As is the case every year, I look forward to the International Car Wash Association’s The Car Wash Show. Last year in Nashville, there were about 8,000 participants. The Show is a great place to connect with hundreds of exhibitors, owners, and operators. It is an opportunity to network and discover the most innovative ideas, tools, and equipment that could increase productivity and/or revenue. The educational sessions are just as important as walking the tradeshow floor. Many veterans of the car wash industry and experts in the market will be sharing their experiences and secrets. If you are in attendance, take a lot of notes and ask plenty of questions.
Most people work “in” their business and not “on” their business.
The Car Wash Show is an opportunity to take a break from daily work and have time to sharpen the saw and come up with innovative ideas to increase productivity, customer satisfaction, experience, sales, and profit.
In the spirit of The Car Wash Show, I decided to share the income multiplier formula I developed to ultimately improve net income and how to take advantage of today’s technology to grow year after year.
There are four ways and only four ways to increase profit:
• Increase the number of customers
• Increase the dollar amount per transaction
• Increase the frequency of visits
• Control operational expenses
Every marketing or operating idea a person can come up with to improve their profit and ensure success falls into one of the above categories. This cornerstone formula divides the task into small chunks and makes it easier to achieve the desired goal.
If you analyze your business and conclude that, due to the rising costs of doing business, and in order to stay profitable, revenue must be increased by 30 percent, the first reaction would be, “How can this be done? It is too hard.” Is it really?
“A journey of 1,000 miles begins with a single step.” The same principle applies here. Instead of thinking of how to increase revenue by 30 percent, why not take it step by step: increase the number of customers, increase dollar per transaction, and increase frequency of visits, each by 10 percent. It’s the same as climbing a mountain — it is done one step at a time.
Below is a chart to put the income multiplier formula into action.
From the example below, if a car wash washes 10,000 cars per month at $10 per car with each customer visiting once a month, the total revenue is $100,000. Minus all expenses, calculated at 80 percent, net income is 20 percent or $20,000.
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In the chart below, a 10 percent increase was applied to the first three modules.
As you can see, the number of first-time customers increased by 33 per day or three cars per hour (1,000 a month). Frequency of visits, or repeat visits, increased by 33 per day or three cars per hour. Most car washes should be able to wash six extra cars per hour without adding more labor. Therefore, the cost of washing these vehicles is the cost of water, power, and chemicals.
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Revenue is up an impressive 33 percent and, by increasing the first three modules of the income multiplier formula by 10 percent, it is easy to achieve.
Operational expenses increased 10 percent or $8,000 to cover any unforeseen expenses and for those who may want to add one extra employee. The average cost of water, power, and soap to wash each additional car is $1. The cost for upgrading the sales of every car wash by $1 is pennies on the dollar. Though operational expenses went up, as a percentage of total revenue operational cost dropped from 80 percent to 66 percent.
Net Income increased by 120 percent. The bottom line that really matters is not the revenue, but rather the net income. The net income is much easier to increase than revenue. As revenue increases, all major expenses remain constant and there is minimal change in the variable expenses. Therefore, most of the extra income from the increase of dollar per transaction goes directly to the bottom line.
A Harvard University study concluded that if you increase revenue by 5 percent, net profit will increase by between 25 percent and 125 percent.
A flood cannot be blamed on one drop of rain, but all raindrops combined. The same in business: success doesn’t depend on one thing, but on all the little things combined.
For every module in the income multiplier formula, there are many marketing ideas that could be implemented to achieve the 10 percent increase. Unfortunately, there is not enough space in this article to mention them all. However, all this information can be found in both my books in more detail: Increase
Business 30 percent in 30 Days and Dirty Cars Filthy Rich. Though the following ideas are tangible, tried, and proven, true success lies in the intangible operating process and it cannot be copied by the competition. That is, building a business culture where every staff member feels that this is their car wash and they are empowered to do whatever it takes to exceed customers’ expectations. Your staff must truly love your customers, have their best interest in mind, and provide customers with a cleaner, shinier car in the fastest time possible. Your job is not to take care of the customers; your job is to take care of the people who take care of the customers so they can provide a great and unforgettable experience. Then the customer will have no choice but to come back.
If you only provide the service paid for, you are a convenient car wash. If you provide an outstanding experience, you become a destination car wash where customers are willing to inconvenience themselves and drive past other car washes that may have lower prices just to come to you. Remember: People do business with people, not companies.
INCREASE DOLLAR PER TRANSACTION
In my opinion, this is the easiest module to increase. There are three easy ways to achieve the 10 percent increase:
1. Increase Car Wash Price
When was the last time you raised the prices of all washes $1 across the board? If you wash 10,000 cars per month that is equal to $120,000 in increased revenue and net income per year. This extra money goes directly to the bottom line, as there is no extra cost involved.
2. Redesign Your Menu.
Simplify your wash menu options. Remove the basic wash from the wash package options and hide it in the a la carte section. I recommend having only two wash packages. Put it this way: the higher wash package should have about $15 in extra services for a couple dollars more than the lower priced wash package. The top wash package should be a no-brainer for customers to choose. Over 95 percent of your customers, when choosing a wash package, should be choosing the higher priced package. If not, that means your packages should be redesigned. If you are a full service wash, add two express detail packages as well to your wash menu.
3. Train Ticket Writers
Conduct regular sales training sessions with all your ticket writers. Teach them how to present the menu to customers and upsell to the best wash package. Training the sales people to stop greeting customers by saying, “What can I do for you today?” or “Wash only?” to a more purposeful greeting that recommends the top wash package can make a difference of up to $3 per car. Do the math: if your salespeople upsell three customers an hour to a better wash that costs $10 more, that will amount to over $100,000 in extra sales in a year.
The fact is, new car washes are opening every day. Every time a new car wash opens, the car volume at existing car washes will drop. Eventually a new car wash will open in your area. What will you do? Increasing the dollar per transaction and increasing the frequency of visits are the fastest ways to make up the lost income. The money is in your parking lot. You just have to learn how to get it.
INCREASE FREQUENCY OF VISITS
This can be achieved by giving customers incentives to bring back the same car or their second car within a certain amount of time and receive an extra discount. Starting a loyalty program where after X number of washes customers receive a free car wash, is a great way to make customers loyal and become their exclusive car wash. At Great American Car Wash, we partnered with MyLoyaltyApps (MyLoyaltyApps.com) to create a customised app to help increase customer loyalty and frequency of visits. When customers come in to pay, there is a tablet next to the cashier and it reads, “Check-in here to receive your tenth wash free.” After nine visits and nine check-ins, customers receive a code via text to redeem for a complimentary car wash. To take advantage of the loyalty program, our express customers must download the app and check-in by scanning a QR code.
For over 20 years, we have been using our POS systems to track the buying habits of our full-service wash customers. Here is what we found:
• 50 percent of customers wash their cars once a year
• 30 percent wash their cars two to three times a year
• 17 percent wash their cars once or twice every three months.
• 3 percent of customers wash their cars at least twice a month
Armed with the above information, we take advantage of the automatic texting feature that is part of the app. We programmed the app to send a personalized message with incentives and reminders for customers who have not checked in within the last 60 days to come back. If customers did not take advantage of the offer, another incentive is sent out 30 days later. The process repeats one more time 30 days later. Once the customer comes back and checks in, the system resets. This feature has tremendously increased the frequency of our customers’ visits.
Text messaging is also part of the app. On slow days, we send out special incentives for our detail services and car washes. Normally, within 15 to 20 minutes, we have customers at the car wash taking advantage of the offers. If the customer really needs the service promoted via text and they are in the area, and if they have the time and money, they will take advantage of the offer the same day.
Increasing the frequency of visits of existing customers is a great strategy to increase the net profit. Increasing average customer visits from three times a year to four times a year is equal to a 25 percent increase in revenue from that customer. As discussed previously, this extra revenue is practically 100 percent profit.
According to a 2013 Loyalogy study, customers who participate in a loyalty program will increase their frequency of visits by 20 percent and increase their dollar per transaction by 20 percent. Forty-two percent will refer four or more first-time clients to you. Loyalty programs have a 90 percent redemption rate, which means they work.
Today, automated texting is essential for communicating with busy clients. Texting produces results. Text messaging is convenient not only for your customers, but also for your business because it provides a highly effective and measurable tool for delivering important messages.
INCREASE NUMBER OF FIRST-TIME CUSTOMERS
You can accomplish this by taking advantage of today’s technology. The old way of doing business does not work anymore. Imagine that you are in an unfamiliar city and you want to wash your brand new car. How do you find a car wash? As will most people, you’ll Google car washes in the area, look at the top three that show up on Google Maps, and then you will check reviews. Most likely, you will check Yelp reviews. As a matter of fact, four out of every five people that search for businesses online will check Yelp reviews. The number of reviews and the ratings of the car washes you researched online will affect your decision on which car wash you choose. Nine out of 10 consumers said their buying decisions have been influenced by online reviews.
You may operate the best car wash in town and provide the best service in your area, but if you don’t show up as one of the top three car washes on Google search, you are virtually the best-kept secret in the industry. If your car wash does not have four to five stars, you are at risk of losing even more customers.
Today, Google moves companies’ ranking up the search engine organically. Which means the more people that talk about your business online and the more people that click on your website, the more likely your company will move up the search engine ranking.
For Great American Car Wash, being the number one car wash on search engines with the most reviews and best star rating in our area in not a coincidence. The process of asking our customers to leave reviews is automated through MyLoyaltyApps. Every time a customer checks-in, the app sends them a text asking to leave a review. The system gives us the opportunity to resolve the issues of unhappy customers and encourages happy customers to leave their reviews online.
To succeed in business today and attract new customers, it does not matter how long you have been in business or how many locations you have. What matters is your search engine ranking and reviews.
AJ Rassamni, has over 30 years experience in the car wash business. AJ is a speaker, consultant, and author of two books written specifically for the car wash industry, Increase Business 30% in 30 Days and Dirty Cars Filthy Rich. AJ helps car wash owners, achieve amazing success by advising them on how to innovate and automate their operations to significantly increase profit. AJ is also the CEO of an innovative technology company, MyLoyaltyApps, whose sole purpose is to create customized apps that automate the marketing strategy of a business. You can contact AJ via e-mail at info@MyLoyaltyApps.com or info@DirtyCarsFilthyRich.com or text 559-284-1919