Holmes said he grew up in the collision repair industry, with his parents founding Holmes Body Shop in 1974, which had grown to four locations by the time he went off to college and now has nine locations.  While he was in college, his parents separated, with his father retaining Holmes Body Shop and his mother joining Caliber Collision Centers for about a year before opening Glendora Auto Craft, he said. 

 
After graduating, Holmes said he went to work for his father for seven years.  His mother, Maureen Holmes, chose to sell Glendora Auto Craft to M2 in 2000, Holmes said, which introduced him to a number of people from the company.  After seven years at his father's company, Holmes said he decided to join M2 as a regional manager, overseeing up to seven stores.

When M2 shut down abruptly in mid April 2005, Holmes said he saw an opportunity.  As a regional manager, he said he was familiar with the capabilities of many of the company's shops.  He discussed the situation with his mother, and the pair formed an equal partnership to bid on a number of the locations.  Within two weeks of M2's collapse, mother and son had bid on and won the assets of five stores, in Rancho Santa Margarita, Riverside, Redlands, Huntington Beach, and Burbank.

Holmes said that from the beginning, it was a strange and difficult process.  Beyond arranging the money in a very short period of time, they were trying to estimate the value of the assets, the work in progress, and the receivables.  In one case, he said, when they arrived to tour a facility and look at the equipment,  his phone rang, and it was the man who had previously sold the facility to M2, threatening him to not even consider making a bid.

Once the bids had been accepted, the situation took a series of turns for the worse, Holmes said.  All of the landlords involved viewed the situation as a breach of the lease and required them to negotiate a new lease.  "A lot of people who didn't bid on the assets went and tried to bid on the leases instead, which pretty much wiped out any negotiating power we had with the landlords," he said. By the time the dust had settled, he said they had lost the lease in Burbank and been forced to purchase the building in Rancho Santa Margarita.

When the pair reopened the shops at the beginning of May, all of the insurance companies canceled their direct repair programs and many pulled out their work in progress, Holmes said.  "The carriers said they were going to let the dust settle and see who was alive and kicking after six months or a year," he said.

"Our business plan was based on doing $1 million a month in sales out of the five locations, but the first month we did just $212,000 and the second month dropped to $160,000," he said.  "We were bleeding cash."

Holmes said he and his mother took out equity lines on their homes to support the shops.  Using their connections in the industry and with the help of a full-time sales representative, they began approaching direct repair programs, fleets, dealers, and anyone else they could find who could help build volume in the shops, he said. "It took about three months to get our first DRP, but once we got one or two, the others would start coming back."

Three of the shops were beginning to find their footing by the end of the first year, Holmes said, but the Huntington Beach location was continuing to struggle.  Huntington Beach was more of a mature market with many competitors, and since buying the location, he said they had filmed three episodes of "Overhaulin'" at the shop, which had started to attract restoration work.

Not wanting to be in the restoration business and with an interested buyer, he and his mother decided to sell the facility.

Holmes said the sale seemed to signify a turning point for the remaining shops, with sales jumping by 217 percent in 2006, another 26.3 percent in 2007, and a projected gain of 11 to 12 percent in 2008.  "Our original goal was to do $1 million a month out of five locations, and we are now doing about $900,000 out of three," he said.

Despite all of the challenges, Holmes said there were some advantages to buying the businesses the way they did.  "It would have cost us a lot more upfront to go into multiple locations all at once," he said.  "I also knew 95 percent of the employees that we hired.  Still, I don't think the way we did this will ever be taught in a classroom."

The company's turnaround has earned it a number of accolades, including the Sikkens Acoat Selected Business of the Year for 2007 and the Coyote Group Most Improved Shop award, Holmes said.

The remaining three locations are located in different demographic areas of the city and are showing varying results, Holmes said.  The 24,000-square-foot Rancho Santa Margarita location has sales of about $350,000 a month with 18 employees.  The shop is equipped with two downdraft paint booths, two Chief EZ Liner frame racks, two Body Loc frame systems, a Genesis measuring system, a Touch measuring system, a Pro Spot resistance welder, a Hunter alignment rack, and two above-ground lifts.  The company's corporate offices are also housed on the second floor.

The Riverside location is also 24,000 square feet and has 12 employees, Holmes said.  It includes two downdraft paint booths, an above-ground lift, two Chief EZ Liners, and a Pro Spot resistance welder.  This is the smallest grossing of the three locations with sales of about $200,000 a month, he said, noting that the area has been hit especially hard by the mortgage crisis and the economic slowdown.

The Redlands location at just 17,000 square feet is actually the company's largest-grossing shop and fastest-growing with sales of more than $400,000 a month, Holmes said.  The shop has 30 employees, six Body Loc frame systems, one downdraft booth, and one downdraft curtained double prep station.

Holmes said the Rancho Santa Margarita location benefits from being on a high-traffic street in a bedroom community with few competitors.  He said about 80 percent of its volume is gained from about 15 direct repair programs to which it belongs.

The Riverside location, in more of an industrial location, is a bit more dependent on DRPs, with about 85 percent of its volume coming from 12 programs.

The Redlands location has benefited greatly from being part of the Geico RX program, Holmes said, and also does work for a number of local dealerships.  "The population in Redlands has really been growing, and we have a nice modern-looking shop rather than the open-bay style of many of the other shops," he said.  "So aesthetically, we have an advantage over our competitors." 

While sales have been growing in all three stores, Holmes said he has been pursuing two initiatives designed to increase profitability and improve cycle times.

"In the last eight months I've really been taking a look at our expenses," he said.  "We have really focused on keeping what we need to have, not what we would like to have."  He said that at current sales levels, he and his mother have trimmed 4.2 percent of expenses by things as varied as refinancing their debt to purchasing their own floor mats, washing their own rags and towels, and eliminating free soda dispensers in the customer areas.

"Having a free soda dispenser in each location was costing us north of $10,000 a year," Holmes said.  "It was meant for our customers, but when we analyzed it, our smallest store was the one with the highest costs.  What started out as a customer convenience had become an employee expense."

Holmes said that for the past year he has also been piloting a lean process at the Rancho Santa Margarita location that is now being introduced to the Redlands facility. "We are always trying to figure out what the next best thing is going to be," he said.  "What is our differentiator?"

Among the changes that have been made are teaming the estimator with an assistant that can handle some of the process.  The result has been that an estimator that could formerly handle about $125,000 in estimates a month can now write more than $200,000.

The installation of a blueprinting bay with an above-ground lift and the Spanesi Touch measuring system has helped the shop reduce its average supplements from up to three per repair order to less than one, Holmes said, which increases the shop's efficiency and reduces its cycle time.

"That's been one of the biggest benefits for us," Holmes said.  "Getting a more complete estimate means that we are not scrambling at the last minute to find the clips and trim pieces that often held up a job on the last day."

The shop now has designated spaces for equipment and parts storage, making it easier for technicians to find what they need and the parking lot is divided into areas designated for cars awaiting such tasks as teardown, in-progress, reassemble, wash, and polish.

"The biggest challenge of this has been getting the employees to buy in," Holmes said.  "Most people are averse to change.  Because lean is a journey and an ongoing process, I've learned that you don't need to force every change at the beginning.  We have found what our employees were comfortable with and started there."