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Do you know your Gross Margins?

bigleo48

bigleo48

Active member
As part of my plan to offer an Self Serve Unlimited Washing (with some restrictions...see http://forum.autocareforum.com/showthread.php?t=8442), I have the need to determine my gross margins for that particular service.

To be more specific, I am trying to determine the cost of delivering SS bay services vs. the bays being empty. So no matter the usage, the lights are on, the floors are heated, etc, so I don't want to count that, just the items such as water/sewer, power, chemicals, electricity, etc.

As I have many services (IBA, Vacs, Petwash, SS Bays, etc), its not as strait forward when looking at my bills. Have any of you done this and come up with a percentage? I'm thinking its in the 90%.

Big
 
bigleo48 said:
As part of my plan to offer an Self Serve Unlimited Washing (with some restrictions...see http://forum.autocareforum.com/showthread.php?t=8442), I have the need to determine my gross margins for that particular service.

To be more specific, I am trying to determine the cost of delivering SS bay services vs. the bays being empty. So no matter the usage, the lights are on, the floors are heated, etc, so I don't want to count that, just the items such as water/sewer, power, chemicals, electricity, etc.

As I have many services (IBA, Vacs, Petwash, SS Bays, etc), its not as strait forward when looking at my bills. Have any of you done this and come up with a percentage? I'm thinking its in the 90%.

Big
Click to expand...

Are you also including wear and tear on pumps, hoses, etc?
 
Leo,
Haven't calculated exactly that, but I have thought about it. Sorry I dont have an answer for you, but a few quick thoughts that may or may not be helpful. Starting with, I think 90% is too high.

In the last 10 years, electricity has more than doubled, gas has doubled, water has tripled, sewer has tripled. My water & sewer are going up another 40% in 2 months. (I keep records, I'm not pulling those numbers out of a hat.) Be careful to review your decision/assumptions periodically.

My water + sewer = 7%, but I'm facing a 40% increase this quarter.
Electricity is 8% for me, I have not separated out lights vs vacs vs pumps, SFR motors, compressor, etc... I'd be wary of estimating less than 50% as customer usage related, but that is off the top of my head.

Add cost for chemicals, including ordering, shipping, etc.

I'm also skeptical of your <1% cost for wear & tear. Well - not disputing your number per se, maybe what I mean is I'd include a lot more in that number. For example, double your # of customers and you'll get double the trash & mud, more customer related administrative costs, more oil changes, etc. I know lots of us think that labor is free, but mine aint.
Just saying dont think too narrowly, its a lot more than just pumps, hoses, and taking Q's to the bank.
 
Hopefully when i have replace all these parts for crappy unit Fusion X, my ratio would be better. My first year ratio is at ~50% (53.4%). Thats subtracting all expenses including property tax and mortgage. I have no labor expense. im shoveling the dirt myself lol.
 
IMO, you better know what every single item cost in your company. IMO, if you do not know what it cost you to produce/provide the product/service either you will be screwing the customer or screwing yourself. Neither is a good thing.
 
Big Leo:

Cant answer your question but one relevant thought: I wonder what people will do if they have unlimited time?

Options: tire cleaner, wax, rinse, soap, foam brush, spot free?

I am hoping foam brush as it's the lowest cost, right? and lowest wear and tear, right?

next thought (less insightful): why not just give them 20 minutes or some other cap that should be more than enough time but protect from abuse?

Turbo
 
Thanks for the responses. First, it would NOT be unlimited. It would be set up for something like 'once a day $10 limit' or 'twice a week $10 limit for each visit', etc. So the customer swipes his card, washes...once he reaches the set amount (say $10), machines shuts off and he cannot reuse it until the next day or week...etc

So it's effectively discounting the wash for customer loyalty and a guaranteed monthly payment at the beginning of each month.

I hear what you guys are saying and I do know off the top of my head the approximate gross margin as a % (about 92%). Paul, sounds like your utilities are killing you...but mine are not so bay (yet). However, that is a different issues. If they go up,then prices must also.

The beauty of this is that I already have the ability with my card system to do this and after a few months I can either adjust accordingly or kill the program altogether. So not much risk.

I still have some research and details to work out and I don't plan on offering for a few months yet.
 
the 90% gross margin point is really making me think. I dont have credit cards but I understand that most customers use the bay for a longer time if they use credit cards.

Since I dont have your ready to go RFID infrastructure I wonder if I should start with cc and give a deep discount for more time (REALLY DEEP). If the bay is not being used enough (mine are not) I might as well.

I could announce on my 4' by 10' LED, full color electronic message board I installed 3 days ago

Not meaning to hijack your thread, seems somewhat related and I am wondering if you ever thought of this idea (it cant be original)

TURBO
 
Turbo,

Some CC systems allow you to also do that kind of thing. But my rule of thumb is make it east as possible to give you money.

With my credit card system (like most), it's swipe, quick acceptance, wash and press stop. That's easy!
 
So I did my calculations. breaking down chemicals costs, pit cleaning, parts, power, water sewer etc and I'm confident that the cost of delivery is 10% and so the Gross Margin is 90%.
 
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