By Bob Levins, Angus Performance Advisors
Does it feel like the margin for error in your business keeps getting smaller? If so, you’re not alone.
The world we knew even 10 years ago is gone. In its place, we wake up every morning to generally warmer winters and customers who use less fuel per degree day. We face greater competition, a shrinking customer base, rising costs, and fuel price whiplash.
Evolve to Thrive
We can complain all we want about these trends, but it won’t change the fact that this is our new reality. If we want to survive in this business, let alone thrive, we’ve got to figure out how to evolve and run our businesses better. If there is less margin for error, we better darn well stay within the margins. And that’s where your metrics become so important.
What Do We Mean by Metrics?
When we talk about metrics, we are referring to the Key Performance Indicators that help you understand what is really happening in your business. When the margin for error is less, you need to get these numbers quicker, so you can act faster to correct problems and preserve your profitability.
In the absence of good numbers, we are left to manage by feeling, by hunch, by intuition, by good guess. And that might have been good enough in the past. But it won’t cut it now.
Putting Your Numbers to Work
A great case in point recently occurred when a client believed he needed to raise his service plan price by $50, because he was losing lots of money in that department. But he feared an increase of this magnitude would cause customers to shop around.
So we did some digging into his metrics. In this case, we focused on his excess call report, i.e. customers who had gotten more than five service calls in the past two years, including tune-ups. This was no easy feat. Pulling this data from his system, and then investigating to rule out call backs, or exclude jobs where a part had to be ordered, took much longer than it should have, but the results were game changing.
Looking at a sample base of 50 random customers, he had a $3,800 loss. But if he took out just five customers who were on that excess call list, his loss turned into a $2,500 gain. He didn’t need to raise his price to an uncomfortable level. He just needed to get these customers off of his parts and labor plan.
As he continued to analyze his numbers, he ended up concluding that he should switch his billing to flat rate, increase his labor rate, and introduce a new type of service plan without parts and labor coverage. He is on track to raise his net on service by $250,000. But none of it would have happened had he not started digging into what his numbers were really telling him.
Where Do You Stand?
Do you know what your real margin is on each gallon you sell, so you can adjust pricing properly, especially as the winter progresses? Can you tell how much higher your retention rate is if a customer is on budget, price programs, service plans or auto pay? Do you know which advertising tactics are yielding the best ROI? Are you able to track your gross profit on service jobs, to understand why you are making or losing money? Most important, can you easily drill down into this so you can draw accurate conclusions, and take smart steps to improve things.
That’s what smart companies are doing these days. Not because they necessarily want to, but because in today’s world, it’s what needs to happen.
The good news is that most of this information is actually logged in your back office system (ADD, Cargas, Blue Cow, AWE, Taurus, etc.) The challenge is getting it out easily and quickly (see the service plan example above.) These systems were designed to keep track of transactions, billing etc. They weren’t designed to turn your numbers into true business intelligence.
Building a BRITE Future
That’s where programs like BRITE come in. BRITE takes the information in your back office system and puts it into visual dashboards and tables that make it much easier to manage your business.
It was designed to give fuel dealers of all sizes the business intelligence they need to succeed in an increasingly hostile environment. It makes it easy to see what’s really happening in service, sales, customer retention, margin and deliveries. Today. Not after your month’s end, or after the season. What used to take days now takes minutes – without running a single report. Because you can’t afford to wait that long anymore.
Whether you use something like BRITE, or try to create these reports on your own, it’s time to unlock the power of your numbers. If you’d like to run anything by me, contact me at 877-686-3489, or go to
www.briteinfo.com. Make your numbers count.