How to Create Opportunity in a Down Economy

It seems that no matter where we turn, news about our economy is bad. Whether discussing the housing market, Wall Street or the relative strength of the dollar, trends are falling and consumer confidence is down. That these factors will also filter into the carwash industry is a given. If you haven’t already felt the effects, then you’re one of the very lucky few.

I have a lot of friends and customers in the carwash business, and I have yet to talk to a single operator across the nation who hasn’t mentioned a negative trend of some kind.

Wallets are tightening. People are either not washing their cars or spending less when they do come in for service. Worse yet, no one has a feel for how long this downturn will last, or if it will get worse before it gets better.

In thinking about all of this, I was reminded of a quote from Napoleon Bonaparte who said, “Victory belongs to the most persevering.”

This may seem obvious and understated, but I think there is a strong message in those words, and more importantly, opportunity. A faltering economy isn’t good for anybody, but those who are proactive in making adjustments to their operations and can persevere through these difficult times will end up being the success stories.

In fact, it sometimes takes hard times to force businesses to analyze their inefficiencies and implement plans to enhance bottom-line profits. Businesses that do this effectively not only find a way to make it through the storm, they find themselves stronger and more profitable when the economy finally changes for the better.

In my company’s own carwashes (two high-volume flex-serves), my partner and I began dealing with economic and other problematic issues well over a year ago. First, our state raised its minimum wage by 31 percent. This was followed by two of the highest precipitation years on record and a skittish consumer market that quickly grew price sensitive and averse to nonessential spending.

Our margins disappeared. Our volume (which had always been growing) began to decline, and our cash flow began to suffer. We quickly determined that our business model wasn’t adapting to the economic changes around us. We knew we had to do something. The questions were: What and how?

The simple solution, of course, was to spend less. The problem was we also had witnessed how knee-jerk reactions by carwash operators (to cut expenses) had actually hurt their businesses even more in the long run. It was something we had always preached against. You can cut labor, but then the time of your service increases and customers impatiently wait longer. You can dial back chemistry, but the quality degenerates. The list goes on for reducing costs, and in almost every scenario, quality, customer service and speed of service are all at risk.

The potential impact of these changes was something we believed would be even more costly to us in the future. We needed a plan for making it through the down market that didn’t negatively impact our customers. We wanted to do something different.

Over a period of about six months, my business partner and I diligently studied our business and then attempted to re-engineer almost every aspect of our operations. We took advice from other operators; we looked at examples of mistakes we’d seen; and then we created a plan for dealing with our economic environment. The overriding rule was that a change could not be adopted if it would negatively impact quality or customer service. Our goals were to reduce cost and increase volume.

Following are some of the highlights of the initiatives that worked well for us:

Cutting Payroll

If you are a full-service or flex-service carwash, then payroll costs are likely the first place you are looking to make a big impact on easing expenses. This makes sense since it is most likely the largest cost line item on your profit-and-loss statement and, therefore, an area where small percentage changes can have significant effects on cash flow.

However, before you make any move to reduce labor, first examine some areas that may not be so obvious. Good operators need to look past labor reduction to see the impact of those missing employees on their service business. Eliminating employees is going to change something about the way you clean and process cars. If you remove them, then what do you do to ensure that your tunnel and your equipment can achieve a clean car (in the same time) without the help of those extra bodies?

The following list encompasses a few key points to review before implementing labor cuts:

Equipment. First, make sure that you are using your carwash equipment correctly and that all of your systems are working properly. Right now may not be the best time to spend a lot of money on capital expenditures (if you are tightening your wallet), but I am always amazed when I visit carwashes to see their existing equipment not working, not tuned or simply not being used correctly.

Go through the tunnel and the back room and tune up. Fix equipment. Test and adjust equipment. Tune the equipment so it is actually cleaning the car the way it is intended to do. Operators too often let their tunnels run down. As this occurs, they require more human bodies to take on those cleaning functions, which ultimately adds payroll dollars. In many cases, it is unnecessary. They just don’t understand the cleaning power they have when their equipment is working the way that it should.

Chemicals. Make certain you are using proper chemistry and enough of it. One of the mistakes I see operators make when cash flow gets tight is to skimp on chemistry. They turn down pumps, skinny tips, and speed up the conveyor. While this will reduce costs (and can be a good move if you were wasting chemicals before), you also can significantly hurt quality.

If your equipment is in a state of disrepair (as mentioned earlier), you are asking for one of two things: lower quality or increased labor to get that quality back. Using the proper chemistry in your tunnel doesn’t have to cost more. Find a knowledgeable chemistry rep who will take the time to study your operation, your tunnel and the type