Thursday, December 12, 2019

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How I Spent My Summer Vacation

by Martin Kirshner, CPA, MSA, Gray, Gray & Gray, LLP [gggcpas.com]


Are you enjoying a leisurely summer? Not likely. The “dog days” are no time to slack off when there is so much work to do to get ready for the upcoming heating season. Just as our favorite football, basketball or hockey team is making moves in the off-season to strengthen their bench, now is the time to prepare your company for a winning winter. Here are four steps to take to help ensure a successful and profitable season.

  1. Set a healthy margin and stick to it. Your margin per gallon is still the most important number to focus on, even more than gallons sold or number of customers. Resist the temptation to chase customers by squeezing your margin – it is giving away money you’ll never recover. For reference, our 2019 Energy Survey [link to http://oilandenergyonline.com/gray-gray-gray-2019-energy-industry-survey-results/] showed the average margin for full-service residential fuel oil delivery was $0.81 per gallon, up 9.3 percent over the previous year. For propane, the average full-service residential margin was $1.36 per gallon, also up about 9 percent. This is a reflection of the relatively stable global oil and gas markets. Your margin should reflect what you need to cover all costs and return a healthy profit. Have your accountant conduct a break-even analysis so you will know how much profit you need to make on each gallon, then set a margin targeted at how much you want to make on each gallon.

  2. Look at your fleet. Summer is the best time to retire old vehicles and bring new ones into your fleet. Review your vehicle service records to see if there are any delivery trucks or service vans that are costing more in repairs than they should – a sign that they need to be replaced. With the new tax law keeping the tax benefits of accelerated depreciation, it could be a good time to make a capital investment in new vehicles.

  3. Automate or outsource. Automate routine tasks through an upgraded management software or accounting system. Or outsource business operations such as bookkeeping, bill paying, vehicle maintenance and collections. You can generally get as good or better performance from an outside resource at a lower cost, with less hassle and reduced overhead, all while freeing your team up to concentrate on customer-facing issues and growing the company.

  4. Identify opportunities for cross-selling. Examine your customer list with an eye toward what the insurance industry calls “account rounding.” Use your CRM system like a doctor uses a patient’s medical history, identifying potential opportunities to “prescribe” system upgrades or new products. For example, if your system detects a customer has required multiple service visits for their furnace over the past few years, it is ripe for a replacement. A home without an outside air conditioner compressor should be targeted for a central air system or a ductless mini-split installation. A customer using propane to heat their home should also be buying propane from you for their pool heater and gas grill. The more connections you can make with a customer, the less likely they are to look around for another supplier. These can be your warmest leads, because they are already customers.

Doing these four things does not guarantee cold weather, clear roads, and stable fuel supplies during the coming winter. But they will help you position your fuel oil or propane business to be ready to take advantage of favorable market conditions, and to be better able to survive a challenging season.

Martin Kirshner, CPA, MSA is a member of the Energy Practice Group at Gray, Gray & Gray Certified Public Accountants and specializes in accounting, tax, and consulting for energy company owners. You can reach Martin by calling (781) 407-0300 or at mkirshner@gggcpas.com.


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