Discount vs OMCAD: How to improve bodyshop profitability

14 October 2021 Automotive

Many bodyshop owner/operators don’t always grasp the relationship between cost reduction and productivity, and how these two factors can affect your bottom line. This short article should help you understand how best to achieve better profitability.

The easy example is a guy who insists on using Brand X masking tape because it is priced at 20 pence a roll cheaper than Brand Y –never mind that it is inferior and leaves an adhesive residue when removed that takes 20 minutes of work to get rid of. If I may say so, that is penny-wise and dollar-dumb.

But we’ll play along. Let’s say he’s spending about £4,000 a month on parts and refinish materials. By shopping around, and using his superior negotiation skills, he manages to net another 10% of discount. Wow! That is £400 a month, an admirable £4,800 a year.

Now let us assume we’re using the best and fastest products out there – the superior primers, ancillaries and coatings. This will greatly increase our productivity, due to having less problems and reworks, as well as better working speed.

This takes us on to the subject of OMCAD- One More Car A Day. Increasing your productivity by working more efficiently and getting more done in the same amount of time is a very powerful thing. OMCAD really refers to the fact that you’ll get more work done in the day, not necessarily that you’ll complete another full job, although you may be able to occasionally!

I don’t know what your average job is worth, but let’s say it’s £3,000. Grab your calculator and work this equation with me: job price (£3,000) x 5 days a week x 4 weeks a month x 12 months a year. So, £3,000 x 5 = £15,000 x 4 = £60,000 x 12 = £720,000. £720,000 a year? Yes, if you were to achieve OMCAD literally every day. I am aware this is hypothetical, but even if you achieved OMCAD just 10% of the time, it would give you £72,000. That is gross, of course, but even after you back out all of your overheads, you’re left with a sum that makes your 10% discount saving pale into insignificance!

Whether you pursue greater discount or increased productivity or both, this small insight into productivity and profitability should help you get your gross profit where we want it to be.