Getting in Control of Your Cost per Car
By Anthony Analetto
Getting in Control of Your Cost per Car
Who doesn’t have one? The magic number that immediately pops into your head when asked: “How’s business?” For some it’s average ticket. For others it’s daily, monthly, or weekend volume or revenue. Lately I’ve been more a net-revenue-per-car guy as this single number reflects the impact of my efforts to both control costs and increase my average ticket. It’s not uncommon for that magic number to change as a business matures, volume stabilizes, or opportunities change. Often, a group of operators that communicate frequently seem to settle on one number, with bragging rights given to whoever is leading the pack at any given moment. But unlike last month, where I talked about creating and monitoring key performance indicators (KPI) to measure progress toward achieving established goals, the magic number just sort of happens.
Enough years, and the first number that pops into your head when asked: “How’s business” becomes habit. Like any habit, some are good and some not so good. One risky and oddly popular habit I’ve noticed is focusing on cost-per-car average. It can only work well if you have a well-documented system in place to benchmark where you are today, and measure the effect of what improvements you plan to implement. If that sounds a lot like goal setting and KPI monitoring it’s because it is. Claiming bragging rights for having the lowest cost-per-car average is fantastic. Just make sure to revisit these key areas to accurately understand your true cost per car, and create a plan to control it, before turning down the soap.
COST PER CAR AND CARS TO BREAK EVEN
Keep a log that accurately calculates your true variable expense per car on a monthly basis. Newer controllers often include this reporting function. Otherwise, it can be as easy as comparing invoices with meter readings, measuring detergent consumption, and calculating labor expense as a cost per car for the period.
Keeping a monthly log not only points out genuine spikes in cost that need to be addressed; it can function as a management tool as well. Involving staff in understanding variable costs can help them appreciate the value of their daily work. Suddenly, their role in monitoring equipment function, performing preventive maintenance tasks, or even turning off lights when not needed, can be seen in a simple bottom-line number. Some operators will take this a step further and share financial information with certain staff members. Imagine working with a team of associates who knew how many cars needed to be washed, and at what average ticket, just to break even. Imagine managers who clearly knew how many additional cars needed to be washed per month to pay for another employee to make scheduling easier. Structuring a program that shares relevant financial information in such a way that it’s easy to understand and motivational is a lot of work, but the payoff can be tremendous.
EVALUATING VARIABLE EXPENSES
There are numerous variable expenses that can be tracked on a monthly basis, but the big four are electric, water, labor, and soap. Locations in cold climates may want to break out heating oil or natural gas as a separate line item, while sites with poor water quality may warrant tracking salt consumption for water softening. Calculating the monthly cost per car for each of these expenses is relatively easy. Evaluate the billing period against the invoice amount and total cars washed for the same period. Documentation is crucial. Whether you keep a notebook, enter values into a spreadsheet, or get reports from your tunnel controller, make sure you have a system to easily compare year-to-year and month-to-month periods that can highlight spikes. Once you have a clear way to monitor the impact of your activities on controlling variable expenses, you’re ready to begin improving your business.
Controlling Water Expenses
Start small. Most equipment components have water applicators running at city pressure. Consider installing inexpensive water-pressure-regulator valves at each component to maintain a constant 40 psi and size nozzles accordingly. You’ll improve wash consistency, save water, and reduce nozzle wear and replacement costs. Next, look at improving your water reclamation program. Although reclaim has become a standard practice in our industry, there remains room for many locations to increase the percentage of water reused. One hundred percent water reclamation is a reality.
Controlling Detergent Expenses
It’s a balancing act. The customer perceives value with large quantities of foam pouring over their car. Your objective is to meet that expectation while keeping control of costs. The last couple of years have seen a dramatic improvement in foaming technologies that allow operators to deliver an ever-better show to the customer with a decreasing amount of chemical. Never sacrifice wash quality or customer experience while looking to control detergent consumption. Whereas most equipment today arrives with check valves and properly sized nozzles, excessive detergent consumption can often occur gradually as nozzles wear and small leaks occur. Review your preventive maintenance routines and documentation to make sure you’re on top of this aspect of your wash. Attention to comprehensive daily preventive maintenance can literally save many locations tens of thousands of dollars each year.
Controlling Electric Expenses
Look beyond the obvious. Absolutely implement programs to turn off any electrical appliance when not in use and explore the use of VFDs on motors and dampeners on air drying systems, but don’t stop there. Calculate the savings of replacing older motors on some equipment with newer, more efficient products on the market. Evaluate the estimated utility consumption on older compressors, pumps, and heaters, with that of newer, more economical designs. Discounts and tax incentives are often available for alternative fuel use or for equipment replacement. Utility providers can often guide you in finding what programs are available, and in some states you may be able to shop for a new utility company entirely.
Also make sure you’re utilizing all the options to tune your tunnel controller for more accurate activation of equipment in the wash process. In recent years, tunnel controller manufacturers have leveraged advancements in computer technology to gain tighter control of equipment. Make it a habit to stay on top of advancing controller technologies. As new products hit the market to improve both equipment and operational efficiency, you want to have a plan to upgrade your wash when savings may offset the money you have to invest to get them.
Controlling Heating Expenses
Keep careful control of your thermostat. Car washes in the winter often experience what I like to call the greenhouse effect. During the day, when the heating system is already running non-stop, freezing employees seem to feel warmer when they turn the thermostat to full blast, even though it has no effect. It’s frustrating to open the wash the next morning to a burst of hot air and a tunnel that feels like a green house. Other than that, like with electrical appliances, you want to keep on top of new, more efficient technologies and fuels, along with incentives that make upgrading to more efficient equipment the right choice.
Getting in control of variable expenses at the wash requires careful evaluation of new technologies and making sense of all the opportunities available. Determining which ones will have the greatest impact on your bottom line demands that you have an accurate measure of each variable expense as a cost per car on, at least, a monthly basis. The real trick, however, isn’t just reducing your cost-per-car average. You must do so while either preserving or improving customer value — now that’s something worth bragging about.
Washing cars for over 30 years, Anthony Analetto serves as president of SONNY’S The CarWash Factory, creator of the Original Xtreme-Xpress Mini-Tunnel, and the largest manufacturer of conveyorized car wash equipment, parts, and supplies in the world. He can be reached at Aanaletto@SonnysDirect.com or at (800) 327-8723 ext. 104.