For many years, most of the work detail businesses did was for auto dealers who demanded quality work for a low price. The detail industry was, in a sense, a slave to the auto dealer.
By Bud Abraham
For many years, most of the work detail businesses did was for auto dealers who demanded quality work for a low price. The detail industry was, in a sense, a slave to the auto dealer. However, with the growing popularity of auto detail services for consumers and the entrance of business people into the industry, times have changed. Smart business people, who knew the cost of operations, refused to do dealer work at low prices, while others stood their ground and demanded better prices to do the work and to create an excellent revenue source all year round.
Which brings us to the question today, “Should a detail business ever do commercial work?” The answer is yes. As you search for ways to increase profits, you must seek diversification alternatives, of which commercial work is one. Keep in mind, dealers are not the only choice, but they are the best and one that provides volume. There are more: body shops, government agencies, rental-car companies, limousine companies, and fleet owners among others.
To optimize your commercial business efforts, you must first assess each opportunity for critical factors that influence the outcome by ranking each opportunity in a grid to prioritize them. Some of the critical factors are:
• Size of market potential
• Existing competitive environment
• Profitable pricing alternatives
• Ease of work and service delivery
• Ease of selling your service
• Ease of access to decision makers
• Capacity to deliver the service
• Resources required to develop and deliver the service
• Availability of the required resources
• Learning curve involved to develop expertise
• Optimum timing for introduction of the service
By using a table such as the one below, rank each factor with 5 being most favorable and 1 being least favorable. Then total the scores to help prioritize.
For example, detail business owner A weighs two alternatives: dealers and body shops. Once each factor on the grid is assessed, dealers rate a 43 and body shops rate a 30 in the market. Thus, it would be logical to focus on dealers first.
Additionally, in a case where the scores are similar but the timing score is significantly different, both may be opportunities; the optimum timing may indicate that the body shops would be a more immediate opportunity.
The analysis will include research, particularly in assessing the size of the market potential.
Size of Market Potential. The Economic Census (www.census.gov/econ/census) is a good place to start in determining the size of the market potential, providing data on numbers of establishments, estimated average sales, number of employees, etc. This information is historical and must be tempered with expectations. You can contact local associations for the numbers as well. Often, it is possible to find research that has been done by college and university students and faculty on a specific business.
Existing Competitive Environment. In addition to the market-potential data gathered, feet-on-the-ground investigation is essential to accurately assess the current competitive environment. Determine how many detail businesses there are in your area and, if possible, how many do commercial work. You will want to know how many competitors are in the specific niche you are targeting, how long they have been doing commercial work, their capacity, where they are in the business-life cycle, whether their customers are happy, and whether their sales are growing or declining.
Profitable Pricing Alternatives. Look into the existing pricing to determine your profit margins. If pennies are critical, one has to decide if the business has the efficiency to compete in a tight-margin business. If quality is the determining factor, what price is necessary to provide the required quality in the time frame required?
Ease of Work and Service Delivery. Do they require an extraordinary service or is it more a matter of using your current staff and equipment? Whichever skill level is required, is it available in your operation at a wage that is realistic? Does the service require specialized equipment? If so, is it affordable?
Ease of Selling Your Service. Do these commercial businesses in your area need detail services? Is it difficult for them to produce desired results internally?
Ease of Access to Decision Makers. Who makes the buying decisions? Is it one individual? Does the individual have advisory power but no budget or spending authority? Are the decision makers easy to reach or must one run the gauntlet of effective gatekeepers? Will a box of cookies get one in the door or will it take an inside introduction from an internal influencer? Do you have the sales ability to know the difference between the effective and ineffective strategies you can apply to the given situation? Do you have the necessary contacts to be immediately effective in selling or must you develop all new contacts from the ground up? Can one “buy” someone with the appropriate contacts to ramp up the sales effort quickly?
Capacity to Deliver Service. Does your business have the capacity that is suitable to provide the detail services needed? For example, is there an unproductive bay used for discarded equipment that you could convert to a detailing bay? Do you have excess space in your shop where the production could be done, possibly utilizing part-time labor?
Resources Required to Develop/Deliver Service. Weigh the cost and availability of all of the resources required to provide the detailing services to a commercial account:
People — Consider the demands on your current staff, including management, production, and sales and marketing.
Time — Can you carve out time to manage the development and the management of the account? If so, what will you give up to pay attention to this new account?
Capital — Diversification usually requires capital investment in people, equipment, and chemicals. Will the ROI for the account exceed other alternative opportunities? Remember, there is also an investment cost in doing nothing due to the lost-opportunity cost.
Availability of Required Resources. Is the capital readily available either in the form of cash on hand or available credit at a rate that is less than the ROl from the account?
Learning Curve Involved to Develop Expertise. How complicated is the account going to be? Does it require any special training or expertise to detail their vehicles? Does it entail detailed regulations that must be learned and followed? How discerning is the end-user?
Optimum Timing to Introduce Service. Is there seasonality with the account? Dealers have highs and lows, as do body shops. Can you count on business year-round?
Many factors affect the decision to go after commercial business. These considerations are mentioned to help you effectively assess opportunities and stimulate thinking about the potential beyond the standard retail consumer detail business.
In your efforts to improve profitability and increase sales, be creative but also be thorough in investigations and considerations.
Bud Abraham is a 40-plus-year veteran in the car wash and detailing industries as a manufacturer, distributor, operator, and consultant. He was a founding member of both the Professional Detailing Association and the current International Detailing Association and their first executive director. He conducts seminars on detailing at industry events and consults worldwide.