the insurance industry would have no reason to steer - because they wouldn't have any sucker shops to steer to." Amen!

Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bainbridge Island, Washington 98110; (206) 842-3621; e-mail: moderncol@qwest.net.