Gray, Gray & Gray Releases 2017 Survey Results

Dealers experienced relative normalcy despite odd weather

Gray, Gray & Gray, LLP Certified Public Accountants of Canton, MA, recently released the results of the firm’s 2017 Energy Industry Survey. The survey was distributed to retail fuel oil and propane dealers throughout the Northeast and Mid-Atlantic regions of the U.S., and collected data from April 2016 through March 2017. This was the 26th year the company has surveyed the energy industry.

“Most oil and propane dealers experienced a heating season that ended up relatively ‘normal,’ despite stretches of warmer weather followed by late season cold,” said Jeff Foley, CPA, who heads the Energy Practice Group at Gray, Gray & Gray. “We are still seeing an active mergers and acquisitions market, as the retail energy industry continues to consolidate. This is reflected in the growing number of dealers expressing an interest in acquiring another company, which has climbed steadily over the past four years.”

Some of the highlights of the 2017 Gray, Gray & Gray Energy Industry Survey results include:

  • After last year’s exceptionally warm winter, this season saw both oil gallons and customer counts up by approximately 15%, but with narrower margins.
  • Conversely, propane gallons delivered and customer counts were down slightly, but margins were higher.
  • The majority of respondents (39%) report “customer referrals” as their largest source of new customers, while many respondents reported gaining new customers as the result of poor service provided by competitors.
  • The number of dealers interested in acquiring another company (37%) was up slightly, while those interested in retirement (12%) was down by almost half.

Complete Energy Industry Survey results, including a breakdown by region and 10-year trend analysis, are available on Gray, Gray & Gray’s website at www.gggcpas.com, or by calling (781) 407-0300.

 

OVERALL RESULTS

In what state does your company primarily do business?
Pennsylvania    33%
Massachusetts    23%
New York    14%
New Hampshire    9%
Connecticut    8%
Maine    7%
New Jersey    3%
Vermont    1%
Maryland    1%
Virginia    1%

Is yours a family-owned business?
Yes: 94% (average of 2.6 generations)
No: 6%

Total number of employees: Avg. of 27

Number of service technicians (full-time equivalent): Avg. of 7
Number of delivery drivers (full-time equivalent): Avg. of 5

Do you own a bulk plant?
Yes: 59%
No: 41%

Average capacity:
Oil: 100,000 gal.
Propane: 60,000 gal.

What is the average HOURLY rate you pay?
Delivery Drivers: $22.00 per hour
Dispatchers: $21.00 per hour
CSRs: $18.00 per hour
Accounts Payable/Receivable Staff: $21.00 per hour
Service Technicians: $24.00 per hour
Service Manager: $31.00 per hour

How do you compensate sales people?
Straight salary: 41%  (Avg. amount:  $51,000)
Salary plus commission: 41% (Avg. amount:  $90,000)
Commission only: 18% (Avg. percentage: 10%)

Which fuel management software program do you use?
Blue Cow    27%
Total Energy    10%
ADD Systems    8%
Cargas        7%
DRM        7%
Destwin    1%
RCC (Rural)    1%
TerraOil    1%
Other/None    38%

Which accounting system do you use?
QuickBooks    64%
Great Plains    9%
K Systems    4%
Taurus        2%
Intacct        1%
Peach Tree    1%
MAS 90/Sage    1%
Ignite        1%
Other        15%

Are you considering any of the following?
Acquiring a company            37%
Selling your company            18%
Transitioning to the next generation    28%
Conducting a business valuation    4%
Refinancing                1%
Developing a new bulk plant        7%
Upgrading a bulk plant        7%
Converting to S Corporation        6%
Converting to flat rate billing        9%
Retiring                12%

How do you intend to exit the business?
Transition to the next generation    56%
Sell to a key employee        39%
Sell to an outside party        5%

How many fuel customers do you have?
Residential Heating Oil    3,030
Commercial Heating Oil    340
Propane            1,655

How many gallons of fuel did you sell during the past heating season?
Residential Heating Oil    1,740,210
Commercial Heating Oil    242,133
Propane            876,004
Kerosene            79,267
Gasoline            986,770
Diesel                845,936

What was your average TARGETED margin for fuel sales during the heating season that just ended?
Retail/Residential Heating Oil:    $0.66 per gal.
Commercial Heating Oil:    $0.45 per gal.
Propane:            $1.13 per gal.
Kerosene            $0.70 per gallon
Gasoline            $0.27 per gallon
Diesel                $0.36 per gallon

How has the change in oil prices affected your business?
Better margins        52%
Lower margins    11%
No effect        37%

In comparison to this time in 2016, has your customer list …
Increased        45%
Decreased        19%
Remained the same    36%

To what do you attribute the gain or loss of customers?
Gained due to increased advertising        18%
Gained due to acquisition            6%
Gained due to other reason            28%
Lost to competitor with similar pricing    2%
Lost to discounter                18%
Lost to gas conversion            21%
Lost due to other reason            7%

Please provide percentages for the following sources of new customers:
Sales team            14%
Customer referrals        39%
Traditional advertising    19%
Digital marketing        22%
Real estate agents        3%
Other                3%

Which of the following do you offer to RETAIL customers?
Fixed pricing                51%
Price cap                53%
Budget plan                87%
Service contracts            66%
Free oil for new customers        8%
Free service for new customers    9%
Temperature monitoring        13%
Tank monitoring system        13%
Tank protection plans            37%
Equipment service            70%
Heating system service        77%
Heating system installation        74%
Prompt pay discount            65%
Online ordering            43%

What percentage of receivables fall into each date range?
Less than 30 days    67%
30-60 days        18%
60-90 days        7%
Over 90 days        8%

Do you have a bank line of credit?
Yes    77%
No    23%

Total line available (from all banks): $1,096,186
Total line used (from all banks): $917,067

Percentage of customers using a budget plan: 25%

Percentage of customers using a price protection plan: 21%

Do you charge retail customers for price protection?
Yes – for fixed price: 5% ($0.20 per gal.)
Yes – for cap price: 36% ($0.24 per gal. or a fee of $145)
Yes – for down side: 17% ($0.23 per gal.)
No: 42%

If you hedge price protection programs, what percentage do you hedge? 75%

Average RESIDENTIAL drop (gallons per stop): 162 gal.

Average renewal price you charge for a service contract: $247

Average number of PAID service contracts: 1,161

Average number of total service calls made last year: 3,443

Have you acquired another company in the past three years?
Yes – retained gallons    14%
Yes – cash at closing    11%
No    75%

Are you planning to add alternative sources of revenue?
Already Offer        Plan to Add
Service Gas Equipment    42%            5%
Sell Propane            35%            0%
A/C Installation & Service    55%            4%
Plumbing Services        24%            2%
Solar Installations        4%            2%
Other

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