On the Wash Front - May 2010

Downturn — Surviving & Operating
in the Black, Part I

By Anthony Analetto

If Mike Black’s name sounds familiar, it should. As a past president of the International Carwash Association and Canadian Carwash Association, Mike has been actively working to help other car wash operators improve their businesses for as long as I can remember. He is the owner of Valet Car Wash in Guelph Ontario. Finding himself at the hopeful end of a four-year weather-related downturn, Mike has managed to navigate his operation through this difficult period to post record numbers in the last several months. Valet Car Wash — with two flex-serve locations both offering aftercare services, unlimited self-serve wash bays, and express-exterior tunnels — is a prime example of everything that is right about professional car washing today. They’re beautiful locations, and what Mike has done to build and retain his business during the downturn is insightful and inspirational.

I want to extend my deepest appreciation to Mike for taking a few minutes to share his ideas on surviving a prolonged downturn for this article. Regardless of what type of wash you’re running or your current weather or market conditions, you’ll find some lessons on operating in the black from Mike’s experience. Below are some excerpts from our conversation.

ANALETTO: During a prolonged slowdown due to weather or some other reason outside of your control, what’s the single most important recommendation you have for operators to survive?

BLACK: As you know, along with most washes in the Northeast, we have gone through four years of weather hell. Now, having just posted our second highest monthly car count in 19 years at one of our locations, I feel like we’re waking up from a bad dream. So far, for the first few months of the New Year, we’ve had the highest car counts in our history. Having washed a few cars, I feel more comfortable talking about how to not only survive a slowdown that’s outside of your control, but how to actually come out of it stronger, and with a larger share of your market. But before I get into all of that, my first recommendation is probably what you’d expect — you’ve got to cut every expense that makes sense.

The other day, however, when a colleague called to ask how much I was paying for a drum of drying agent, I realized that there’s a lot of room for interpretation on “what makes sense” when talking about cost control. I don’t know exactly what I pay for drying agent and it’s honestly not my primary interest. I have my equipment dialed in to deliver a consistent wash, have long-term relationships established with detergent suppliers, and know to the cent how much it costs me to wash a car at each service level. There’s only so much time in a day. When your business is off, putting forth a lot of effort to shave pennies on variable expenses like detergent doesn’t make much sense. You’re simply not washing enough cars. Personally, I’d recommend first getting control of your labor expense. Each night I get an e-mail with a detailed summary showing my hourly labor cost per car. I adjust my operation accordingly and couldn’t run my business without this information. After that, it’s important to see if you can acquire better financing from private lenders. Once that part of the business is in order, spend every ounce of energy coming up with ways to get people on your property to get a car wash.

I’m a boater. When people ask me about surviving a long downturn in business, I tell them to imagine they’re out on the water and the boat springs a leak. You most likely won’t have the tools or material to stop the leak. The best you can do is slow down the water rushing in enough so that the bilge pump can keep up with it. As long as you can do that, you’ll stay afloat.

You mentioned looking for sources of refinancing. Where should an operator looking for this type of lending start?

First, understand that there are people out there who’d be happy to invest in your car wash. There are two sides to everything, and a recession is no different. On the one hand, money is tight, hard to get from traditional lenders, and operators are struggling under debt payments. On the other hand, because of the low interest rates on invested money, there are tons of private money out there looking for a secure place to invest with a decent return. I’m talking about private individuals, charities, trust funds, estate money, and the like. These people can’t survive with a 1 percent return from conventional investments. If you look, you’ll find some that are more than happy to take your property as security with a 7 percent to 9 percent return on their money. Interest rates may be slightly higher, but in many cases terms are longer, they are not looking for much of a principal return, providing you extra flexibility to stay afloat. By using contacts such as lawyers, accountants, real-estate agents, and even customers, you can find these people. We replaced two of our bank loans with private money last year. That move saved us over $200,000 a year in payments and eliminated the tedious reports and projections that the banks needed.

To be completely honest, I started keeping an eye out for alternative financing years ago when we had just opened two washes. I kept a list of potential lenders. I’d think of a person or different financial avenue and follow up. One financing opportunity I found was with a local credit union. With a little work, you will discover that a car wash can be a very attractive proposition for the right lender.

What marketing activities were most effective in driving traffic to your car washes during the four-year slowdown?

There’s really no magic bullet. You have to do lots of small stuff and keep figuring out new ways to get people onto your property. I remember stapling 1,000 business cards with a coupon code for a free express wash to copies of our wash menu. Driving to every realtor office I could find, I’d walk in, ask how many agents worked in the office, and leave a free wash for each of them.

A car wash is dominated by fixed costs, meaning that, to a point, it costs me the same amount of money whether I wash cars or not. Giving away free washes certainly has a downside, but it helped me keep the floor wet, and worked to continuously build our customer base. Now that the weather has changed, other operators I talk to are having decent months, while we’re breaking records! I attribute our current situation to all the work we did when business was off.

Would you mind sharing some of the other advertising activities that worked well to get people on your property?

Especially now that the recession is in full swing, it’s important to realize that it’s not only the car wash industry that’s getting hurt — everyone is looking to hold onto their customer base. It’s important to search for advertising opportunities. One example I remember was with the newspapers. Running regular ads was expensive, and whenever we did run an ad, more often than not it would rain. Then, one local newspaper started holding auctions. Local businesses could auction a product or service for free. The newspaper kept the proceeds, and gave the business the full retail value of the auction in advertising credits. We auctioned 11 unlimited wash passes with a retail value of $4,000. Customers learned about our unlimited wash pass program from the auction; it cost us very little; we got 11 new customers and a $4,000 budget to drive traffic with advertising in the paper. Everybody wins. Now we’re doing this with several other newspapers. Some of the local radio stations have also started a similar program where every Wednesday they have an online sale of gift certificates at 50 percent off. We donate a $100 gift certificate, get visibility from the auction, and $100 in free advertising on top of it. Basically, the rules have changed. There are a lot of other companies in the same boat — struggling to stay afloat.

We’ve been able to run cross-promotions with other local retailers where we offer coupons to each other’s customers. One of the local oil change centers has driven so many people to us that we’re now giving a free car wash with every oil change. The other thing that’s big is bartering services. If you need your place to look good, but can’t afford landscaping, try giving a local landscaper free passes that he can give to his customers. You’ll pick up more business from his customers, and your site will look more inviting to draw in more traffic.

Also, don’t underestimate the huge upside of offering fleet accounts. Whether it’s Joe’s Plumbing, or Mary’s Catering, we go out and bang on the door of any business with a truck that comes onto our property. Once they sign up, they get a free upgrade to the next wash package, a fleet card programmed only for the wash they select, and convenient monthly billing. Small businesses understand the value of keeping their cars clean but need to control cost. By being able to deliver a tremendous value, we get a regular customer that’s connected to the community and loyal for life.

Questions can be sent directly to Mike at: mdblack@sentex.net.

Good luck and good washing,

Editor’s note: Anthony will conclude this discussion with Mike Black in the June issue of Auto Laundry News.

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.

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