Smash Repairs: Gold Mine… or Insurance Nightmare?

Smash repairs look like a simple trade business.

Cars crash.
Panels get fixed.
Insurers pay.

But underneath the workshop floor is a much bigger machine.

Insurers.
Assessors.
Parts delays.
Hire cars.
Labour shortages.
EV complexity.
And customers stuck waiting for answers.

In this episode of Good Bad Business, Peter and Fabs break down the smash repair industry using the MOAT framework, Margin, Operation, Advantage, and TAM, to understand whether this is a gold mine… or an insurance nightmare.

We unpack:

• Why smash repair is really a claims logistics business
• How insurers control workflow, pricing, and volume
• Why delays destroy customer trust
• The hidden pressure of parts, labour, rework, and EV repairs
• And whether a smash repair shop can realistically generate $1M in year one

This isn’t just about fixing cars.

It’s about who controls the claim.

Because the customer sees the repairer.

But the repairer sees the insurer.

And in this business, one million dollars of revenue can still feel broke.

We break down the numbers so you don’t get into a pickle.

If you’re thinking about buying a business,
 listen first.

If there’s a business you want us to break down,
 send it in.

And if you got value from this, share it with someone before they sign something they shouldn’t.

Because we don’t want you to get into a pickle.

Transcript

SPEAKER_02 0:00

Welcome to the Good Bad Business Podcast, sponsored by a pickle, the team that removes caveats from directors' homes.

SPEAKER_01 0:08

Good bad business. I'm a pickle.

SPEAKER_00 0:12

Good bad business.

SPEAKER_02 0:17

On this episode, we're going to be looking at smash repairs. So let's get into it, Pete.

SPEAKER_00 0:22

There you go. Now, this one has been brought into us from one of our audience members that have been pushing me to do the smash repair industry for quite some time. Now, when we say audience, now it sounds like we've got a massive audience. It's actually my son Ethan. He's a spray painter. Yep. He's going, Dad, dad, dad, you gotta, you gotta break down my industry. So, Ethan, my boy, um not only do I love you a lot, but we thought we'd schedule in your thought thought process and do it on the smash repair industry. So let's do it. Ethan, this one's for you. So the the crash is the easy part. You smash a car, right? Why not? Yep. Big tan. There's plenty of cars around. So that's easy. So let's break it down. Picture this. We've got a customer has a minor car crash, nobody's hurt, the car still dries, but then the real drama starts. The insurer says, Listen, mate, take it, take it to your preferred repairer. And the repairer says, Oh, we're waiting on parts. And then the customer says, Why the friggin' hell has this taking six weeks? And somewhere in the middle lies the smash repairer. So here's the real question Is a smash repair a good business in Australia? Or is it a money pit filled with spray booze, waste pressures, insurers' controls, and a lot of angry customers? But here's where what most people miss this isn't just a panel shop. It's actually a claims logistic business. So if you really break down this business, which is what we're going to get into today, and the customer, they only see one business, but there's a whole mirage of things in the background. And that's behind the scenes. Because behind the scenes, there's insurers, assessors, part suppliers, tow trucks, high cars, technicians, and now EV battery specialists. This is giving me anxiety. We haven't even started. We've started here. And I've already got anxiety behind this business.

SPEAKER_02 2:34

And you have this one, you have uh you know the movie Flight, where the guy works as the insurance assessor and they've got car accidents, just like that.

SPEAKER_00 2:41

Yeah, yeah, yeah. The promps that just gone in there, and then they're punching on as they go up and that's what used to happen in the old days. Like whoever whoever was the strongest tow truck and could punch on, they were the ones that get the business.

SPEAKER_02 2:53

Yeah, yeah. 100%. No, and it's still to this day, there's there's a lot of there's a bit of a racket involved in it.

SPEAKER_00 2:58

100%. So it does get complicated, but um, let's break it down. So I'm gonna move over to the origin story. And I want to sort of think about how the actual business started because it went from panel beaters to an insurer network. I mean, what happened to the old days? It was just a bunch of panel beaters. Now we've got this massive network of insurers. So the Smash Repairer, it actually started as a local trade. A couple of panel beaters, spray painters, and some family workshops. So simple, simple, right, don't fit? Yep. Right, why why complicate it? Yeah, just keep just keep things simple. Yeah the problem is that you know we're we're emotional beings and entrepreneurs, they they like to scale. Yes. And I think this is where the smash repair industry really started to get a lot of congestion because Australia then added more cars. So if you got more cars, you've got more congestion. Yeah. Then if you've got congestion, you've got insurers because they're rubbing their hands together. Oh, here we go. Yeah. Here's here's here's an opportunity. Payday. That's right. And the industry started to evolve. Now you've got independents, you've got dealer repairers, you've got insurer networks, consolidators, and EV specialists. But the biggest shift is the insurer control because the real customer is often isn't the driver, it's the insurer. And that actually changes everything. NRMA becomes IAG, the insurers build their preferred networks, and then volume starts flowing through relationships. And once an insurer controls the volume, that obviously influences the margin. And that's something that we talk about a lot on this podcast. Because believe it or not, it's like the one that we did on the mortgage break when we're talking about the banks. If the banks are bringing in their own platform and they pay less to the broker, hate the breaker to everybody, but businesses like margins. So if NRMA can control the flow, they can control the margin.

SPEAKER_02 5:04

That's right. That's why automation is such a hot topic right now, right? 100%.

SPEAKER_00 5:08

But tell us about the snapshot first.

SPEAKER_02 5:11

So let's trip this back. So a smash repair business restores damaged vehicles, revenue comes from insurance work, private repairs, fleet work, dealer referrals, um, hell damage, not at fault claims, EV repair. Sounds straightforward, but operationally, this is not a repair business. It's a workflow business. You've got quotes, assessments, strip, order parts, repair, paint, calibrate, quality control, handover, and every delay compounds.

SPEAKER_00 5:39

And when you've got a logistical style business, if there's a clog in the wheel, that's where it starts to compound. Yes. And it's like, it's like with us, right? Like if we can't get the deals out of the pipeline, things clog up. Correct. It's the same, it's the same analogy with this type of business, but unfortunately, you know, that's in real time. Yes. Because you're trying to get the car out as fast as possible. Exactly. It involves manual labor. It says it's manual labor. That's right. And so, you know, automation can only go so far.

SPEAKER_01 6:08

Yeah, that's right.

SPEAKER_00 6:08

Um, it's not like, you know, it's a it's a it's a Tesla um sort of work factory where you've, you know, it's completely automated by robots. And maybe it should. I mean, that maybe that's how the industry needs to evolve. Yeah. And I'm sure NRMA is thinking about it right now because I know the the conversations that I have with my son Ethan is that those types of businesses, it's very much completely systematical in respect to your post. Like you can't leave your post. You know, it's it's a complete subway transaction line. You start from one end and you work your way down the other end. And you're only as good as the next job. You're only as good as the next job. That's right. And that's where the industry gets really boring. Yeah. So people don't hate the repairer. They actually hate the rate. Yeah. And when the weight starts to increase, the customers, they're just not, they're just not happy.

SPEAKER_02 7:01

Yep. We've all we've all heard the, you know, when there's an insurance um claim happening and you know there's been a car accident, the biggest holdup usually is in that repair period where they're waiting for feedback and waiting for outcome.

SPEAKER_00 7:11

Yeah, yeah. And a lot of the customers say the car looked brand new. Uh the paint match, it was spot on. So these are some of the reviews that we've looked at. Um, staff handled the insurance good. Loan car was made easy. You know, a bit about the service. You know, if you can get the service right, if you've got your loan car, which is, you know, I've seen a lot of these loan cars that are just terrible. Like they're like 20 years old.

SPEAKER_01 7:33

Yeah.

SPEAKER_00 7:34

Yeah. It's this is a service-based industry. If the customers are unhappy, at least make them happy with the loan car. Yeah, exactly. And so we have seen some good reviews. So that's really, really important. Some of the reviews that we've seen that are absolutely terrible is, and it's the same theme appears time and again in this particular sector in this industry. Delays, poor communication, the quote changes, the negative reviews, the blame shifting, and then the high car confusion. Again, comes down to high car. Get your high car right, gentlemen.

SPEAKER_02 8:06

Yep. Sort it out. Yep. Fill that void that they're missing, right?

SPEAKER_00 8:10

Yeah, and you want to make it like I I remember there was a mate of mine that owned uh a BMW dealer. And when they got their car in for a service, they knew what type of music they like and and and mints that they liked and all that type of stuff. So then when they took the loan car, they did exactly the same thing. They just sort of transferred that over. Oh, that's that's it. So it's the it's the little things that you do that's gonna make the customer just be an absolute raving fan about your business. So if there's gonna be a way, make it comfortable for them.

SPEAKER_02 8:47

Yeah, that's right.

SPEAKER_00 8:48

And most bad reviews are actually not workmanship failures, they're actually workflow failures. Yeah. Again, time delay. The parts were delayed, insurers, the approval was actually delayed, and also the assessment was delayed.

SPEAKER_01 9:04

Yeah.

SPEAKER_00 9:04

So again, it comes back down uh to the logistics. And the customer experiences all of that because at the end of the day, it's the repairer that failed. You can't blame the assessor because they've come to you. Yes. Yeah. They've come to Fab Smash Repair. That's right. They don't care what goes on in the background. You're you're the brand, you're the you're the front.

SPEAKER_02 9:24

And then tell me this. I'd be interested because you probably know a bit more about this by virtue of Ethan. But um, with the repairer failed, how often is it that they actually get upset? Because you know how often, you know, you get into a car accident, you hope that your vehicle could be a write-off if there's enough damage, right? Because you want to get it replaced. And then the uh repairer comes and says, actually, no, it's not a write-off. How often does that happen? Does that have you heard much about whether that causes an issue? Yeah, all the time.

SPEAKER_00 9:50

Yeah, it's it's it's it's one it's one of those things. Yeah, because you you don't you see you hope that it's a it's a write-off. Yeah, if it's damage bad enough, but it also depends on the insurer as well. Because in most instances, they're not gonna say that it's a write-off because that means they're gonna write off.

SPEAKER_02 10:04

It's gonna cost them more money. It's an easy scapegoat to say, well, this is what the repairer assessed, this is what the repairer did, and this is what we've assessed. Yeah, so yeah. So on that note, so M for margins. So now the economic. So average repair value, small repair, 1,500 to 3,000. You know, we've all even coped those and those can be painful. Uh meter repair, 3,000 to 7,000, and heavy repair, you got 8,000 plus. Cost stack parts 25 to 45%. Unsurprising. It's all metallic and you know, uh competable mechanics, yep. And then you got labor, 25 to 35%. As we said, it's just, you know, you're just as good as the next job that you've done, and it's all labor intensive. Um, paint and consumable, six to twelve percent, still, you know, a significant part of the margin, and rent admin compliance, 10 to 18%. I mean, you're looking at these workshops that are specialized properties. So, yeah. So best case Ibita, 12 to 15%, base case, 7 to 10%, worst case, break even or loss. And look, this is not a coffee. Um, you simply can't raise prices because insurers influence the rates.

SPEAKER_00 11:09

Yeah. And if if they're if they're influencing the rates, the real margin is the driver. It isn't the price. Yes. It's the cycle time. Yeah. It's the the labor recovery, the parts control. If there's a clog in the parts control, the whole thing shifts itself.

SPEAKER_02 11:26

Yep.

SPEAKER_00 11:26

And then you've got to, then you've got reworks. Yes. You've got to come back in if the cup, if the customer isn't happy, you've got to bring it back in, you've got to put it back into the system again. So not only is that clogging up the wheel, you've done the same thing twice. Yes. And then insurer relationships. So, you know, one million dollars of revenue, I don't know, it can, it can still feel very, very broke. So what do we score margin? Uh like it's it's a tough one. Like this, there's this there's a massive cost there. Yeah. Like, what did you say? Parts of 25 to 45 percent and Libra and all of a complain.

SPEAKER_02 12:01

The same thing happens, right? You're stressed out, you've got manual labor, but then a lot of times there's not much loyalty. And sometimes if there's too much loyalty, people rely on that one good tradesman. Then when he leaves, good luck finding a new one.

SPEAKER_00 12:13

But then you've got to train it. Yeah, then you then you've got to train the next person.

SPEAKER_02 12:15

Well, how long was um Ethan's appointment?

SPEAKER_00 12:18

Uh we're still doing it. I think he's only third. Four years in total, just like everybody. See, that's that's four years you're teaching a newbie. I mean, that's right. You know, that's right. And that's when he goes to toe. Yeah. He's just he's just hanging out with the girls, I think.

SPEAKER_01 12:32

Of course. The apple doesn't fall too far from the tree.

SPEAKER_00 12:37

Um, actually, I shouldn't say that because his girlfriend might be listening. So Maddie, Maddie, if you're listening, we love you lots.

SPEAKER_02 12:44

So the score, um, look, I'll say, look, margin, you can get margin, but I'm gonna probably give it a five out of ten because there's that tension of, as we said, the labor and all that. So yeah, I'll probably give it a five because there is margin.

SPEAKER_00 12:58

But there is margin, but your margins are gonna blow out because of the logistic nature of the type of business that it is. There's too many clogs in the wheel. And I think you know, when you've got multiple reworks that are taking place, um, your margins are gonna diminish quite rapidly. Correct. So I'm gonna give it a low score. It's gonna be a two for me.

SPEAKER_02 13:16

Two, two. And you know, to add to what you just said as well, it you can't automate this yet, right? Unless you've got some sophisticated robots. So, so unlike you know, every other job that's a bit less hands-on, you can find ways to use technology. You really can't use it unless you want to get a Tesla factory. So that's fair. Yep. So, yeah, um, over to operation on that note.

SPEAKER_00 13:35

So, operation. The the business is operationally intense. And what we're just sort of talking about a moment ago, you need great technicians, you need great estimators, painters, part coordinators, admin. I mean, who's processing all the insuring insurance claims? Totally. Insurer communication, compliance system. Now, the at least with AI and technology, the admin insurance communication and compliance systems, that can be automated. Yeah. Your parts coordination, maybe. I mean, if you without going into too detail in too much detail with L and Lambsa, maybe we'll we'll save that for another episode.

SPEAKER_01 14:16

Definitely.

SPEAKER_00 14:17

And we we spoke about it in the Harvey episode, um, which which is they use the the vault, and the vault revolves around rag, which is retrieval augmented generation. And if you're if you're able to get a lot of data and chunk that up, you're converting that into what's called a vector. And the vectors is a series of numbers because LLMs do not read um text, they read numbers. So you're looking for patterns. Okay, so if you can train an LLM based on patterns, that enables you to automate. But that's a highly sophisticated process because it would be like um having a highly customized smash repairer, LLM. And someone actually needs to do that because a lot of these um these types of businesses, again, it comes back down to what we spoke about within that um that episode, the legal episode that we did. There's a lot of data that's out there. The smash repairers have been around for a hundred odd years. It's the same scenario. Cars have been around for a long time. There's a lot of data out there. So a lot of this process can be automated, but it all comes back down to how can you train an LLM by having a hyper-customized Smash Repair LLM. So it can be done, but it's gonna take, it's it's gonna take time.

SPEAKER_01 15:42

Yep.

SPEAKER_00 15:43

Um, and the sooner, sooner rather than later. Um, EV capability, which is one thing that we we've touched on briefly, but you know, the more EVs that come into um into the um Australian market, the more complexity there's gonna be. And there's only a small percentage of Australian repairers are actually certified that work on EVs. So again, you know, that's a big shift. So if you are to specialise in something, which always comes back to a conversation that we always have on this podcast, if you're gonna focus on something, maybe a lot of the smash repairers should slowly start focusing on the EV components because we know that's gonna boom.

SPEAKER_01 16:19

Yeah.

SPEAKER_00 16:19

So who is going to be the smash repairer for EVs? That's right. And so that's gonna be a huge shift in this particular um sector.

SPEAKER_02 16:29

Yeah, yeah, especially as it goes mainstream. I mean, Tesla's not gonna have the capacity to be able to just be the be all and all for uh electronic vehicles. So as they but all the Chinese EVs?

SPEAKER_00 16:38

Like, yeah, who's gonna repair them? Yeah, yeah. Who's gonna repair all the BYDs? Yep, yep. Because they're flooding the market. Yep. And then the the smash repairs are scratching the head going, what the freaking hell do I do with these things?

SPEAKER_02 16:48

Yep, yeah, that's right. That's right. So, and I mean the operational score. I mean, look, on that note, look, outside of what we discussed for the realms of possibility in the future with the EV market, I'm probably gonna give that a uh two out of ten, only because, yeah, look, it's got the same constraints operationally. I mean, it can do quite well, but as as we said before, it is only as good as the next manual labor that it's able to deploy. So, yeah, I'll probably get it at two out of ten.

SPEAKER_00 17:18

Yeah. I I'm gonna be as harsh as you. I'm also gonna say two out of ten because it's about workflow discipline that can actually still create the moat, but without that workflow discipline, it makes it extremely difficult to implement. To implement exactly. And then and without without that discipline, you've also got complexities, which is within the um the logistical component.

SPEAKER_02 17:44

Yep, that's right.

SPEAKER_00 17:45

So yeah, discipline, you can't do that alone alone without the clogs in the system.

SPEAKER_02 17:50

And I'll add to what you mentioned before, you know how we're talking about automating potentially the admin. I just realized something. So imagine you're a tradee, right? You you you're working on the tools, you're you're yelling at your staff just to get things done. And you know, they've got a much more masculine and rugged kind of culture. And then all of a sudden, you know, you've got to then use the AI to deal with the insurers, but then you can't read it. So then you've got to technically hire someone to kind of reinterpret whatever the AI is saying to the insurers, and you need someone that understands the financial services place. So yeah, it adds to the complexities.

SPEAKER_00 18:20

So there's there's always complexities.

SPEAKER_02 18:22

Yep. And um, look on that note with the complexities, let's look at if there's any advantage. So what's defensible? Insurer relationships, uh OEM uh certifications, technician bench, EV capability, local reputation, which is huge in that industry. Uh cycle time data, what's copyable, generic panel beating, cheap ads, loan cars, and which was obviously the the higher cars I were mentioning before, and one of the bigger parts of the customer reviews.

SPEAKER_00 18:48

Yeah, and look, the moat is not the spray booth, it's the workflow. I mean, anyone can have a fantastic spray booth.

SPEAKER_01 18:56

Yeah.

SPEAKER_00 18:57

But how are you gonna get the cars into the spray booth, out of the spray booth, back to the customer? That's that's the key in this type of industry.

SPEAKER_02 19:05

Yeah, yeah, that's right. So I would say, look, on a score level, I'm gonna be, I'll probably be, I'm actually gonna be very harsh. I'm gonna give it a one out of ten because the biggest one for me, other than what we've already discussed, is that local reputation. That is huge. And I know that there's been a lot, look, if you go on the news, you'll see that there's a lot of things that happen in that locality that can cause a big problem. So yeah.

SPEAKER_00 19:29

So for me, yeah, would you give it?

SPEAKER_02 19:31

Yep, one out of ten.

SPEAKER_00 19:32

One out of ten. Yeah, got the time.

SPEAKER_02 19:34

Yeah, it's harsh. It's harsh. But yeah.

SPEAKER_00 19:37

I mean, look, you're right, because there is no real advantage. On the flip side, yeah, if you were an EV specialist, then you're starting to create an advantage. Correct. And it all comes back down to everything that we talk about in this podcast. Focus on the one thing, do it really, really well. Have I ever told you my my Asian-inspired breakdown when it comes to focus? No, no, no, tell me. So it's the difference between the eastern artist and the western artist. Have I told you that story?

SPEAKER_02 20:10

Oh, yes, yes, yes, yes, yes, yes. I've actually heard this. No, but but go on.

SPEAKER_00 20:14

I actually like the um I like the example that you so and I think it's a it's a good point just to be able to um put forward in this particular scenario because the eastern artist, and I'm talking about an artist, a painter, not us, the bullshit artists, we're talking about we're talking we're talking about artists. So the eastern artists are opposed to the western artists. Now, why is that the case? An eastern artist when they're looking at a blank slab of J, they're then removing everything that isn't the art. So you're breaking everything down, you're removing, and then you're exposing what is beautiful about that statue of David. Yes. Because you're chiseling away that you're you it's the art of removing. And that's one of the reasons why they're opposed to the Western artist, because the Western artist starts with a blank canvas and then they start adding. Yes. They add the trees, they add the birds, they add the mountains, they add the landscape. You add, add, add, add, add. And so it's an interesting synergy with what we talk about, because we talk about all the time when when a business loses, they start adding. When a business wins, they remove everything that isn't the core fundamentals of the business. Correct. Yep. So if you're trying to find an advantage, you need to remove, you don't add. Yes. So if you're doing, in this particular scenario, if you're doing car customization, if you're doing truck repairs, car repairs, um, if you're doing all of the other verticals, you're throwing shit at walls to seeing what's there. Correct. So if you remove all of that and In this particular scenario, just become the EV specialist for repairs, then you're going to be renowned for that one thing.

SPEAKER_01 22:08

That's right.

SPEAKER_00 22:08

And so therefore, that becomes your advantage. Yes. Now, that may not be the case. I know we're going to have a lot of our smash repair clients are going to come to us and go, look, Pete, you're full of shit. But we don't know if that's the case. We don't know that, you know, having that A V capability and specializing that is going to be the one product that's going to turn their business around. But we're just saying that focus on one of those elements within the business and be renowned for that. That's the point that we're trying to get at.

SPEAKER_02 22:40

Especially because the way it's built, the way the car's made is so unique to each, not only country and geography, but also each manufacturer and each model. So you kind of want someone that really specialized in that one place. And I think even without going to EV, a good point you mentioned was the truck. Imagine you specialize specifically in the track.

SPEAKER_00 22:56

I say that to my son Ethan all the time. Yeah, yeah. It's that, you know, if you're going to specialize in the one thing, specialized fleet. Yeah. It's the trucks. The trucks are a fleet. If you've got a client that's got a fleet of trucks, well, then you've got constant repairs.

SPEAKER_02 23:09

And excuse my ignorance on this, because I'm the I'm I'm like the most opposite thing to a trade. Do we actually have specialized smash repair kind of businesses where it's like there's one for buses, there could be one for trucks. Do we even have a big thing? It definitely does exist, yeah. Yeah, but there's not many of them.

SPEAKER_00 23:25

Not many of them. So there's more smash repairers versus the truck repairers. And and for me, the you know, the way my brain works, if there's if there's minimal truck repairers, well, wouldn't you compete with the min with the with the minimal rather than the maximum?

SPEAKER_02 23:41

Correct. Oh, you know what? I see that analogy.

SPEAKER_00 23:43

Well, yeah. So why would you why would you compete with car repairers when there's more of them and there's less truck repairs, specializing truck repairs?

SPEAKER_02 23:49

I'm seeing the analogy to our lending. I feel like the trucks, right, is more like kind of commercial, uh, non-coded lending versus the cars, which is more retail. It's like, yeah, there's a lot more cars, but then you're competing while you're specializing. So interesting.

SPEAKER_00 24:02

Yeah, exactly what we do. I mean, we just do one thing and we do it really, really well. Really well. That's what we're renowned for. Um, we could quite easily do um asset finance, car finance, you know, home loans, refinances, and all the rest of it. But again, it's you're just throwing shit at the wall. Correct. Do the one thing. Yep, indeed. So what's the total do? I don't know, we gib it on. Did we did we score the advantage? Yeah, we did. We gave it a harsh one out of 10. It's like this is because I went on an absolute rate.

SPEAKER_02 24:29

Oh, mate. It's it was all relevant. But honestly, oh surprisingly, our tangents in this space has been very relevant to the topic. So it's good.

SPEAKER_00 24:37

That's something different for us.

SPEAKER_01 24:38

Yep, yeah.

SPEAKER_00 24:39

Tam, okay, so what is the demand pull? Look, the demand pull is massive. Yeah, insurers processed 86,000 motor and household claims per day in 2025, and then add weather events, hail storm, theft, congestion. Can you imagine, like, you know, the hail storms? Wow. Especially in Queensland, obviously, huge.

SPEAKER_02 25:04

Yeah, yeah. That would have been crazy. I remember in Kellyville, we had a freak storm, and you guys can Google it. I think it was 2017 or 18. And I remember I thought, like, I literally thought a black hawk had gone over our house and had literally just pumped it out with a machine gun. It turns out they were like golf-sized um hail. And I remember clearly watching every neighborhood, every car in Kellyville was destroyed. And I was thinking, man, the insurers are gonna have a field day with this.

SPEAKER_00 25:29

I remember that. I had my mates that had the they had the golf balls and they put it into a they put into a sock and then they're smashing their car with it. They're trying to get a new spray job. Then the idiots got busted. Oh man. So, kids, if you're listening, the trick doesn't work. Yeah, please don't. Yeah, don't do that. Um, you do as I say, but yeah, not as I do. Yeah, um, it didn't look, it's it's a multi-billion dollar market. Yeah, but the the operator, there there is a real TAM. It's local, it's toe radius, um, it's insurer's approval, it's repair capacity. So that's that's the real game. Like, how good are you in respect to your toe radius? Yeah, yeah. So there's a lot of elements, there's a lot of those clogs that really need to sort of tap in. So what do we give the TAM, mate? What do you score?

SPEAKER_02 26:19

Oh, I would I'll give it, I'm gonna be pretty harsh for this. I'm Susie's gonna probably give this a one out of ten as well, only because it it's it's very analogous to what we mentioned in the Gloria Jeans episode, which was really about, you know, there is a market there, there's no doubt about it, everyone needs it repaired. But once again, it's constrained by locality, toe radius, and all of that. So yeah, I'm gonna be harsh. One out of ten for me.

SPEAKER_00 26:42

So one out of ten for me. Um, but I'll I'll add a caveat to that. You can flip it on its head by understanding the advantage. If you can flip the advantage, and it's probably one thing that um a lot of people that are thinking about getting into this industry, yeah. How big is the truck industry? Obviously, it's a massive, like without without trucks, so many like Australia stops, right? Especially because it's fast, Australia. Yep, yep. So there's there's your advantage and there's your tan.

SPEAKER_02 27:14

Yeah, that's right.

SPEAKER_00 27:15

That's right. You're a specialist in that, yeah. Become the specialist. Yep. It's it's always a common thread in this particular podcast. If you've noticed as we go along, the more the more we do, it's always a common thread when we break down these businesses.

SPEAKER_02 27:26

You've got to fine-tune your craft, you know.

SPEAKER_00 27:28

Fine-tune the craft, that's right. Yep. So trying to be everything to everybody, end up being nothing to nobody.

SPEAKER_02 27:32

100%, 100% focus, you know. Um, so effectively, let's see. Let's see this moat score. So we've got a total of four out of uh 40 for uh Pete and a nine out of 40 for Fabs, which gives us drum roll 16.25%.

SPEAKER_00 27:49

So we're we're pretty harsh, but harsh on this industry.

SPEAKER_02 27:53

Yeah.

SPEAKER_00 27:54

Okay. Well, can you earn a million bucks in the first yeah, Fabs over here?

SPEAKER_02 27:58

Let's run the numbers, Pete. So average repair order, 4,500. To hit 1 million revenue, you need 222 repairs annually. That's 4.6 jobs per week. Sounds easy, but here's the catch. Revenue is not profit, as we always say. If the parts get delayed, the labor blows out, the rework increases, there might be, you know, there might be uh uh feedback from the insurers, the insurers might be slow in processing the payment or approving the case, the shop still feels broke because there's that cash flow constraint.

SPEAKER_00 28:28

Look, it's it's possible. Yeah, absolutely. But is it easy? It's not even climate. But look, if you're if the average repair is 4,500, we've that number is incorporated into the car analogy that we spoke about, because that's the majority of smash repairers. Yeah, if you're focusing on trucks, well then your average repair order blows out, it's gonna it's gonna 10x it. Yes, not 10x it, but is it at least gonna be at least gonna be 3x, right? That's right. So if you can 3x that 4,500, yes, well, then you don't need to do 222 repairs annually. Correct. You can spend more time. So then you can spend more time on the one product and then start to systemize the clogs that typically happen with this type of logistical business. Yeah.

SPEAKER_01 29:15

Yeah.

SPEAKER_00 29:15

So if you take that out by focusing on less repairs and focusing on the trucks, which happen to be a bigger order, well, then you need to repair less annually. Yeah. So therefore, the million bucks happens pretty quickly with less work.

SPEAKER_02 29:29

Yep, that's right. More people come into you and you get more wider reach. You don't have to be as local because people from another suburb will hear that you're the guy for the trucks or whatever.

SPEAKER_00 29:39

But then, like every every truck business, like I know here, like in in in in Parramatic, like we know where all the trucks are, they're in Weatherall Park.

SPEAKER_02 29:46

Yeah, correct.

SPEAKER_00 29:47

It's where the transport business. So when you just have a truck repair business in Weatherall Park, that's and it's the same thing in every state. You know, you know where the transportation companies are. Yep. And it's not just Weatherall Park, it's all around the M4. So it's all that new industrial area that's been built around the M4 because you need to be able to get to the M4, the M2, and all the major freeways as fast as possible. So all the artillery roads are all there right on Wargrove Road.

SPEAKER_02 30:09

Yep, yep.

SPEAKER_00 30:10

So again, know where your trucks are, open up the repairer there.

SPEAKER_02 30:14

And and honestly, it's a to be an analogy to a pickle. How many of our clients would live in rural regional areas? And honestly, they're the best kind of people, but the best kind of clients. And I'm telling you right now, those people will drive six hours, they'll drive their trucks, vans, whatever, if they can go to someone that they can rely on. And that's another way to get someone outside the cities, get clientele outside of it. So 100%.

SPEAKER_00 30:35

So, what are the risks in the red flags? Well, the biggest risk is the insurer concentration. Um, what happens if there's one insurer that controls 40% of the work? Yeah. And so, with a lot that's happening in the industry, NRMA is trying to control the margins. And so they're opening up their own smash repair centers, which is what we spoke about before. So if you if you're a smash repairer and you've got NRMA that controls 40% of the work, what happens when they take it? Correct. What happens when they take that 40%?

SPEAKER_02 31:04

Yep.

SPEAKER_00 31:05

So they effectively become your landlord.

SPEAKER_02 31:08

That's right. Similar to what we what you said um last episode about the banks, right? The banks wanting to uh you know automate things and you know reduce the margins.

SPEAKER_00 31:16

That's right. CBA have got their own product, they've got their own platform, they want to control the margins. Yep. We live in a capitalist society. It's what happens, ladies and gentlemen. Yep, it happens. So, but you need to you need to be able to see around corners. This is the problem why a lot of businesses that we speak to, they get themselves into a pickle. Yes. Because they don't see around the corner. You can see what's happening in a smash repair industry. You've got a smash repairer where you've got one insurer that controls 40% of your work, which is typically the main insurers. Yes. And there's only a handful of them. And if they take your work, you've got no business. Yes. Your business is gone. It's finished overnight, literally overnight. So if you've got labor shortages, you've got EV complexity, you've got reputational risk, the compliance exposure. And one thing that um we've noticed with a lot of this research is the environmental regulation. And so when you've got a an industry where bad repair, bad repairs, I should say, hurt reputation and bad communication actually destroys it. And we could see that with all of the reviews that we read out earlier on.

SPEAKER_02 32:23

And I'd be interested to see, you know, um, if we could ever do a little AI search on how many times there's been litigation between, say, insurers and smash repairers for say maybe a job that was either misleading or they just had a disagreement about it. Be curious to see how many times they've litigated it.

SPEAKER_00 32:38

Well, I actually know this is very litigation side of this. Well, yeah, pushing on litigation in our industry. Yeah, there's 44 Africa complaints a day to Smash Reparers. Wow.

SPEAKER_02 32:53

Wow. I had no Africa complaints. Africa complaints obviously falls under see, and that's the other thing, right? The insurers got a very unilateral advantage as well because they got all the regulatory kind of leverage over the smash repair. The smash repair doesn't know about that stuff, right? So wow.

SPEAKER_00 33:08

So it's not a passive income. It's very labor intensive. When a when a cars crash, where this happened, and obviously the claims continue, but it's capital heavy. Yeah, it's labor intensive, it's workflow defensive, uh workflow dependent. And if you've got a good operator, look, they can obviously build a big business. But passive investors, look, it's very, very dangerous. It's dangerous territory.

SPEAKER_02 33:33

Yeah, very especially because it's hands-on. It's not it's not an investment asset, you know. You can't just put your money into it and hope for the best. You have to be involved. So um, you know, on that note, what is the pickle lesson, right? The best smash repairers don't sell repairs, they sell certainty. Um, the worst shops sell confusion. And and that's really effectively it.

SPEAKER_00 33:51

Yeah, so let's wrap this up. Look, if you're if you're buying a smash repair business, don't just inspect the workshop. Inspect the workflow. I don't know why people are attracted to shiny objects. You know, you've got this nice big brand out there, and there's probably a couple of um brand new Mercedes parked out the front. Don't just move away from the shiny objects. Inspect the workflow. Spend some time there. See how fast they actually get the cars out because that's gonna generate that's gonna generate your your revenue. That's where your passive income is, and how fast you can get the cars out. And if if there is a business that you want us to break break down, send it in because we do not want you to get into a pickle. And if you like the podcast, send it to a friend because it helps other people find us. Great stuff. Well, thank you so much for another one done. Done done.