by Mark Curtis, CEO of Splash Car Wash
Blog post writer for Carwash Words- Mark Curtis CEO of Splash Car Wash and partner in the new carwash consultancy group – PPC
A speaker at the Northeast Regional Carwash Show in October presented analysis showing that carwashing has been off as much as 40% from the highs reached in 2007 – and his numbers didn’t take any weather into account! I can definitely say that the rainy weather in my area, the northeast, has exacerbated what the economy has done to our volume not just this year, but for the last 3 years.
For purposes of this discussion, I think it’s important to analyze what’s happened to the volume besides weather in order to identify opportunities that may exist to increase our business.
I believe there are three different categories of people in this economy. The first group is comprised of the unemployed and the underemployed – those people who have taken jobs with less pay. This group has grown to 15 to 20% of the population over the past three years, and that simply means they have essentially disappeared as our customer. If I’m worried about paying my rent and putting food on the table, I’m not paying someone to wash my car.
While we might see some small improvement in this category over the next two years, I wouldn’t be projecting huge volume increases because of incremental employment gains.
The second categories of people are those living on a budget. Their income hasn’t changed much during the recession, but they allot a certain amount each month to housing, to food, to entertainment, and to their car. So what’s changed? gas prices! Whereas they used to spend $40 to fill up their car, they are now spending $60. So, the budget that used to have an extra $20, $40, $80 a month to wash the car and maybe get the oil changed has been reduced to just filling the tank to get from here to there.
I think this is a big part of the down-trend in wash volumes. Before the stock market crash and the economy went into a spin in September of 2008, we saw the spike in gas prices affect us in the spring of that year.
The good news is that as gas prices start to decline, additional money starts to show up in people’s pockets. And that means more people washing their cars! With the slight drop we’ve seen over the past few months, we’ve seen our volumes have an upward trend at our washes as a result (discounting the weather of course).
The last group is the hardest one to decipher, but it’s the group whose income hasn’t changed and who do not have to worry about job security or cutting back to make ends meet because of skyrocketing gas prices. But regardless, they are cutting back.
Why? I’m not sure. Maybe it’s because they feel guilty spending like they used to, or the recession has them thinking about their purchases more. These are your best customers – the every week or every other week client that comes in each time like clockwork. Whatever the reason, they’re going out to dinner less often, stopping at Starbucks less frequently, and washing their car less frequently.
But I believe it’s these last two groups that are the most likely to wash with us, wash with us more often, and/or spend more cash when they do. I think for that reason that these are the groups we should target to keep them loyal to our washes and to try to increase their expenditures with us.
But before we do, there’s an additional trend for us to consider: everyone – I mean everyone – is looking for value when they do decide to finally make that purchase. It used to be that a customer probably couldn’t tell you how often they came to you or how much they spent. Now they can tell you the time of day, the name of the service, and the receipt number!
This trend is one that will continue for the foreseeable future. People are going to continue to need motivation to buy and they will continue to scrutinize their purchases for value received.
So, what does this all mean?
It means that volumes are not going to spike back up suddenly and what we see is pretty much what we’re going to get for awhile.
What do we do to change our profitability outlook?
I think the first thing is to take an honest look at our locations and critically assess how we look to our customers. Now I know we’ve been putting off that maintenance and that paint job trying to save money, but now’s the time to get your place in shape. This is table stakes. If you’re place doesn’t look the part, if you’re equipment is broken and looks like it can’t do the job, people will react by not spending their hard earned dollars with you. They will instead go down the road and spend it at a place they perceive is doing a better job. And here’s the thing: they might not really be doing a better job – they just look that way!
Listen – I know I may be speaking to the choir and I know that some of you may be wondering how I’m going to afford fixing stuff at this juncture. I know because I’ve been there. Do whatever it takes - bartering services, making payment arrangements, anything –- you need to have your site looking the part.
So, let’s assume your site looks good, then what. If your volume is steady, then revenues will only increase by increasing your price and/or increasing the services that a customer buys from you. I don’t want to dwell on increasing prices, but I will say that I believe that we need to consistently raise our prices to cover our increased costs and provide for the depreciation of our equipment and the repair of our buildings.
Let’s talk about the second way to increase revenues – additional services. We have found that while customers may be visiting us less, they are spending more when they come. Now, this doesn’t make sense, does it? Aren’t people cutting back?
Well, they are, but because they’re coming less, our surveys have shown that they are willing to spend more when they do come to take care of their cars. Many are keeping their cars longer – I heard tell that the age of the average car on the road in the U.S. is 11 years?! Whatever the motivation, your customers are willing to spend more money with you if you can provide a service that delivers value for the dollar spent, that can make their car look better, make it run better (or at least they think it does), or that saves them money.
These could include express detailing, or if you’re already express detailing, how about full detail or restoration? Or perhaps, paintless dent repair, windshield repair, or headlight restoration? Or odor removal or paintless scratch repair?
Whatever you decide on, the first thing you must do to have the service go anywhere is to be committed to fully installing it, training it, and marketing it. If you are planning to dabble to see if it works, I can assure you that you will get results reflective of your partial commitment. I’ve seen this at many sites, including my own where we have gone at it in a half-baked way and then blamed the service as un-saleable – the customers just don’t want it.
The entry cost is not high in terms of equipment and supplies. What is critical however is the signage, sales training and production training. Sales and production go hand in hand with express detail – you cannot have a successful express detail business without both. A salesman who is commissioned will stop selling if he can’t get the work done (oh, and by the way, people stop buying the “express” service if it isn’t express!)
The production workers will find other places to work if not given enough work to keep them employed for a full day. Additionally, if they share in a bonus based on cars detailed each week or each month, you will start to lose them if your sales staff is not up to par.
This is a managed source of revenue – you can’t just set it up and leave it. Sales and production need to be a part of your culture or you will not sustain the success you have at the outset of starting this service.
This is true of any service you add. Full service detail is a service that is sold off the back end of your wash where your send-off person or QC offers to remove small surface scratches off a part of the car with some compound followed by a polish of the area. Obviously, that leaves that one spot on the car looking so much better than the rest that 7 out of 10 times the customer books an appointment or has it done right then and there.
With windshield repair, you can choose whether to bring this in-house and do the repairs yourself or to outsource the work. There’s another component to windshield repair as many of the repairs are covered by most insurance companies without cost to the customer. This makes it a great pitch– quick and free.
We chose to use an outside firm to sell, process the claims, and to perform the work. Obviously, they take a much larger cut of the fee, but we don’t have to manage the personnel, handle the claims, or to sell the service. One thing that is important here though is as you invite outside contractors onto your site, you need to make sure that they are not over-selling their service. We monitored customer reaction closely to make sure that they felt that the service was legitimate, that there were specific guidelines with regards to the depth of the chip or crack in the windshield, and that the salesman acted professionally.
Initially, there was some push back, including some from insurance agents, who weren’t pleased about additional claims being processed by their clients. After we spent some time educating our clients, reassuring the agents that we were operating legitimately, and refining the approach of the sales agent on our property, we’ve actually had people calling to book appointments with us.
As a side note, you might have seen the safelight commercials on TV recommending just such a repair. This is fabulous for this business – just as jiffy lubes’ ads for changing oil every 3000 miles was to the lube industry.
Paintless dent repair is the removal of small dents and dings from fenders, hoods and doors. Once again, this can be done internally or outsourced to an outside contractor. I’ve seen it done both ways. As this service requires trained skills, it might be easier and less risky to outsource than to hire within. This service takes a bit of time to develop, but once established can be a very lucrative business.
Other ideas which we’re about to install are paintless scratch repair and headlight restoration. These are great add-on services to your detail bay that enable you to increase your per car ticket and provide more service to your customer. The customer is pleased about the convenience, the cost savings, and most importantly, how great you’ve made their car look again.
That plays into that whole value proposition concept i was talking about earlier. if your wash is offering more ways for them to make their cars look better, run better, be more valuable at trade-in or resale time, or save them money at lease turn-in, then your wash is where they’re taking their business. All of it!
This will appeal to those on a budget trying to maintain their car’s value or to avoid lease return charges. It will appeal to those who really take pride in their cars and want to keep them looking good without the inconvenience (and maybe the extra expense) of going to the body shop.
It’s a lot to digest, but there is help available. There are companies that can help you with setting up these services and help with the training necessary to make them successful additions to your bottom-line, but you need to make the decision of what services to add and the commitment to making them successful at your site.
There’s a great movie – The Shawshank Redemption – one of my favorite movies. It stars Morgan Freeman and Tim Robbins. There’s a great quote from Robbins, who at one point after several years in prison, states that “it’s time to get busy living or get busy dying.”
I don’t think there’s more appropriate words of advice for us. I think it’s time to get busy making our businesses successful, irrespective of the weather, irrespective of the price of gas, and irrespective of the economy. Those that do will find themselves making money – whatever happens – and when things turn around will be making a lot more money.
I wish my fellow operators success with your businesses and for an early and long carwashing season.
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