INDUSTRY TRENDS AND OPPORTUNITIES

• Anti Steering Legislation - As insurance companies gain more and more control over the flow of business to the auto repair industry, several states are considering legislation that would prevent insurance companies from steering business to direct repair shops. When insurance companies steer the flow of business to direct repair shops, smaller shops end up losing business. If such legislation passes, this could really help the small repair shops compete with the larger direct repair shops.
• Alliances with Car Dealerships - Owners of expensive cars usually would like to have all maintenance and car repairs done at their local car dealership where the car was originally bought. However, since most dealerships are at an inconvenient distance from the car owner, dealerships are now seeking alliances with local mechanics. Repair shops are now being referred new business from distant dealerships in exchange for meeting quality standards and for buying parts from the dealer.
• Service for Car Electronics - The recent boom in car electronics such as cell phones, CD players, navigational devices, video systems, and internet access, are providing great opportunities for repair shops to develop an expertise in this field of repair.
• Expansion of Service - Increasingly, repair shops are adding additional complimentary services such as towing and windshield repair. Towing services, for example, provide better profit margins and can be contracted out to local police, AAA, or insurance companies. This type of product diversification strategy is helping the auto industry to generate a steadier stream of revenues.

“Things to know before buying an auto repair business”
If you are considering buying an auto repair shop there are a lot of factors to consider. Since several associates at Murphy have expertise in the industry we know the major factors in the industry to consider. We know the trends and opportunities in the industry as well and can help you capitalize on that knowledge. Here are some important items to consider.

• What is kind of reputation does the company have? Since consumer distrust is the number one issue with the auto repair industry, knowing how the current company’s relationship with clients is critical.
• Low Receivables- Auto repair shops typically have very low receivables since payments are made up front when repairs are complete.
• What are the local demographics- Location always plays an important factor in the buying decision of any business. Demographics and surrounding income levels are important to know because they ultimately set the price for labor and services rendered.
• Does the company use a Point of Sales System- Point of sales systems allow managers to manage inventory more efficiently and lower operational costs.
• What percentage of business is from repeat customers- Typically, auto repair shops get about 80% of business from repeat customers, while body shops get about 50%
• Does the company participate in a direct referral program with insurance companies- If so, this could mean a higher sales.
• Has the company had difficulty hiring or retaining skilled technicians- Due to the growth in the industry, demand for skilled technicians has increased.
• Has the company recently invested in new equipment- Sophisticated diagnostic equipment is becoming more and more common as cars become more advanced.