Using Finance to Drive Systematic Growth

Previously I spoke about how collision repair operators will have to develop new core competencies in order to compete against the increasing competitive pressures as a result of industry consolidation. As we saw last week, consolidation is a trend that is not going away, and most likely will continue in frequency and intensity. Collision repair is no longer just about fixing cars and minding KPI’s.

In business school we talked a lot about core competencies. The most basic definition of a core competency is something a business is really good at. In collision repair, most operators would have a core competency in vehicle repair and customer service.

In fact, we may actually be too good at those things. […]

The State of the Industry: How Consolidation Impacts Your Business

Recently I decided to take a closer look at consolidation in the industry since late 2012. It goes without saying that consolidation is a hot topic in the industry. We talk about it almost every week here. It also seems that every week a new mega deal is announced where one company buys another company.

Whenever rapid change hits an industry it often causes an emotional reaction. Some argue passionately against consolidation. Others strongly believe consolidation brings much needed improvement. Still others shrug it off with ambivalence.

My opinion of the consolidation trend is agnostic. […]

Grow Like a Consolidator

For the past few weeks we have been speaking about the options that are available to a collision repair operator: stand pat, grow, or sell.

I spoke at some length about the risks involved in each strategy. Standing pat is a risky strategy due to the concentration of risk into a single business in a single city / region.

Growing is risky because it involves developing a new set of core competencies built around high level financial management as well as acquisition and integration competencies. Most collision repair businesses have not developed these competencies; and those that have developed those competencies now compete for deals against other large MSO’s with extensive experience sourcing, closing and integrating acquisitions. (Editor’s Note: Keep an eye out for an upcoming article about how the franchise model plays a role in growth.)

Selling is similarly risky as there is almost a certainty that a buyer will have vastly more experience in a business transaction, leaving you and your business vulnerable. Buyers will pay a premium for a well-documented, well-run business but most collision repair businesses have little experience presenting financial information in a usable format to a multi-million dollar institution.

Those are the risks. But I promised an article about opportunities!   […]

Buy, Sell, or Hold: The Risks

Last week we spoke about the conundrum that collision repair operators currently face. Because of the influx of Wall Street money and rapid consolidation, owners have essentially three choices when looking towards the future. They can:

  • Stay small and continue to compete on a standalone basis, or with the help of a franchise (more on the franchise approach in future articles);
  • Build scale, acquire competitors, open brownfields and compete with large MSO’s by becoming a small MSO;
  • Sell to a regional or Big 4 consolidator.

Each of these three strategies carries inherent risk, as well as potential rewards. This article will break down each of these three key strategies to help better explain the specific risks and rewards implicit in each. […]

Buy, Sell, or Hold: The State of the Industry Part II

Long time readers of my posts notice two main themes running through my writings. The first is a focus on corporate finance and how to apply those topics to a collision repair business to better manage a business. The second is a focus on M&A (Mergers and Acquisitions) and how to be prepared to buy or sell a business.

Many readers inherently see the logic of the first topic. Understanding the tools mid to large sized business use to manage their business allows the reader to better manage their business, and be more successful as a result.

The second topic is sometimes met with less clarity. It often begs the question: why so much talk about buying and selling a business? […]