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Moving forward

October 11, 2010
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"Is she or isn’t she?" Back in January that was the question on the minds of America’s leading economists as well as its small business owners and even consumers. Is America sinking into a recession or is she merely teeter–tottering on the brink of a slowdown?

By September, that question was no longer important. Gas prices had risen to record levels (yet again), foreclosure signs were popping up on lawns across the nation, and the government had stepped in with an unprecedented $700 billion bailout bill. Now the question became, "How the heck are we going to survive this mess?"

PC&D cornered three industry experts to ask them that very question. What follows below is an abbreviated version of our conversation, featuring ideas and advice for steering your carwash or detail business out of the messes of 2008 and into the opportunities for success that await in 2009.

Jerry Nix: Owner of Speedi Carwash Inc., Tacoma, WA; president of Western Carwash Association

Bob Schrum: president and CEO of Chester, VA–based Flagstop Inc.; president of Southeastern Car Wash Association

Bud Abraham*: president of Detail Plus Car Appearance Systems; executive director of the International Detailing Association

*Editor’s note: Abraham’s responses apply exclusively to the detail industry.

PC&D: For starters, please highlight what you think were some of the most challenging issues for carwash and detail operators in 2008.

NIX: The perilous concern for the carwash industry is the ever shrinking disposable income for our consumers. Consumers have less money to spend due to the depth and breadth of the recession and the uncertainty of the economy. Investor operators are shying away from investing as a result of the economic uncertainty.

Other challenges for 2008 that are in the forefront in the Western region are the market saturation of carwashes that the associations and operators have to deal with today and in the future. I strongly urge new investors to do their due diligence in building a successful carwash since nobody will truly succeed in an overpopulated carwash market.

It really goes without saying that the weather is always an issue in the carwash business and 2008 was no different. Changes in weather patterns effected profitability during peak carwashing opportunities such as the weekends and during the pre- and post-holiday periods. It’s not about being in command of the weather; it’s about being in command of your business.

ABRAHAM: The major issue for detailers in 2008 as in the past is having the time to improve their business skills. Far too many technicians are going into the detail business without any sense of the business problems they are going to be confronted with once they start operating.

For those comfortably in the business finding good labor is a problem because they are hiring minimum wage people who have no chance at advancement or career type salaries so there is constant turnover.

Water containment and discharge is another issue because the majority of mobile detailers do not operate with a containment system and a good number of fixed locations do not have the proper discharge system into the sanitary sewer.

And, with the emphasis on green and water conservation, more and more local governments are focusing on the Clean Water Act and passing new legislation or enforcing current law that forbids the discharge of such effluent on to the ground or into the storm drain that goes untreated directly into the rivers and streams.

PC&D: How have these challenges shaped the industry?

NIX: One: It has forced the operators to focus on their carwash in a way to re–evaluate their wash quality, customer service and product mix they have to offer to their customer base. Working through challenges only can help create opportunities for the operator today and in the future.

Two: Adapting or modifying to the changes in the marketplace is critical for survival. Rising fuel prices, shrinking disposable income and other economic news needs to be actively addressed in your short–term and long–term planning.

SCHRUM: Well, it takes longer to do projects, costs are higher, and fewer folks can afford to be a first–time carwash owner and operator.

PC&D: What are some creative or effective solutions to these challenges?

NIX: Be in the forefront of your competition by re–investing into your facility with a new marketing strategy, new signage, or a fresh coat of paint for an improved appearance. Take a closer look at your curb appeal and landscaping to see where you might improve the image of your business.

Control your variable expenses by analyzing your chemical costs, lighting, vehicle leases, repairs, and other costs that are not necessarily the cost of doing business.

People are usually one of the highest costs in a business. People don’t just cost wages and benefits; they spend money and consume resources. Analyze your labor force and lay off the underperforming staff that is a drain on your business. Perhaps combine job descriptions by reallocating the work load of your staff and cut excess people added when times were good.

Keep close tabs on your cash flow by thinking ahead of your projections. Plan your projected cash flow three–six months out and control your spending.

SCHRUM: More prayer — just kidding. Seriously, operators should look for creative sources for funding. They should seek better loan packages. My advice? Find the best commercial realtor in your town and tell him/her what you need. They’ll know best how to find it for you.

ABRAHAM: First, the want–to–be detail business owner must understand how to run a business, not just detail a vehicle. They must develop a business plan to determine how much money it is going to take to operate the business and where that money is going to come from. From this, a marketing plan to help them go after the business.

The operator needs money, sufficient operating capital to purchase the needed equipment, water containment or recycling system and capital to promote the business and support them until the business can.

Lastly, they need to know what they don’t know.

PC&D: What were some positive points for the carwash and/or detail industries in 2008?

NIX: The positive points in the carwash industry were the inroads the national and regional associations made in the environmental arena of educating local water purveyors and water districts as to the harmful effects of washing your car in the driveway. Many municipalities had no idea as to how harmful the chemicals were that get washed down the storm sewers and into our lakes, streams, as a result from driveway car washing. Professional carwashes are water savers, not water wasters.

Manufacturers are increasingly meeting the needs of the carwash owners’ desire to build and design equipment that will save in labor and utility costs. Water–saving reclamation units, water–saving pumps and valves, and variable frequency drives are only but a few examples of the many ways to save on energy costs.

SCHRUM: For one, the labor force is more readily available because unemployment rates are rising. There are also good sites coming on line with less competition for the same parcels.

Lastly, carwashes are somewhat recession proof in that people will take better care of their old vehicle (detailing, lube services, washing) instead of buying new ones.

ABRAHAM: As mentioned, the detail industry is attracting more and more business people into the business.

As well, 2008 saw the resurrection of an industry detail association. What was called the Professional Detailing Association in the 90s is now called the International Detailing Association (IDA).

PC&D: What are some of the larger, less resolved issues for 2009?

NIX: As we enter into 2009, the exhibitor community along with the ICA and regional associations need to focus on attendance and frequency of the trade shows in our industry. Frankly, there are too many trade shows and this is limiting the exhibitor from displaying their full inventory of equipment due to transportation and labor costs. Thus, the operator or end user is not seeing the entire product line displayed at trade shows from the manufacturer.

Water conservation will always remain at the top of the priority list in the carwash industry. With local and/or state governments declaring water restrictions due to droughts, the industry needs to continue its crusade and educate the governmental officials that professional carwashes are water savers in their community, not water wasters. The utilization of state–of–the–art reclamation systems will become more prevalent in the next decade.

SCHRUM: First, adapting to the changes that may come about from the presidential election today. Namely, more capital gains taxes, higher wages, mandatory health care for all, less depreciation, etc.

Another issue is the shortage of financing for new washes and higher ratios on loans. Most banks were requiring 15–20 percent down before, are now looking for 30–40 percent down which would prevent many potential investors from entering into our industry.

PC&D: What will be the immediate issues for our industry to focus on in 2009?

SCHRUM: Water shortages, as well as higher tap fees for water and sewer connections. Financing is another big one, as is making a profit and keeping volumes up.

I think that as carwashers and suppliers, we owe it to new investors to explain to them it is not smart to build next door to existing operators. Remember that people eat three times a day — that is why Wendy’s and McDonald’s can build next door to each other and be successful. They don’t wash their cars but once or twice a month.

PC&D: What are some of the goals of your association for 2009?

NIX: The Western Carwash Association (WCA) has an ambitious agenda for 2009. Among those goals are to re–design its website to make it more interactive and informative. It will feature more training and informative videos, as well. Also, we want to develop online surveys to measure member needs and wants.

When it comes to the environment, the WCA plans to retain an environmental consultant help our membership. We plan to create a membership advisory council to work in conjunction with the WCA Environmental Committee to discuss the benefits of becoming more socially and environmentally acceptable in the carwash industry and to promote the findings through state and local governments. Also, we will continue our environmental crusade to educate schools, water purveyors and water regulators as to the benefits of professional carwashing in their communities.

We will also be increasing the capabilities and resources for our membership for 2009 with our new association management firm, Association Resource Center located in Folsom, CA.

SCHRUM: The Southeastern Car Wash Association (SECWA) will focus on improving attendance at our large show and our road shows. It is imperative that we "put butts in the seats" — more attendees — so that our suppliers and venders can hopefully get a return on the huge investment they make in setting up at all conventions.

SECWA has dropped its fees for show space almost 50 percent to help lower the burden on our valued suppliers and venders. We will be doubling our marketing efforts to attract more attendees, both seasoned operators and new investors, more and better educational classes at our shows, and will continue with our ever popular carwash tours, where we will try and showcase as many different suppliers and vendors while we or on the tours.

Lastly, we will continue to update and improve our new website, increase our membership, and help our valued members be more successful and profitable.

ABRAHAM: The overall goal is to help members become business people, not detailers. If the IDA can do that many of the above mentioned problems will solve themselves.

PC&D: How do you plan to personally adapt your business in 2009?

NIX: Continue what I have been doing for the past two years by re–investing in my carwash businesses by installing new vacuum equipment, improved lighting, technological advances in bill/coin monitoring, maintain high levels of curb appeal, and to continue running wash specials to attract new customers to the carwash. Now is a great opportunity to re–invest and get economical pricing on labor and materials.

SCHRUM: We are carefully reviewing each and every expense item in our washes (chemicals, utilities, labor, maintenance, etc.). We are stepping up our customer service to levels that will "shock and wow" our valued customers.

We are looking at new areas and methods of marketing and merchandising, cross marketing our washes, lubes, gift shops and detailing centers to get all of the honest dollars out of the consumer that we can for the services that they need.

We are installing new equipment to help save on labor (we dropped our labor costs at one wash by 4 percent with new equipment), improving training with our greeters and are having monthly carwash meetings with our great staff at each location.

ABRAHAM: As an equipment manufacturer we are faced with some challenges. With car sales declining industry experts predict that one in five new car auto dealers will close in 2009 which is about 6,000 dealers out of 30,000 in the USA. And, those who stay in business are not going to be making a great many capital investments. As a result we have to adjust to a reduction in sales from this market.

For the detailer business owner who depends on auto dealers for some of or all of their work, it means a major decline in used car detailing work and they will have to adjust by finding other markets. In addition to retail, which is also on the decline due to the economic problems in the country, they need to turn to boats, RVs; motorcycles; airplanes and even farm and construction equipment to offset the loss of dealer business.

PC&D: In closing, what is the message you would like to share with operators who may be struggling in 2008 or searching for ideas to help boost business in 2009?

NIX: I do know that belonging to a regional trade association like the WCA has always been one of the most effective tools to weather the storm for anybody who is in the carwash business. Under any conditions relating to the business climate, and especially in these tough economic times, it is critical to belong so not only to enjoy the benefits of the association, but to help strengthen and participate in the association’s network base of its current membership and future membership.

Carwash owners will also need to differentiate their businesses from their competitors by offering a better perceived value for their customer base to increase their profitability. Giving their customers the very best value for their dollar while providing an exceptional level of services will help create loyalty, increase wash volume and lead to increased profitability.

The world is a changing place and we as operators need to stay informed and change with the needs and demands of our customers. By embracing change in our particular carwash segment, self serve, IBA, or tunnels, opportunities do exist for those operators who are steadfast and are willing to put forth the effort of creativity, innovation, and a renewed business model.

SCHRUM: We all are facing challenging times and unfortunately most other industries are in that same boat. Remain positive: If you cry "Oh, woe is me," it will trickle down to your staff and customers.

Keep in close contact with your bankers and financial folks and let them know what creative methods you have come up with to remain profitable or at least reduce your loses during these tough times — before they call you. Don’t be afraid to make the necessary cuts to keep your company healthy. No one is entitled to their job; everyone needs to earn their pay and deliver an honest day’s work for an honest day’s pay.

We have found that the nicer we are to our customers during these tough times the more they actually will reward our valued employees with better tips and they do truly appreciate the effort we are making to make sure they are happy. Appreciate and compliment the work that your dedicated staff is doing, they too are facing the same challenges we as owners, operators, and leaders face.

Remember, the harder you work the luckier you will get. Best of luck in 2009; as our past, past SECWA President Richard Davis always said, "Happy carwashing."

ABRAHAM: Develop a business plan to give you direction on where you are going and how you are going to get there. Focus on having sufficient operating capital to set–up and operate the business.

Enroll in classes at the community college to continue our business education. Focus on basic marketing and advertising seminars.

Join a national association or regional group to create a network of operators you can call on for help and assistance. The relationships that develop from membership in trade associations are unbelievably helpful to any business owner. Already with the IDA we are seeing bonding going on among operators and manufacturers to everyone’s benefit.

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