Automotive Repair & Maintenance Services pdf

INDUSTRY PROFILE
Automotive Repair & Maintenance Services
SIC CODES:
7532, 7536, 7538
NAICS CODES:
8111
11/21/2011

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Industry Overview
The US automotive repair and maintenance services industry includes about 165,000 establishments (single-location
companies and units of multi-location companies) with combined annual revenue of about $85 billion. Major companies
include Meineke (a division of Driven Brands), Midas, Monro Muffler Brake, Precision Auto Care, and Safelite Group.
The industry is highly fragmented: the 50 largest companies generate less than 10 percent of revenue.
Separate industry profiles cover Automotive Oil Change & Lubrication Services and Car Washes, which are included in
the automotive repair and maintenance services industry.
COMPETITIVE LANDSCAPE
Demand depends on car usage and the number of cars on the road. The profitability of individual companies depends
on convenient location and good marketing. Large companies can maximize use of expensive diagnostic equipment

and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by providing
superior customer service or offering specialized services. The industry is labor-intensive: average annual revenue
per worker is about $100,000.
Competition includes other venues that provide automotive services, including some gas stations, car dealerships, and
branches of chain stores, like Sears and Kmart. Auto repair shops perform an estimated 70 percent of repairs for out-of-
warranty vehicles, according to the Automotive Service Association (ASA).
PRODUCTS, OPERATIONS & TECHNOLOGY
Major services include mechanical repair (about 60 percent of industry revenue), collision repair (25 percent) car
washes (10 percent), and oil change and lube (5 percent). Mechanical jobs are classified as repairs to undercar
systems (mufflers and exhausts, transmissions, brakes, and shock absorbers) or underhood systems (engines,
electrical systems, radiators). Body work includes exterior and interior repair and glass replacement. Companies may
also sell parts for do-it-yourselfers (DIY).
The industry includes national and regional chains, franchises, and independent operators. The majority of auto repair
shops are independently owned, although many are franchises of large companies. Car repair shops may specialize
in a particular field of repair, such as brake jobs or collision repair, because of the specialized knowledge and equipment
required. Most companies in the mechanical field provide generalized services, such as regular maintenance, in addition
to specialty services.
In auto repair shops, estimators review vehicles and give customers quotes on the approximate cost of a repair.
Estimators may rely on car makers' recommendations or computer software to help develop an accurate estimate.
Repairs sometimes uncover other problems, resulting in additional work and charges in excess of the estimate.
Regardless of the cause of error, inaccurate estimates have resulted in unhappy customers and general mistrust of the
industry.
Mechanical repair shops deal mainly with deterioration of parts due to normal wear. Common repairs involve air
conditioning, brake, transmission, and electrical systems. Because of the increased technological complexity of newer
cars, most shops have specialized diagnostic equipment to identify and fix problems. Shops typically keep an
inventory of replacement parts or have arrangements with quick delivery parts suppliers. Experienced, well-trained
auto technicians are critical to quality repair work. Companies may also employ apprentice or entry-level technicians.
Collision repair involves two distinct types of repair: body work and painting (or refinishing). In the body shop,
technicians correct damaged car frames and panels. Each repair is unique and depends on the accident that caused
damage. The painting process includes several standard steps and operates more like an assembly line. Paint

preparation includes feathering (smoothing the surface) and priming. Paint application typically involves applying
multiple coats. Finishing provides a protective clear coat. Collision repair jobs usually take four to eight days.
Equipment includes welders, paint booths, frame machines, and plasma cutters. Key staff includes framers, technicians,
and painters.
A typical mechanical repair shop has seven service bays and handles 200 repairs a month, according to the Automotive
Service Association (ASA). A typical body shop has 15 bays and handles about 100 repairs per month.
Auto repair shops may buy replacement parts and supplies from full-line vendors, such as NAPA, or have supply
arrangements with multiple distributors. Some large companies have purchasing contracts with specific suppliers. Chains
of repair shops often maintain parts distribution centers to minimize the parts inventory needs at individual stores.
With hundreds of parts needed for thousands of car models and production years, individual stores can't keep complete
inventories. Shops may install OEM or aftermarket (rebuilt) parts.
Many shops use computerized information systems to help manage point-of-sale, inventories, purchasing,
accounting, and customer relations. Database programs give companies fast access to customer and vehicle information
and repair histories. Electronic cataloging allows companies to research maintenance requirements and specific parts
needed for a vehicle's particular make, model, and mileage. Diagnostic computer systems are essential equipment for
mechanical repair shops because modern cars are filled with sensors and onboard diagnostics (OBD) - a vehicle's
self-diagnostic system.
Many shops have websites that communicate basic information, including hours of operation and services performed.
Some companies allow customers to schedule appointments or obtain estimates online.
SALES & MARKETING
Almost 80 percent of mechanical repair shop and 50 percent of collision repair shop customers are repeat, according to
the Automotive Service Association (ASA). Auto repair shops typically draw customers from a 20-mile radius.
Marketing and promotional vehicles include phone directories; signage; local newspaper, TV, and radio ads; and direct
mail. Because business related to insurance claims can be a large percentage of sales, relationships with insurance
agents and companies are important for large body shops. About 30 percent of body shops report higher profits after
affiliating with an insurance-sponsored direct repair program (DRPs), according to Body Shop Business.
Because companies tend to rely on repeat business, maintaining customer satisfaction is crucial. A good reputation
among customers can yield valuable word-of-mouth advertising. Recommendations and links from consumer ratings
websites also can help generate referrals.
FINANCE & REGULATION

While cash flow is generally even, some mechanical repair shops have higher sales in summer (when consumers tend
to drive more), and some collision repair shops have higher sales in winter (when more crashes occur). Most repair
shops have low receivables, since payments are generally made when repairs are complete. However, shops that
perform insurance-related work may carry some receivables as they wait for insurers to process payment.
Companies may have large investments in tools and specialized equipment, such as lifts, compressors, painting
systems, and computer diagnostics like gas analyzers, engine analyzers, scanning tools, and crash data retrieval
systems. Some larger companies that service foreign cars may buy directly from foreign suppliers, and consequently
have exposure to foreign currency fluctuations.
Some large chains, such as Midas and Jiffy Lube, are mainly franchise operations. Owners of a franchise typically pay
an initial franchise fee, monthly royalty payments, and advertising fees. The franchiser generally helps with operations
systems, personnel training, and advertising; connects the franchisee to its centralized inventory management system;
and sells parts and equipment at discounted prices. Franchisers may own the land and buildings of its locations and
lease property to franchisees. Franchise agreements may run for up to 20 years and are often protected by strict state
franchise laws.
Because repair shops usually handle motor oil, gas, antifreeze, lubricants, paints, and solvents, companies must adhere
to various state and federal environmental pollution regulations, mainly concerning toxic waste disposal, ground
contamination, and underground storage tanks (USTs). In the case of body paint shops, government regulations try to
minimize air emissions and worker exposure to hazardous fumes. Various state laws penalize repair shops for
overcharging, performing needless repairs, and using poor-quality replacement parts. Shops that handle insurance
business are subject to state insurance laws that focus on inflated claims estimates and other types of insurance
fraud.
REGIONAL HIGHLIGHTS
The types of car repairs made and the types of cars that repair shops usually see vary by market. Undercarriage and
collision repairs are more frequent in cold winter states, where snow, ice, and salt can increase accident rates and
corrosion. States with high accident rates include Rhode Island, Georgia,
Illinois
, and Kentucky, according to Body Shop
Business.

HUMAN RESOURCES

Owners and managers of repair shops are usually experienced mechanics who directly oversee the technicians who do
most of the actual repair work. Technicians can receive various grades of certification from professional groups like the
American Institute for Automotive Service Excellence (ASE). To gain experience, many workers start as apprentice
technicians.
Because average hourly industry wages are moderately lower than the national average, turnover, particularly
among entry-level workers, can be high. The industry injury rate is about the same as the national average.
Industry Employment Growth
Bureau of Labor Statistics



Average Hourly Earnings & Annual Wage Increase
Bureau of Labor Statistics



Recent Developments
INDUSTRY INDICATORS
US consumer spending on services, an indicator of auto repair shop sales, rose 2.1 percent in December 2011
compared to the same month in 2010.
The average US retail price for diesel and regular gas, which influences consumers' use and wear of their automobiles,
rose 11.6 percent and 12.2 percent respectively in the week ending February 13, 2012, compared to the same week in
2011.
Total US revenue for automotive repair and maintenance rose 2.3 percent in the third quarter of 2011 compared to the
same period in 2010.


QUARTERLY INDUSTRY UPDATE
Consumers Keeping Older Cars Longer - As prices for cars, gasoline, and tires keep rising, consumers are holding
on to their older model cars longer, according to The Wall Street Journal. Post-recession concerns about the economy

limit consumer spending, and many are opting to keep old cars running rather than buy a new vehicle. Monro Muffler
Brake has said the average age of the cars coming into its repair shops has risen from between 6 and 10 years to about
12 years since the recession began in 2008. Monro's exhaust system business is growing again after 14 years of
decline. In September 2011 Monro reported record sales and profits in its fiscal second-quarter 2012. Monro's sales
rose 6.9 percent compared to the same period the year before; profits increased 14 percent.
US Auto Sales Improve - US passenger car and light truck deliveries, an indicator of demand for automotive repair and
maintenance services, improved in September 2011, according to Autodata. US deliveries of passenger cars rose 3.4
percent in September 2011 compared to the same month in 2010; light truck deliveries grew 16.1 percent. Year-to-date,
passenger car deliveries were up 8.7 percent and light truck sales 12.2 percent. Volkswagen Group of America saw the
largest gains in September 2011 with growth of 30.8 percent; Saab Cars of North America experienced the weakest
delivery volume, with a drop of 61.9 percent.
Business Challenges
CRITICAL ISSUES
Competition from Large Repair Shops and Chains - The greater operational and pricing efficiencies of large shops
allow them to take business from smaller shops, despite some having less convenient locations. Franchise chains,
dealerships, and large shops also have advantages in buying, managing inventory, and amortizing expensive
equipment. Because of strong competition in local markets, repair shops have limited ability to raise prices.
Public Mistrust - Because of the complexity of cars, consumers can't easily judge if a repair shop has treated them
fairly. Polls consistently show that a high percentage of consumers believe that repair shops make unnecessary repairs,
overcharge, or use inferior replacement parts. Media reports about repair shops engaged in unethical practices,
including insurance fraud, are frequent.
OTHER BUSINESS CHALLENGES
Body Shops Depend on Insurance - Revenue generated by insurance direct repair programs (DRP) can account for
a large portion of a shop's business. Large companies, such as Allstate, State Farm, Farmers, Nationwide, and
Progressive, dominate the insurance industry. To maintain their insurance business, body shops must conform to
insurance company demands about billable rates, replacement parts, and warranties. Some shops feel forced to agree
with insurance suggestions, like overlooking auto damage or installing cheaper aftermarket parts.
Car Makers Control Repair Information - Because of their control over repair information, especially information in
onboard diagnostic (OBD) systems, car makers can hinder shops' ability to make appropriate repairs. Technicians must
have specific information from car manufacturers about how to repair a part or problem, and, in some cases, must have

special equipment. Car makers sometimes release such information first to their own dealers.
Competition from Car Dealers - The parts and service centers of dealerships are often more profitable than the sales
department. Many dealers offer evening and weekend hours to compensate for inconvenient locations. If dealers can
perform initial warranty services to a customer's satisfaction, they increase the chances of customers returning for
maintenance and repair business when warranties expire.
Growing Car Complexity - As automobiles become more technologically complex, maintenance and repair services
become more difficult and expensive. Shops may need to invest in special diagnostic equipment or other tools to make
repairs to advanced systems. Service technicians may also require additional training to work on the latest model cars.
New Materials Require Special Handling - The growing use of aluminum and other non-traditional materials in auto
bodies has created new challenges for repair shops. The number of trained shop technicians lags the increasing use of
the lightweight materials, such as magnesium and carbon fiber. Aluminum repairs require specially trained technicians, a
separate bay, and special tools. Some auto manufacturers require certification for shops that repair vehicles with
aluminum body parts.

Trends & Opportunities
BUSINESS TRENDS
Driving Trends Evolving - Record high gas prices and a weak economy have affected driving habits and the number
of cars in the US. After decades of growth, total traffic volume has leveled off in recent years. The US car fleet shrank by
2 percent in 2009, according to the Earth Policy Institute. The US fleet is shrinking because the number of cars scrapped
each year is exceeding the number of cars sold. The trend of scrappage exceeding sales is expected to continue
through at least 2020.
Service Offerings Evolve - Because auto parts are more durable now, many mechanical shops have adapted service
offerings to focus on light repair. Some newer engines require oil changes less frequently, reducing maintenance needs.
However, increasing complexity of newer vehicles forces many DIYers to rely on repair shops.
Anti-Steering Legislation - When insurers steer repair business to direct repair program (DRP) shops, smaller
independent repairers lose revenue. Auto insurance companies increasingly control the flow of business to the auto
repair industry, prompting some states to consider legislation that would prevent "steering." Because insurance
companies refuse to pay more than the "prevailing rate" for labor in a particular market, many shops blame insurers for
depressing labor rates and hindering the ability of small shops to turn a profit.
Increasing Need for Certification - More insurance companies now require certification of body shop technicians, and

certification is becoming more widespread among mechanical repair shops. The most common certification is Automotive
Service Excellence (ASE). As more repair shops specialize, they're more likely to get certification from car
manufacturers.
INDUSTRY OPPORTUNITIES
Servicing Nontraditional Vehicles - Auto repair shops can create a niche by developing expertise in nontraditional or
specialized vehicles. Rapidly growing sales of fuel-efficient vehicles, including hybrids, electric cars, and cars that run on
alternative fuels, have increased demand for specialized repair services. By offering restoration or custom paint jobs,
shops can attract owners of vintage or classic cars. Hot rods and muscle cars may require nontraditional or "retro"
engine parts and special attention. Owners of nontraditional vehicles can be passionate about their cars and are likely to
spend more to keep them functional.
Paintless Dent Repair - By providing paintless dent repair (PDR), repair shops can fix small dings and dents at a
reasonable cost to the customer. Recognized by most major insurance companies, PDR is a growing segment of the
collision repair market. Because the volume of PDR jobs can vary, many shops outsource PDR. Some companies use
PDR as an add-on to an existing job.
Alliances with Car Dealers - Owners of expensive cars are more likely to want to use the service department at their
car dealer, but are often at an inconvenient distance. By allying with a car dealer and meeting quality standards, a local
repair shop can be referred new business by a distant dealer in exchange for buying parts from the dealer. Collision
repair is a key opportunity for shops because an increasing number of dealerships are opting out of providing body shop
services.
Older Vehicles Require Frequent Service - Older cars, which require more maintenance and repairs, are a major
source of business for auto shops. To save money, many consumers are delaying new car purchases. The median age
for light vehicles has steadily increased over the past decade, to more than 10 years old, according to RL Polk. The
strong market for used cars also contributes to future growth in vehicle repair services.
Service for Car Electronics - The proliferation of electronic devices in cars, such as cell phones, navigation systems,
video systems, and Internet access devices, will provide greater opportunities for shops that develop repair expertise
with these systems. Vehicle manufacturers are responding to consumer demand by increasing the number of car models
with new, integrated electronic features.
Executive Insight
CHIEF EXECUTIVE OFFICER - CEO

Determining Repair Specialties
Car repair can be complex and require specialized skills or equipment. Advances in automotive technology have forced
many companies to specialize in the types of repairs they make or the types of cars they service, because of the
different knowledge and equipment required. Mechanical repair accounts for 60 percent of industry revenue, body work
for 25 percent. Within the mechanical field, shops may do undercar or underhood work.

Negotiating Referral Agreements with Insurers
Most large body shops receive the majority of their business through direct repair programs (DRP) from insurance
companies. To qualify for DRP, repair shops must meet various service and financial criteria, buy replacement parts from
approved providers, and negotiate the labor rates and rate basis for repairs. Once qualified, insurers provide customers
a list of approved shops.

CHIEF FINANCIAL OFFICER - CFO

Setting Pricing Strategy
Because major car repair can be expensive, consumers may get multiple estimates to get the best price. To be
competitive, shops typically set pricing according to prevailing local market rates. Some companies use estimation
software to help standardize pricing. The rate at which labor is billed is the crucial element of pricing. Labor may be billed
for actual time spent or according to guidelines published by car manufacturers for specific jobs.

Buying Low-Cost Replacement Parts
Both mechanical repair and body shops can use various sources of replacement parts when making repairs. Parts
supplied by car manufacturers are usually the most expensive, and those made specifically for the replacement market
by non-original manufacturers can be significantly cheaper. Some repair shops buy used parts from salvage yards.
Depending on the customer's preference, shops buy from several parts distributors in their region.

CHIEF INFORMATION OFFICER - CIO

Installing Computerized Diagnostic Equipment
Computer systems and microprocessors are an integral part of most modern vehicles. Diagnosing problems with engines

and similar components requires special equipment to communicate with the on-board diagnostic (OBD) systems now
installed in cars. Various devices can be connected to the OBD system, from handheld scan tools that read the trouble
codes to expensive laptop computer models that can be connected to record large amounts of data during a test drive.

Integrating Inventory Management with Suppliers
Although repair shops hold an inventory of basic items, parts for a particular repair job are often ordered for same-day
delivery from regional suppliers. Through computer access to a supplier's inventory, repair shops can find and order the
specific parts they need electronically. Some supplier ordering systems can check orders for accuracy, confirm order
receipt, and alert repair shops through instant messaging if a part is out of stock.

HUMAN RESOURCES - HR

Retaining Repair Technicians
Retaining experienced technicians is difficult because the value of technicians is higher than their pay. Much of a shop's
profit comes from the difference between the cost for labor and the customer charge for labor. Experienced technicians
can fairly easily start a repair shop of their own. Offering full benefits packages, including vacation and health insurance,
and training can help companies retain technicians.

Training Technicians for New Model Repairs
Because of annual changes in auto design, repair technicians must receive ongoing training to work on new car models.
Car manufacturers supply repair manuals for new cars, codes for OBD systems, and training programs. Technicians
receive the majority of training from parts suppliers, according to the Automotive Service Association (ASA). Time
constraints limit the amount of training a technician can receive, especially in a typical mechanical repair shop that has
only a half-dozen technicians.

VP SALES/MARKETING
-
SALES

Devising Customer Loyalty Plans
Mechanical repair shops get most of their business from returning customers or through referrals from existing
customers. To encourage repeat business, shops remind customers of routine maintenance schedules, mail them
discount coupons for maintenance items, and award free services like a car wash or an oil change for frequent
appointments. Free services are also awarded for referrals of new customers.

Maximizing Internet Opportunities
Internet sites are typically used to list services and provide directions, but advanced sites can make appointments, list
prices, and provide customers with detailed information about their cars. Shops can link to third-party auto sites, like
AllData, or business-related sites like chambers of commerce to generate referrals.

Call Preparation Questions
EXECUTIVE INSIGHT

CEO: What types of repairs does the company specialize in?
Within the mechanical field, shops may do undercar or underhood work.
CEO: How important is DRP participation to the company's sales?
Most large body shops receive the majority of their business through DRP from insurance companies.
CFO: How does the company develop pricing strategies?
Shops typically set pricing according to prevailing local market rates. Some companies use estimation software to help
standardize pricing.
CFO: What is the company's most important source of replacement parts?
Parts supplied by car manufacturers are usually the most expensive, and those made specifically for the replacement
market by non-original manufacturers can be significantly cheaper.
CIO: What types of computerized diagnostic equipment does the company use?
Various devices, from simple handheld scan tools to expensive laptop computer models, are used to diagnose and fix
vehicles.
CIO: How does the company integrate its inventory management systems with its suppliers?
Through computer access to a supplier's inventory, repair shops can find and order the specific parts they need
electronically.

HR: How does the company retain skilled technicians?
Offering full benefits packages, including vacation and health insurance, and training can help companies retain
technicians.
HR: What training does the company provide for technicians so that they can repair the newest vehicle
models?
Because of annual changes in auto design, repair technicians must receive ongoing training to work on new car models.
Sales: How does the company promote customer loyalty?
Shops can send reminders for routine maintenance, mail discount coupons, and award free services for frequent
appointments.
Sales: How has the Internet changed the way the company markets its services?
Advanced websites can make appointments, list prices, and provide customers with detailed information about their cars.
CONVERSATION STARTERS

How does the company compete against large repair chains and car dealers?
The greater operational and pricing efficiencies of large shops allow them to take business from smaller shops, despite
some having less convenient locations.
How does the company build trust with customers?
Because of the complexity of cars, consumers can't easily judge if a repair shop has treated them fairly.
What types of problems has the company experienced when dealing with insurance companies?
Revenue generated by insurance direct repair programs (DRP) can account for a large portion of a shop's business.
What specialized services does the company offer?
Auto repair shops can create a niche by developing expertise in nontraditional or specialized vehicles.
How does paintless dent repair fit into the company's service offerings?
By providing paintless dent repair (PDR), repair shops can fix small dings and dents at a reasonable cost to the
customer.
How might relationships with car dealers help the company's business?
Owners of expensive cars are more likely to want to use the service department at their car dealer, but are often at an
inconvenient distance.
QUARTERLY INDUSTRY UPDATE

How, if at all, has the sluggish economy affected demand for the company's services?
As prices for cars, gasoline and tires keep rising, consumers are holding on to their older model cars longer, according
to The Wall Street Journal.
OPERATIONS, PRODUCTS, AND FACILITIES

What kinds of special equipment does the company use?
Because of the increased technological complexity of newer cars, most shops have specialized diagnostic equipment to
identify and fix problems. In body shops, common equipment includes welders, paint booths, frame machines, and
plasma cutters.
What does the company rely on to develop repair estimates?
Estimators may rely on car makers' recommendations or computer software to help develop an accurate estimate.
How often does a repair cost more than the estimate?
Repairs sometimes uncover other problems, resulting in additional work and charges in excess of the estimate.
Regardless of the cause of error, inaccurate estimates have resulted in unhappy customers and general mistrust of the
auto repair industry.
What are the company's most common repairs?
Common repairs involve air conditioning, brake, transmission, and electrical systems. For body shops, each repair is
unique and depends on the accident that caused damage.
What types of commitments does the company have to its suppliers?
Auto repair shops may purchase replacement parts and supplies from full-line vendors, such as NAPA, or have supply
arrangements with multiple distributors. Some large companies have purchasing contracts with specific suppliers.
How does the company manage replacement parts inventory?
Chains of repair shops often maintain parts distribution centers to minimize the parts inventory needs at individual
stores. Some shops keep a limited inventory of parts on hand or have arrangements with quick delivery parts suppliers.
How often does the company use aftermarket parts?
Shops may install original equipment manufacturer (OEM) parts or aftermarket parts (rebuilt).
What products or services does the company offer in addition to repair work?
Most companies in the mechanical field provide generalized services, such as regular maintenance, in addition to repair
work. Other services include oil changes and car washes. Companies may sell parts for do-it-yourself (DIY) customers.
What is the average number of repairs for the company's shops?

A typical mechanical repair shop has seven service bays and handles 200 repairs a month, according to the Automotive
Service Association (ASA). A typical body shop has 15 bays and handles about 100 repairs per month.
CUSTOMERS, MARKETING, PRICING, COMPETITION
How big is the company's geographical market area?
Auto repair shops typically draw customers from a 20-mile radius.
What are the company's most effective marketing and promotional vehicles?
Marketing and promotional vehicles include phone directories; signage; local newspaper, TV, and radio advertising; and
direct mail.
How important is word-of-mouth for the company?
Companies rely heavily on customer referrals. An honest reputation can generate positive word-of-mouth.
What are the benefits of insurance-related sales?
About 30 percent of body shops report higher profits after affiliating with an insurance-sponsored direct repair program
(DRPs), according to Body Shop Business.
What warranties does the company offer?
Many shops offer warranties on repairs, in case problems arise.
What is the company's primary competition?
Competition includes other venues which provide automotive services, including some gas stations, car dealerships, and
branches of chain stores, like Sears and Kmart.
REGULATIONS, R&D, IMPORTS AND EXPORTS
How do government environmental regulations affect the company's operations?
Because repair shops usually handle motor oil, gasoline, antifreeze, lubricants, paints, and solvents, companies must
adhere to various state and federal environmental pollution regulations, mainly concerning toxic waste disposal, ground
contamination, and underground storage tanks (USTs).
How have emissions and safety regulations affected the company's paint shops?
In the case of body paint shops, governmental regulations attempt to minimize air emissions and worker exposure to
hazardous fumes.
How does the company avoid violating consumer protection laws?
Various state laws penalize repair shops for overcharging, performing needless repairs, and using poor quality of
replacement parts.
How does insurance fraud affect the company?

Shops that handle insurance business are subject to state insurance laws that focus on inflated claims estimates and
other types of insurance fraud.
ORGANIZATION AND MANAGEMENT

What skills does the company's staff need?
Mechanical repair shops typically employ skilled auto technicians. Body shops employ framers, technicians, and
painters.
What types of certification do the company's technicians have?
Technicians can receive various grades of certification from professional groups like the American Institute for
Automotive Service Excellence (ASE).
How important are apprentice programs to the company's staff development?
To gain experience, many workers start as apprentice technicians.
How does the company minimize turnover?
Because average hourly industry wages are moderately lower than the national average, turnover, particularly among
entry-level workers, can be high.
If the company is a chain or franchise, what is the company's relationship with the parent company?
The industry includes national and regional chains, franchises, and independent operators. The majority of auto repair
shops are independently owned, although many are franchises of large companies.
FINANCIAL ANALYSIS

How does seasonality affect sales?
While cash flow is generally even, some mechanical repair shops experience higher sales in the summer (when
consumers tend to drive more), and some collision repair shops have higher sales in the winter (when more crashes
tend to happen).

What are the company's average receivables?
Most repair shops have low receivables, since payments are generally made when repairs are complete. However, shops
which perform insurance-related work may carry some receivables as they wait for insurers to process payment.
How does the company fund expensive equipment purchases?
Companies may have large investments in tools and specialized equipment, such as lifts, compressors, painting systems,

and computer diagnostics like gas analyzers, engine analyzers, scanning tools, and crash data retrieval systems.
What problems has the company encountered when purchasing parts from foreign suppliers?
Some larger companies that service foreign cars may buy directly from foreign suppliers, and consequently have
exposure to foreign currency fluctuations.
If the company is a franchise, what are typical franchise terms?
Owners of a franchise typically pay an initial franchise fee, monthly royalty payments, and advertising fees. The
franchiser generally helps with operations systems, personnel training, and advertising; connects the franchisee to its
centralized inventory management system; and sells parts and equipment at discounted prices.
BUSINESS AND TECHNOLOGY STRATEGIES

How have advances in auto technology affected the company's operations?
Diagnostic computer systems are essential equipment for mechanical repair shops because modern cars are filled with
sensors and onboard diagnostics (OBD) - a vehicle's self-diagnostic system.
How has information technology improved the company's basic business operations?
Many shops use computerized information systems to help manage point of sale, inventories, purchasing, accounting,
and customer relations.
How could the company improve access to key information required for the repair process?
Database programs give companies fast access to customer and vehicle information and repair histories. Electronic
cataloging allows companies to research maintenance requirements and specific parts needed for a vehicle's particular
make, model, and mileage.
How has increased use of new body materials affected the collision repair business?
The growing use of aluminum and other non-traditional materials in auto bodies has created the need for specially
trained technicians, separate bays, and special tools.
How do driving and car purchase trends affect the company?
Record high gas prices and a weakening economy have affected driving habits and the number of cars in the US.
How has the collision repair market changed over the last few years?
Increased vehicle safety, fewer miles driven, milder weather, and more "cash outs" (consumers opting out of repairs and
spending insurance money elsewhere) have slowed demand for collision repair and caused many small body shops to
struggle.
Financial Information

COMPANY BENCHMARK INFORMATION
NAICS: 8111
Data Period
Last Update 2010
Small Company Data
Sales < $1 Million
Table Data Format
Mean


All
Small Company
Company Count
97517
90076

Income Statement
Net Sales
100%
100%
Gross Margin
91.1%
91.9%
Officer Compensation
4.2%
5.1%
Advertising & Sales
1.6%
1.6%
Other Operating Expenses

82.6%
82.5%
Operating Expenses
88.3%
89.2%
Operating Income
2.8%
2.8%
Net Income
0.6%
0.6%

Balance Sheet
Cash
8.7%
9.7%
Accounts Receivable
10.4%
10.3%
Inventory
8.1%
8.7%
Total Current Assets
31.3%
32.7%
Property, Plant & Equipment
48.3%
47.5%
Other Non-Current Assets
20.4%

19.8%
Total Assets
100.0%
100.0%
Accounts Payable
5.0%
5.3%
Total Current Liabilities
18.9%
19.8%
Total Long Term Liabilities
37.7%
37.6%
Net Worth
43.4%
42.6%

Financial Ratios
(Click on any ratio for comprehensive definitions)
Quick Ratio
1.04
1.05
Current Ratio
1.66
1.65
Current Liabilities to Net Worth
43.5%
46.5%
Current Liabilities to Inventory
x2.34

x2.28
Total Debt to Net Worth
x1.30
x1.35
Fixed Assets to Net Worth
x1.11
x1.12
Days Accounts Receivable
27
22
Inventory Turnover
x1.57
x1.57
Total Assets to Sales
72.0%
60.8%
Working Capital to Sales
8.9%
7.9%
Accounts Payable to Sales
3.5%
3.1%
Pre-Tax Return on Sales
0.9%
1.0%
Pre-Tax Return on Assets
1.3%
1.6%
Pre-Tax Return on Net Worth
3.0%

3.8%
Interest Coverage
x0.99
x1.05
EBITDA to Sales
4.3%
4.0%
Capital Expenditures to Sales
2.9%
2.4%

Financial industry data provided by MicroBilt Corporation
- Use our Integra Financial Benchmarking Data for detailed Business Valuation and analysis data
from over 900 industries (SIC & NAICS) and 13 sales size ranges. 2010 data and historical data from 1998-2009 available by subscription or single report
purchase at www.microbilt.com/firstresearch.
ECONOMIC STATISTICS AND INFORMATION
Annual Construction Put into Place - Census Bureau
Change in Consumer Prices - Bureau of Labor Statistics
VALUATION MULTIPLES
Automotive Repair & Maintenance Services
Acquisition multiples below are calculated using at least 86 private, middle-
market (valued at less than $1 billion) industry asset transactions completed
between 8/1995 and 3/2011. Data updated every six months. Last updated:
October 2011.
Valuation
Multiple
MVIC/Net
Sales
MVIC/Gross
Profit

MVIC/EBIT
MVIC/EBITDA
Median Value
0.4
0.7
4.1
4.2
MVIC (Market Value of Invested Capital) = Also known as the selling price,
the MVIC is the total consideration paid to the seller and includes any cash,


notes and/or securities that were used as a form of payment plus any interest-
bearing liabilities assumed by the buyer.
Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any.
Gross Profit = Net Sales - Cost of Goods Sold
EBIT
= Operating Profit
EBITDA
= Operating Profit + Noncash Charges
SOURCE: Pratt's Stats™ (Portland, OR: Business Valuation Resources, LLC) To purchase more detailed
information, please either visit www.BVMarketData.com or call 888-287-8258.
Industry Forecast
The output of US automotive repair, maintenance, and services is forecast to grow at an annual compounded rate of 3
percent between 2011 and 2016. Data Published: October 2011
Automotive Repair and Maintenance Services Growth Flattens



First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research
Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures

the links between industries and the aggregate economy.

First Research Industry Growth Rating
The First Research Industry Growth Rating reflects the expected industry growth relative to other industries, based on
INFORUM's forecasted average annual growth for the combined years of 2010 and 2011. INFORUM forecasts were
prepared by the Interindustry Economic Research Fund, Inc.
Demand: Depends on miles driven
Need convenient location and good marketing
Risk: Dependence on auto insurance companies for work

First Research Industry Drivers
Changes in the economic environment that may positively or negatively affect industry growth.
Data provided by First Research analysts and reviewed annually.
Consumer Spending: Change in overall level of consumer spending on goods and services



Web Links & Acronyms
INDUSTRY WEBSITES
Automotive Body Repair News
Industry news.
Automotive Industries Association of Canada
News from Canadian trade association for the automotive aftermarket.
Automotive Service Association
Industry news, trends and statistics from trade association. Annual business survey in AutoInc Magazine.
BodyShop Business Magazine
Industry news, trends, and statistics. Annual business survey for body shops.
Bureau of Transportation Statistics
Statistics about car and truck registrations and driving trends.
Canadian Automotive Repair & Service Council

News from Canadian trade association for auto technicians.
CollisionWeek
Collision industry news.
INSIGHT
Collision industry repair news.
National Automobile Dealers Association
See "NADA Data" for details of parts and service department operations of car dealers.
National Highway Traffic Safety Administration
Crash statistics and economics.
National Institute for Automotive Service Excellence
National certification organization for auto technicians.
Professional Tool & Equipment News
Auto repair tool and equipment market news.

GLOSSARY OF ACRONYMS
ASA
- Automotive Service Association
ASE
- Automotive Service Excellence
DIY - do-it-yourself
DRP - direct repair program
OBD - on-board diagnostics
OEM - original equipment manufacturer
PDR - paintless dent repair
POS - point-of-sale
UST
- underground storage tank
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value of securities or the advisability of investing in securities, and the Profiles are not intended to be relied upon or used for investment purposes.”

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