Options narrow in vehicle repair game - Mark Mentiplay: Case study

IN the words from the old country song The Gambler: “You’ve got to know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.” So it is in business. But how does a business operator know when they, or the business itself, have reached the end; when it is no longer viable, for personal and/or economic reasons, to go on? After 34 years in the automotive panel and paint business, Kevin Lee has reached that point. The 50-year-old, who has lung and other stress-related health problems, is selling the Landsdale-based Urgent Auto Panel & Paint business he established five years ago for about $120,000. He plans to eventually head north to the gas rigs near Karratha to work as a painter and blaster for about five times what he is earning now. The irony of Mr Lee’s situation, and many others in the industry, is that there is plenty of work available. However, much of it is just not worth doing. Most of Mr Lee’s work is dished out by the big insurance companies; and their rates are lousy – between $26 and $30 an hour – and they provide the estimate on how long each part of a particular job should take. A major problem for Mr Lee was that he needed to hire more highly skilled staff to allow him to offer a higher, more specialised range of services to his insurance and private clients. But because of the low rates paid by the insurance companies, he could only afford to pay base rates that, in this business, began around a gross $485 a week. “That’s just not enough for a family to live on. The pressures this produces are huge and result in a very high divorce rate,” said Mr Lee, speaking from personal experience. Small operators, he said, were also being pressured into doing work they were not qualified to do, such as the removal and refit of engines, for which a mechanic would charge between $70 and $80 an hour. “I don’t think many people really know what goes into repairing their cars,” Mr Lee said. An additional problem was that all skill levels throughout the industry were heading for the big money opportunities offered by the booming resources sector, a lure Mr Lee himself is about to swallow. On top of these business issues, were Mr Lee’s own growing health concerns over the effects of paints, solvents and other chemicals. While collectively, they all contributed to the decision, there were three key decision making incidents that brought Mr Lee to the conclusion that his life as a panel beater, spray painter and business owner was over. These included the death a few weeks ago of his 51-year-old non-smoking brother and fellow spray painter from lung cancer, the similar death of a young spray painter just one week out of his apprenticeship and Mr Lee’s own divorce, and its resultant effect on his three children. Add to that emotional mix spiralling paint costs caused by a rising oil price, some extra scrutiny from the tax department and just operating an increasingly electronic-based business in “an over governed, over legislated” environment, and the big money “northern option” became a beacon. “It’s just too hard to make any money in this business. At the very least, it’s a young man’s game,” Mr Lee said. Waiting in the wings are 23-year-old twin brothers Adam and Ben Turner, both tradesmen, who will spend the next three months working with Mr Lee before deciding on whether to buy the business. “If they find it too hard or I think it will be too tough, I won’t sell the business to them. I’ve seen too many young lives destroyed by this business and I won’t let it happen to these guys,” Mr Lee said. His options then will be to advertise the business for sale, consult a business broker or just walk away. It is not just about business.