Are the cost of parts you buy from the dealer and the discounts required by some insurers driving you crazy? Are the increasing cost of materials and low insurer reimbursements getting you down? Well, cheer up there is sunshine on the horizon if you are willing to put out a little effort and a small amount of money.

Multiple shop operators (MSOs) and consolidators have a competitive advantage over the average independent because of their ability to negotiate better discounts and concessions from suppliers. You have heard it before; this is called the economy of scale. The bigger you are or the more shops you own the better prices that can come your way. Think about how competitive you would be with an extra two, four, six or ten percent off all of your purchases. This is especially important in today's economy when you need to make as much money per job as possible.

What I am going to discuss this morning is nothing new. In some places it is already being done. In other places it has been discussed with little or no action taken. All of you have heard about it, but alas the greater majority have done nothing about it. What I am talking about is co-ops. Co-ops can and would add thousands of dollars to your bottom line.

Why more collision repairers have not formed co-ops is beyond me. Aside from developing contracts and doing the legal stuff it is relatively simple. You do need one person to run the co-op and handle negotiations and follow-up. This person will expect to be paid, but those in the co-op share that cost.  Ah ha, maybe that is the problem, shop owners may not want to lay out money until they are sure what they are receiving. Or maybe they have some strange loyalty to their suppliers so they don't want to switch even though changing suppliers might be worth thousands of dollars. Or some shops might be in debt to their suppliers or they might be allowed extended terms to pay their bill so they are afraid to switch. Obviously these are costly mistake because it is just like throwing money down the drain when you don't use the vendors offered by the co-op

Some co-ops are strictly buying groups aimed at saving their members money. Others may offer additional services. Costs may vary from co-op to co-op, but there aren't a ton of co-ops so your job is not too difficult. Buying co-ops will probably have a list of qualifications that a shop must meet to qualify as a member. Any shop that meets those qualifications has a right to join the co-op if they follow the rules of the co-op. The co-op cannot discriminate. Depending on what additional services are offered may create a two-tiered system so part of the co-op might be open where additional services may only be open depending on territory.

If you are part of a group you might be expected or required to do several things in order to remain a member. Obviously paying your fees to the co-op is probably the number one requirement. Paying your bill to the suppliers in the co-op is also important. You can lose group suppliers real quick when the participants don't offer any value to the supplier and believe me paying on time is one of those requirements. Some groups might require their co-op members to be Class A shops because the suppliers want to do business with the best operators.  Most importantly the co-op will expect you to use the suppliers that have been chosen. It is odd, but the biggest problem most co-ops have is convincing their members to use all of their suppliers, especially the paint and material vendors. The biggest savings to the group usually comes from paint and materials yet this is the area that members seem to balk at first. There is usually a range of excuses not to change paint suppliers, but actually none of the reasons have much validity since all the major paint brands are similar (even the suppliers will admit that).  The excuse that a painter prefers a specific brand is ridiculous. Most painters have used several brands so they can use any one of them. If you can save ten or twenty thousand dollars on a paint and material line and your painter doesn't like it, maybe it is time to change painters.

If you or a few shops owners decide to start your own co-op there are a number of people around the country that I'm sure would be willing to help you set up yours. Ask around a lot of people know of plans that are working in all parts of the country.

Buying co-ops has to be the wave of the future because most shop owners don't have the clout to negotiate the best discounts. This is an area of your business that requires very little action on your part, but can pay high dividends. Why more people don't get involved is beyond me.