While some shops shy away from fleet
repairs, others find it a profitable way to enhance their businesses. But
in order to successfully pursue this niche, repairers must understand the
specific needs of fleet customers.Do you find that your business has excess
capacity that you would like to fill? Do you have all of the direct repair
(DRP) relationships that you want for your business? Have you exhausted
all reasonable marketing opportunities? Maybe it's time to consider the
self-insured-the vehicle market also referred to as fleet work.Shop owners often avoid fleet work because
they've heard negative remarks based on the experiences of others. They
also may not want to get into the competitive bidding process, discount
their rates and parts, buy special equipment or wait 30 to 45 days to get
paid. But all of these factors depend on the type of fleet work a shop
chooses, as well as the specific relationships they develop with their
fleet customers. Many shops find that adding fleet work to their retail
business is profitable and rewarding.What is the Fleet Business?While privately insured vehicles have an
accident rate of about 12 percent, the fleet universe-not counting
heavy-duty trucks-consists of 10 million vehicles that have an accident
rate between 15 percent and 30 percent, says Wayne Smolda, the chief
executive officer (CEO) of CEI, a Southampton, Pa. company that provides
accident and risk management to self-insured auto fleets and claims
management outsourcing to the property and casualty industry.Fleet businesses usually fall into one of
five categories: small business, rental car, government, utilities and
large commercial. Each of these has specific needs and requirements, as
well as different ways of administering claims and returning the vehicle
to the road.The small business fleet traditionally
consists of 25 vehicles or less for small construction companies,
sales-oriented agencies and local service firms, such as pest control
businesses. These fleets tend to be insured by property and casualty
companies, as opposed to being self-insured, but because the vehicles are
often leased, they are considered part of the business fleet universe.
Because these vehicles are used in the pursuit of business, the operators
are looking for better, more reliable and consistent service experiences.
Insurers generally do not offer enhanced solutions for their specific
needs, which opens an opportunity for collision repair shops that can
offer these solutions.Rental car fleets are referred to by most
as deep discount work. A number of body shops report having tried to work
with this market, but they found it unrewarding and unprofitable. Because
of the service demands and deep discounts on parts and labor-some
companies want to supply their own parts-shops that pursued this line of
work found that they became contract employees for the rental companies,
basically working for wages. The shops that do stay with rental company
fleet work often end up devoting most of their business to this type of
work. Some don't even try to compete in the consumer market.Government fleets consist of vehicles
operated by federal, state, county and local municipal agencies, including
law enforcement. The government agencies usually require two or three bids
on each job, and these jobs can involve a lot of administrative work. But
with some agencies or departments, once you've established yourself
price-wise and quality-wise, you can escape the bidding process. It
depends on the parties you're dealing with and the policies that are in
place.Utility fleets consist of vehicles for
gas, electric, telephone and cable companies. There is a different
mentality at play here when it comes to repairs. These companies often
prefer to patch the vehicles instead of having them completely repaired,
and you may end up fixing about half of the items you would fix on a
retail customer's car. The garage manager for these fleets might look at a
vehicle that was hit in the front end and decide to leave the bumper
dented. As a result, the dollar total of your average repair order may be
on the low side. Some shops may also be uncomfortable with performing a
less-than-complete repair.Large commercial fleets are companies with
25 or more vehicles-they are more likely to have 300 to 10,000 units. They
are often spread across a region or even the whole country. These fleets
consist of any combination of cars, light trucks, SUVs and cargo vans.
Collision repair work is typically managed by the accident management
department of the vehicle leasing company, by a company that specializes
in claims or accident management or by a third party administrator (TPA).
Sometimes, large insurance companies offer these types of services through
their claims management divisions.Typically, large commercial fleets are for
a company's executives or its sales and service force. The average
capitalization costs for the typical fleet vehicle is $16,000 to $18,000,
for which the average repair is about $1,500, Smolda says. "If these
vehicles are on the books at depreciated, capitalized costs, [the
companies] are not going to spend the money to repair a heavy hit,"
he says. Typically, if repairs exceed 50 percent of the capitalized value
on the books, the companies won't repair the vehicles. Instead, they sell
them as a rebuildable wreck.Success with FleetsSmolda started in the fleet repair
business in 1980 when he and a partner took a 6,000-sq.-ft. building, set
it up for collision repair and began pursuing local and regional fleet
companies. Smolda served as the outside sales rep, and his partner managed
the shop. Within three years, they built East Coast Fleet Services into a
$1.5 million business. In 1984, CEI was founded. In addition to its claims
management business, CEI owns nine collision repair facilities under the
name of CollisonMax AutoBody Repair Centers."If shops want to develop a program
to service the fleet universe," Smolda says, "they have to be
very dedicated to this. It should be treated as a separate business
segment from the retail business because fleets have special needs. For
example, turnaround time is very important to fleets. Each day that
vehicle isn't in service, it costs the company or agency money. They're
paying for a leased vehicle, and they don't need to go out and pay for a
rental car, which may not be suited for the unique needs involved. With
service vehicles, they usually don't have another one to use."Christopher Ferrante, president of Gilbert
Collision Center Inc. in Gilbert, Ariz., made the business decision long
ago not to participate in DRPs. Instead, in 1995, he began doing fleet
work at Metro Auto Body, a shop he had previously owned in Mesa, Ariz.
Today, fleet work makes up 23 percent of his business.For Ferrante, who is also president of the
Central Chapter of the Arizona Collision Craftsmen's Association, fleet
work has been beneficial in more ways than just financially. "I find
that establishing a successful relationship with a fleet operator,
learning what their needs are and being able to deliver exactly that type
of service is very rewarding," he says.It has been so rewarding that when
Ferrante opened his 12,000-sq.-ft. shop on June 1, 1999, the setup
reflected the needs of a fleet repair business-wide doors and driveways,
special equipment, a 40-ft. paint booth and frame equipment that
accommodates up to medium-duty trucks. Although the shop can repair and
paint heavy-duty trucks, it sublets frame work. The shop is also equipped
to provide onsite, mobile estimating services for fleet accounts, enabling
fleet managers to expeditiously process claims and release the vehicles
for repair.Gilbert Collision's fleet business
includes private fleets; municipal and government fleets; large commercial
operators, such as towing companies, plumbers and construction companies;
and commercial fleets, such as leasing companies and automobile
businesses.A large part of Ferrante's success has
come as a result of identifying, understanding and fulfilling the specific
needs of each client. A former federal agent and police officer, Ferrante
started first with law enforcement fleets. "For me, this is a natural
market," he says. "I understand their needs because I've been
there. They need very fast turnaround and a very high quality repair on
their patrol cars, which may be driven at high speeds and in high-stress
situations."The shop also repairs undercover vehicles
for several agencies, which presents an additional challenge. "They
need to be able to bring in these vehicles and not have them identified as
such," Ferrante explains. "All of the paperwork must be handled
discreetly. They don't want to broadcast what type of car it is."As an added benefit for the agencies, the
shop does all of the specialized repairs on the vehicle. "They don't
have to take it to us for the body repair and then to a radio shop to fix
the lights and radio or to someone else to do the custom interior
work," he says. "We do it all."Gradually, Ferrante added other types of
fleets to the shop's customer base, continuing to pay attention to the
specific needs of the clients. "Commercial fleet operators, such as
leasing companies, have a need to get their vehicles repaired to absolute
pre-accident condition so that when they sell the car at the end of its
lease, they can get as much value as possible," he explains.
"Service fleet operators need to get their vehicles back on the road
right away. Some of the things we will do for them are stock the company
colors, make the decals for their company logos and provide other services
they need in order to prevent delays and to keep from re-inventing the
wheel each time a vehicle is repaired."Should You Do It?There are a number of things to consider
before taking on fleet work. No. 1 on the list should be capacity. Look at
it on an annual basis, not month to month. If your shop is busy all year
round, you may not want to consider fleet work.You also need to determine if you are
willing to meet the needs of the fleet operator. "One of the mistakes
a shop owner will make is to give priority to regular retail business when
they get real busy because the retail pays full list and pays when the car
is delivered," Smolda says. "Not all fleet business is
discounted or paid on term, but when most body shop owners get busy, they
look at the discount work or work where they might not get their money
right away and change the expected level of service required. You can't
change your service level no matter how busy you are, and it's unfair to
expect a fleet customer to be put through those changes of
inconsistency."Can You Afford It?If you decide to pursue fleet work, you
must make sure you price your services properly. Be careful not to
undercharge or overcharge. Some fleet customers pay full retail, while
others expect some discount. Don't agree to terms you can't afford. Also,
if you are working with a TPA or accident management company, expect to
pay administrative or sourcing fees. Some shops try to charge the fees
back, instead of allocating them appropriately under advertising or
marketing expenditures. These fees should be viewed the same as a Yellow
Page bill, not as a cost of sales or as a reduction in the repair order
price.Just as fleets have different needs, they
have different ways of billing and submitting payment. Some fleet
customers pay on delivery or with credit cards, but shops have to bill
most of them, in which cases they receive payment in 10, 30 or 45 days
from when they submit the invoice. "The shop owner has to be
realistic," Ferrante says. "If he can't afford to float the cost
of parts and labor for 30 to 45 days, then he shouldn't sign a contract
agreeing to be paid in 45 days." Smolda, however, warns that "if
a client cannot pay your bills in 30 to 45 days religiously, then you have
a poor customer and you shouldn't consider working for them."Another problem body shops have is failing
to be administratively competent at following agreed-to procedures. This
is not unlike problems some shops encounter when they have several DRPs.
If shops don't receive a regular stream of work from a fleet management
company, it is easy to forget administrative procedures. But if you are on
someone's list, it's important for staff to stay on top of the details.Are You Equipped and Trained?Don't take on fleet business unless you
are equipped to do so. If you're going to approach a fleet that has a mix
of vehicles, from cars to medium- and heavy-duty trucks, you can't say,
"I just want your little cars." You have to be able to handle
most of the vehicles they have in their fleet. "It does no good to go
out and solicit fleet work if you can't meet their needs," Ferrante
stresses. "You have to be prepared to make the investment in the
equipment and materials that you need to do the jobs."Training is very important, too. Gilbert
Collision is an I-CAR Gold Class shop. In addition, most paint system
manufacturers have fleet-specific refinish product lines and may offer
specific training and certification programs for fleet refinishers.Getting the WorkIf you plan to seriously pursue fleet
accounts, you need someone-such as a marketing manager-devoted to these
efforts. This person should be responsible for bringing in the work,
setting up the accounts and acting as a communicator/ insulator between
the customer and the shop. Fleet operators aren't interested in the
day-to-day problems of running a shop, and likewise, the people in the
shop shouldn't have to deal with anxious fleet operators."You really need someone to focus on
the needs of the fleet customer," Smolda says. "Make sure that
their interests are always protected, regardless of what's happening in
the body shop. They will often put more pressure on the body shop owner to
deliver the car because they need that vehicle back on the road. One or
two local accounts aren't going to make a difference to a body shop in
terms of volume, but if you want a lot of them, you will want someone to
manage the weekly trials and tribulations that can be distracting."Ferrante chose to act in this capacity
himself. "This way, I control exactly what is said and what is
promised and what is offered to the customer," he explains.
"When I make a presentation to the fleet company, they're dealing
with the principal owner of the company. I am very strict on giving the
consumer the absolute truth. I believe strongly in complete disclosure to
the customers during all facets of the repair. If there's a problem, I am
totally available at any time to my fleet customers."Making contact with fleet operators begins
with identifying the fleets and contacting the appropriate person. In
terms of smaller fleets, look at tradespeople around town who aren't part
of a larger chain-plumbers, construction companies, pest control, etc.
Larger fleets might have a fleet or risk manager who could then tell you
who manages their collision repair claims and who to contact. Government
fleets and utilities are often "depoted" fleets, where the depot
includes a garage. The garage superintendent may be the one who outsources
the fleet repair business.Fleet work has proven to be a profitable
and satisfying line of work for Ferrante and Smolda, but their success has
come by giving special attention to the needs of their clients. "I
can't stress heavily enough that you shouldn't bite off more than you can
chew," Ferrante says. "You cannot satisfy the demands of a fleet
customer with untrained, unprofessional personnel. You have to be
extremely professional. Any lapse in professionalism will be immediately
apparent to them, and you will lose the business. You have to be
absolutely truthful and deliver the absolute best quality at all times, or
you will embarrass yourself and you will embarrass the industry. It's not
something to be taken lightly."
