Gray, Gray & Gray Releases 2017 Propane Survey Results

Gray, Gray & Gray, LLP Certified Public Accountants, of Canton, MA, has released the results of its second annual Propane Industry Survey. The firm surveyed propane dealers from six northeastern states.

“Our survey paints a picture of the retail propane industry in the Northeast U.S.,” said Joe Ciccarello, managing partner at Gray, Gray & Gray. “There is an old saying that ‘What gets measured gets managed,’ and we hope that propane dealers will use the results of the survey as benchmarks against which individual company performance can be compared.”
This year’s results paint a picture of an industry that is robust, with sales and margins both increasing over the previous season. Dealers are also optimistic: 53 percent of respondents are considering acquiring a competitor (up from 44 percent last year), while 56 percent are thinking about transitioning the business to the next generation (up from 40 percent last year).

Some of the other highlights of the 2017 Propane Industry Survey results include:

• The average propane company serves 4,717 residential customers and 679 commercial customers. The number of residential customers is up 5% over last year while commercial customer counts nearly doubled.
• Residential gallons increased by approximately 5% (1,667,680 gallons sold during the 2017 heating season versus 1,588,238 gallons in 2016).
• Organic growth in gallons was primarily through conversions while new customers were generated largely from sales teams, customer referrals and marketing efforts.
• The average targeted margin for residential deliveries last year was $1.29 per gallon, up from $1.10 in the prior year.
• For commercial deliveries, the average targeted margin was $0.71 per gallon, up from $.63 in 2016.

For additional information, contact Gray, Gray & Gray at (781) 407-0300 or visit gggcpas.com.

In what state does your company primarily do business?
Massachusetts: 24%
New Hampshire: 24%
Connecticut: 24%
Maine: 18%
Vermont: 5%
New York: 5%

In what year was your business founded?
1956 (Avg. 61 years old)

In what year did you begin selling propane?
1988 (Avg. 29 years)

Are you a family-owned business?
Yes: 91% (Avg. 3 generations)
No: 9%

Total number of employees:
Peak Season: 45
Off-Peak: 40

Number of delivery drivers (full-time equivalent):
Peak Season: 12
Off-Peak: 7

Number of service technicians (full-time equivalent):
Peak Season: 11
Off-Peak: 11

What is the average HOURLY rate you pay?
Delivery Drivers: $21.61 per hour
Transport Drivers: $24.58 per hour
Dispatchers: $24.83 per hour
Customer Service Representatives: $18.19 per hour
Accounts Payable/Receivable Staff: $22.24 per hour
Service Technicians: $24.23 per hour
Service Manager: $30.43 per hour
General Manager: $46.10 per hour
Operations Manager: $33.80 per hour
Office Manager: $27.46 per hour
Sales Manager: $36.63 per hour

Does your company have a sales team?
Yes: 56% Avg. no. of salespeople: 4
No: 44%

How do you compensate salespeople?
Straight salary: 24% (Avg. amount: $64,000)
Salary plus commission: 71% (Avg. total: $61,266)
Commission only: 5% (Avg. 8%)

Are you considering any of the following?
Acquiring another company: 53%
Selling your company: 15%
Transitioning to the next generation: 56%
Conducting a business valuation: 3%
Refinancing: 6%
Converting to an S Corporation: 9%
Retirement: 15%

How many propane customers do you have?
Residential: 4,717
Commercial: 679

What percentage of your customers’ aboveground propane tanks do you own?
Massachusetts: 90%
New Hampshire: 98%
Connecticut: 81%
Maine: 97%
Vermont: 93%
Rhode Island: 94%

What percentage of your customers’ underground propane tanks do you own?
Massachusetts: 51%
New Hampshire: 86%
Connecticut: 16%
Maine: 52%
Vermont: 35%
Rhode Island: 31%

Do you charge rental fees for customer propane tanks?
Yes: 68% (Avg. $92)
No: 32%

Do you charge an installation fee for propane tanks?
Yes: 59% (Avg. $109)
No: 41%

Do you charge a minimal use fee for propane tanks?
Yes: 56%
No: 44%

If yes…
Fee varies by tank size: 33%
$50-$60 annual fee: 21%
Full tank capacity for 12 months: 27%
Half tank capacity for 12 months: 7%
$45 fee per quarter: 6%
2x tank capacity for 12 months: 6%

Do you charge a permit fee for propane tanks?
Yes: 56% (Fees vary based on town.)
No: 44%

Do you charge customers a delivery fee?
Yes: 18% (Avg. $7.68)
No: 82%

Do you charge customers a hazardous material fee?
Yes: 21% (Avg. $7.58)
No: 79%

Do you charge other fees for propane tanks?
Yes: 3% (Lease fee)
No: 97%

Do you require customers to have a multi-year contract on propane tanks?
For aboveground tanks:
Yes: 9%
No: 91%

For underground tanks:
Yes 18%
No: 82%

If yes, how many years?
Average: 5 years

What do you spend annually on the purchase of propane tanks?
Average: $169,269

What percentage of your annual spend on propane tanks is financed?
20%

How far, on average, do you travel to pick up propane product?
43.3 miles

How many gallons of propane did you sell during the previous heating season?
Residential Propane: 1,667,680 gallons
Commercial Propane: 484,705 gallons

What was your average TARGETED margin for propane sales during the previous heating season?
Retail/Residential Propane: $1.29 per gallon
Commercial Propane: $.71 per gallon

Do you sell any other fuel or energy products?
Heating Oil: 79%
Kerosene: 69%
Gasoline: 35%
Electricity: 18%

Which of the following do you offer to RETAIL customers?
Fixed pricing: 76%
Price cap: 59%
Budget plan: 82%
Service contracts: 50%
Free propane for new customers: 24%
Free service for new customers: 12%
Introductory pricing for new customers: 41%
Prompt pay discount: 68%
Temperature monitoring: 15%
Tank monitoring system: 53%
Tank protection plans: 38%
Equipment service: 76%
Heating system service: 79%
Heating system installation: 76%
Other responses: Generators, Air Conditioning, Coal, Plumbing

What do you spend annually on liability insurance?
Avg. $120,219

What is your average RESIDENTIAL fill (gallons per stop)?
144 gallons

What is the average renewal price you charge for a service contract on heating equipment?
$236

How many PAID service contracts do you have?
633

How many total service calls were made last year?
2,176

Do you require customers to have a multi-year contract with your company?
Yes: 6% (Avg. 3 years)
No: 94%

Have you acquired another company in the past three years?
Yes (retained gallons): 21%
Yes (cash at closing): 12%
No: 67%

How are you trying to grow your gallons organically?
Digital marketing: 4%
Traditional marketing: 13%
Builders/contractors: 14%
Conversions: 43%
Good service: 5%
Competitive pricing: 4%
Outdoor living: 13%
Networking: 4%

Sources of new customers:
Sales team: 41%
Customer referrals: 30%
Traditional marketing: 19%
Digital marketing: 18%
Real estate agents: 11%
Other (contractors, trade referrals): 18%

What computer software do you use to run your business?
Industry Software
Blue Cow: 39%
Rural Computer (RCC): 14%
ADDS: 14%
Cargas: 10%
Taurus: 7%
Factor: 5%
Suburban: 5%
FDMS: 3%
Not applicable: 3%

Accounting Software
QuickBooks: 65%
Great Plains: 12%
Sage: 5%
Peach Tree: 4%
Taurus: 4%
Microsoft Dynamics: 4%
Rural Computer (RCC): 3%
Clarity: 3%

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