There are things you can do to turn your bottom line around & actions you need to avoid at all costs

by Philip Toppino

In most any town in America you’ll find three groups of businesses side by side. Fast food chains like McDonalds and Burger King, and home improvement chains or drug stores will typically park themselves right across the street from one another.

Keep your friends close but your competition closer. That doesn’t necessarily work in the car wash industry it is actually the exact opposite. If two car washes are placed next to each other, typically they will split the customer base and neither will get “retirement” busy. In the rare case that both car wash locations do well, imagine if there was only one location to soak up all that business?  That’s a perfect world scenario but when your volume isn’t where you want it to be, owners will default to under cutting their prices below their competitors’ prices in an attempt to draw extra business and the race to the bottom line begins.

Owners have reached out from across the country inquiring for more information on articles I’ve written and one of the recurring questions seems to be,”what do you do when a competitor drops their price or extends their hours?”

Every town is different, based on consumer spending habits and their perception of the car wash in the community. Everyone is racing to the top to capture that volume however there are certain strategies to avoid. And for some, the race to the top is also a slide to the bottom. When business revenue drops some owners get aggressive in the wrong areas of their business. If your business discounts its products and services in order to keep up with the competition that’s ok but what other reasons are consumers going to choose them over another?

Put a Stop to Shrinking Profits

Shrinking profits, labor issues, competitors cutting their prices, bargain shopping customers and a general lack of appreciation for the value of your services … does this about sum it up?  As consumers are consuming less, many locations are suffering and one of the big mistakes I see are those who use the strategy of dropping their prices first in order to compete with their in-town rivals. Before you drop your pants I would suggest other strategies that might also help your bottom line. When a company adopts certain business strategies that we are going to discuss, I call it the “death spiral”, those businesses will see a steep decline in volume by making three bad decisions;

1. They stop advertising to cut costs,

2. they lower their prices to try and boost sales to compensate for the subsequent lost volume, and

3. they cut key staff in order to stop the hemorrhaging of labor costs because volume is down (with no advertising) and revenue is now also down with their price reduction. What irony.

You can’t continue to pay bills without money in the bank and I get that but for those of you out there that are struggling but still hanging on, let me suggest a few options.

1. Advertising. Every month in CarCareBuzz.com there is typically one article that specifically addresses advertising in depth. In short, you need to advertise smarter not harder and find ways to get your message out but on a tight budget. Elite Car Wash has moved over to mass e-mailing our customer base and using street billboards. In my opinion, the way of print media advertising is slowly being over taken by “Facebook” and mobile media, where consumers are likely to get a majority of their information. When you own a business, feedback is valuable and we try to utilize all aspects of the Internet with surveys and the ability to e-mail the owner directly. That’s what I expect from companies and businesses with which I choose to spend my money.
2. Lowering Prices. When the profit on a particular service becomes too low, you must raise the price and just offer a better service. The word “value” comes to mind when I think about this situation. What would you say to a customer who asks, “why are your prices so high?”  The standard answer is, “we don’t discount our prices in order to provide great customer service and our work is guaranteed.
3. Key Staff. If your staff is not cross trained to handle most positions in the car wash, you need to train them properly or upgrade them. Elite car wash is currently a flex service location with “human” service writers; we still live and die by the quality of our staff. Car wash owners now receive job applications from many over qualified applicants who have been laid off, so take advantage of the economic situation of the high supply and low demand for quality employees. Have employees on the payroll who can not only work on equipment and service write, but also market on rainy days when the wash shuts down. If you utilize them properly they will pay for themselves tenfold. We are looking to add a (POS) point of sale system to complete our renovation from a traditional full service location to a flex service location. The reason for this is not all customers want to deal with a person and express pay terminals are fast, really fast.

Face Reality

Let’s have a real discussion here and talk about the nitty-gritty. Not all businesses are going to survive this recession and keep your eye on the ones that start the “death spiral” because they seldom make it. Most locations that were built on business models from 2001 to 2006 where consumers were spending, have an even less chance of surviving. At the end of the day there is only so much you can do and if your competition is dropping prices and operating in the red, it’s going to come down to who has the deepest pockets. Now, I’m using this example assuming that both businesses are fairly equal in terms of customer service and wash quality but it’s a real question to ask. Anyone who doesn’t even consider closing their doors and continues to spend everything they have, keeping their business running, is not doing themselves or their family right.

Regardless of what our President says, no one is going to come in and save you and this economy is going to stay sluggish for a few years. Our tax dollars are going to build infrastructure however, the unemployment will continue until we stop borrowing money to create temporary jobs.

To summarize this doom and gloom there are things you can still do to turn your bottom line around and actions you need to avoid at all costs. If your competitor decides to drop his prices or starts adding additional services (at no cost) you need to be ready to react by making sure your services have value. Cut expenses to the point that you can still provide good customer service, reinvent the way you use your employees and evolve in this market or go extinct.

The good customers will seek value and will appreciate your hard work.

Philip Toppino is the owner of Elite Car Wash and Elite Lube in Clermont, Fla. He offers consulting services for the professional car wash market and specializes in real estate development. You can reach him at ptoppino@gmail.com. Visit his Web sites at www.toppino.com or www.elitecarwash.com for more information.