Four MSO leaders recently shared insights about current market challenges and future growth opportunities during a panel discussion held at the AkzoNobel Collision Industry Experts Event (CIEE) in July.
Moderated by Tony Adams, senior services consultant at AkzoNobel, the panel included Andy Tylka, owner of TAG Auto Group; Matt Whittenberger, corporate fixed operations director for Diehl Automotive Group; Paul Williams, founder and CEO of Brightpoint Auto Body; and Brian von Tress, owner of Collision Pros.
Evaluating Acquisitions
When evaluating acquisitions, Williams searches for multi-generational businesses that have “game in their community,” some of which have served their surrounding areas for more than 40 years and have a good culture. Brightpoint, based in Tennessee, operates 34 locations in 11 states.
Williams stressed the importance of understanding the current market and concentrating on areas where it is performing well. Deciding whether to acquire a brownfield or greenfield site depends on what is available.
“When you're competing for key performance indicators (KPIs), you're competing against some sharks,” he said. “You're a small fish, so you have to stand out.”
When von Tress’s company, Collision Pros, was first looking for acquisitions, they didn’t have an abundance of investment money. “We would just go out and find something and figure out how to finance it and how to get it done,” he recalled. They now have 12 shops in Northern California and Nevada.
Recently, von Tress has observed a shift in the market. Early on, the strategy was to acquire smaller shops with ample capacity and hardworking employees, join some DRPs and then work to double or triple the volume.
“In the current market, it’s hard to get DRPs and now there’s not a lot of volume out there,” he explained.
More recently, they have purchased larger shops and concentrated on buying market share. In addition to looking for facilities with a good team, they also evaluate if it’s an area that can be serviced. “It’s really difficult to service something that's four hours away from you,” he acknowledged.
When meeting with potential sellers, von Tress asks a comprehensive list of questions to learn about the business. “We sit and talk about it a little bit, but with my first hunch, I know whether or not it's a good deal for me or not, and we pursue it from there,” he said.
For businesses looking to grow their footprint, Tylka recommended owners and managers ensure everyone is aware of the end goal.
“Really broadcast it out there,” he suggested. “You're not going to be cold calling and doing it yourself.” He advised getting involved in the industry, including joining performance groups and talking to paint companies, distributors and equipment manufacturers.
TAG Auto Group currently operates 15 locations, 14 of which are collision repair facilities, while one focuses on fleet repair. Tylka also owns eight calibration facilities, a towing company, a glass company and mechanical shops.
For Whittenberger, rather than looking for certain KPIs, he and his team typically search for a brick-and-mortar that can handle more volume than the existing shop. He also determines if there are at least a few good staff members who will stay in the business.
“My biggest challenge whenever we're growing is finding the people to run it,” Whittenberger shared. “That’s more important to me than any KPI that's in place.” Diehl Automotive Group has 22 dealerships and nine collision centers in Pennsylvania and Ohio.
“It’s really about the team that you are acquiring,” said Williams. “Essentially, whether you want to admit it or not, anybody can open a brownfield; however, it’s very hard to keep people who know what they are doing.”
In his experience, Williams has found that 95% of the time, an owner leaves the business in about 30 days during the transitional period. In light of this, he recommends establishing a succession plan.
Tylka looks at an acquisition as an investment. “Am I going to make more than the loan payment? If I am, then I know it’s going to be a good investment,” he said. “It’s as simple as that.”
When the time comes to exit and sell, Tylka said the goal is to ensure it will be worth more than what it was purchased for. “Ultimately, know what you’re buying,” he advised.
This includes working with the bank to understand the financials and margins to ensure loan payments can be made. “Think of it as an investment just as you would a real estate investment,” he suggested.
Key to growth, according to von Tress, is having good financials and knowing the business’s margins.
“You can grow up in the body shop business and know how to run one store… but when you go to two, three and four, it's more complicated,” he said. “Cash flow becomes really important.”
“Three felt really easy to manage,” recalled von Tress. “Four, five and six were a nightmare.”
He said the seventh, eighth and ninth locations became a lot easier because he was prepared.
“The setup of the financials was easier, the QuickBooks was easier,” he explained. “All the little things you have to do when you're acquiring a collision center were easier.”
When growing from one to two locations, Williams advised owners to consider whether the business will still operate if he or she takes time off.
“If you can look in the mirror and say, ‘Yes, my business can continue to run while I’m gone,’ then you need to get ready for some hard work, but you can go from one to two,” he noted. “If you’re the guy who leaves and the business falls apart in a week, you’re not ready.”
He emphasized the importance of having a good team to stabilize operations. “That second location is going to take everything that you have,” he shared. “It’s usually one of the hardest ones to kick off because there are some mistakes you’ll make.”
From experience, von Tress learned how beneficial it was to have a manager in place before an acquisition, so someone was there every day and knew what was expected.
Tylka pointed out that most owners double as the facility’s general manager. When a second location is added, he said, they just work harder, but when there is a third, they realize they can’t be everywhere at once. When the owner has the mentality of hiring someone to help, Tylka said, that’s true leadership.
“After the third and fourth locations, the business begins building an infrastructure,” he said. “You're creating these duplicative processes now, which makes it a lot easier.”
Growing as a Leader
Tylka encouraged shop owners not to be intimidated if they feel they don’t have the personality to own multiple shops. “My personality molded when I had three locations and it turned into more of a leadership role,” he said.
As the guy who always liked to know everything, Tylka hired people who weren't as talented. He quickly realized that wasn’t an effective strategy.
“I was teaching them instead of hiring people who could teach me,” he recalled. When Tylka began hiring managers who he felt were smarter than him and specialized in a particular area of expertise, the business started to develop.
“All you're doing is you're leading them and holding them accountable,” he added.
When Whittenberger transitioned from collision director to fixed operations director for the car dealership group, he recognized the need to have a game plan to effectively oversee the collision centers, service centers and other departments.
He promoted two of the individuals he trusted to be the collision directors. “I continue to stay on them about building their bench,” he shared. “That’s more important than anything… developing your people and figuring out who is next.”
Williams suggested determining if an individual is a general doer or a general manager. “There's a big difference between the two,” he pointed out.
At Brightpoint, Williams said the team thrives on growing from within the company.
Running multiple locations isn’t for everybody, noted von Tress.
“I think 5% of people should probably do it. It's not easy,” he said. “It takes a lot of dedication, and you've just got to be a little bit stubborn and a person who likes puzzles and figuring stuff out.”
As Collision Pros has grown, von Tress said they continually seek ways to do this.
“The way I ran one store was very different than three and six,” he said. “As Andy [Tylka] said, it does get easier in some ways because you're not the person there.”
Being a Type A personality, von Tress acknowledged there's a little bit of an ego check in letting go of control and bringing people in. At the same time, it affords some freedom.
“There literally is somebody out there who's better than you at anything,” he said. “If you can employ them and get freedom, you should hire them.”
Training and Compliance
To ensure locations are compliant and avoid liability, Whittenberger relies on the company’s regional directors.
“I meet with them regularly, at least monthly, to go over the progress of training,” he said. The company uses a dashboard to keep track of their OEM and collision center training.
Williams said it’s critical to trust the location manager. Brightpoint uses ALLDATA to access OEM procedures. “Through ALLDATA, you can check and see what their usage is by location,” he said.
To track training and compliance at Collision Pros, the corporate office uses software to notify staff know when it is required.
Having a process is especially important when you can’t be in all the shops, according to Tylka. He recommended creating a process that can be audited and ensuring the goals are met.
Setting Themselves Apart
As a smaller regional player, von Tress said Collision Pros competes with the consolidators in their area. “Early on, I realized if we try to duplicate everything, we're just going to get beaten trying to be the same,” he shared. Instead, they looked for ways to be better and lean into that through the company’s culture.
At the company’s annual meeting, they spend time determining what they can do to set themselves apart. For example, they pride themselves on being a friendly place to work. When von Tress was first starting out and had six employees, he routinely sent them a card and a gift card on their birthday. He continues that tradition today and makes an effort to send cards for anniversaries and spouses’ birthdays. However, he said it can be challenging to demonstrate how they care about the 170 employees at their locations.
Whittenberger said he and his team have worked hard to improve relationships with the insurance carriers they are partnered with. “Some we parted ways with and others we've had a lot of success with,” he noted.
As a car dealership selling 1,000 cars every month, Whittenberger said they have a captive audience. As a result, they initiated a successful program called “The Diehl Difference,” which includes exclusive perks with every purchase. For example, every purchase comes with “deductible forgiveness” built in, so if the customer has an accident, they can bring it back to be repaired.
“We get a lot of customers coming back just because of that alone,” he said.
Williams talked about the importance of establishing relationships with local insurance agents in the communities where the business operates. “If you want to be the employer of choice, that is key,” he said.
He always tells people, “We're in the people business. We just so happened to fix cars at the same time,” he said.
Tylka said his biggest mistake was letting the entities operate separately. “I was nervous about upsetting people and upsetting processes,” he recalled. Now, he communicates the goal to the entire company and uses the same processes throughout.
Mitigating Market Downturn
To help mitigate challenges associated with the market downturn, Whittenberger recommended “not having all your eggs in one basket.” For example, Diehl Automotive Group is repairing Amazon vans, cultivating relationships with insurers and OEMs, and doing fleet work.
“Even if you're not a dealership, you can still work with local dealerships to try to get some of that work at the places that don't have body shops,” he suggested.
Last year, Tylka said TAG Auto Group went back to the early 2000s “boots on the ground” mentality. This involved visiting insurance companies, measuring the capture rate and finding out what was falling out of the funnel that they weren't capturing.
“If you can't get the market share from your DRP model, you have to go somewhere else,” he said. They also realized they weren’t paying enough attention to their scorecard and regretted it.
By doing a thorough analysis, von Tress found some of their stores slowed down, while others remained busy.
“Mostly our brownfields and newer stores were the ones that suffered the most,” he observed. In response, they made adjustments and ensured they had the right team in place.
His opinion is the work might not be dwindling. “I just almost feel like we were in a fake market for three years where it was just an excess amount of work, and now we're back to kind of a regular market,” he noted.
He recommended paying close attention to cycle time, Customer Satisfaction Index (CSI) scores and Google reviews. “I go on every Google review that comes across my phone and I answer it,” he said.
Williams agreed about the importance of Google reviews and demonstrating you care about customers. He noted how most larger companies have call centers that assign jobs. “When the assignment hits, they are on it within less than a minute,” he said. For smaller companies, he said the front desk needs to approach the work similarly. “They have 60 seconds on the phone when an assignment comes through to capture that job and get the keys,” he explained.
Until recently, Tylka didn’t realize how beneficial it would be to follow up with customers immediately after they talked to their insurance companies. “We didn't do that,” he acknowledged. “Just recently, we did and found this huge return of customers.”
Lessons Learned
Tylka recalled riding in the car with his dad, who used to say he could have bought a certain shop or building and regretted it. “When I make a decision, I ask myself, ‘Five years from now, am I going to regret it if I don't do this? Am I going to regret not buying this location?’” shared Tylka.
Once he decided to grow, Tylka said it was time to figure out how to finance it. He often works backward to determine the gross profit he wants to end up with and then decides where market share is coming from, whether it’s customer pay or insurance warranty. He also uses Google and ChatGPT to find creative ways to finance the purchases.
“There are all these fun and creative things that you can do,” he said.
Writing a business plan and talking through the options has been helpful for von Tress and his team. They hold annual planning meetings and quarterly meetings to check if they are on track.
“Every deal is different, and every seller is different,” said Williams. Because Brightpoint doesn’t have venture capital, they fund their growth.
“At the end of the day, it's not about what you sell for, it's about what you keep,” Williams explained. “It's very important to understand what that individual is looking for.”
Stacey Phillips Ronak