Rock bands and small businesses start in the garage. Tough to find something more suited to such digs than a body shop.
Two transactions -- one commercial, one residential, none needing electric guitars -- some 1,600 miles apart illustrate that truth, along with one or three items on the industry and its operators and two markets they serve.
Daniel Palermo this fall sold Palermo’s Auto Works in Rochester, NY, and is starting up an as-yet-unnamed new venture in Colorado Springs, CO. He’s considering calling it Palermo’s Paint and Auto Spa, to include detailing, ceramic coating and possibly PPF.
The first takeaway, though, is he made it.
Personal Concerns Guide Why, How Body Shops Go
Running a body shop involves lots of people and can get pretty corporate.
Kaylie and Daniel Palermo.
Buying and selling one stays deeply personal, Palermo said, no matter how many people get into it.
He and wife Kaylie have five kids, and extended family in Colorado Springs. The couple spruced up their house in New York and sold it in a week. The shop took 40 days.
Both sold for less than expected, with the 4,500-square-foot shop slashed from $175,000 to $120,000 to seal the deal. The price was competitive in the area and included all the equipment.
“I could’ve got asking, but I wanted to get out of there; I missed my kids,” Palermo said, as the rest of his family had already headed west to scout new homes. “I lived in the camper in the parking lot of the shop” until it sold.
William Melnikov is the new owner. “I accidentally bought it,” he joked. “It came along at the right time.”
Melnikov is 27, about what Palermo, now 36, was when he opened in 2017. Melnikov alternated among three Crash Champions sites for 10 years; Palermo started in the industry at an uncle’s and did two years in vo-tech. Both have been in the body shops since their teens.
Palermo’s Auto Works hit $700,000 to $800,000 revenue annually, with 38% NOI, prior to sale, Palermo said. His new shop in Colorado will be in garage space next door to his family’s new house.
What One Might Find Moving Business, Family
The Rochester shop was on a four-lane highway near an interstate.
Amid larger shops, Palermo’s Auto Body “was on a dirt road in the country, an hour from the city, and people were driving out there daily. There was always enough work, including specialty work,” Palermo said.
William Melnikov.
Most business was the equivalent of private pay health care -- “elective surgery” in a sense, such as getting rid of dents or painting rims black. Palermo specializes in painting and hires body techs.
“Nothing flashy, but pickier than heck,” he said. “Texting at all hours. Made me better but drives me bonkers.”
Melnikov plans to keep the shop name, which after nearly a decade is well-known. He said he’ll pursue DRPs and fleet accounts, and offer a better work environment than corporate shops. “I’ll appreciate them more,” he said.
Palermo said after five weeks in Colorado Springs, he’d found jobs at 30 shops and gotten one interview.
“A painting position, with an MSO. The guy was awesome, one of the best managers I’ve ever met,” Palermo said. Still, “in Rochester, I could probably get a job in an hour.”
He looked at buying a shop but found asking prices and lease rates astronomical, compared to the site he sold. “They want an insane amount of money,” Palermo said.
Instead he’s opening in Divide, CO, a suburb of “The Springs,” as locals call the larger metro area. He said the area is “more lenient” as to regulations and has “fewer mom-and-pop shops than Rochester.”
He’s found many MSOs there, including Caliber, Gerber and Crash Champions.
On his new 2,500-square-foot shop, he said, “I don’t have ambition to grow it as big” as Rochester. “With the location, it won’t get there anyway.”
Data-Driven: Colorado Springs vs. Rochester
The future site of Palermo's new body shop in Colorado Springs.
A Google search shows comparable unemployment in both cities as of September. Colorado Springs has twice the “city limits” population, but only three-fourths the metro area numbers, spread over five times the space.
“The Northeast has high population density,” said Madeleine Roberts Rich, a Focus Advisors senior associate in its automotive M&A practice. The region is also known for a high concentration of auto dealers with shops.
She confirmed a “very big presence” in Rochester by the three MSOs Palermo also found in Colorado Springs.
There are also independent multi-shop operators -- intra-market chains that can be favorites of locals precisely because they’re not part of a private equity-backed behemoth.
“It’s a competitive market,” she said of upstate New York.
Colorado has fewer indie MSOs but is more than a little known for backing homegrown enterprises -- Crocs or Otterbox, anyone? And automotive groups are still strong in collision centers here.
“Certain cultures really care about supporting local businesses,” Roberts Rich said. And add Classic Collision to the Springs competitors. It bought Williams Body & Paint in August, she said.
Average rates are comparable in the two markets. LaborRateHero.com shows 17 body shops within 25 miles of Eastman Kodak HQ in Rochester, 41% either Crash Champions or Caliber. Body or paint average $74 an hour; storage rates average $85 a day; pre- and post-scans are $89.
The site lists 33 body shops within 25 miles of the Air Force Academy in Colorado Springs, 57% Caliber and Crash Champions, averaging $76 an hour for painting or body work, $81 a day for storage, and $96 and $111 for pre- and post-scans.
Paul Hughes