Anyone who is planning a wedding, a vacation, or works in the carwash business knows that rain is considered an enemy. Sure it’s nice for water supplies, but bad for business. With today’s economy, a rainy day can be a downer, especially if that rainy day is a Saturday or a Sunday.
Robert Weber is relatively new to the carwash business, having bought one three years ago. In a previous life, Weber was a professional trader and understood how many industries with similar risk problems used hedging products to help protect themselves. Now, as a carwash owner, he searched for a product that could hedge against rainy days, but came up empty. Knowing what was needed, he started developing one.
While working on his product, the Wall Street Journal got wind of it and interviewed him along with a company called WeatherBill. The Wall Street Journal article ran on May 29, 2007. WeatherBill then approached Weber and they formed a partnership and the RainProtection.net/WeatherBill contract was born.
David Friedberg, formerly a top executive at Google, launched WeatherBill to help small businesses, such as carwashes, with weather-based insurance protection. In a story for Newsweek, Friedberg explained how his idea was born out of a morning commute that took Friedberg past a bike rental shop. “When it was rainy out, the store would literally close down — the guy wouldn’t even come in to work,” Friedberg said in the article. “I thought, ‘That’s such a terrible business — whether this guy makes money in any given week is based totally on whether it rains or not.’”
What is rain protection exactly?
A RainProtection.net/WeatherBill contract is a financial instrument that can be used to protect against rainy days. It is the arm of WeatherBill that specializes in rain protection; only by going through RainProtection.net will a three percent discount be automatically applied to your cost of the contract.
These contracts are available at www.RainProtection.net
. Basically, you decide what day, days or any time period you want protected, and the amount of money you want to get paid should it rain on those days. A price quote then appears with the cost for this coverage. You then click and purchase using a credit card, or pay with a previously funded account. The contract will then pay you if the rainy day occurs, thus “hedging” your risk.
“Having this coverage will change your whole outlook,” Weber said. “When those meteorologists forecast a rainy weekend, you might just smile, knowing that even if you’re closed, your business will still earn the same profit as if it were open. Just imagine, it’s pouring outside, you’re closed, and you are relaxed, knowing you’re covered.” Weber said that you might even secretly pray for rain once in a while. “Just look at it as a safeguard, ensuring that you will never experience rain-related devastation again.”
Signing on the dotted line
To customize a contract, there are two strategies to consider. First, there is the Individual Day Method. “Since weekends are more important to most businesses, they might consider covering only Fridays, Saturdays, and Sundays on a typical week,” Weber said. “Special situations, such as holidays, might make it advisable to cover other days. For instance, since the Thursday before Labor Day weekend is generally very busy, it would be important to cover days like this as well.”
Then, there is the Time Period Method option in which a season or time period is covered with a sort of “deductible” built in.
“For example,” said Weber, “Let’s say, you chose to protect the days from October 1 through December 31, (which is three months or 92 days). You may have chosen to get paid $2,000 for every day it rains over one tenth of an inch. You can also decide not to be paid until after the first 15 days of rain occur and this would be the deductible.”
You would do this, Weber said, because 15 rainy days out of 92 (five per month) is average, and therefore tolerable. This way, you’d be protected against an above average and intolerable rainy season. Your deductible should reflect an average amount of rain in your region. “Now,” he said, “starting on the 16th rainy day, you would get paid $2,000 for every day it rains, effectively, protecting this time period. By using a deductible it also makes your contract less costly.”
You also choose a precipitation level that’s right for your business. Some businesses are adversely affected by one tenth of an inch of rain, and would choose this as their level, while others might choose two tenths of an inch. This precipitation level affects the cost of the contract. The higher the level you choose, the less costly the contract. You also pick the weather station closest to your carwash by entering your zip code.
Using the product
To use the product, you will need an Internet connection. You have to log onto www.RainProtection.net
. It works a lot like an online shop. You have to enter and send your information in the contact form and then place the order.
“When it rains, the weather station closest to your zip code is where the rainfall amount is automatically measured for your contract. Every facet of each contract is dictated by your needs,” Weber said.
The funds are held in trust at the Bank of New York and are available immediately ensuring that coverage will be paid in a timely manner, Weber said. Priceline.com has already signed up and is currently using the product as a way to mitigate the number of vacations ruined due to rain.
Coverage is for a full 24 hours (12 midnight to 11:59 p.m.) and it does not matter what time of day it rains. “This has become an added bonus,” Weber said. “Let’s say it was sunny and you were open for a full day. It then starts to rain after closing, but still before midnight. Not only did you generate your normal business revenue, but you’ll also collect from your contract.”
Weber said the program is a way to protect yourself from being at the mercy of the weather. “Before www.RainProtection.net
, we had no recourse but to grin and bear it. This should no longer be the case when you have coverage,” he said. The old saying, ‘everyone complains about the weather, but no one does anything about it,’ just isn’t true anymore. You now have in your power a shield against the storm.”
Debra Gorgos is the managing editor of Professional Carwashing & Detailing magazine. She can be reached at email@example.com