Volume 9, Issue 1 - January/February 2007

Field of Vision

New Realities 
by Charles Cumpston

As we begin a new year, I wish I could report that the industry is looking healthier and that more of our readers are looking forward to increased sales and profit. This is not the case.

I have spoken with many company owners who have told me that they are going to shut their doors. One of those was Chris Trap of Auto Glass Service Center in Loomis, Calif. He said that he just canít survive any longer.

ďIím throwing in the towel after 30 years of beating my head on the wall. I remember a time when there was a free market and you could battle for your existence using market forces. Now I find myself faced with the reality of signing another lease with my landlord. Just like the phonebook ad that never costs less than the year before, my rent is sure to go up. You do all you can to cut cost and make a profit. It used to be exciting to see the NAGS list price go up because I got to make a little bit more profit, but the insurance companies figured that one out and took care of that. They would adjust the discount so that they would pay the same price and the warehouse would, of course, have to raise their price to me because they said the list price went up. Now NAGS was the club that was being used to beat me over the head.Ē

Our industry is in a dramatic change, and we deal with aspects of that change in a number of articles in this issue. We have talked with you about the growing cash market and the fact that there are fewer jobs going to independents. These are hard realities.

Then there is the new Customized Offer program from State Farm (see page 36 for interview with the companyís Bob Bischoff about this) that offers opportunities, but also can be quick sand. What companies are going to benefit from the program? Those that know what their business is, where it comes from, and what their profit margins are.

A company has to know what its business is. How much of your business comes from b/to/b (dealers, etc.), from cash and from insurance. You canít start thinking about what a custom offer is going to be if you donít know how much of the work you do is insurance. How much profit will you make from these jobs? If your insurance work goes up, how will you handle that vis a vis the other kinds of work that youíre doing and the ability to do the work well in a timely manner?

Are you making a different profit margin from these different segments? There is no sense increasing your insurance work as a percentage of your total work if youíre going to be taking on less profitable work at the expense of the more profitable jobs.
You canít blame State Farm for wanting to get the best price it can for the work that it is having done. If the industry is providing work at a less profitable rate than is sustainable, thatís not a good situation for the insurance companies, but itís not their responsibility to see that the industry is operating at a reasonable profit level. 

And both the industry and the insurance company need people like Chris Trapp and Auto Glass Service Center. That he and companies like him are going under is a tragedy for all of us. Letís hope this is the last year weíll have to report this is the case. 

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