Auto Repair Shops Industry Snapshot doc

         AutoRepairShops IndustrySnapshot                         119NorthCommercialStreet,Suite195Bellingham,WA98225‐4455 phone:(360)733‐4014fax:(360)733‐5092www.cevforbusiness.com IndustrySegments Thefollowingchartbreaksdownthesegmentswithintheautorepairindustry. 1   Generalautomotiverepair 85.60% 6.70% 5.70% 2.00% IndustrySegments GeneralAutomotive Repair AutomotiveTransmission Repair&Maintenance AllOtherRepairs AutomotiveExhaust Repair Thissegmenthasgrownasapercentageofoverallindustryrevenueinthepastfiveyears,and isexpectedtoincrease.Businessesthatmakeupthissegmentprovideallinclusiveservices. Theseservicesinclude:diagnostics,alternatorandstarterrebuilding,no‐startanddriv ability, fuelinjectioncleaning,timingbeltchange,tune‐up,clutches,brakeservice,plusmanyother services.Itisreportedthateachyeartheaveragerepairshopreplacesbetween25to30 engines.  Automotivetransmission Includedinthiscategoryis:hydraulic,electronic,andcomputersystems.Thissegmentis expectedtomaintainitscurrentpercentageofthemarketsegmentforthenextfiveyears.  Automotiveexhaustrepair  Thissegmentismadeupofmechanicswhospecializeintherepairandinstallationof automotiveexhaustsystems.Overthepastfiveyearsthissegmenthasbeencontractingasa resultofimprovedtechnologies.Non‐corrosivestainlesssteelpartshaveextendedthelivesof partsinexhaustsystemsapproximately10yearsandthathasdecreasedtheneedforrepairs.  Otherrepairs Otherrepairsinclude:tune‐ups,tireretreading,automotiveelectricalrepair,fuelsystem conversion,batteryandignitionrepair,andgeneratorandstarterrepair.Approximately17.2% ofotherrepairscomefromradiatorrepairs.    1 IBISWorld Pty Ltd., “Auto Mechanics in the US.” New York: IBISWorld. March 15, 2010. http://www.ibisworld.com CenterforEconomicVitality   Page1 IndustryData BodyShopBusinessMonthlyprovidesindustrydataonoperatingcostsforrepairshops. 2 The followingchartshowsannualgrossincomeandthepercentageofrepairshopowners reportingthatincome.   0% 10% 20% 30% 40% LessThan$249,999 $250,000to$349,999 $350,000to$749,999 $750,000to$1Million $1Millionormore 34% 10% 20% 10% 26% AnnualGrossSalesVolume Thechartbelowestimatesthebreakdownofpurchasedollarsforshops.Theaverageshop spends$2,500amonthonpaint.Ofallautomotiverepairshop,91%ownsometypeof computerizedestimatingsystem,50%ownacomputerizedmeasuringsystem,andowna35% ownacrossdraftspraybooth. 3     21% 31% 15% 8% 7% 6% 8% 4% %ofPurchasingDollarsSpenton: Paint CrashParts RefinishingMaterials RepairMaterials Tools CapitalEquipment MechanicalParts Other    2 “Industry Statistics,” BodyShop Business, http://www.bodyshopbusiness.com/IndustryStatistics.aspx (April 23, 2010). 3 Ibid CenterforEconomicVitality   Page2 AverageAnnualSalary   MetalTechnicians $48,973 Painters $51,720 Mechanics $44,478 EntryLevelEmployees $28,342 OfficeManagers $38,132 SeniorEstimators $56,365  ThetableabovebreaksdownaveragesalaryforautorepairshopsintheU.S.Sixty‐fivepercent ofshopshaveatleastoneemployeewhohasbeenemployedwiththemformorethantwenty years.Belowisalistofsomeofthefringebenefitsofferedbysomeshops:  • 77%ofshopsoffermedicalcoverage • 65%ofshopsofferuniforms • 93%ofshopsofferpaidvacations • 67%ofshopsofferpaidtrainingandeducation • 28%ofshopsoffera401Kplan • 13%ofshopsofferavisionplan • 33%ofshopsofferpaidsickdays • 16%ofshopsofferprofitsharing  SuccessFactors 4   AchievingEconomiesofScale Businessesthataresuccessfulinachievingeconomiesofscales,especiallyindistributioncosts andadvertisingprovetobethemostsuccessful.  WorkplaceSafety Successfulbusinessesfocusonmaintainingsafeworkingconditionsanditscorporateimage revolvesaroundsafetyandenvironmentconsciousness.  StrongInventoryManagementSkills  Strongbusinessesareabletocontrolstockonhandandinstallaccuratecostingsystems.  EmploymentofSkilledAutomotiveTechnicians Itisimportanttohaveaccesstoaskilledworkforceasvehiclesarebecomingmore technologicallyadvancedandcomplicated.   4 IBISWorld Pty Ltd., “Auto Mechanics in the US.” New York: IBISWorld. March 15, 2010. http://www.ibisworld.com CenterforEconomicVitality   Page3  ProvideSuperiorafterSalesServiceandSupport Thissegmentcanbeextremelycompetitive,sosuperiorcustomerserviceisextremely important.  ObtainMostRecentRepairandTechnologyInformation Togainrepeatcustomers,businessesneedtohaveaccesstorepairinformationfromthe originalequipmentmanufacturer.  LocatedClosetoKeyMarkets Thesizeandlocationofthebusinessisessentialtoitssuccess.Thelocationwilldeterminethe potentialmarketsizeandindicatesaveragecustomersincome,vehiclecount,population,and competition.  RisksandChallenges  InsuranceDependence Insurancedirectrepairprogramscanmake‐upnearlyallofashop’srevenue.Someshopsfeel forcedtoconformtoinsurancedemandsandsuggestionstoinstallcheaperaftermarketparts atcertainbillablerates,tomaintainthesaleslevelsandbusinesstheyareusedto.  RepairInformationControlledbyCarMakers Onboarddiagnosticsystemscanhindertechniciansfrommakingappropriaterepairs. Techniciansarerequiredtohavespecialequipmentandinformationtorepaircertainpartsand problems.Insomecases,carmakersreleaseinformationfirsttotheirowncardealers.  CarDealerCompetition Moderncarshavebecomemorecomplexrequiringtechnicallyproficientrepairshops.The partsdepartmentinmanydealershipshasbecomemoreprofitablethanthesalesdepartment. Ifcustomerserviceisperformedwellduringthewarrantyphase,thereisanincreasedchance thattheclientwillreturnforadditionalrepairandmaintenancewhenthewarrantyexpirers.  TurnoverofPersonnel  Thereisagreatdemandforexperiencestechnicians.Turnoverremainshighinmany companiesdespitetheincentivesmanybusinessesareusingtokeeptrainedstaffaround.  SpecialHandlingRequirementforNewMaterials Non‐traditionalmaterialusehasbecomeachallengeformanyrepairshops.Trainedstaff, specialtools,andinsomecasecertificationarerequiredfortherepairofvehiclesusingcertain material;likealuminum.    CenterforEconomicVitality   Page4 Trends 5   DecreasingNumberofCarAccidents Withincreasedvehiclesafety,milderweatherandfewermilesdriven,thedemandforauto repairhasslowedandautoshopshavebeguntostruggle.  EvolvingServiceOfferings Asvehiclespartsbecomemoredurable,shopsfocusonlightrepairandexpandservice offerings.Customerswhooncedidworkthemselvesareforcedtogotoashopbecauseofthe growingcomplexityinnewvehicles.  GrowingNeedforCertification Insurancecompaniesarebeginningtorequirethecertificationofrepairshoptechnicians.The mostcommoncertificationcurrentlyisAutomotiveServiceExcellence(ASE).  TrendsEvolvinginDriving Drivinghabitshavechangedforconsumersduetorecordhighgasprices.Aftermorethana decadeofgrowth,totaltrafficvolumedecreasedbetween2007and2008.  Anti‐SteeringLegislation Somestateshaveconsideredpassinglawstopreventinsurancecompaniesfrom“steering” businesstolargeautorepairshops.Thiscausessmallerindependentbusinessestolose revenue.Insurancecompaniesrefusetopaymorethanprevailingrate,andmanyshopsbelieve theyareatfaultfordepressinglaborrateandpreventsmallshopsfrombeingprofitable.  ConsumerDemographicsorExpenditures  AccordingtotheHouseholdSpendingguide,thefollowingareconsumerdemographicsfor vehiclemaintenanceandrepairin2007: 6  • Thoseages35to44aretentimesmorelikelytothantheaveragepersontospend moneyonvehiclemaintenanceandrepair.Annually,theaveragepersoninthis segmentspends$805ontheseservices. • Thoseages45to54aretwenty‐eighttimesmorelikelytothantheaveragepersonto spendmoneyonvehiclemaintenanceandrepair.Annually,theaveragepersoninthis segmentspends$941ontheseservices. • Thoseages55to64aretentimesmorelikelytothantheaveragepersontospend moneyonvehiclemaintenanceandrepair.Annually,theaveragepersoninthis segmentspends$885ontheseservices. 5 First Research, Inc. 2007, “Automotive Repair Shops.” Austin, TX: First Research. January 25, 2010. http://www.firstresearch.com . Our subscription to this service is possible through donations made by Metcalf Hodges and Wells Fargo Bank. 6 Household spending: who spends how much on what. 1997. Ithaca, N.Y.: New Strategist Publications. CenterforEconomicVitality   Page5  • Marriedcouplesare36timesmorelikelythantheaveragepersontospendmoneyon vehiclemaintenanceandrepair.Annually,theaveragepersoninthissegmentspends $1,010ontheseservices. • Asinglepersonis36timeslesslikelythantheaveragepersontospendmoneyon vehiclemaintenanceandrepair.Annually,theaveragepersoninthissegmentspends $621ontheseservices.  FinancialInformation  Thefinancialsofsmallandlargecompaniesareusedtoestablishindustryaveragesforseveral itemsontheincomestatement,balancesheetandfinancialratios.Smallcompaniesincluded thosewithsaleslessthan$729,228annually;atotalof267smallbusinessesweresurveyed. Companieswithsalesgreaterthan$729,228wereconsideredlargeautorepairshops.There wereatotalof1068largeautorepairshopfinancialscollected.Thebelowtableisbasedoff informationfromFirstResearchandcanbeusedasabenchmarkagainstthefinancialsofany autorepairshop. 7  CompanyBenchmarkInformation IncomeStatement Small Company Aggregate  NetSales 100% 100% GrossProfit 51.20% 48.10% OperatingIncome 4.10% 3.90% NetProfitAfterTax 2.80% 2.30%  BalanceSheet Small Company Aggregate  Cash 9.40% 8.40% AccountsReceivable 5.60% 13% Inventory 9.00% 13.30% TotalCurrentAssets 24.40% 36.10% TotalFixedAssets 31.80% 23.40% OtherNon‐CurrentAssets 43.80% 40.50% TotalAssets 100% 100% AccountsPayable 5.90% 9.20% TotalCurrentLiabilities 39.50% 36.70% TotalLong‐TermLiabilities 5.20% 7.70% NetWorth 55.30% 55.50% 7 First Research, Inc. 2007, “Automotive Repair Shops.” Austin, TX: First Research. January 25, 2010. http://www.firstresearch.com . Our subscription to this service is possible through donations made by Metcalf Hodges and Wells Fargo Bank. CenterforEconomicVitality   Page6 CenterforEconomicVitality   Page7  FinancialRatios Small Company Aggregate  QuickRatio 0.84 0.89 CurrentRatio 1.84 1.76 CurrentLiabilitiestoNet Worth 14.50% 42.0% CurrentLiabilitiesto Inventory 152% 155.50% TotalLiabilitiestoNet Worth 31.50% 69% FixedAssetstoNetWorth 19% 32% CollectionPeriod 7.70% 15.10% InventoryTurnover 21.30% 18.60% AssetstoSales 32% 29% SalestoWorkingCapital 4.50% 7.40% AccountsPayabletoSales 2% 3% ReturnonSales 3% 2% ReturnonAssets 7% 6% ReturnonInvestment 34% 23% InterestCoverage 4.40% 6% Websites Thefollowingwebsitesaregreatresourcesforindustrytrends,statistics,news,networking connections,tradeshows,events,andarticles. AutomotiveServiceAssociation http://www.asashop.org/  AutomotiveBodyRepairNews http://abrn.search‐autoparts.com/  ProfessionalToolandEquipmentNews http://www.pten.com/  BodyShopBusiness http://www.bodyshopbusiness.com/   BureauofTransportationStatistics http://www.bts.gov/ 