Building A New Body Shop

The purpose of this article, and the subsequent follow ups I will be writing, is to share with our customers what we hope will be valuable information in not only starting but running a successful collision repair facility.

When someone decides they are going to start a business, it usually comes from the thought that “Hey…not only can I do that…but I can do it better than the other guy….AND I can make some money doing it.” As such, the entrepreneurial spirit in us kicks in. We put together a business plan, we weigh the options of cost/loss versus profit and we decide to roll the dice, as it were, because we know we can build a better mouse trap. It is this spirit that drives us all in business.

In starting a collision repair facility, there are essentially two schools of thought. The first being the “corporate” path where one looks to build large scale, borrowing heavily either from banks or investors to finance the designing, building, staffing and managing of a larger facility. The second, and far more common is the “mom and pop” approach. Now arguments can be made as to which one is better for the ROI of the investment, but I tend to believe that the smaller shop is a better investment, long term for the ownership. I recently spoke with a long-time customer of mine about his thoughts on a start up body shop. He had successfully expanded and maintained a very large facility over the past 20 years. His annual gross numbers are well above 2 million. When I asked him his opinion on a best case scenario for starting a body shop, I was surprised to hear that his views are very much like mine considering he chose the “corporate” method and it has done extremely well for him.

When my friend Robert went to the bank 8 years ago, he was asking to borrow about one million dollars to build his new shop. He was looking at increasing the size of his operation by over four times its current state. Expanding his operation from a 4200 square feet facility to a building well over 22,000 square feet was a mammoth undertaking. He rolled the dice, borrowed heavily and has since made a very good living for himself as well as his employees. Yet when asked if he would recommend doing the “corporate” start up, he said he would not and that the “mom & pop” approach was a much better decision for a new shop owner. As we discussed the issue over a few phone calls, these were some of the key points we agreed upon.

1. You should not start any business without a business plan and you will not borrow money from a bank for a new business without a business plan, period. My advice is to seek professional help on this. Look to the Small Business Administration to help you with establishing your plan. They have a large library of “how do I’s” for the small business starter. They can recommend advisors, give ideas about money management and in some case help you secure some funding sources to help in the startup process. Additionally, with the current economy having banks scared of lending money to anyone regardless of your credit score, borrowing history or cash flow, they can help you solidify your smaller business plan. Also getting a bank to lend you a smaller amount of money maybe a little easier if you have a well thought out and structured business plan as long as they feel comfortable with the amounts and the diligence you have put into the research of the plan. Be sure to include studies of the surrounding marketplace. How many other shops are in an immediate proximity to your proposed location? Is there sufficient egress to the property via main intersections or other businesses in the area that can generate potential “drive by” advertising for you? Do you plan to build or perhaps lease an existing building?

Have you made any contacts with potential clients such as rental companies, delivery companies, cab companies, or perhaps municipalities for bid work? Getting secured, contracted work will add bottom line receivables to your business that banks like to see. Be sure to approach suppliers and work out some soft numbers for discounts on parts and materials so you know your margins based on percentages. As you are looking for a location or perhaps looking to build, remember that you can always expand if the business calls for it. Avoid going into “building” debt and not being able to afford to install the necessary tools you need for opening day. Try not to over extend your business on Day 1 by over borrowing. Establish the track record with the lender by borrowing what you need to get your shop up and running and perhaps a small operating cushion. Sell them on the fact that you will be profitable quickly.

2. You will need to further decide how your business plan will be incorporated into a complete business model for your shop. A common misconception is that “bigger makes more money”. This can be true as we see in the larger consolidators. It means, however, as we are starting up more cost, higher risk and an inability, far too often, to survive. Start with what you know. Perhaps you are a good painter/body man. You have a good body man ready to come on board. Perhaps another fellow is a frame man. All you need is a small space, perhaps three bays, a small Chief rack and a paint booth to make it all happen. It is as simple as that. Start small and grow. Do not over commit unless you have something you can fall back on. In Robert’s case, he was maintaining his original shop while he expanded and built his new shop. As you establish your business, your customer base and your reputation, you will see opportunities to expand as your bottom line grows.

3. Pay “cash” as much as possible until you have established your cash flow patterns. Many shops I have talked to over the years get strangled in a cash flow net. It is easy to do regardless of the industry but in our collision repair industry, it happens more than most due to the nature of the business. Fronting repair costs of parts and labor, awaiting payment for past repairs, fleet accounts that pay on 30 or 60 notes or getting stuck with abandoned vehicles are only few of the problems shops face. These and many more lead to faster cash out and slower cash in. So do what you can to minimize credit exposure. Pay cash for parts when possible. Try not to give away profits by “financing” deductibles whenever you can. As you establish your profit margins, you could consider this as an alternate revenue source but I caution against it in a start up shop.

4. Try not to bog your shop down with “stall sitters” such as severe hits or restoration projects. If you have the physical space to store them or move them easily from the work areas, it isn’t a big deal but remember, we are looking at a small shop scenario. The longer a car sits on the frame rack or in a tear down stall waiting on another car to come out means higher turn time and less flow through your shop. Try to establish a quick fix mentality. “Hang and Paint” repairs, while considerably less dollar amounts, tend to be as high or higher profit percentage than heavy hits. The turn time for fender benders is obviously less and can lead to attracting clients such as rental companies or service companies that need their vehicles on the road. A faster turn time for repairs on a rental car equates to more money for the rental company. This can obviously lead to more work in volume from the rental company to your shop. So consider keeping a streamlined process to handle smaller hits more efficiently to be more profitable. I am not suggesting you turn work away but rather be a little selective on the scheduling if you can.

5. Work to make sure your customers are the top priority in your business. They are the reason you are here. Go the extra mile. Make them realize they came to your business for a reason. A business man I know is fond of saying “the difference in ordinary and extraordinary is the extra.” When you think about it, it is the extra things one does for the customer that offsets them from the competition. Taking care of your customer is the easiest way to secure another customer. Generations of family member continue to take their vehicles the same shop because they have an attachment to the repair facility by some means. If you can establish that type of relationship by taking care of the extras, you can grow your client base laterally without much cost. Remember, every job we do in a body shop is like a rolling billboard for the next potential customer. Friends know that “Joe Consumer” wrecked his car. When they ask, you clearly want “Joe” to tell them that every aspect of the repair process was handled professionally, quickly and without incident. Since on the average, drivers only come to need repairs done once every 7 years. That is a long stretch if you are not ambitiously going after more customers. You do this by taking care of the details, the extras.

While these steps might seem simplistically drawn out, they are the cornerstone to a thriving business. What needs to be understood is that there are a lot of moving parts to getting a shop open. These are more fundamental practices. In my next article, we are going to get more involved with the actual shop set up, discuss DRP relationship and how we go about marketing to the public for our new body shop.

Importance of a Complementary Educational Agenda for DR-CAFTA

LAYING THE GROUNDWORKIn September 2000, the member states of the United Nations unanimously adopted the Millennium Declaration. That document served as the launching pad for the public declaration of eight Millennium Development Goals (MDGs) – which include everything from goal one of halving extreme poverty to goal two of providing universal primary education; all to be accomplished before the year 2015. Progress towards the first seven goals are dependent upon the success of goal eight – which emphasizes the need for rich countries to commit to assisting with the development of “an open, rule-based trading and financial system, more generous aid to countries committed to poverty reduction, and relief for the debt problems of developing countries.”1At first glance, the recent actions of Central American countries and the United States to liberalize trade seem to support, at least partially, successful realization of MDG Eight. However, upon closer examination, the picture blurs and the outcome seems uncertain.Following only a year of negotiations, the Central America Free Trade Agreement (CAFTA) or DR-CAFTA (as a result of its recent inclusion of the Dominican Republic), was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the United States in 2004. The agreement, committing each country to reduce its trade barriers with the other DR-CAFTA countries, was ratified by the United States Congress on July 28, 2005.2Rather than attempting to analyze all of the specific economic and social intricacies associated with liberalizing trade in Central America, this brief aims solely to cast light upon the overlap between countries’ efforts to implement the Millennium Development Goal Two/Education for All and their need to implement a complementary CAFTA agenda.Specifically, this document highlights the importance of educational priorities if economic development efforts are to be successful. The premise of the argument elaborated here is that without sufficient prioritized emphasis by Central American countries, multilateral organizations and targeted donor countries on a complementary agenda that directs resources towards education infrastructure, CAFTA will never succeed in assisting these countries in reaching an ever elusive state of “economic prosperity.” In fact, it may deter them from fully accomplishing the MDGs as well.CURRENT STATE OF EDUCATIONWith the need for collaboration between economic and educational efforts in mind, let us examine the current status of MDG Two implementation and broader educational reform in Central America:Over the past fifteen years, most Central American countries have implemented at least basic forms of educational reform. As a result, more children are entering school and spending more days and years enrolled than ever before. On an aggregate level, the larger Latin American and Caribbean region has made considerable progress toward the goal of universal primary education enrollment and according to the most recent UN Millennium Development Goals report, “Net enrollment rates at the primary level rose from 86 percent in 1990 to 93 percent in 2001. The region’s pace of progress in this indicator has been faster than the developing world average (which rose from 80 percent to 83 percent between 1990 and 2001). Net enrollment rates in 23 countries of the region (12 in Latin America and 11 in the Caribbean) surpass 90 percent.” 3 The reality is that, large scale disaster or other unforeseen event aside, all six countries are on target to reach the MDG enrollment targets.Unfortunately, progress towards the target of completing five years of primary education has been slower and few countries in the region can boast success in this arena. The lack of progress towards completion of this target is most directly related to inefficiencies in the education system and the socioeconomic conditions of poor children – both situations that result in high repetition and desertion rates and both situations that must be ameliorated if CAFTA is to succeed. Furthermore, while the number of children initially enrolling in school has increased, the poor quality of education throughout Central America is also certainly a factor in children’s failure to complete their primary education. Quality must therefore also be taken into account when considering educational infrastructure needs.While not necessarily relevant to MDG Two but quite possibly relevant from the CAFTA perspective of needing a skilled workforce, Central America’s educational woes most definitely extend beyond the primary school environment. In response to the recent Millennium Development Goals Report 2005, an Inter-American Development Bank representative wrote “It is difficult to avoid the impression that the countries of Latin America and the Caribbean are falling behind with regard to secondary education. Although this is not included in the MDGs, it is the single most important educational indicator separating upper and lower income groups in the region.” 4
When less than one third of a country’s urban workforce has completed the twelve years of schooling that your or I take for granted, how can they hope to compete in today’s technology-dense free trade environment?HISTORY LESSON -HAPPENING AGAIN?Upon an examination of the Mexico of today as compared to pre-North American Free Trade Agreement (NAFTA) times, a rise in the Mexican poverty rate over the last decade or so is apparent. Rather than being directly due to the implementation of NAFTA, it is more likely that this increase in the poverty rate is attributable to Mexico’s failure to simultaneously implement a complementary agenda; specifically, the inability of Mexico’s poorer southern States to improve their poorly trained workforce, infrastructural deficiencies and weak institutions in order to participate meaningfully in a liberalized trade environment. Rather than gain, the southern Mexican states lost even as the northern states benefited from the liberalized trade environment created by NAFTA.Dr. Daniel Lederman, co-author of the World Bank report entitled “NAFTA is Not Enough” (and issued ten years after NAFTA was originally enacted) explained in an National Public Radio (NPR) interview in 2003 that Mexico’s financial crisis in the 1990s was bound to deepen poverty there with or without NAFTA. Dr. Lederman said:Mexican income dropped in one year, 1995, by six percent. Wages across the board for all Mexican workers, on average, fell by 25 percent in less than a year…Still, NAFTA helped Mexico limit the damage, lifting per capita income at least 4 percentage points above where it would have been otherwise. The bottom line is, Mexico would be poorer without NAFTA today. Clearly trade alone won’t alleviate poverty. But if Mexico makes the right investments, especially in education, the next decade should be better. 5POTENTIAL FOR ECONOMIC SUCCESSAs was the case in Mexico, it is likely that the majority of households in Central American countries stand to ultimately gain from the price changes associated with removing trade barriers for sensitive agricultural commodities and other goods. However, in order for this to happen, as Dr. Lederman suggests above, each country must now make appropriate investments in development efforts (most especially in education) in order to guarantee an equitable distribution of the benefits of these efforts in the future.Simultaneously, it is of critical importance that each country provides for the needs of their most at-risk citizens. In order to guarantee that the children of these families are given the opportunity to be counted among those in school, countries must identify resources, both internally and externally, to provide incentives for families “to invest in the human capital of their children.” 6Examples of such incentives have been implemented through funding from the Inter-American Development Bank and several other organizations in Costa Rica (Superemonos), the Dominican Republic (Tarjeta de Asistencia Escolar), Honduras (PRAF), and Nicaragua (Red de Protecci├│n Social). Most immediately, these incentives (often in the form of conditional cash transfers) serve to increase food consumption, school attendance and use of preventive health care among the extremely poor. In the long run they are intended to assist with poverty and malnutrition reduction and to improve schooling completion rates. As reported by the IDB, “results are proving that it is possible to increase a family’s accumulation of human capital (measured by increased educational attainment and reduced mortality and morbidity) and, as a result, also raise potential labor market returns for the beneficiaries, as well as overall productivity. The programs have had a substantial positive long-term impact on the education, nutrition and health of its beneficiaries, especially children.” 7In the World Bank’s expansive document analyzing CAFTA’s potential impact on Central America, entitled “DR-CAFTA – Challenges and Opportunities for Central America” the authors repeatedly reference technology and emphasize the importance of a complementary educational agenda that is tied to each country’s stage of development and innovation. For example, “for those countries farthest away from the technological frontier -such as Honduras and Nicaragua– the best technology policy is likely to be simply sound education policy… in the more advanced settings of Costa Rica and El Salvador, where adaptation and creation of new technologies is more important, issues of education quality and completion of secondary schooling are more important.” 8 In fact, without ever making specific reference to the MDGs, the authors recommend that the former countries focus on the goal of achieving universal primary education while the latter countries focus their energy on expanding and improving secondary level education. Failing to do so is choosing failure in the open market.Ultimately, rather than seeing CAFTA as a first class ticket to a better economic end – with no strings attached, countries must acknowledge the critical importance of first implementing MDG Two – target three. This target, which says “by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling” 9 is a critically important step towards guaranteeing the emergence of a workforce that can respond to increased marketplace demand and evolving technologies. Without immediate investment in that future workforce via the education system, CAFTA will surely flounder and drag MDG Two along with it.Furthermore, as mentioned above, educational infrastructure must be put into place now that will not only guarantee a higher quality education but will also be made accessible and desirable to Central America’s most at-risk citizens. After all, based on Mexico’s experience, the likelihood of a positive outcome for both CAFTA and MPG Two is slim. Yet the possibility of economic success does exist if we agree to truly choose “Education For All.”CITATIONS1) Millennium Development Goals, Goal Eight, http://www.un.org2) At the time this brief was written (Dec 2005), the agreement still hadn’t been ratified by the Parliaments of Costa Rica, Dominican Republic and Nicaragua.3) The Millennium Development Goals Report 2005, http://unstats.un.org/unsd/mi/pdf/MDG%20Book.pdf4) The Millennium Development Goals in Latin America and the Caribbean: Progress, Priorities, and IDB Support for their Implementation, Inter-American Development Bank, Washington, DC, Aug 05, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=5910885) National Public Radio, All Things Considered, Interview with Daniel Lederman, Monday, December 8, 2003 http://web.lexis-nexis.com/6) The Millennium Development Goals in Latin America and the Caribbean: Progress, Priorities, and IDB Support for their Implementation, ibid7) The Millennium Development Goals in Latin America and the Caribbean: Progress, Priorities, and IDB Support for their Implementation, Inter-American Development Bank, Washington, DC, August 2005, p. 568) DR-CAFTA – Challenges and Opportunities for Central America, Chapter VII: Obtaining the Pay-off From DR-CAFTA, p199.9) Millennium Development Goals, Goal Two, http://www.un.org

Promote Your Photography Sites – Part 1

You may have spent a great deal of time and money creating the perfect Website – your photography images may be superb, but if people cannot find your site your images and talent along with your business may become a white elephant.Promoting your Website is not that difficult but will take up some of your precious time. My advice for you is to set out a few hours per week for this.If your Website is new the chances are that Google, Yahoo or any search engine won’t index your site for a few months. And it may even take several months before they place it to appear when someone types in a search phrase that suits your site. So you need to give your photographs and business a reasonable chance of getting paying customers.When a search engine index’s your Website it looks to see how many links point to your site. The more links you can create the better your site will rank, but only if they are the right kind of links. Don’t spend hours and hours online getting thousands of standard ordinary links. Get links that relate to your site. Get links from other photography sites.Photography Directories are a great way of creating free advertisement for your site and also a great way of getting valuable links to your site that search engines will recognise.Before you submit your Website to directories, research the correct keywords that best describe your site. If your photography site is Landscaped based you need to optimise your site correctly for the keywords Landscape photography.Once you are happy with which keywords best describe your site start submitting your site to Photography Directories. Most photography directories require a return link so you should create a links page for this alone.When you are submitting your website you need to use the correct keywords that best describe your site in the link title to your site. The link title will be the title on the submission form. You will also need to create a good definitive description for your site. This should be no more than twenty-five words and should start with the keywords that best describe your site. This is what people will read – this is where you sell your site – a good description will enable potential customers to enter your site.Once you have completed the form click submit and move on to the next directory. There are many good photography directories online – some specialised in certain areas of photography, more cover all areas of photography. Once you fill out the submission form correctly you will start to see the rewards.Some directories will charge you when creating a listing; my advice is to research such websites before you part with your hard earned cash. Stay away from link farms and link companies that offer you thousands of links – these sites don’t rank well with search engines and may harm your site in the long run.While photography directories are just one way of promoting your site; they are the easiest and quickest way to get started. Creating good quality inbound links to your site will help you achieve excellent search engine ranking for your site resulting in more and more traffic entering your photography site.In part 2 of Promoting your photography site, read how to gain exposure from entering photography competitions.

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