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How's Your Business?Posted 12/9/1999By Denise Caspersen
Mechanical Graphs: Mechanical: Top 5 Employee Benefits Mechanical: Advertising Options In keeping with tradition, the Automotive Service Association (ASA) recently conducted its seventh consecutive automotive industry survey. The annual survey provides a look into mechanical and collision facilities, their sales and marketing techniques, descriptions of facility owners, managers and technicians, expectations for the coming year 2000, industry concerns and industry involvement. The survey was mailed in September 1999 to randomly selected ASA collision and mechanical members. Results are based on a 10 percent response from the surveyed mechanical members, and a 10 percent response from surveyed collision members. All survey responses are anonymous. By using a 10 percent sample size, there is a confidence level of 95 percent accuracy with a confidence interval of +/- 6 percent. What this means is that when reading the results of the survey, you can be 95 percent certain that the result given is representative of the population with a variation of +/- 6 percent on the final number. The independent mechanical industry has continued to increase in overall size and revenue. The latest number from the Bureau of Labor Statistics puts general auto repair facilities at 68,390 with 265,518 employees. This is an increase from 1996 when shops numbered 66,870 facilities with 252,107 employees. The total sales by general independent repair facilities rang up at $30.3 billion, an increase from 1996 when the till totaled $28.9 billion. These figures come from the U.S. Department of Commerce and do not include the approximate 27,000 auto dealerships with service facilities that took in approximately $62.9 billion in parts and service in 1997 according to the National Automobile Dealership Association.
Shop Profile To achieve such sales numbers, the average ASA mechanical shop has been around for 19 years, is composed of seven bays, and averages 5,470 square feet. According to survey results, an average of four technicians perform 57 jobs per week and ring up an average ticket of $302. While the jobs per week decreased this year from the 1998 report of 70, the average ticket increased a few dollars from last year's average of $295. In keeping with past survey results, 49 percent of the ticket accounts for parts and 50 percent of the ticket accounts for labor. In addition to an average of four technicians, ASA mechanical shops also employ an average of two managers and three support staff. The majority of ASA shops are independent (95 percent) and family owned (85 percent). Four percent of shops are franchise or conglomerate owned. Currently, consolidation has not become a trend within the independent mechanical shop sector. Shop expansion is on the agenda in 2000 for 39 percent of mechanical shops. This trend follows the 27 percent that expanded or changed facilities in 1998. Along with shop expansion, ASA shops are also planning equipment purchases. Of the 157 responses regarding equipment purchases, 32 percent are planning on purchasing lifts, 20 percent are looking into diagnostic equipment, 19 percent will be adding additional computer hardware, and 15 percent plan on purchasing tire and alignment equipment. Other anticipated purchases include computer software (7 percent) and A/C equipment (5 percent).
Owner Profile Owning and managing a repair facility takes a large amount of time and dedication. Along with that, ASA shop owners also understand the importance of being involved in the industry and promoting a technical field that keeps more than 200 million vehicles on the road. Currently 18 percent of ASA shop respondents are serving on advisory boards of vocational schools and 67 percent are willing to sponsor an apprentice, co-op or work-study student.
Technician Profile According to the How's Your Business results, 82 percent of employers fund the continuing education of their technicians. Only 3 percent of respondents rely totally on their technicians to fund their education. Thirteen percent of respondents incorporate a system in which both employer and tech finance the technician's continuing education. Gaps in the percentages for the sources of education for technicians were slim. According to respondents, sources included product manufacturers' information, 23 percent; industry seminars and trade magazines, both at 20 percent; association seminars, 19 percent; and in-house programs, 16 percent. Compensation of technicians closely resembled the 1998 results. According to the 1999 respondents, 31 percent of technicians receives an hourly wage. This is followed by 20 percent receiving a percentage of the flat rate, 19 percent receiving a salary, 12 percent being paid hourly plus commission, 7 percent salary plus commission, and 10 percent receive a percentage of the labor rate. On average, an entry-level technician can expect to receive $21,715. Other benefits supplied by employers included 91 percent providing paid vacations and work clothes, 83 percent of ASA shop owners covered the cost of training and 68 percent funded a portion of medical insurance costs. When the end of the year rolls around, 44 percent of shop owners give their employees a yearly bonus. Life insurance is covered by 35 percent of the shops and 21 percent also offer some form of dental insurance. Tools are supplied as a benefit by 20 percent of ASA mechanical shops. Thirteen percent of shop owners offer eye care insurance. When respondents were asked to rank employee categories they were in the most need of, journeymen received the loudest cry at 48 percent. This is followed by 30 percent in search of entry-level technicians, 9 percent looking for service counter help, and 6 percent wanting customer service specialists. An average of one technician left the shop in 1998, balanced by an average of one technician hired. Although shops are replacing technicians, the skill level of the new technician is less than the skill level of the one leaving the facility. Departing technicians are opting for retirement, new occupations or other repair facilities. Survey results show new hires are found through referrals or word of mouth advertising (55 percent), vocational schools (14 percent), other repair facilities (10 percent), or classified advertisements (10 percent). Only 3 percent of new hires come from an apprentice program, however, 67 percent of respondents said they would be willing to employ an apprentice, intern, work-study or co-op technician.
Sales Forty-four percent attributed their 1999 sales increase to marketing and advertising campaigns. A better economy was cited as the main reason by 33 percent of respondents, and 20 percent felt that an increase in labor rates had created an increase in sales for 1999. Poor weather conditions were cited by 3 percent as the main reason for their sales increase. Other reasons included shop expansion, management, employees and customer service. When comparing 1999 to 1998 in terms of profit, 60 percent of ASA mechanical shops surveyed cited a slight increase. This was followed by 14 percent finding no change in profit, 13 percent seeing a large increase, and 12 percent noticing a slight decrease. Comparisons of the customer base for 1999 and 1998 brought similar results. A slight increase has been experienced by 60 percent of those responding, followed by 19 percent experiencing no change. Only 12 percent expect a large increase in their customer base; 7 percent expect a slight decrease. Although survey results show the average number of jobs per week decreased from 70 in 1998 to 57 in 1999, 54 percent of respondents felt their total jobs per month slightly increased in 1999. A large increase in the number of jobs per month was felt by 8 percent of ASA members, and 21 percent reported no change. A slight decrease in jobs per month was cited by 14 percent. Most respondents (64 percent) saw no change in the number of employees in 1998 compared to 1999. A slight increase in the number of employees was cited by 23 percent, while 9 percent reported a slight decrease. The remaining 3 percent are divided among no response and a large increase. Again this year, mechanical shops report that summer is the busiest time of the year, with 78 percent singing its praises. All other seasons registered in the single digits with fall being the busiest season for 8 percent; winter, 5 percent; and spring, 5 percent. The busiest day of the week also resembles the 1998 results with Monday wracking up 53 percent, followed distantly by Friday, 19 percent; Tuesday, 12 percent; Thursday, 9 percent; and Wednesday, 5 percent. Weekends are showing slim results with Saturday being selected by 3 percent and Sunday not showing any results. Projecting into 2000, 86 percent of ASA mechanical shops expect an increase in sales. Ten percent don't anticipate a change, and only 2 percent expect a decrease in sales.
Customer Demographics To keep in touch with the customer after the job is completed, 40 percent of mechanical shops perform customer satisfaction surveys. Eleven percent of ASA mechanical shops use newsletters as a form of customer contact and marketing. Of those customers coming through ASA mechanical shop doors, 50 percent are women and 50 percent are men. That has changed only slightly from 1998 when 49 percent were women and in 1997 when 48 percent were women. When asked to determine the distance of their customer base, 33 percent responded that their customer base extended 30 miles or more. Twenty percent report a 10-mile customer base, and 19 percent hit the 20-mile mark. Ten percent said they receive the majority of their customers from as close as five miles or less.
Marketing/Advertising It isn't that repair shops are not advertising, 85 percent of ASA mechanical shops reported using advertising to market their repair facility. Only 14 percent do not advertise and rely strictly on word of mouth and their reputation. According to the How's Your Business survey results, the most effective advertising medium cited by respondents was word of mouth at 77 percent. Yellow Page usage has shown a decrease during the past few years with percentages dropping from 76 percent in 1997 to 70 percent in 1998 and to 59 percent in 1999. More than one advertising medium is often used by repair facilities, so the percentages will not add up to 100. The next choice for advertising following the Yellow Pages is direct mail at 41 percent. Direct mail has remained a constant 40 percent to 42 percent for the past three years. Newspaper received 20 percent of the respondent's votes, while radio slipped from 23 percent to 18 percent. The "neighborhood shopper" or "penny-saver trade publications" also decreased a bit as a favorite advertising medium going from 21 percent to 16 percent. Although 32 percent of ASA mechanical shops use the Internet to advertise their shop, only 10 percent make it their primary advertising medium. The remaining percentages are scattered among broadcast television, cable television, billboards and cause marketing events. With the majority of ASA mechanical shops having Internet access at home or within their shop (83 percent), the Internet has quickly become a resource of advertising, research, entertainment and discussion groups. Of those having Internet access at home or at their shop, 38 percent of shops reported using the Internet to advertise their shop with a Web site. The Internet is also being used by 79 percent for research. Finding news is a priority of 42 percent of Internet shop users. Purchasing products off the Internet is becoming less intimidating - 40 percent of those surveyed report using the Internet to purchase products. Entertainment is sought by 50 percent of shop Internet users. Chat and discussion groups on the Internet are used by 28 percent of those surveyed.
Industry Issues As in the past, ASA strives to improve and enhance the automotive repair industry's image and as survey results show, strides have been made. According to respondents, 58 percent of mechanical shops feel that the public's perception of automotive repair facilities is improving. This is followed by 33 percent reporting the image has remained the same. The remaining 9 percent is equally divided among members who feel the image is rapidly improving and those noting a decline in the public's perception of automotive repair. Collision Graphs: Collision: Top 5 Employee Benefits Collision: Advertising Options The independent collision industry has undergone some consolidation changes the past few years, but the number of facilities has only slightly changed. According to the U.S. Bureau of Labor Statistics, collision shops numbered 36,690 in 1997 up from 36,095 in 1996. These are the most current figures available. Total sales figures for automotive body shops also increased to $19.8 billion in 1997 from $18.8 billion in 1996, according to the U.S. Department of Economics. These figures do not include the approximate 14,000 dealership collision facilities, which registered total sales for 1997 at approximately $7 billion, according to the National Automobile Dealership Association.
Shop Profile To achieve such numbers, the average shop has been in business for 24 years, has 17 bays and is approximately 10,388 square feet. On average, 14 employees are involved in the weekly repair of 21 vehicles. Jobs per week are down significantly from 1998, which was reported to be 35, but shop owners are optimistic about sales and the coming year. An average team of eight technicians, three management staff and three support staff accomplishes an average cycle time of five days. This group effort results in an average ticket of $1,690. The 1999 average ticket rate is down from the 1998 ticket of $1,850, but up from the 1997 ticket of $1,545. Parts and labor percentages have remained fairly constant coming in at 45 percent parts, 49 percent labor and the remaining percentages being devoted to shop supplies and waste fees for 1999. Direct repair programs (DRPs) continue to be an intricate element of the collision repair facility. According to 1999 survey results, 36 percent of a shop's business comes from DRP referrals and, on average, shops belong to five different DRP programs. Although the number of DPR programs that shops are participating in has increased by one, the percentage of business has decreased from 41 percent in 1998. Not all shops are DRP members, but a solid 81 percent are. This is up from the 70 percent that reported DRP participation in 1998 and 1997. Prior to the Illinois court's ruling concerning State Farm Insurance Co. and aftermarket parts usage, ASA collision shops were asked in the 1999 How's Your Business survey to cite the percentage of parts used that were OEM, non-OEM, and salvaged/recycled. OEM parts received the largest percentage, registering a healthy 69 percent. That's up 6 percent from last year's 63 percent. Non-OEM parts usage in 1999 remained the same as 1998 with 16 percent. Salvage/recycled parts usage was 20 percent. These percentages total more than 100 because some salvage/recycled parts may be either OEM or non-OEM part types. When asked what the impact of DRP programs have on the collision industry, 36 percent of ASA collision shops responded positively. This was almost counter balanced by a 32 percent undecided response. DRP programs are perceived to have a negative impact on the collision industry by 27 percent of ASA shops. The jury is still out for the 5 percent who chose not to provide an opinion. Expansion or renovation is on the agenda for 40 percent of responding collision shops for 2000. That is a bit above the 33 percent that expanded or renovated in 1999. Equipment purchases are also planned for 43 percent of ASA collision shops next year. The favored piece of equipment up for purchase by collision shops is paint booths at 33 percent. Next in line are frame machines (23 percent) and lifts (15 percent). Computer software, computer hardware and spot welders are on the equipment purchase agenda of 9 percent of shop owners. Prep stations and down draft booths round out the bottom of equipment purchases with 8 percent and 6 percent purchase expectations, respectively.
Owner Profile Keeping up standards of excellence, 62 percent of survey respondents are ASE certified and 85 percent are I-CAR trained. Education and training are obviously important elements of being a skilled, qualified shop owner or manager. Although these managers have accumulated a large amount of education, 43 percent are continuing to increase their education by taking AMI management courses. Currently, 31 percent of respondents are serving on the advisory board of a vocational school and 75 percent are willing to sponsor an apprentice, co-op or work-study student.
Technician Profile According to the 1999 How's Your Business survey, 79 percent say employers are primarily responsible for a technician's continuing education. That's a nice incentive for the technician who wants to keep up with a changing industry. Within 16 percent of collision repair facilities, the funding of a technician's education is co-sponsored by both the employer and the technician. Only 1 percent of responding shops requires the technician to foot the entire bill. With the largest collision trade show in the industry (NACE) being sponsored by ASA, it stands to reason that association seminars would act as an educational source. Twenty-two percent of respondents cited association seminars as an educational source, followed closely by paint manufacturers (21 percent). Product manufacturers and trade magazines were also mentioned at 18 percent and 15 percent, respectively. Other sources of education used by shop owners, managers and technicians include industry seminars (13 percent) and in-house programs (10 percent). Compensation for entry-level collision technicians rose compared to last year's salary of $19,945. Compensation for an entry-level technician in 1999 averages $20,278. This is a national survey average and may vary throughout the country. Compensation of technicians, not specifically entry-level, comes in various forms. According to 1999 survey results, 32 percent of technicians receive an hourly wage and 26 percent are compensated from a percentage of the flat rate. Salaried technicians average 14 percent, and 11 percent of technicians receive a percentage of the labor rate. Other forms of technician compensation include hourly plus commission (10 percent), salary plus commission (3 percent), and team plans (3 percent). In addition to monetary compensation, 91 percent of collision shops also offer employees a paid vacation and 82 percent provide training and seminars. Medical insurance is provided by 79 percent of ASA collision shops. Life and dental insurance rank a bit lower at 42 percent and 30 percent, respectively. With the understanding that personnel appearance has a positive affect on the shop's image, 77 percent of shops provide work clothes. A yearly bonus is given to shop employees by 50 percent of respondents. Eye care (19 percent) and tools (17 percent) come in at the bottom of the benefits list. When asked to rank several employee categories in order of need, 47 percent cited journeyman technicians as their primary need, followed by entry-level technicians at 33 percent. Other employee needs included customer service or front counter (7 percent), management (5 percent) and estimators (3 percent). A "no response" rate of 5 percent was also tabulated here. When asked to report the number of technicians leaving their shop in 1998, owners and managers reported an average of two technicians. To determine if a current deficit existed, the number of technicians hired was also tabulated at an average of two technicians. Sources for finding collision technicians closely resembled those used by mechanical shops. According to survey results, 57 percent of new hires comes from referrals and word-of-mouth contacts. Vocational schools produced 16 percent of new hires and a smaller percentage (9 percent) was garnered from other collision repair shops. Paid classified advertising had a return on investment for 8 percent of repair facilities. The apprentice/industry program option for locating technicians remained at 4 percent. (This percentage seems curiously low considering 31 percent of owners said they serve on educational advisory boards and 75 percent are willing to sponsor an apprentice, co-op or work study student).
Sales Although the tax forms weren't completed, those projecting a sales increase are estimating 15 percent better billing in 1999. For those finding it more difficult this year compared to 1998, a 10 percent decrease in sales is expected at the end of 1999. Sales increases were attributed to many things, with the strongest of those going to marketing/advertising strategies and an increase in insurance referrals (DRP programs) at 28 percent and 27 percent respectively. The collision industry is one industry that is happy when it rains and snows and hails. Poor weather conditions contributed to 20 percent of shops that responded to a sales increase. A better economy was cited by 16 percent and 8 percent used an increase in labor rates to improve their sales numbers. Consolidation turned up a slim 1 percent citation for sales increases along with other reasons such as: customer referrals, repeat customers and building expansions. When comparing 1999 to 1998 in terms of profit, 51 percent found a slight increase. Nineteen percent of ASA collision shops cited no change in profit. A disappointed 18 percent reported a slight decrease in profit. On the extremes, 9 percent pronounced a large increase in profit while 2 percent combated a large decrease. Customer base comparisons for 1999 to 1998 resembled those of profit with 53 percent chiming in with a slight customer increase. Twenty-two percent of collision shops recognized no change in their customer base while 13 percent noted a slight decrease. A large decrease and no response both clocked in at 1 percent. Although the number of jobs per week decreased from 35 in 1998 to 21 in 1999, 49 percent of respondents cited that the number of jobs per month showed a slight increase. Like above, 22 percent saw no change and 16 percent felt a slight decrease in the number of jobs per month. A fortunate 10 percent cited a large increase in the number of jobs entering their collision repair facility. As for the number of employees working in a shop in 1999 as compared to 1998, the numbers showed some variation. According to survey results, 54 percent of shops retained the same number of employees. A slight increase was noted by 28 percent while 11 percent saw a slight decrease. Large increases and decreases were far and few between at 3 percent and 1 percent, respectively. As for the busiest time of year, two seasons ran neck and neck this year. According to survey results, 36 percent of ASA collision shops are busiest during the summer followed closely by 30 percent who recognize winter as their busiest season. Fall brings the most business for 14 percent of shops and spring strikes a high customer cord for 7 percent. Thirteen percent of those questioned provided no response to this seasonal question. Resembling mechanical shops, the busiest day of the week was cited as Monday, according to 62 percent of collision shops. The workdays in the middle - Tuesday, Wednesday and Thursday - were cited to be the least busy for new job acquisitions with a combined percentage of 12. Things seem to pick up Friday for 20 percent of ASA collision shops. Projecting into 2000, collision shops appear to be optimistic with regard to sales. A strong majority of 79 percent are expecting an increase in sales for the new millennium. This is followed by 18 percent taking a no change attitude. Only 3 percent anticipate a decrease in sales for the year 2000.
Customer Demographics We all know that collision shops are visited when accidents happen. One way that 10 percent of shops are keeping their name in front of consumer is with a customer newsletter. This is up from the 6 percent that produced newsletters in 1998 and 1997. When asked to determine the distance a shops customer base extends, 35 percent stated that their base was 30 miles or more. Another 23 percent selected the 20-mile range. A significant 10-mile span customer base was ranked highest by 20 percent of respondents. Falling in between these two was the 15-mile range, which garnered 15 percent. Three percent of shops cited that their customers like to keep things in close range at 5 miles or less.
Marketing/Advertising Although the amount spent on advertising dropped, 84 percent of collision shops reported advertising. Selecting the best medium with which to advertise or market their shop has become a strong focus of shop owners. According to survey results, 84 percent found word of mouth to be the strongest advertising medium. That was followed by a use of the Yellow Pages by 59 percent. Often times, shops use a combination of advertising media, averaging between two and three various types. Newspaper and radio were part of advertising campaigns used by 26 and 25 percent, respectively. The neighborhood shopper (16 percent), the Internet (16 percent), cable television (14 percent), direct mail (13 percent), and billboards (11 percent) all received percentages in the teens. Broadcast television, the most expensive of advertising media is used by 5 percent of collision shops. Just as the Internet is increasing within the general population, so it is within collision repair facilities. According to survey results, 79 percent of collision shops have access either at home or at their repair facility. Of the shops having Internet access, 69 percent use the Internet to research products. The Internet is also used for entertainment by 45 percent. News follows close behind entertainment at 41 percent. Thirty-seven percent of collision shops reported using the Internet to advertise their shop. Purchasing products off the Internet has become less intimidating to 31 percent of shop owners and managers with Internet access. Chats and discussions also take place on the Internet for 18 percent.
Industry Issues
Conclusion Currently the collision side of automotive repair is dealing with consolidation and aftermarket legal issues. ASA collision shops are well-equipped for the future and the coming millennium. The coming years should produce interesting changes between collision DRP programs, insurance company requirements and consumer involvement. The mechanical industry has yet to begin a strong consolidation process within independent repair facilities. Shop owners are demonstrating a more active role in advertising and community involvement. The public's perception of the automotive technician continues to improve. ASA mechanical shops are part of the reason for such changes. Shop owners, managers and technicians have realized the importance in creating a positive environment for employee and customers alike. The final outcome of such strategies equal increased sales and increased pride.
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