On the Wash Front - June 2008

Variable Expenses: Getting Control
of Your Cost per Car?

By Anthony Analetto

The harder you work, the luckier you get. This statement is almost as fundamental to business success as the equation that revenue minus expense equals profit. Now embrace the truth that it’s better to look before you leap. You can almost always trust that these three basic concepts combined can guide any business owner through even the most uncertain times. Below, I’ll outline some areas to evaluate to improve the efficiency of your operation. All require some work or investment. All can contribute to the overall profitability of your location. But, before you start making changes to your wash, make sure you have a well-documented system in place to benchmark where you are today, and to measure the effect of the improvements you plan to implement. Let’s take a look.

COST PER CAR

Most bills at a car wash are due monthly. When times are good, you look at the electric, water, labor, salt, and soap statements, write out the check, and look to wash more cars. When times are tight, you look at each statement, determine you’re spending too much, and quickly look for ways to cut back. Problems arise when you react to large dollar expenses without complete information on how that total relates to your dollars per car on a monthly basis. At a car wash, it’s not enough to look at how much you spent, you have to take the extra step to look at how much you used. For example, getting a large detergent bill for the month can be caused by anything from volume spikes, equipment malfunction, or just an earlier than normal delivery schedule. If you react to a large detergent bill by trying to reduce soap application without knowing what you actually spent per car for the month, you risk disrupting the quality of your product and eroding customer satisfaction.

If you’re not already doing it, you may want to consider keeping a log that accurately calculates your true variable expense per car on a monthly basis. Some locations with newer controllers may already have software that includes 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, but 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 even take this a step further and share financial information with certain staff. 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. Picture 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.

EVALUATE 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. Just 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 labor costs is a subject that requires more space than we have available here. It’s an issue we will return to at a later time.)

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 variable frequency drives (VFDs) in vacuum and air dryer applications — 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.

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 really 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 Water Expenses
For the most part, water reclamation has become a standard practice in our industry, but there remains room for many locations to increase the percentage of water reused. One hundred percent water reclamation is a reality. The ability to return less wastewater to the sewer system opens an entirely new issue. Most washes pay a sewer expense that is 50 percent of the total water bill based on the assumption that the water used is then returned to the sewer for processing. Ironically, while writing this article, I was contacted by a company regarding the application of a new sewer meter they’ve introduced. The product measures water returned to the sewer for more accurate billing. Also on the water side of the operation, look to incorporate check valves, and sizing nozzles accurately for maximum efficiency.

Controlling Detergent Expenses
As with electrical, accurate tuning of your controller for efficient equipment activation can deliver handsome savings on detergent. 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 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.

SUMMARY

New technologies and ideas to improve efficiency seem to be entering the market at an accelerating pace. Making sense of all the opportunities, and knowing which ones will have the greatest impact on your bottom line, demands accurately measuring each variable expense as a cost per car on, at least, a monthly basis. Once you know where you are, it’s easier to make the right decision on where to go. Remember, the harder you work, the luckier you get. Good luck and good washing.

Anthony Analetto has over 26 years experience in the car wash business and is the president of SONNY’S The Car Wash Factory’s Equipment Division. Before coming to SONNY’S Anthony was the director of operations for a 74-location national car wash chain. Anthony can be reached at (800) 327-8723 x 104 or at AAnaletto@SonnysDirect.com.

 

AUTO LAUNDRY NEWS is published by EW Williams Publications Company
2125 Center Avenue, Suite 305, Fort Lee, NJ 07024-5898, USA Phone: 1-201- 592-7007 Fax: 1-201-592-7171