Owners and Operators have been doing a lot of self-evaluation during the past two years. Many are rethinking how they operate from the ground up. At this point, it may be good to start thinking about ways to build up businesses. This takes a certain mentality or outlook. Most car care business owners are fairly good operators. Most (not all) know how to deliver a clean and dry car to a customer. Business building skills may be a good thing to acquire.
As car care business owners look at the remainder of 2010 and into 2011, they may benefit by deconstructing (figuratively speaking) their businesses. This means that a good starting point is having the best available business information. This means accurate and timely information as well as meaningful information. Not all information is equal!
Good decision-making depends on reliable, timely and accurate information. Reviewing all the basic components of a car care business is important to the Business Building process. You must have good information on chemistry products supply and inventory, chemistry blends, dilutions and even transport and storage costs. You must have equipment reports that adequately capture the operating costs, replacement costs and even the energy consumption of the facility. Of course, all operating expense data should be captured into useful reports. This business building process also requires good analysis of all revenue data. Volumes, customer frequency, menu values, up-selling and cross-selling revenues. You should even be monitoring the expense and return of promotions and your lobby.

Members of the Thought Leadership Club were asked the following two questions.

1. What measures can car care business owners take to accumulate and compile truly useful information abut their business? How can proper analysis be executed? Are there proven ways to understand, compare and contrast chemistry supply and expense options? Are there better practices for aggregating operating and equipment information on a business? Can labor costs be best evaluated by some methods and not others?  Are there report building tools that are truly better than others?

2. How can car care business owners smartly evaluate revenue streams and options. What are the best ways today for improving ticket value per customer? Are there new methods and best practices to follow when evaluating the entire revenue and expense parameters of a car care business? Are there analysis’ and reliable information that are building up the revenue potential and production of today’s car care businesses?

Joe Cameron

“There has always been a tendency in America to run a business on the bottom line alone. While there is not anything necessarily bad about this, it can and often does lead to blindness on aspects of the business that may be improved or are providing tremendous value that doesn’t necessarily show up in the bottom line.”

National Sales Manager, Kim Supply

jcameron@kimsupply.com

Answer Question 1 & 2:
I subscribe to the notion that knowledge is power and when it comes to running a car wash, or any business for that matter, it is difficult to have too much knowledge, unless of course you don’t know what to do with it. The level of complexity of the business is proportional to the amount of data needed to run it effectively. Fortunately, there are many tried and tested tools out there to assist with this.

We are at what I would describe as a transitional time in the car wash industry. Over the last several years, we have seen an explosion of new technology that has the potential for radically changing the way we do business and has in fact already done so. We now have the ability to pull up data on water consumption, revenue taken, what services were used and how much it cost to supply our services from the comfort of an armchair. What is more amazing, this technology can be applied rather inexpensively depending on which system or systems are used to gather this data. Having said that, there are still many operators out there that operate on guess work, a piece of ledger paper and a pencil. On the other hand, we are now experiencing an influx of younger operators for whom computers are as integrated in their lives as a second brain. I would hesitate to make value judgments on which way is better except to say that the more complex the business model, the more effective and efficient that data management needs to be. A four bay self-serve operator can probably get by with “old school” methods but operators of a full-serve or flex-serve wash are doing themselves a grave injustice by not fully utilizing the information technology available to them.

Take chemistry for example. I have spoken with large numbers of operators over the years that have yet to make the distinction between cost versus price. They will purchase their chemicals based on a per gallon price without regard to dilution ratio or even cleaning strength and are therefore not getting the most bang for their chemical buck. This is especially tragic given the fact that evaluating this data can easily and accurately be accomplished using what is now a good old fashioned Excel spreadsheet. (I will be expecting a check from Bill Gates for the endorsement any day now.)

There has always been a tendency in America to run a business on the bottom line alone. While there is not anything necessarily bad about this, it can and often does lead to blindness on aspects of the business that may be improved or are providing tremendous value that doesn’t necessarily show up in the bottom line. A classic example of this is the automobile industry. GM ran their business off the bottom line for years. The theory was quantity over quality. If an assembly line worker saw a flaw in the product coming down the line, he or she were discouraged from stopping the line to correct the flaw, relying exclusively on quality control to rectify it on the back end, often at much greater expense than if the flaw had been corrected when it was first spotted. The Japanese manufacturers on the other hand, learned the fallacy of this long ago and it was taught to them, ironically enough, by an American. They empowered every single person in their production operation to be quality control inspectors correcting flaws on the spot. With the notable exception of Toyota, I need not remind anyone how that turned out! I honestly think Toyota is having the problems they are having because they got away from this thinking.

And so, having metrics on every phase of the car wash process empowers us to analyze our business model at unprecedented levels of detail and allows us to tweak our business models accordingly. Can we save money by making the tip sizes on the rinse arch a half size and still deliver a clean car? These really are necessary calculations to make, especially in an industry that has become as competitive as ours has.

I would hesitate to say that there is one system or software package that is better than another for accomplishing this. A lot depends on ones comfort level with technology. There are a lot of software accounting packages out there and there are even some made especially for car washes. Getting back to spreadsheets, I have found them to be an extremely powerful tool for making these calculations. They can be obtained relatively inexpensively and allow the operator to make comparisons in metrics in minutes that would have previously taken hours to do with a pencil and a calculator. Cost per car, customer counts, wash packages purchased, complaints and the corresponding costs, energy consumption, and labor costs can all be readily compared with a few keystrokes and a click of the mouse.

Again, for a complex business like a full-service wash with a lobby selling impulse items, there is virtually no excuse to remain in the dark on these metrics. Even the two bay self-serve operator would be surprised at the efficiencies gained from analyzing some of this data. For those that resist this sort of data gathering, there are excellent publications out there to assist in understanding and getting the most out of something as simple as a spreadsheet. At the risk of endorsing another product, the “For Dummies” series of publications is excellent and for my part, they have done a good job of making me appear smarter than I really am.

Ultimately though, all business metrics aside, I still subscribe to the “old school” thought that we are in a service business and that it depends completely on having satisfied customers. To couple a passion for the customer with an efficient business model made so by having real time data on costs and revenue streams at your fingertips will go a long way to ensuring success. If this can be accomplished with the expense of a PC and an appropriate software package, it would seem to me to be self defeating not to.

Ryan Beaty

“Evaluating the success of your menu is made easy by many POS systems and the reports they provide.  By analyzing the percentage of customers buying each package you’ll be able to make pricing, marketing and payment option decisions easily.”

Vice President of Sales, Mark VII Equipment Inc.

rbeaty@markvii.net

Answer Question 1:

Compiling useful information starts with knowing the in and outs out your business.  Many operators are very hands on, spending most days at their wash(es) and even turning the wrench themselves.  They know who their customers are, their buying habits and preferences.  The equipment is like a family member and the operator knows it like the back of his/her hand.  If you fall into this category then more than likely you have your arms around your business and you’ve successfully navigated it through these tough economic times.

Other operators, those who rely on others to manage their wash may or may not be in the same boat as those that live it every day.  This is where a successful marriage with a manager or car wash provider can pay some real dividends.  On the other hand, it can also leave you staring into a dark abyss.  A good car wash provider should always be giving you constant feedback through charts, graphs and/or spreadsheets on your chemical/equipment operating costs and how you can maximize revenues with fully benefiting from efficiencies.

When it comes to chemicals particularly, most manufacturing companies have representatives that are always performing analysis and bringing new and improved options by for trial.  These representatives are extremely helpful for both hands on and hands off operators.  Many hands on operators already understand volumetrics and the like, but it still never hurts to have a second set of eyes.  When it comes to equipment, top manufacturers are now able to provide you with very specific consumption data as it relates to water, chemical and energy use.  The same goes for those who are in the business of water reclaimation, spot free systems, water softeners, vacuums and other profit centers.  Many provide easy to use spreadsheets in which you’ll be able to calculate savings, ROI and even track data that will help you receive refunds from the government.

Depending on your business model, labor may or may not be something that is high on your priority list.  Most certainly, if you are in the full-serve tunnel business, labor costs are something that must be watched very closely.  Figuring out how many employees need to be on site at any one time will only come from experience in knowing peak and slow times combined with what services you are offering on the site.  These recent economic times have forced just about every business to get more with less and labor has been no different.  Productivity is up and employee counts are down.  The weather will also obviously play a huge factor with labor as well.

In recent years, many tunnel operators are opting for more equipment that will take the place the employees.  However, operators must really know their customers before making these changes to ensure that there isn’t a value proposition issue.  Many customers appreciate seeing many familiar hands touch their vehicle and removing these employees may give the wrong impression, even if wash quality is better.  Visualization will always help you manage your labor costs and there are plenty of employee management software programs out there that will do the rest.  Figuring out the “loaded” cost of an employee will always give you the best road map to understanding how to maximize profits and minimize the amount of wasteful spending that could be cutting into your bottom line.

As our business has become more automated as has the software available to us.  Just as most tunnel operators have a different opinion of what equipment should go in what order, most will tell you they all are comfortable with different reporting options.  Some are still using pen and paper while others have Excel spreadsheets and others have sunk thousands of dollars into professional management tools.  It all really depends on your operation, your business model and what exactly you want to see.  Bottom line, whether you are an on-site operator or laying on a beach somewhere, if your car wash providers aren’t acting like a partner it may be time to look for another.

Answer Question 2:
In recent years, the number of revenue enhancing options operators have had to choose from has grown dramatically.  With increased options comes the ability to really build a nicely tiered menu.  No matter what your business model is, menu pricing and differentiation has become easier than ever.  So easy in fact that you must be careful not to confuse customers and leave them staring at the Point of Sale trying to figure just what wash they want to purchase.  Ala Carte’ options, customer loyalty programs, fuel discounts and other marketing promotions can all have a positive effect on average ticket prices.

Deciding on when to upgrade equipment has always been a decision operators have struggled with since the price of equipment is such a hefty investment.  However, if you feel you could raise your menu even $1, the benefits that come with new equipment geared with revenue enhancing options can pay dividends quite quickly.  Coupling increased revenue with the efficiency that many new equipment upgrades bring will bring smiles to even the most scrutinizing accountants.

Evaluating the success of your menu is made easy by many POS systems and the reports they provide.  By analyzing the percentage of customers buying each package you’ll be able to make pricing, marketing and payment option decisions easily.  Benchmark reports give operators a national feel for how their site stacks up, by business model, with other similar sites.  Many large manufacturers track data for many multi-site owners and can provide operators with a “window” of revenue vs. expenses and the like.  Attending trade show seminars and engaging in online forums can also be a good source of a measuring stick.

I think it’s safe to say that while many car washes are quite similar, no two are exactly the same.  Simply having a dynamite location does guarantee success in this business, although it doesn’t hurt.  It really comes down to the operator.  A great operator can make a poor site do well and a poor operator can turn a site with lots of potential into a below average producer.  That said, what works for some will not work for others.

In my opinion, this is where associating yourself with your peers within a market place is so important.  Sure you are all competing, but I’ve seen these kinds of “clubs” up close, and it really provides a “local” look at your business.  It might be nice to see the numbers from an operation on the other side of the country but it really doesn’t give you much help as it relates to your own local market.  I can’t stress enough the importance of knowing as much as possible about what your competitors are doing, sharing best practices and figuring out who the best car wash partners are in the area.  Between your local peer group and a good car wash provider you should be able to better understand your strengths, weaknesses, opportunities and threats.  This SWOT process is something most operators go through on a quarterly basis anyhow, but it never hurts to do it with others.  In addition, a good car wash provider is going to be able (or should be able) to provide you with options and ideas for not only growing revenue, but also reducing your expenses, which has come to the fore-front the past couple of years.

With the ICA show upon us, there will be ample opportunities to see not only what is new but also take advantage of listening to speakers with great experience in many different niches.  No doubt there will be something for everyone and the ICA Show provides a great venue for gathering the kind of data and benchmarking you should be utilizing in your business.  See you in Vegas!

Ryan Carlson

“How are you tracking the success of promotions? Do you have any way of tracking success or failure, redemption rate, average dollar per ticket on a promotional customer? Do you have tools available through your equipment provider?”

Director of Marketing, WashCard Systems

ryan@washcard.com

Answer Questions 1 & 2

The ability to make key decisions about your business comes down to making smart well-informed businesses decisions based on real-numbers. The problem with the vast majority of car wash operators is that their passion is in becoming a better technician (somebody who knows how to get a car cleaner) rather than becoming a better business person.
This issue of building your business based on good data really is not much of a problem for the larger wash operations. They’ve already taken the plunge and are neck-deep in computers, software, and databases that can kick out data on command. The wash operator that is making decisions “based on their gut” is the very same business owner that has the most growth potential. The big wash groups already have their customer base, their marketing and branding message, their value statements, and more importantly the data to back-up decisions on whether to build another location or change up aspects of their labor component.
The wash operator that makes their decisions “based on their gut” and by the heft of the bag of coins they pull out of their equipment has just got to stop, take a deep breath, and get plugged in with operators from within their regional association. They need to talk to the larger multi-site operators and ask them what they are doing and how they do it. As long as this person isn’t a direct competitor, you will be surprised how experienced operators will share their wisdom.

Here is where you can get a head start on making good decisions on your business:

1. How are you tracking the success of promotions? Do you have any way of tracking success or failure, redemption rate, average dollar per ticket on a promotional customer? Do you have tools available through your equipment provider?
2. Have you considered finding software solutions for running and tracking your loyalty programs? Time to ditch the untraceable tokens (although I’ve heard some clever low-tech color-coded token solutions, just requires lots of manual sorting and counting).
3. Are you making decisions about your business that makes your business more appealing to consumers of 2010 and beyond? Here’s a hint from personal experience, consumers are not carrying a lot of cash and if you’re not taking plastic everywhere you currently take cash you need to jump on this bandwagon. This is not a fad that is going to go away.
4. Suck it up and find a car wash consultant that can come in and look at your business with a fresh pair of eyes. There are experts out there that get serious results when you listen to their advice (even when the advice is not what you wanted to hear). These people do not work for free so start budgeting now—but the good news is most consultants more than pay for themselves.

The final bit of advice is to start planning for things like equipment replacement and upgrades. As you may have noticed banks are not lending money like they used to so it’s going to take some out-of-pocket cash to get some of these projects rolling. You may need to replace a major piece of equipment sooner than planned, or come across a product that you believe will be a good fit for increasing business at your wash. You will need some funds on hand to make things work—just don’t forget that it takes money to make money and if you’re not tracking the money coming in and going out very closely, you’re on the wrong end of the equation. We are supposed to be telling our money what to do for us, not the other way around.