Fighting Inflation

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J.R. Martino is Vice President and Managing Partner of Budds’ Collision Services, one of the most progressive facilities of its kind in North America. He can be reached at [email protected]. Photo J.R. Martino

A different approach to business is required today.

We’ve all seen the impact of inflation. The cost of food, the cost of fuel, the cost of keeping the lights on and the cost of equipment, paint and materials. For collision centres today, as mentioned in my last column, the biggest issue we have is capacity. Now I’m not talking in terms of square footage of the shop itself, but the ability to push work through and get vehicles completed and out the door.

Rising costs and labour shortages

The problem many of us are finding is that as a result of the COVID-19 pandemic, not only has the growth in the money supply devalued our currency, causing goods and services to become more expensive, we are also having to deal with a serious labour shortage. This situation has become more acute because not only have staff retired or chosen to leave the industry during the lockdown period, but since then, our work volumes have in most cases, significantly increased. There are more vehicles on the road, which leads to more crashes and more repairs.

The trouble is, we don’t have enough technicians to repair these vehicles. We need new talent and we need to ensure that once we find it, we are able to keep it. Insurance companies are becoming increasingly aware of the capacity issue as well. Ours is no longer an industry driven by repair volumes and in many cases, insurers can no longer dictate what we will get paid for a job, since there is often more work available than many shops can handle.

When you factor in the cost increases as a result of inflation, now is the time for shops to take up the mantle and work with their insurance partners to set fair labour rates. Everybody needs to understand that there is a cost to doing business and doing it properly. If a shop has the means to attract top quality technicians, because it is charging a healthy labour rate, it is also able to provide the training needed to ensure those technicians perform at the top of their game. Good training is expensive, but it’s essential to our business, along with good quality equipment and supplies. On the flipside, if a shop hasn’t been able to negotiate a fair labour rate for the work it performs with insurers, in a high-inflation environment like today, it will find it harder and harder to stay in business.

Shop responsibility

Ultimately, cars need to be fixed and it is the responsibility of collision centres to ensure they are in the best possible position to do so. With more vehicles on the road, insurers are only too aware that they need to work with shops to look after their customers. And the only way they can effectively do that today is by offering more aggressive labour rates. If they don’t, they will lose customers and referrals which can damage their reputation and harm their brand, since they are no longer able to provide adequate protection needs for their clients.

That is why now is the ideal opportunity to take advantage of the situation by re-negotiating your door rates and ensure you are getting paid for the work you perform. We have to pay premiums today for everything due to the rise in the cost of living and as an industry, we are in the fortunate position of being able to pick and choose the work that is presented to us. Furthermore, if we want to continue growing our business for the foreseeable future, we will have to do it not by volume, but by gross profit, which means getting paid more for every job. It’s the only way we can beat inflation.



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