Auto Detailing - June 2007

Detail, Inc., Part XI Compliance:
A Commitment to High Business Standards

By Prentice St. Clair

This is the eleventh in a multi-part series dedicated to the “business” of detailing. In last month’s column, we discussed the importance of appropriate pricing. I introduced the concept of the “pricing cycle,” which, for the typical detail business, begins with the operator setting prices too low. That leads to lack of profit, the inability to fund business improvements, and ultimately to business stagnation or failure.

Why does this happen so often in the detailing business? I believe it is because of the general perception that detailing is a relatively easy and inexpensive business to start. Many new operators move into entrepreneurship from an employment situation and are excited about the first few days of income, not realizing that their low pricing does not account for operational expenses and taxes.

Low pricing also comes from the fear that customers won’t pay higher prices. Yet with the confidence derived from professional training and the use of professional equipment, the detailer committed to service excellence can command a higher price than most operations by offering superior service, better results, and a commitment to delighting the customer. With appropriate marketing efforts, detailers can find willing customers who have disposable income and the desire for the best service.

Part of the cost of providing superior service is complying with applicable laws and regulations. This can be seen as a nuisance or a matter of pride in “keeping all your ducks in a row.” Now, I don’t claim to be a business attorney or even an expert in compliance, but let’s discuss at least some of the compliance issues that are faced by automotive detailing business owners.

LICENSE TO OPERATE

Most municipalities require that businesses operating within their boundaries have a current business license or permit. For most cities, this is simply a way to collect a fee (read: tax). But some cities take it seriously and will levy fines on businesses caught collecting revenue without a permit.

Obtaining a business license is usually pretty simple. It’s just a matter of going down to city hall and finding the office that handles this formality. You may even be able to take care of it all on-line. In some areas, the jurisdiction is larger than your city, and you have to go to the county level, but the idea is the same.

In larger metropolitan areas, like Los Angeles, a mobile detailer might operate in several cities within a few miles of his or her base location. Most municipalities allow you to conduct business for a certain number of days per year without a license. In some cases, several adjacent cities might offer a one-stop business license that covers you in all of those neighboring cities. In most cases however, you will need a business license for each city within which you expect to service customers.

As mentioned, obtaining a business license should be a relatively simple procedure; city governments generally make it easy for you to give them money. There is another benefit to possessing a business license other than “operating above board.” When you are licensed, your business is perceived by your customers as having a more legitimate nature. Your business license should be considered part of the image that you market to your customers.

WASTEWATER RECLAMATION

According to the Clean Water Act of 1973, water running into natural watercourses and bodies like streams, rivers, lakes, and the ocean, must be free of contamination. This means no dirt, no debris, and no chemicals. In short, as far as business operators are concerned, anything other than natural precipitation is forbidden from entering the storm drain system. It seems like a fairly clear regulation, but enforcement of the regulation was left up to local municipalities, and there were many years of non-action.

With increasing awareness of the harmful impacts of contaminated run-off, more and more local governments are beginning to enforce the Clean Water Act by requiring businesses to reclaim water that is a by-product of conducting business. This is true for car washes, detail shops, and especially mobile detailers. The days when we can wash cars in the street willy-nilly are fast disappearing.

It is becoming increasingly necessary for all detailing operations to reclaim wash water and dispose of it appropriately. For the fixed operation, this may mean containment and treatment systems before releasing the water into the city sewer system. For the mobile operator, this means a containment system, a storage system (for the dirty water), and a place to legally dump the water.

WORKERS’ COMPENSATION INSURANCE

In every state in the Union, it is required that if you have employees, you must have workers’ compensation insurance to ensure that the employee is covered in the event of a work-related accident. Specific regulations like amount of coverage per employee and threshold number of hours worked per week can vary widely from state to state.

Suffice it to say, if you are paying employees (see the definition of “employee” below), it is likely that you need workers’ comp insurance. Take the time to talk with a workers’ comp attorney, or your business insurance agent, about your specific situation.

EMPLOYEES VERSUS SUB-CONTRACTORS

A growing business usually requires duplication of human resources. In some situations, excess work can be farmed out to other business owners in exchange for some kind of finder’s fee, percentage, or wholesale rate. In most situations, however, it is necessary to hire employees to help you with the workload. Some operators try to skirt the issues involved with employees by calling them “sub-contractors.”

It seems like a pretty simple solution to a complex problem. Yet, categorizing employees as sub-contractors can have serious implications, like the stiff penalties levied by the Internal Revenue Service for such infractions. Moreover, should your “sub-contractor” be injured while under your employ, you are in for a wild ride of fines, penalties, and medical payments.

You can check with the IRS, your CPA, or your tax attorney for specifics, but there is a simple way to tell if a “sub-contractor” is in fact an employee. If you require your “sub-contractor” to show up at a certain time, use your tools, and do it your way, it is likely that you actually have an “employee.”

OSHA COMPLIANCE

The Occupational Safety and Health Administration’s mission “is to assure the safety and health of America’s workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual improvement in workplace safety and health” — www.osha.gov. The OSHA website has a ton of information about business owners’ compliance with national standards of workers’ safety. Your state likely also has it’s own office of OSHA, with it’s own set of regulations, that supports or supplements the federal program.

There are a number of issues an employer must be aware of regarding workplace safety. Business owners are responsible for having Material Safety Data Sheets (MSDSs) for every chemical on-site, and these must be made available to employees. Additionally, it is the employer’s responsibility to train employees on the safe use of all chemicals and equipment on the premises, and to conduct regular safety meetings for updates and refreshers.

OTHER COMPLIANCE ISSUES

Your local fire marshal will probably have a few words to say about how your shop is set up, especially if you have any flammable or hazardous chemicals. As detailers, some of our favorite solvent cleaners (e.g., bug and tar remover) are flammable and require, by law, special handling and storage.

Additionally, the local chapter of the Environmental Protection Agency, the Air Quality Management District, and local agencies will likely have some regulations to which you must adhere.

The bottom line with compliance is to get educated about the issues. It may take a period of weeks or months to become fully compliant, but it is important to start the process.

COMPLIANCE AS A MARKETING TOOL?

The best way to show your commitment to customer service is to provide the best results possible with every completed job. You can also show your commitment to excellence by running your business in compliance with local, state, and federal regulations. In fact, doing so can become a part of your marketing campaign.

Certainly, if you paid several thousand dollars for a formal detail-training program, you would proudly display your certificate of completion. Additionally, you would be smart to include the word “certification” on every piece of promotional material that you have, including business cards, brochures, and signage. By the same token, you can use the word “licensed” to indicate that you have the necessary local business licensure. This distinguishes you from the local hack who does not care about running an up-standing business.

Another example of using your compliance efforts in your marketing is to proudly announce that you run a “green” or environmentally friendly business, illustrated through your reclaim of wastewater.

In general, when your business is in compliance, you can hold your head up and speak proudly to your potential customers about your commitment to service excellence, as well as your commitment to higher business standards. Additionally, these efforts justify a higher cost to the customer, because he or she is dealing with a stand-up business. Ultimately, the customer benefits by having your business in the community.

SUMMARY

Every professional detailer should be concerned with compliance with state, local, and federal regulations regarding the running of a small business. With a bit of research, you can determine which regulations affect you directly and address them as needed. Make sure your customers know that you care about running a stand-up business, and don’t be afraid to charge prices that reflect the direct costs of compliance and the value to the customer.

Prentice St. Clair is president of Detail in Progress, a San Diego-based automotive reconditioning consulting firm. To contact him, e-mail Prentice@DetailinProgress.com or call (619) 701-1100.

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