More on Raising Rates Without Losing Business
7/15/2008 4:48:05 PM
I own a body shop in an eastern North Carolina county with a population of 150,000. Our dilemma is that we have one body shop doing probably 90 percent of the insurance work here. I know the customers are being steered there. The problem we have with that shop is that it’s doing work for $2 off the prevailing rate. It’s surely making up for the difference through unethical practices. The shop has a two-month backlog and the insurance companies just continue to send work its way.
I’ve been in business for 16 years and am getting my work from repeat business and referrals, but it’s getting harder and harder to make a profit. I don’t see how we can compete with a shop like this. We try to raise our labor rate but the insurance companies keep us at $40 per hour. I’ve raised my rates twice in the past few months but always end up going back down to $40 again. Only the small shops like us are willing to raise our rates up, but some of these shops aren’t very trustworthy and we don’t want to lose business by charging a higher rate.
There’s always an exception to the rule when it comes to raising rates, and I think we have one here. I don’t know what the answer is but I’m surely looking forward to retirement and getting out of this rat race. It seems that the shops that are working for the customer at a fair price and in the customer’s best interests are getting less and less work because of the steering practices.
Name withheld for publication
When there’s no longer any competition due to the fact that shops can no longer afford to staff properly to keep up with insurance company requirements, and only a small percentage of shops remain, guess who’ll be calling the shots? The body shops will be in full control. We’ll wake up on Monday morning and say, “Today, I believe I will double my rates.” When Mr. Insurance Company comes in and threatens to take the job elsewhere, we’ll simply state, “Where? My nearest competitor is 30 miles away, and last I knew they were three months behind.”
There will be no more doing things for free, no more cycle time, no more bending over backwards and jumping through hoops just to keep the doors open. I’ve heard horror stories from some of the larger shops about how they’ve had to staff to administer the DRPs. They’re so top heavy that they can’t make any money. The shops I’m in contact with in my area are starting to grumble and rethink their relationships with some of their DRPs. I personally am not having any problems...yet. But I’m in a small, rural area at a local dealership with loyal clientele.
Wake up, insurance companies! The ball is currently in your court. But, in the near future, it’ll be in mine!
Terry Smith, body shop manager
Shepherds Chevrolet-Cadillac
North Manchester, Ind.