If you had to choose one word to characterize the growth of Caliber Collision over the past year, it would have to be "rapid." The company kicked off 2012 with the acquisition of a new center in San Antonio, and crossed the 100-location threshold when it purchased 101 Collision's five shops a month later.
In March of last year, the company acquired Autocraft of Torrance, which expanded its presence in the greater Los Angeles area. That was followed by Crown Auto Body and Burgess Auto Body & Paint (both in California) in April. There were more acquisitions in the San Antonio region, including Legend Collision Center and Boerne Mercedes. The company expanded in Arizona with the purchase of Crown Collision in Gilbert, along with a former 911 Collision franchise and Elite Collision in Tempe, and followed that up in July with three collision centers in the Oklahoma City area. At the end of 2012, Caliber announced it had acquired 10 Hi-Tech Collision and Glass Centers in the Los Angeles and Orange County markets.
You can expect that pace to continue, too, says CEO Steve Grimshaw. Beginning in 2009, Caliber laid out a plan to double its core business every five years. To do that, Grimshaw says Caliber would have to achieve 15 percent annual topline growth. So far, they've surpassed that goal, averaging 20 percent growth in the past two years. The 125 shops now under the Caliber banner average $4.5 million in revenue annually, and last year alone the company added nearly 700 employees, expanding its team to 2,900 staffers in five states.
Balancing sources of growth
In the early years of Caliber, Grimshaw says the company was largely focused on an aggressive roll-up acquisition strategy. Caliber grew from one to 66 locations between 1997 and 2005. That growth eventually slowed, however, because the company had to re-focus on shop-level performance.
"Like many MSOs at that time, we made a lot of commitments to the insurance carriers as far as the benefits that we could bring to them by having multiple shops over multiple geographies," Grimshaw says. "Many of us struggled to deliver the consistency they were looking for."
Between 2005 and 2009, a period which Grimshaw refers to as Phase 2 of the company's history, was marked by moderate growth and improved operational performance. "We spent a lot of time getting those 60-plus disparate centers operating consistently," he says.
As of 2009, Grimshaw says Caliber has launched Phase 3 of its growth plan. "We want to profitably grow the company, and that means having a nice balance of organic and acquisition growth," Grimshaw says. "We're targeting 60 percent growth via acquisition, and 40 percent through same-store sales. Right now, we're right at that 60/40 split."
Both types of growth need to complement one another. "The No. 1 priority we have is retaining our existing business," Grimshaw says. "Our purpose or reason we are in business is to restore our customers to the rhythm of their lives. It's our own version of the golden rule: treat the customer the way they wanted to be treated, and treat their cars the way they want them treated."
That means consistently delivering on customer satisfaction, as well as on the key performance indicators that the insurance carriers pay close attention to.
Succeeding in a challenging market
Still, the North American autobody market is under a lot of pressure. There are fewer collisions and more total losses, and the vehicles that do find their way to the body shop are more expensive and complicated to repair.
"We really look at those challenges as opportunities to differentiate us from other shops," Grimshaw says. "If you are looking at lower frequency and higher severity, then you have to put a much greater focus on customer satisfaction. That's painfully apparent to every carrier, because it's what drives policy retention, along with price sensitivity. There's a huge focus to drive cost out and remain competitive."
Grimshaw says that more than 90 percent of Caliber's volume comes from DRP relationships, which means that the individual shops have to make investments in training and equipment, and focus on improving the repair experience for customers. Happy customers not only return to the shop for future repairs, but also are more likely to stick with the carrier that referred them to the shop in the first place.
"The reality is that although we've seen a turnaround of late, we're in an industry where, under the best case scenario, frequency will be flat, and most likely declining," Grimshaw says. "We have defined our mission to become the repair provider of choice in every community we serve. I'm confident there will be plenty of business for the top performing shops in every market in the U.S. for a long time to come."
As for repair complexity, Grimshaw says that it will be tough for independent shops to shoulder the additional costs to keep up with technology, equipment and training required to properly fix today’s vehicles. "It's much more complicated out there, and it won't get any easier," Grimshaw says. "There's a constant challenge to make sure you have the appropriate equipment to fix the vehicles that are out there.
"You have to have the proper processes in place, the proper OE certifications, and you have to sit down with your partners and make sure you are completely aligned on your long-term goals and outcomes," Grimshaw adds. "Don't ever think you already know the answer. Ask your partners what they are looking for, and you'll be surprised at the areas where you aren't aligned. Expectations can change quickly, depending on the environment."
Another key challenge as the company moves into new markets has been finding the right employees and identifying shops that can easily be assimilated into Caliber's culture. "There has to be a good fit," Grimshaw says. "That's an ongoing challenge when you have an aggressive expansion plan."
As for finding new team members, Grimshaw says that Caliber (like the industry as a whole) faces a shortage of talented, experienced technicians as current techs retire and fewer new technicians are brought into the pipeline. "That has driven us to place a lot of focus, energy, effort and money in building our own bench, so to speak, for future Caliber employees," he says.
Multiple locations, maximum production
By operating multiple shops in focused geographic areas, Caliber has been able to leverage a "cluster strategy" in the cities where the company operates. That gives customers more options and choices when it comes to choosing a location, and allows Caliber to load level vehicles, maximize production, share resources and leverage greater purchasing power.
Load leveling is a particularly valuable tool when it comes to maintaining competitiveness in a given market. "If you operate enough stores in a certain geography, that gives you much more flexibility," Grimshaw says. "You're rarely at that point where you are full, and you simply can't take any more vehicles."
The company is also able to leverage the benefits of having a centralized call center, a uniform scheduling system, and having deployed the CCC-ONE management system across its network. Caliber has also implemented automated systems to improve post-repair communication with customers.
Those investments ensure compliance when it comes to DRP relationships. "There's not as much auditing and oversight, because you can make the carriers comfortable and give them the visibility to see that you are doing what they are paying you to do," Grimshaw says.
Operational consistency is critical to ensuring that the company meets its productivity and customer service targets. To that end, Caliber developed its Caliber Advanced Repair System (CARS) guidelines to highlight best practices. That approach has been refined to center on ten primary steps that each center is expected to master to deliver key CSI and operating metrics above the industry average.
"We realized we had originally missed half the equation," Grimshaw says. "Our manual was being written from an operational perspective, but we had to look at it through the eyes of the customer. Now we have what we call our 'owners manual' that follows those 10 steps. Any initiative we undertake has to improve the effectiveness of one of those steps in the owners manual, or we don't do it."
The revamped operational guide was launched in conjunction with CCC-ONE and the establishment of a new information technology infrastructure. "About three years ago, we were at a point where we felt our IT systems and processes were an impediment," Grimshaw says. "I hired a CIO, and we built a staff of 17 full-time employees in our IT organization. In the past 18 months, we've rolled out a new website with live chat and online estimating, and we've installed the CCC-ONE system at every location."
Customer follow-up has been automated, each shop has been equipped with Caliber's assignment management and scheduling tool (C.A.R.E.), and the company expects to roll out tablet computers to its advisers in the near future to improve estimate writing.
Continued expansion
Over the past year, Caliber has focused on expanding its presence in Texas and California, while adding more locations in Arizona and Oklahoma. "Our first priority is the existing markets, to make sure we have full market coverage in those territories," Grimshaw says. "A lot of that comes from our carrier partners. They let us know when there is a gap in a certain area based on a lack of shops."
Caliber is also exploring contiguous markets. "You can still leverage the benefits of the cluster strategy that way," Grimshaw says. "With new markets, you look at population growth and expected trends, as well as the competition in those markets and how they are performing."
The company has established a full-time integration team that helps convert new acquisitions into Caliber locations. "They know exactly what needs done from day one through our 100-day post-close plan," Grimshaw says. New shops are immediately equipped with CCC-ONE and the other software solutions, as well as a Lawson accounting system.
"We try to do this in a way that is not disruptive. We don't want to interrupt the current performance of the shop," Grimshaw says. "We want to transition them to the Caliber way of doing things, but at the same we know that we don't have the answer for everything. If they are generating better results than we are, then we look at updating our own best practices to reflect what we've learned from those new shops.
That openness to new ideas is another key factor to staying competitive, Grimshaw says. "Most good ideas don't come from the corporate office," he says. "We have a committee that reviews the 10 steps of our manual and all the best practices, and we update those once per quarter. We also look at any feedback from the field. If they have found a way to do things better than what we have defined, then we make those changes."
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