How's your business?

How's your business?
By Denise Casperson
For five years now, the Automotive Service Association's (ASA's) How's Your Business? survey has given us a glance at how the year is going for ASA members in terms of sales and profits. It also gives us an understanding of the most challenging issues shops face, how shops market their businesses and some forecasts for the coming year.
Survey results are based on a 15 percent response from ASA mechanical members, and a 20 percent response from ASA collision members.
The survey was mailed in September 1997 and responses were anonymous. Some percentages noted in the article and accompanying graphics may not total 100 percent due to "no response" or "other" results.
Mechanical
Of those responding to the mechanical survey, 95 percent are business owners, while 4 percent are shop managers. The respondents range from 22 to 76 years of age with the survey average age of 46 and the average number of years of industry experience equaling 26. A majority of the respondents - 62 percent - are ASE certified. Eighty-five percent of the mechanical respondents represent family-owned businesses, and 94 percent have one shop. According to survey results, the average age of a mechanical shop is 20 years. Of those responding, only 4 percent listed their business as a franchise or conglomerate shop.
On the number of service bays in the shop, the largest number of respondents - 39 percent - have three to five service bays. Twenty-seven percent report having six to eight bays and another 27 percent have more than nine mechanical service bays. The responding establishments employ an average of four technicians per service facility; the average number of total employees is seven. Compensation for technicians shows a slight shift from hourly to salary. The 1996 How's Your Business? survey showed 40 percent of technicians receiving hourly wages and 10 percent on salary. 1997 survey results demonstrate that 36 percent of technicians receive an hourly wage as compensation and 13 percent are on salary. Seventeen percent of the shops pay based on a percentage of flat rate, 12 percent pay a percentage of labor rate and 14 percent compensate with an hourly wage plus commission. As in 1996, the least used pay structure at shops remains salary plus commission, representing just 5 percent of the respondents' shops.
Similar to the results of the 1996 survey, the majority of responses cite journeymen technicians (62 percent) and entry-level technicians (21 percent) as the strongest employment needs for the upcoming year.
Sales
Sales remain steady among mechanical shop respondents. According to survey results, the largest number of respondents - 37 percent - said gross annual sales revenue in 1996 was between $250,000 and $500,000. The next largest group - 17 percent - reported sales between $500,000 and $750,000. Fifteen percent ranged between $100,000 and $250,000, while 14 percent placed themselves within the $750,000 to $1 million range. Eleven percent showed revenues greater than $1 million.
When asked to compare 1996 sales to current 1997 sales, 63 percent experienced an increase in sales. Twenty-three percent saw no change and 15 percent experienced a decrease in sales. The most cited reason for sales increase was attributed to marketing and advertising efforts followed by a better economy and increase in labor rates. Shops report that poor weather conditions and an increase in vehicle accidents had minimal effects on the increase.
The majority of shops - 70 percent - reported that most business occurs during the summer season. This was followed by 11 percent listing fall and 8 percent responding that winter was their busiest season. Spring slipped in at 6 percent. According to the survey, Monday is the busiest day of the week for 51 percent of shops. Friday follows with 20 percent of shops listing it as their busiest day. The remaining mid-week days totaled 23 percent.
According to the mechanical survey, an average ticket per job is $294 and the average number of jobs performed per week is 64.
What do shops predict for 1998? Optimism shows through the numbers. Sales increases are projected by 85 percent of respondents, while 12 percent expect no change and only 2 percent are preparing for a decrease in sales figures.
Comparing 1997 to 1996 in terms of profits, 61 percent anticipate a slight increase and 10 percent estimate a large increase. Twenty-seven percent are less optimistic, expecting either no change or a slight decrease in profit.
Slightly more than two-thirds of shops (68 percent) have seen a slight to large increase in the number of customers, with the remaining one-third experiencing either no change or a slight decrease.
Compared to last year, 62 percent of shops reported a slight to large increase in the number of jobs performed per month. The number of employees among shops has remained constant (62 percent) or shown a slight increase (22 percent).
Eighty-eight percent think that business will be better in five years.
Advertising & Marketing
Advertising remains an important avenue for generating sales, a strong customer base and name recognition among mechanical shops. Eighty-one percent of mechanical shops advertise their business. An annual advertising budget per shop is estimated at $14,205. This shows a slight increase from the 1996 figure of $12,701. The majority of these shops utilize the Yellow Pages. This is followed in descending order by direct mail, newspaper, radio, the neighborhood shopper and television. The Internet has demonstrated an increase in popularity with 10 percent of shops now adding this form of advertising to their marketing package.
Customers are not deterred by distance, according to shop responses. The survey showed that 31 percent of a shop's customer base extends 30 miles or more. An additional 20 percent stated that customers drive from 20 miles away for service. Sixteen percent maintain that a majority of their customers come from a 15-mile base; while 19 percent gather the largest portion of their customers from a 10-mile base. The remaining 12 percent estimate their customer base is within five miles of their shop.
Customer loyalty remains a strong profit factor for the majority of mechanical shops. According to survey results, 39 percent of shops say 80 percent to 89 percent of their customer base are repeat customers. An additional 27 percent feel that 90 percent to 100 percent of the customers are loyal repeaters. Twenty-three percent of shop owners reported a 70 percent to 79 percent loyal customer base. Only 12 percent of shops service less than 69 percent repeat customers.
Only 36 percent of mechanical shops are performing customer satisfaction surveys to gather suggestions on their service and areas where improvements might be beneficial. The remaining 64 percent have no such formal program. A minority of shops - 12 percent - also utilizes company newsletters.
Education
With 64 percent of shop technicians being ASE-certified, education and certification have become top priorities for the majority of mechanical shops. Fifty percent of survey respondents increased the amount of education their technicians received last year. Forty-four percent kept the education for technicians the same and a small percentage (5 percent) decreased education for technicians. Over the past 12 months, shops reported that on average, 36 hours of updated education, including self-study, was undertaken by the typical technician.
Educational materials for technicians come from several strong sources. The largest portion of technicians (73 percent) gained educational materials from trade magazines, followed closely by product manufacturers (71 percent), association seminars (66 percent), industry seminars (59 percent) and in-house programs (41 percent). Based on the results, technicians are not limited in their sources of educational materials.
To locate new technicians, shop owners and managers rely heavily on referrals and word-of-mouth (43 percent). Other options include attracting technicians from other shops (17 percent), vo-tech schools (11 percent) and classified advertising (13 percent). Apprentice programs provide only 3 percent of employee recruitment.
Industry issues
Finding good technicians remains the issue having the largest impact on the mechanical repair industry, according to 35 percent of respondents. Twenty-six percent also pinpointed keeping up with technology as an issue to contend with. These issues are followed by industry image (13 percent), repair information availability (9 percent), increased competition (8 percent) and regulatory compliance (6 percent).
The concern of industry image is changing. In 1996, 16 percent of respondents felt image was a major concern; this has slightly decreased to 13 percent in 1997. Is the public's image of automotive repair changing? According to 1997 survey results, 52 percent believe the image is improving. An additional 4 percent are of the belief that the image is improving rapidly, while 36 percent feel the image is staying the same with little or no change. Only 7 percent of those surveyed report an image decline.
Collision
Ninety percent of the respondents for the 1997 How's Your Business survey are shop owners. The remaining 10 percent are ASA shop managers. The average age of the respondent is 47 years old with an average of 26 years of experience in the collision repair industry. Results show that 85 percent of shops are family-owned. The average age of a collision shop is 24 years, according to AutoInc.'s survey. A small portion - 9 percent - owns more than one shop and 7 percent are part of a franchise or conglomerate.
Shop size varies slightly among respondents, with close to two-thirds (58 percent) having 12 or more bays. This is followed by 22 percent of shops having nine to eleven bays; 14 percent utilize six to eight bays; and 6 percent work with five bays or less. On average, a shop employs eight collision repair technicians. Forty-eight percent of technicians are compensated with hourly wages followed by 20 percent receiving a percentage of flat rate; 16 percent receive a percentage of labor rate. Other forms of compensation include: hourly wage plus commission (9 percent), salary (4 percent) and salary plus commission (2 percent).
Collision shops predict that locating journeymen technicians (55 percent) and entry level technicians (27 percent) will be the largest employee-associated need during the next year.
Sales
Gross annual sales revenue of respondents for 1996 demonstrates an even cross section. According to the results, 20 percent reported $250,000 to $500,000 in revenue in 1996, followed closely by 18 percent with $500,000 to $750,000, and 16 percent with sales revenue between $1 million and $1.5 million. Fourteen percent cited $2 million plus and 13 percent ranged between $750,000 and $1 million. Eleven percent earned between $1.5 million and $2 million in 1996. The remaining 8 percent represents $250,000 or under.
When asked to compare 1996 sales to 1997 sales, 61 percent of those surveyed reported an increase in sales, 20 percent saw no change as compared to 1996 and 19 percent noticed a decrease in sales.
Forty-three percent of shops are operating within their busiest season during wintertime. The collision repair business proves to be a year-round industry; with summer following closely at 25 percent and fall and spring being represented with 9 percent each.
During the week, as in the mechanical repair responses, Monday (57 percent) and Friday (25 percent) are the busiest repair days. The remaining 25 percent is dispersed throughout the week.
According to the 61 percent who reported experiencing an increase in sales, 29 percent attribute it to marketing strategy and advertising; 25 percent cite more insurance referrals (including DRPs), 19 percent point to a better economy and 14 percent suggest other various reasons as the sales increase motivator. Poor weather conditions and more vehicle accidents were mentioned as factors by only 8 percent of respondents.
Comparing profit in 1996 to 1997, 53 percent note a slight increase, 10 percent are seeing a large increase while 12 percent report no change in profit. Twenty percent of respondents are noticing a slight decrease in profits. Only 3 percent of collision shops are exposed to a large decrease in profit compared to 1996.
In correlation to profit changes, 54 percent also noted a slight increase in terms of their customer base, while 15 percent are seeing a large increase. Another 15 percent report no change. A slight decrease in their customer base is reported by 14 percent and 2 percent announced a large decrease.
Jobs per month correspond with such figures with 52 percent reporting a slight increase, 12 percent receiving a large increase, 17 percent seeing no change, 15 percent noting a slight decrease and 3 percent registering a large decrease.
Technical employment remains an optimistic constant among collision shops with 52 percent reporting no change, 32 percent promoting a slight increase and 2 percent having a large increase in employees. The majority of the remaining 15 percent recorded a slight decrease.
Collision shops also reported that the average job ticket equals $1,545 and the average number of repair orders per week is 28. Positive attitudes prevail among collision shops. When asked what shops expected sales to do in 1998, an overwhelming majority of 85 percent expect an increase; 14 percent anticipate no change and a slight 2 percent foresee a decrease in sales. Eighty-four percent also project business will be better in five years.
Marketing & Advertising
Marketing plans and advertising play a role with 88 percent of collision shops surveyed. Collision shops estimate an average $18,031 will be spent on advertising in 1998. According to those respondents who advertise, 82 percent utilize the Yellow Pages as an advertising medium. This is followed by 36 percent using radio, 34 percent incorporating newspaper ads, 19 percent investing in their local neighborhood shopper and 15 percent sending out direct mail pieces. Forms of advertising used to a lesser degree include cable television (12 percent), billboards (11 percent) and broadcast television (7 percent). The Internet is quickly becoming a useful marketing tool for collision shops with 12 percent funding Internet advertising. The remaining 18 percent incorporate other forms of advertising or supplied no response.
Providing quality service proves to be an effective means of securing customers. On average, 56 percent of collision shop customers are repeaters. The gender distribution is balanced at 50 percent male and 50 percent female.
Differing from mechanical shops, half of collision shops questioned provide a customer service survey.
Education
When asked about the amount of education a technician received in the last year, 53 percent stated educational training stayed the same and 43 percent saw an increase in education. On average, 18 hours of updated education (including self-study) were undertaken by the typical collision technician in the past 12 months. Sources for such come from a combination of the following avenues: association seminars (80 percent), product manufacturers (70 percent), trade magazines (57 percent), industry seminars (51 percent) and in-house programs (49 percent). Nearly half of collision shop respondents (48 percent) are ASE certified and 68 percent are I-CAR trained.
Common techniques used by shops for locating new technicians include: 46 percent rely on referrals and word-of-mouth, 20 percent attract employees from other shops, 16 percent utilize local vo-tech schools, 9 percent place classified advertisements and the remaining 6 percent come from apprenticeship or industry programs.
Industry Issues
When asked what issues currently have the largest impact on the collision repair businesses, 34 percent of respondents pinpointed insurance industry influences, down 4 percent from last year. Other issues requiring attention include finding good technicians - 24 percent - and direct repair programs (DRPs) - 18 percent. The remaining percentages are distributed fairly evenly among labor time allowances, caps on labor hours or materials, industry image, regulatory compliance, keeping up with technology and diminished value.
DRPs stimulated a large response with 70 percent of ASA collision shop survey respondents participating in an average of four programs each. According to survey results, 32 percent of a participating shop's volume is generated from DRPs. The impact of DRPs on the collision repair industry is still undetermined. Twenty-two percent of collision shops think DRPs have a positive impact, 39 percent are undecided and 35 percent have concluded that DRPs are having a negative effect on the industry.
An average of 12 percent of crash parts used in repairs at ASA collision shops are salvage parts. Two-thirds of collision shops acknowledge sometimes using salvage parts (used, recycled parts) and an additional 32 percent use salvage parts only when the insurance company requires it. One percent of shops never uses salvage parts. A vast majority (82 percent) of collision shops surveyed believes that there should be a "grading" system to rate the condition and quality of salvage parts and assemblies.
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How's your business? || EGR systems: operation and diagnosis || Achieving pre-accident condition, avoiding diminished value || Tax reform: past, present, future || Coping with extended warranties || Value-added services build loyalty || Guest Editorial: It's time to role up our sleeves || Tech Tips || News Briefs || Taking The Hill || Around ASA || Shop Profile || Net Worth || Chairman's Message
AutoInc. Magazine ®, Vol. XLV No. 12, December 1997