The State of the Industry (And why we’re all in trouble!).

In case you’ve been living under a rock for the past two years here’s a news flash – the industry is rapidly consolidating. Wall Street has arrived and they’re taking no prisoners. But what does that mean?

First it means that there are the “Big 4” – Caliber, ABRA, Service King, and Boyd/Gerber. You’ve probably heard of at least one of these guys, if not all of them.

They have hundreds of locations. They do hundreds of millions of dollars in sales a year. They are tied in with major insurance companies in a way you or I never will be. They’re financially backed by some of the largest most powerful financial institutions in the U.S. and Canada.

Yeah, but you may be thinking: Those bankers don’t know how to fix a car. They aren’t sustainable. They won’t last. The banks give them a bunch of money. They are just in them for a quick million. They will collapse just like M2. Etc. etc. etc.

I hate to be the bearer of bad news, but if you think that way you’re dead wrong. Your business could end up dead as a result.

In 2009 Boyd (also known as Gerber) completed $225 million in sales. Fast forward five years and Boyd does that every 3 months. Then the large players like Boyd accounted for less than 10% of the market. Now, they account for over 20%. And they have no plans to stop growing.

They are all very public about it. They set growth targets. They set acquisition targets. And they tell the world about it. Then they hit those targets. Most of the large players acquire (purchase) at least 30 to 40 locations a year and only plan to increase the pace.

As the Big 4 continue to grow and consolidate, the industry will face more price competition, more quality competition, more cycle time competition. The idea that you can only pick two out of the three Price, Quality, Speed triangle will be obliterated. Collision repair facilities will have to produce all three. Businesses that are unable to keep pace will be relegated to completing one off restoration jobs and bumper repairs.

Wall Street has entered the collision space. It is all about the money. There is no patience for the old ways. And they will win. Now is the time to be prepared – financially, operationally, strategically. But more about that in future letters.