Is this A Good Time To Sell Your Body Shop Business?

Have you ever asked yourself the question? “Is this a good time to sell my business?” That is a question every business owner asks himself, every time he has a bad day. I once received e-mail from the editor of the Auto Body News, asking me that key question. “What is happening in the market today? Is this a good time to sell? ” My quick answer was “These are very interesting times.”

Of course that answer doesn’t tell you anything that you can get your teeth into. So! Let me clarify my answer. Since I have been selling body shops for nearly 5 years, I have seen many changes in the body shop industry. One thing that hasn’t changed is that there have always been an abundance of both sellers and buyers. The buyers have always been, and still are picky about what they were looking for.

The perfect shop in the eyes to the buyers is (A) 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. (B) doing a volume of at least $100,000 per month, but really much more. Large volume sellers think that if they have a DRP (Direct Repair Program. This is where the insurance companies set up a relationship with the body shop to do all their clients business. Much like an HMO in health insurance) contract, they have what the buyers want.

This may be true but the contracts are not automatically transferable, and a buyer will be very unhappy if the DRP leaves after paying money for this “reliable revenue stream.” Smaller volume sellers, on the other-hand, not having corporate accounts, dealerships or other contracts still have hopes of getting lot of money for their shops. The average shop I run across is only doing about $300,000-$500,000 annual gross income. So what we have is a situation where a lot of buyers are looking to buy a shop, but there are not a lot of shops available, that fit what they are interested in.

This year, one change has occurred. There are fewer shops available than at any time in my career. Not fewer of the large volume shops for sale, that is fairly stable, but fewer of the small mom and pop repair shops that have not been in heavy demand. The reason, I believe this has happened is because of the booming economy. Low volume shops are doing better than they have in years. They are making money, and do not feel as much pressure to close down. They still would like to get out, but when they find out that their 5,000 sq. foot shop which is making them a $100,000 net profit, is only worth $100,000 on the open market they decide to keep on working.

As always, the shops doing $1 Million to $3 Million per year gross income is still in demand. The price alone still is the main factor, in determining if these shops will sell. A good example of this is what is happening in lower Orange County. There are currently a couple of shops in Lower Orange County that are for sale, by the owners. They appear to be very profitable but the asking price is too high and the buyers all know it. Even the fact that these are the only shops available for sale in this prime area has not changed the fact that buyers just refuse to over pay.

Last year I was marketing a high volume shop, in Ventura County. The buyers refused to pay the asking price, even though the volume was there. Why? The profit wasn’t. In this situation, the buyers would not pay for the volume and stability of income unless the net profits were there. They didn’t assume that they would make a profit where the current owner was not. It appears that buyers of today are very careful. I believe they do not trust their own ability to get business and are too careful.

To clear up any confusion about what kind of buyers we are talking about, lets break the buyers up into categories. The first category is the consolidators. There are two large ones in Southern California but they are not the whole market. I have talked to out of state consolidators that have inquired about moving in to the So California market. Consolidators want shops that fit their model. That model sometimes changes but basically they will buy a shop if it fits their model.

If it doesn’t, they will not touch it. The price by itself doesn’t turn their interest on or off. We do not have enough space to discuss what this group will buy, in this article. It is enough to say, ” If your shop fits their criteria they would have contacted you and expressed interest. If they haven’t contacted you, they are not interested.” Period! They know their market place and who is in it.

By the way, if I owned a shop that a consolidator wanted, I would never sell to them. Being a professional negotiator for 20 years, I find the requested seller financing terms totally unacceptable. When I have found out about these sales, after the fact, I am amazed. I had buyers for the same money, or more, without the seller being at risk, but no one asked me.

The second category is the multiple location shop owners. Usually with one or more DRP contracts shop that wants to expand into more areas. They are very interested in the sq. footage of the shop, and its ability to handle over $2. Million Gross Income per year. This buyer only looks in limited areas. The areas being where they have been offered a DRP contract. When they are looking, they need it now, while the window of opportunity is open to them. If they can’t find it quick, they will not need it at all. Recently I had a multiple shop buyer who had made an offer and was negotiating a shop in West Los Angeles. By the time we finished the negotiations, the DRP contract was gone and so was the buyer.

The third category is the buyers who have worked in the industry before, but do not currently own a shop. Also in this group are the buyers who have family in the industry, and money is no problem. This buyer believes ” If it doesn’t have a DRP, forget it. If it has a DRP and isn’t making much money, also forget it”. If it has a DRP, and it is making money, they are interested but only at what they consider is a fair price (In their eyes). This group I have successfully changed their mind at how they analyze what a good shop looks like and on occasion have bought shops with “a steady reliable income”, other than insurance contracts.

The fourth category is the person that just wants a shop. They will do what they have to, to afford a shop that will work for them. This group is the working body man or auto repair shop mechanic. Because of their limited funds, this buyer will only pay what he or she feels the equipment is worth. They will pay nothing for goodwill because they believe that the seller’s customers are not stable and will leave when the ownership changes. Are they wrong?

In Conclusion: There are a lot of buyers out there. My database has over 250 current names of body shop buyers. There is currently a shortage of shops for sale but mostly in the properly priced category. Most days I feel like a marriage broker with a lot of plain brides and a few beauties. The dowry for the beauties is more than most good-looking boys will pay. The balance of the girls may not be pretty, but some of them can sure cook. . Anyone want to get married? “Have I got a girl for you”

The Preferred Body Shop Trap and How to Escape It

Promoting preferred body shops is standard procedure for many insurance companies. If you are insured by one of the insurance companies that has preferred body shops, you are already the prime target for this trap.

Insurance companies negotiate with body shops. They will offer the body shop a large amount of claims work. The body shop must agree to do the work for lower negotiated labor and parts pricing. Body shops look at the deal and see that even though their profit margin might be lower per car, they will get more business.

The body shop will usually have to agree to use cheap aftermarket parts, which are of inferior quality to the Original Equipment Manufacturer (OEM) parts. OEM auto parts have to pass strict inspection with the US Department of Transportation to be installed on a new vehicle. Aftermarket parts do not undergo such inspections. They might fit your car, but are arguably of lower quality than OEM parts.

It’s a great deal for the body shop, as they get more business. It’s a great deal for the insurance company, as they lower claims costs.

The insurance company will tell you that if you agree to have your car repaired in their preferred body shop, they’ll guarantee the repairs, and make the repairs happen quicker.

But just because your car LOOKS good after the repairs doesn’t mean that all of the identical repairs were done to return your car to its pre-loss condition. In many cases, the body shop cuts corners with the encouragement of the insurance company.

So, who is in the trap?

The policyholder who has an automobile claim after a wreck is in the trap! Your car may be less safe after repairs using aftermarket parts, and certainly will sustain a drop in value after the repairs.

Here’s the Escape Strategy

There is NOTHING in most car insurance policies that forces you to accept the preferred body shop of your insurance company. Check your policy to be sure.

After the wreck, insist that the wrecker tow your car to a body shop of your own choice. If you do not know a reliable body shop, insist that they tow the car to the closest dealer of your car’s make. For example, if your car is a Toyota, have them tow it to a Toyota dealer.

Have your chosen body shop write an estimate, using only original manufacturer’s parts.

The insurance company’s adjuster or auto appraiser can come to the body shop of your choice to write his estimate. Make sure he gives you a copy of his estimate.

Once you have seen both estimates, insist that the estimate using original manufacturer’s parts be used. By doing this, you can be certain that your vehicle will be repaired to “like kind and quality” to its pre-loss condition.

If you have experienced a car wreck, no matter if you were at fault or the other driver, you need to know winning insurance claim strategies. The insurance company will not tell you the claims process, but I will. I will show you how to take control of your insurance claim, and add hundreds or even thousands more dollars to your claim settlement. For more information, go to the website listed below.

How to Pick the Right Auto Body Repair Shops

Some of the biggest questions people run into deal with the repairing their vehicles. Many times people are confused and don’t know how to go about picking the right auto body shop. What process should I run through in picking the right vehicle repair shop? What questions should I consider?

What value am I getting for my Auto Body Repair?

The most important question in determining what auto body repair shops is: What value am I getting in repairing my vehicle here? Many body shops out there are looking for unsuspecting customers and ways to pad their bottom dollar. A lot of times body shops will offer the lowest price because they know this will attract customers. Unfortunately, from a customer standpoint choosing the lowest price is not always the way to go.

Daniel T., Vice President of National Auto Parts, in Dallas, Texas, concurs that doing this will only create more car issues in the future. “Repairing your vehicle is always about what you get in return. These days, body shops continue to push the limits of their customers to see how much more they can get away with. At this point the body shop knows exactly what they’re doing. Is the customer to know the better?”

What can I do to protect myself?

A solution that’s been picking up a lot of traction recently is hiring a third party to assist you in this area. There are a few good car crash consultants out there that will help you figure out what’s being put on your vehicle and how the vehicle’s being repaired. When looking for a good car crash consultant selecting one that gives you a lot of insight on the repair and product being used is imperative. Using these specialists provides visibility in an area with many questions.

Another way is looking for a detailed report of the work being put into the vehicle and reviewing the warranty the shops offers. When you get into an accident, every insurance gives you an assessment of the damages, take a look at the sheets and read over to see what product they’ve listed for use. Auto Body Shops sporadically will attempt to use cheaper parts to make more money. Requesting the use of what’s listed on your insurance assessment is not unusual and will help protect against this. In regards to warranties, most legitimate body shops will have an extensive warranty and stand by their work.

Where should I look for the body shop?

Driving to the nice plush auto body repair shops off the highway might be convenient, but doing this often drives up the price of the job. “All businesses have costs and are in it to make money. With this assumption, you have to believe any cost a business incurs will be passed onto their consumer,” Daniel says. Hanging off the highway, and looking more in-city gives any prospective client a better chance to keep labor costs low. Prices per hour for labor can vary wildly from $30-$100 for the same type of work. Don’t misunderstand the shop may not look the best, but you can be guaranteed going this route will provide good value.

How To Choose An Excellent Auto Body Shop

There are a lot of things that you can find out about an auto body shop. Almost all shops do painting, body repair, and some engine repair. This means if your car has damage due to an accident or needs to be rebuilt they can fix it. Most will also repaint your car if you want a simple color change or some highlighting.

Almost all shops will be happy to give you an estimate for painting or body repair. If you are looking for a body shop there are a few things that you need to look at before choosing. The first is if the shop itself is clean. The second is whether or not they show their previous work. The third is whether or not your insurance company or other insurance companies use them.

It might not seem important whether or not the shop is clean considering what they do there. It is extremely important because especially if they are painting your car. Things like dust, hair, and metal shavings can get into the paint while it is wet. Some can be fixed but a lot of it cannot. Make sure at least the paint booth is clean before having your car painted there.

A lot of body shops will let you look at work conditions. If they do not you might not want to choose them. It is usually a good sign of a good body shop when their shop is neat and clean. Their might be some dust if they are currently working but for the most part it should look good.

When insurance pays for a body repair due to an accident or other issue they normally use specific shops. They have ones that they recommend. You can always call your insurance company and ask who they recommend even if you are not asking to file a claim.

Most places that do paint and body are very proud of their work. They usually will have before and after picture books, walls, boards, or at least access to pictures if not access to people whose cars they have done. If they do not it is a good sign that there is an issue.

The regular auto body shop should allow all of these things. You should be able to check the shop for cleanliness, check insurance companies, and they should show you work that they have previously completed. Usually if they do not allow these things you should check further into the business and make sure that they are reputable. You can always call around and ask if they have a good reputation in your area.