Weathering the recession by reducing costs and increasing productivity

by John Holzinger

We would, in normal times, have a clearly defined discussion regarding business success. Increasing profitability, generating customer loyalty and gaining market share would be main topics for examination and discussion.

Now, unless you have been in a cave for the last 18 months, success can be defined as “survival” so I thought a better direction for this month’s article would be “weathering the recession.” Most operators I speak with define success this way.

Those of us who watch CNBC or CNN or read the business sections of local newspapers recognize several concepts systematically used by today’s “successful” companies. If you are involved in the stock market these same two concepts now create enhanced stock values by creating “success” in today’s definition. These companies weather the recession by reducing cost and increasing productivity.

I’d like to address these two concepts and business success targets as they pertain to the in-bay automatic.

Reducing Costs

Reducing cost is always the first item most operators will scrutinize and look for areas that can easily be impacted. It seems the price of chemicals is always the first to be analyzed and there is no reason for us to discuss. If for some reason you have not considered this cost area then I would simply suggest that you examine and calculate your cost per wash, NOT the cost of a drum! Most quality suppliers will be able to provide you with this calculation as part of their quotation. Beware of seeing only the drum price and using it for your comparison. There are critical chemicals designed to enhance chelation, saponification, and other physical actions that are the expensive components of a quality product. I am not sure those are actual words but I do know these components can be omitted to reduce gross cost but will also impact wash quality to where you use much more product per wash than necessary. Do your homework here and demand the data.

Energy savings

Reducing energy costs can readily be examined and measures taken. Most automatics now allow you to manage the speed of the entire wash process. Most have software in the controller that enables adjustments by pass of the gantry. Have your technician meet with you to review the capabilities and limitations of your automatic. Most operators tend to accept the machine with the factory settings and never take the time to recognize the capabilities provided to make these adjustments. Imagine and calculate what energy savings would be generated if you reduced dryer time by 20 percent per pass and still generated a quality dry. Why not adjust this when humidity conditions are low. If your automatic applies hot water with the presoak and you speed that process by 10 percent per pass how much energy will that save? Why not examine each pass of the wash process and determine where adjustments will create energy cost reduction without effecting wash quality.

Another area to examine potential energy savings independent from the automatic would be your lights. Several operators mentioned that they have installed timers so that lights go off during non-business hours. Other operators have lights go off in certain bays during non-business hours. Since electricity can be <B>7 percent to 8 percent<$> of your total revenue it certainly merits some discussion. What about equipment room lights? What is the setting for your floor heat or in-bay overhead heat?

Water savings

Water savings potential should be examined next. Not just water, but water and sewer. These two components also amount to another 7 percent to 8 percent of revenue, so what steps can you take here. The first I suggest goes, again, back to the available software that the automatic provides that allows you to adjust speed. Any time shaved results in a like reduction in water and sewer. Operators have told me about ideas such as recapturing the spot-free rinse reject water. I should mention that if you have reclaim tanks already in the ground but have not installed the system, then this should also be considered. It is easy to calculate your return on investment based on saving 70 percent of your current water and sewer bills!

Payroll impacts

If you currently have an attendant supporting your site then you have probably considered this as an expense and who wouldn’t. National surveys indicate attendant payroll as approximately 9 percent of gross revenues. Boy, have I had many discussions about this over the years! Is the attendant really an expense or a revenue generator? What would happen to revenues in the automatic if he was not there? Does he interface with customers and assist them in the loading process and suggest upgrades available? Does he simply provide cleaning and minimum maintenance? What would happen to revenues if that stopped? I would rather talk about how an attendant impacts the next area of discussion, which is increasing productivity.

Increasing Productivity

Revenue per car, revenue per hour, revenue per square foot and revenue per month are all areas we can examine regarding the automatic wash and increasing productivity.

Last month we discussed signage, menus and marketing as ways to increase revenue per car—so let’s discuss several more creative ideas in this article.

Revenue per car

Gary Baright and his family, owners and operators of Foam and Wash Car Wash locations in the state of New York, offer several ideas that they have implemented to help them weather the recession by increasing revenue per car. I have personally known Gary since 1993 and he is kind enough to share some of their progressive ideas that may generate actions you can also take.

Their focus on generating higher revenue per car is through the use of what I would refer to as “buying technologies.” They offer each customer the ability to “build a wash” off of the standard menu choices. Each time the customer arrives at the automatic teller they can choose the itemized extra services they want on that particular day. This also enables the attendant to suggest options they may want depending on vehicle condition or season of the year.

The automatic they recently installed offers both friction and the combination of high pressure and friction, so after a heavy snow they can offer the necessary option to remove the salt, etc.! If you can find Poughkeepsie, N.Y. on the map, you may want to visit.

Gary states, “We are able to get a good ticket per wash with the customer knowing they were able to purchase what they feel is right for them at the time.”

I suggest strongly that you investigate the available software with your automatic and teller, and determine what upgrades you can make that will allow you to also offer the customer the ability to build their own wash each time.

Revenue per hour

Are you maximizing revenue per hour with your automatic? The first area to examine is, again, your speed options and current settings. It’s a “no brainer” to speed up the wash when conditions permit or dictate. One of my customers in Syracuse, N.Y. has determined that by offering an “Express Wash”—no dry, high speed settings—this creates higher revenue per hour than his standard menu options. Does this work all year round? Maybe, maybe not but have you tried?

Does your attendant, or if you had an attendant, assist each customer entering the teller area and also entering the bay? An extra two cars an hour equates to $15 to $20 per hour in additional revenue.

Can you extend your bay via awning or canopy and move the dry process far enough from the automatic to enable multiple actions at the same time? If you are in the build or design process now for your automatic then certainly consider a bay of at least 50 ft. This length allows the dryer to be distant enough from the wash gantry so that three cars can be processed at once; one at the teller making the buying decision, one in the wash process and one in the dryer. Now that’s maximizing revenue per hour with your automatic!

Revenue per month

Revenue per month certainly is another way to measure and impact productivity at your automatic wash. More and more operators, as business entrepreneurs, are analyzing their monthly income statement and determining their “breakeven” regarding gross revenues target. Now, how can I best hit that target? What are my slowest days of the week and how can I increase those days? Should I investigate these new technologies that enable me to offer a “pay monthly club?” I certainly hear pros and cons regarding this idea but more pros than cons. If you analyze your wash in terms of monthly targets then this concept begins to make more sense.

Gary Baright and his family at Foam and Wash have definitely taken steps in this direction. They are working with technology companies such as MicroLogic to create the system they want to offer. The customer will be able to pay a monthly fee and then use the automatic, self-serve wash, vacs and even the dog wash (pet wash if you are a cat owner like me) whenever they want.

If your income statement indicates a required revenue target of $6,000 per month you can sign up 200 customers at $30 per month and guess what? You are on your way to weathering the recession by providing maximum value to your customers. Imagine the profitability of all other revenues generated at the site and you will probably be scheduling that visit to “sunny Poughkeepsie.”

John Holzinger is manager of business development, Eastern United States, for Mark VII Equipment Inc. He has been with Mark VII since 1992 and has served past positions including director of operator/investor sales, director of petroleum sales and manager of national distribution. If you would like to contact Holzinger, call 720.837.4585 or e-mail jholzinger@markvii.net.