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You may not be aware that carwashes with low incident rates earn higher profits. It is a myth that your insurance will pay for all of the costs associated with a claim. This is known as the 'Iceberg Effect' ― those hidden/indirect costs. The following is an illustration of a simple claim:
Incident - Employee Injury equals direct costs totalling $1,500
Using the formula developed by the National Council on Safety for calculating indirect costs on claims under $3,000:
Direct Costs x 4.5 = Indirect/Hidden Costs
Then of course we add the hidden costs to our direct costs for a total claim of $8,250.
Here is how that affects your bottom line. Assuming our wash has $300,000 sales with a $75,000 profit equating to a profit margin of 25 percent, you would need to generate $33,000 in Net Sales (Gross Sales less overhead/operating costs) to completely cover the total costs of the $1,500 claim.
Just think how many cars you have to wash in a given month to simply cover this 'Iceberg Effect'.
So what are indirect costs? This is just a small sampling of them:
- Lost time spent by supervisors investigating the accident
- Lost time by supervisors completing paperwork
- Lost time by clerical staff completing and following up on paperwork
- Damage to tools and equipment that will need to be replaced or purchased new
- Cost of training a new employee replacement
- Loss of production and productivity
- Loss of business due to damaged public image
- Loss of efficiency due to break-up of crew
- Failure to promptly service your customers
- Lost time by other employees discussing the accident
- Loss of productivity due to employee moral
As you read this remember that your competitor may already be aware of this.
A safe wash protects people and profits!