Business Profitability Explored
Increasing profits for paints and materials is a challenge because like most industries, pandemic-related shipping and logistics issues have greatly affected prices on supplies, and the auto body industry is no exception.
“Generally speaking, industry-wide materials costs are increasing, and the shipping and stocking issues are all things that are affecting paints and materials cost,” says Brian Stebbins, marketing manager with Sherwin-Williams Automotive.
This cost increase in supplies can make a decent profit margin seem even more out of reach than ever. But that doesn’t mean you can’t make a profit on paint jobs. In fact, it just means you have to strategize and make some tweaks in your practices.
Definition of Paints and Materials
It may seem obvious but knowing what is included in the definition of materials can help delineate what is actually profit. “Typically, what is included in gross profits are things that end up on the vehicle during the repair process,” says Stebbins. He adds that liquids are the highest dollar revenue generator, and that includes undercoats, primer, sealer, base coat, top coats, etc., all of which will represent close to 70 percent of the paint and material cost and sales per repair. The remaining 30 percent will be made up of items used in preparation for getting the vehicle ready for painting: masking paper, tape, abrasives, grinding discs and other abrasives, etc.
Lowering Costs and Increasing Profits
Lowering costs and increasing profits are two sides of the same coin when it comes to maximizing margins on paints and materials. Fortunately, there are some basic steps that collision centers can take to help in either direction.
Inventory Management Control
One effective way to increase profit margins on paints and materials is to only use what is needed per each job.
For example, Collision Core, Sherwin-Williams’ branded inventory management system, allows a shop to build an approved product list as part of that system. It also is able to track product over- and under-usage, and inventory can be adjusted accordingly, therefore maintaining stock at optimal levels. The Collision Core system also captures the usage of billable items that can be invoiced against specific repair orders.
“It’s designed to help reduce redundancy in inventory. The ultimate goal is to reduce the number of SKUs yet have everything needed to do the repair properly,” Stebbins says.
“We often suggest they secure materials and dispatch those as consumed; inventory management is tied to that, so technicians will check it as they consume it. That prevents overbuying, so they are not pulling out 2-3 boxes of an item, but just pulling out what is necessary for a job that they are on, so that they are not overstocking,” Stebbins adds.
Waste Control Standards
Tracking and measuring liquid wastes and overpours is important for mitigating loss and waste. Improving the mixing process will help with waste reduction. One solution offered by Sherwin-Williams’ Collision Core is through their Collision Core color retrieval systems and scale. “Everything is mixed on a scale, and a computer program tracks how many ounces are mixed in every product,” he says.
It is also important to use the recommended spray equipment to ensure against not overapplying paint in the spray application.
Another technique to help mitigate waste is to use the correct shade of gray undercoats to achieve hiding faster. “The correct lightness or darkness will help your hiding so you don’t have to do extra coats,” Stebbins says, adding that leftover paint should be used for a ground coat.
Stebbins also notes that you can eliminate cut-ins by painting parts off the vehicle. “When you have a new fender, an older practice was to paint the edges of the fender, put the fender on the car, and paint the exterior later. Now, they’re putting the part on a stand and painting the fender all at once, so they are not masking or doing extra work,” he says. Thus, by eliminating the need for masking, there’s no overspraying.
Training staff on how to reduce waste is another key factor in reducing costs, along with having them track their usage of materials. Training should periodically be done in-house or provided by the paint manufacturer.
Stebbins also suggestd having technicians attain certification training for application of a car and color verification. Color verification, up front, reduces the risks of mistakes and therefore, reduces the potential for wasted paint.
Another way to lower costs is to build quality into the repair process so as not to have to redo work. Measuring and monitoring is certainly a key piece; if you’re not measuring your performance, you have no idea where you are at,” he says.
An Accurate Accounting Analysis
First and foremost, Stebbins says that it’s essential to complete an accurate damage analysis, or a blueprint, to charge for all damages related to the accident. “Sometimes labor operations are not all fully accounted for, and the estimators could miss items they could charge for paint material,” he says. That is why it’s important for estimators to work with technicians to capture everything that is damage-related and make sure it is reflected on the estimate.
He also said it’s important to properly classify all traditionally “not included” items, like car covers and flex additives as paint materials sales to get a more accurate gross profit margin calculation.
Stebbins notes that Collision Core’s digital suite offers other applications designed to reduce costs and increase profits, including a color retrieval system; inventory; quality; scorecard; and production. For example, “The Scorecard captures sales and costs associated with paint materials. The Scorecard helps the shop with that data/reporting, a separate, standalone tool, tied to its estimating system. We electronically tie in to the system to capture data on the sales side,” he says. The Scorecard helps monitor how many hours on average they are capturing per estimate versus the benchmarks of the industry.
Another example is the Collision Core production application that allows shops to properly schedule the correct amount of work based their shop’s capacity and manage the flow of production through the shop. “This also ultimately contributes to a more consistent flow in and out of the paint shop, contributing to the Paint and Materials gross profit percentage, he says.
“Data is king today—that is true about every industry in business today, capturing the data and using it to help make good business decisions,” Stebbins says.
Article Credit to Fenderbender.
Given all the challenges in the market, what are you doing to ensure that you make profit on your paint job? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.
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