Automotive Body Shops are everywhere. Most auto dealers have one, as well as most commercial vehicle dealers. Then there are the shade-tree body shop guys that repair cars in their garages in their spare time. Finally, you’ll find many independent body shops sprinkled throughout your area.
So, how does a person who is not an expert in automobile repairs determine what body shop to choose?
In the insurance claims field, the choice is even more complicated. Many insurance companies have relationships with certain body shops that they call “preferred vendors.” The insurers will try hard to steer you toward their favorite repair facility. Customarily, these preferred vendors have made a deal with the insurance company to repair vehicles at a discounted labor rate. They will also agree to use aftermarket auto parts in the repairs.
But remember…you own your car. The insurance company does not own your car. It is YOUR responsibility to make sure your vehicle is repaired correctly.
I recommend three important strategies in dealing with body shops.
1. Take your damaged vehicle to YOUR chosen body shop, not necessarily the preferred vendor of the insurance company.
2. Insist that the body shop write an estimate using Original Equipment Manufactured (OEM) Parts. Aftermarket parts, favored by the insurers, are characteristically inferior parts that do not go through the same inspection and screening that OEM parts undergo. So, while they may FIT your car, they can compromise your safety as well as the value of your car.
3. The insurance companies are required to return your vehicle to pre-loss condition. That is impossible using cheap aftermarket parts.
So here’s how to choose a body shop.
1. Seriously consider getting at least one estimate from a dealer of your make of vehicle. For example, if you have a Toyota, get a Toyota dealer body shop estimate.
2. Ask your friends, neighbors and business associates for referrals to body shops they’ve used in the past.
3. Use your computer search engine to find body shops in your city or zip code.
When you narrow it down to about three shops, interview them asking these questions:
1. Are you licensed in your state?
2. How many years have you been an Auto Body Repair specialist?
3. Do you have a specialty?
4. Can you provide a list of at least ten satisfied customers with phone numbers?
5. Do you have documentation of your success in insurance settlements?
6. Have you ever had a complaint filed against you with the Better Business Bureau or State Office of Consumer Affairs?
Once you get two or three estimates, negotiate with the insurance company based upon the HIGHEST estimate.
Based upon the information you glean from your interviews, you can make a choice of the best auto body shop to use.
Now, I’d like to offer you two special reports at no cost. One is “5 Things To Do When Shopping For Car Insurance,” and the other is “5 Things To Avoid When Shopping For Car Insurance.” Each one is a $9.95 value, but free to you when you sign up for my newsletter at the website address below.
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Many smaller body shop owners have asked, “How do I appraise my body shop?” In the last month I have been asked to do two appraisals on body shops. The first appraisal was to assist in partnership dissolution; the second appraisal was for marriage dissolution. (That is what the attorneys call a divorce.) Would you like to know how to appraise the value of a body shop business?
Before we begin, I would like to make one comment. Whenever a CPA has done an appraisal of a body shop, I find that their opinion of value is much greater than the actual value the market place will pay. This is not because the CPA’s do not know what they are doing because they do; it is just that the market place places a much higher risk on buying a body shop than the accountants do. The following is an excerpt from one of those appraisals.
THE THREE WAYS TO APPRAISE A BUSINESS
1. The ASSET VALUATION METHOD. This method is basically used when a body shop does less than $400,000 a year in gross income and the seller is making wages, but no real profit above what he would be paid if working for another. On this size business, a buyer is willing to pay for the assets of the business but little or nothing for goodwill. The equipment is usually worth between $50,000 and $100,000, depending on how many frame machines the business owns and how nice a spray booth the business owns.
I have seen some specialized shops sell for more than the above number because they have a truck spray booth or another business attached to the main business. Examples of attached business might be an auto repair shop or towing operation. Also the location, size and real estate rental amount will influence the value of any business, to some degree.
2. The second method, I call the GROSS SALES METHOD. This is used when the sales are over $1,000,000 a year but the profit is unknown or financials are not available or reliable. Because of experience, a Body shop buyer can make reasonable estimates of future profits, if they have some basic information. The basic information includes rent, source of business (DRP, STREET, or a CAR RENTAL AGENCY), and the desirability of the location.
When this method is used, the value appears to be about 3 months sales or 25% of the last 12 months sales. This method is not very reliable on businesses with sales of less than $1,000,000, because the question of being profitable is very questionable. Why is this breaking point $1,000,000 in annual sales? Multi-store buyers will have well paid managers, so many figure their breakeven point is around a million.
Less than $1,000,000 in sales is not even worth their time. Of course we know that there are exceptions to the rules. Some of the exceptions are A. when a new location will be a satellite store to a bigger location. B. The buyer must have a location in a specific area to please a DRP. C. To get rid of a competitor.
3. The third and most used method of evaluating any business, including body shops, is the NET PROFIT METHOD. This method is based on the idea that a business is worth what it generates, in profit and benefits, for an owner. Body shops, like so many other small businesses, often do not show a profit, at the end of the year. Strange, how so many businesses of different sizes all just happen to end up with little or no profit. What I find really amazing is that the IRS doesn’t audit more businesses then they currently do.
As a result of showing poor profits, on the books, it becomes very difficult to use the NET PROFIT METHOD for appraising many small businesses. Luckily for me, I can quite often find hidden profits, of a business, by adding to the books, items we call owner’s benefits. These include: Owners salaries, if a corporation. Personal autos and all the related expenses used by the owner and his family that are written off against the business, fife insurance and health insurance for the owners.
Depreciation is also a hidden profit that is usually added back in to the taxable profit to help build up the total owners benefits. And lastly, personal utilities, phones, trips, etc. that are deducted on the tax return but are not really costs to run the business.
After saying all this, what is the value of a business based on the Net Profit Method? Automotive businesses, especially auto body shops appear to sell for between 1.5 to 2 years adjusted profit (book profit plus owners benefits added back in). Larger body shops doing over $2,000,000 in annual sales may sell for much more, because the owner is making much more money, than just his salary and a buyer will consider part of the profit a return on his financial investment.
Very large body shops that are being bought by public corporations are evaluated primarily on their return on investment (Percentage profit that is being made on the cash purchase price of the business.) These big buyers can afford to pay between 5 times and 10 times annual net profit, after deducting all officers’ salaries and perks.
Often these, public corporations, high purchase prices include two important restrictions, which is really why they are buying the business in the first place. First: The business is bought for little or no real money. They use restricted corporate stock that is not negotiable for two years. And second: The management is required to stay and run the company for some period of years.
The bottom-line, as I see it, is that you sold your soul, not your business. One last comment on selling to large corporations; heaven help the seller who sells his business for corporate stock or the buyers bonds and the buying company goes broke or the stock market crashes. I had a close friend sell his company for mostly cash and some seller carry back financing in Dec 1997. By Feb 1998 the buying company was in bankruptcy, making the paper my friend held worthless.
CONCLUSION: Appraising a business, especially body shops, is an art not a science. No two people will appraise the value of a business the same. I am amazed that the same thing one buyer thinks is a great asset is what another buyer thinks is a major negative. Differences of opinion are what make life interesting.
When we feel under the weather, we usually seek out medical attention. If we were experiencing toothaches, we would go to a dentist. If we have a heart condition, we go to a Cardiologist and so on. We seek out the specialists who will take care of our specific areas of concern. The same thing should be done with our cars. People experience different auto trouble on a daily basis. It could be something as simple as fixing a few scratches or something more complex like a full bodywork. But in any case, it is important to find the right auto body shop to do the job for you.
Looking around, you will find a lot of different shops that specialize in a variety of vehicle repair. There are a number of one-stop auto shops that take care of every automotive problem imaginable. Most people, however, prefer to deal with specialists in certain areas. This is quite understandable, as the shops that specialize in a single area of expertise tend to be masters of that field, while the one-stop auto shops that cover a wide range of vehicle issues might not give the same results. You might end up being referred to a specialist afterwards.
Some people like to go directly to their vehicle dealer, but be warned that most of the time, the in-house vehicle repair services can be quite pricy, and usually, they wouldn’t cater to older vehicles but mostly just the newer ones. We usually hear about these vehicle centers through word of mouth, either through friends or family. The best idea would be to go around town and scout your local auto repair shops.
Try to see what areas of vehicle repair they specialize in. Some shops may specialize in full bodywork after crashes, collisions or wrecks. Others are experts when it comes to paint jobs or minor scratch repairs and detailing. In some cases, there are shops that only deal with trucks; some just deal with smaller cars and so on. Once you have identified what sort of issue you need to address, you should take them to the specialists in that field. The experts in their areas will quickly determine what solution you need, with a quick and hassle-free turnaround. This would prove to be more cost-efficient as well. Since these experts know what issues they are dealing with, it avoids the trial and error situation, and you don’t have to keep getting referred to someone else.
Just like any other services, however, it is best to find an automotive repair center that houses a certified auto technician. Try to find out whether their resident vehicle technician is ASE (Automotive Service Excellence) certified. This would indicate that they have gone through numerous tests and exams gauging their knowledge and expertise in different fields of auto repair. This would also mean that they have had at least 2-year hands on experience in their specific field in the automotive repair industry. To sum it all up, if you need your car or truck repaired quickly and efficiently, you must determine the underlying issue that needs to be corrected. You must make an effort to choose an auto body shop with an ASE certified technician, and then take your vehicle to a shop that specializes in your specific area of concern.
Keeping a set of basic automotive body tools in your car can be real handy at times. These car repair tools can be very useful in situations where you are stranded in the middle of the road and do not have access to a repair shop. Having the repair tools can not only save you a lot of problems and precious time but can also save you from being robbed or attacked; if you are in the middle of a deserted and dark place. Moreover there are times when you might get a mechanic, but he may take advantage of your helpless situation. The problem with your car may be very minor, but the mechanic may charge you an exorbitant amount, since you have no other option. So again, it’s advisable to carry along a tool kit equipped with the necessary auto repair tools and know how to use them as well, to avoid any untoward incident while travelling. Most of these tool kits include screwdrivers, wrenches and pliers. Nowadays you get a lot of technologically advanced screwdriver sets, different sort of wrenches like impact wrenches etc. that you can easily purchase online. You also get the appropriate impact sockets and tools to be used with these wrenches. So before purchasing, get a good understanding of the equipments that need to be carried along.
Apart from carrying basic hand tools in your car, it is also important to take the vehicle for regular servicing to professional repair shops to get a thorough job done. They usually have all the latest hi-fi automotive body tools that you’ll generally not purchase for personal use. In order to keep your car out of trouble; good and timely maintenance and care is required. There are various different kinds of sockets apart from impact sockets, like standard chrome sockets, shallow and deep sockets; which you probably may not know about. They also have different sorts of air tools and wrenches to be used with these sockets. The professional repair shops are equipped with all sorts of different machines and tools to make your car run, look and feel like a showroom piece.
Therefore in order to maintain your vehicle properly for years and keep it in running condition it is necessary to purchase some automotive body tools for personal use as well as take it for regular servicing to a professional auto body shop.