Earlier in the week, in Profit Series part 14, I posted an estimate with photos for a quarter panel replacement on 2017 Traverse.
Last week’s TEST estimate had approx. 40 estimate lines, 43 hours of labor and approx. $2473 in gross profit. This was an actual job we did in our shop a while back for Safeco Insurance.
After a thorough Blueprint, we sent in our initial estimate with the GM procedures for quarter panel replacement/seatbelt inspection/battery disconnect/SIR disabling and quality supporting photos. We then called the virtual appraiser and had just one initial 5 minute phone conversation with him. We ordered parts that day, even without their initial estimate returned. Some may think this to be risky. We just keep moving forward unless there is a chance of a total loss. Why? Well, we have a signed authorization to repair from the vehicle owner and idle inventory is the king mother of all wastes. We then sent in one more supplement near the end of repairs, with invoices for paint & materials, quarter panel materials, tire, scans, alignment etc.
Between our initial estimate and Sup 1, we sent in a total of 75 photos. Safeco came back after supplement one with 131 estimate lines, 93.7 labor hours and a total of $9,524.28 W/O sales tax (look at my photos). We DIDN”T have to send in 6 supplements, spend 3 hours with back and forth email wars, no customer involvement and no extra customer pays outside of their deductible. Remember, “Cost is not numerical!”
After a short phone conversation, sending in proper photos and documentation we nearly doubled last week’s estimate GP to approx. $4657. My shop made good GP, my technicians made good $ and we went on to the next one.
My goal in taking time to do this Profit Series is to make people think. I am sure there are naysayers, right now who are saying, “That car should have been totaled!” or “At my shop, we could have gotten 140 estimate hours between the insurance company and the owner paying the short pays.” My response is, it was my customer’s vehicle in my shop and not yours. My shop was content with the amount of work vs the amount paid.
I was talking with a very successful shop owner last week, who’s average RO is $8500. It made me feel rather inferior, at my shops pint sized average RO at $5000. Then I came back to reality and remembered, there are many factors in making a high net profit. Good estimating is just one of them. At the end of the day, you must find your sweet spot for your shop to run with high profitability.
Just for estimating, here are some good benchmarks to shoot for. I am in Mike Anderson’s Business Council. Mike has preached for years, to work towards the 30-20-10 rule. Otherwise, let’s take an average RO of $5000 like my shop. What Mike is saying is, 30% or $1500 of the estimate should be BODY, FRAME & MECHANICAL LABOR, next 20% or $1000 of the estimate should be REFINISH LABOR and lastly, next 10% or $500 should be PAINT & MATERIALS. The remaining 40% or $2000 is for list prices for parts & sublets.
It is a very good idea to look over your P&L with the same thinking.
Of anytime in my 37 years in the industry, RIGHT NOW is one of the best opportunities to push for higher rates. This is due to the very high customer demand for collision repair and a 40-year high inflation rate. Please don’t have your head in the sand and totally miss this golden opportunity. When this market cycle deflates and insurer’s investments start shrinking, there won’t be any rate increases on the table.
I promise you!’ If YOUR door retail rates are ONLY say $2.00-4.00 above what insurers are paying in your market, YOU are without question part of the rates problem in our industry!! Remember, general repair auto mechanics door rates are $110-170 per hour.