New York Times hidden warning to Oilheat and Propane Industry:
We have all heard that saying and most of us would choose to put it into practice if possible. This past weekend there was a very interesting article in the New York Times, As Price of Oil Soars, Users Shiver and Cross Their Fingers, highlighting the plight of consumers who heat with oil facing soaring costs. To meet this increase in price they are conserving oil by turning down the thermostat, substituting pellets, wood, natural gas or alternative energy sources to stay warm. Perhaps you are dealing with customers who are conserving, substituting, or switching all together; at the same time banks are lending less, customers are taking longer to pay, and your fixed expenses continue to increase and you are seeing the 2008 heating season all over again and potentially much worse.
Where is your value and how to do you measure it? (Your bank is…):
What you will find is there is no shortage of articles or seminars to sell your company and offers to buy your company. Go to any association meeting or open up an industry trade journal and you will hear metrics are changing; it is no longer gallons or margin but EBITDA or cash flow that drives value, heck we are even learning that will call customers add to value calculations. What trade show seminars and these articles leave out is how to achieve the results you need to drive value and produce stable, repeatable, quality EBITDA and a stable of core customers so that you are not playing a reactive game of catch up to buyer’s flavor of the week. Many a coach has said the best offense is a good defense; what are you doing to defend your customers and your business? At Lake Rudd & Co. we advocate clients build a business that is repeatable, has sustainable cash flows and creates substantial value for its owners or a prospective buyer regardless of those variables out of our control such as weather, conservation and commodity market volatility. It is working on your business not simply in your business on a daily basis that will build the significant value you all deserve. By changing the dynamic with your customers you will find that the banks are more willing to have substantive and productive discussions about being your partners and you will be able to stem the loss of accounts and believe it or not add clients. Perhaps this example will help to clarify what we mean.
Value in a declining and highly competitive markets:
We have a very large international client who just the other day walked away from a sizable transaction because at the end of the day the target was simply a retail heating company. Many in the industry would think that the target was a great company doing many of the right things but in the end they simply only supplied commodity products to a customer base who could substitute oil and propane for pellets, solar energy, natural gas, or wood. Let’s face it each year the majority of companies in our industry loose customers and gallons for the most part you can only raise or lower prices so much. You are playing a losing game of catch up; it is as if you have sprung a leak in your boat and as quickly as you can bailout the water more comes in.
One of the central concerns that kept coming up with this potential acquisition was what do you do with a customer base that is shrinking each year be it in gallons or numbers of customers, how do you protect that customer and change the dynamic in your business to be more of a toll road model and not simply a supplier of a commodity? How do you continue to create sticky loyal customers who are willing to hand over a larger portion of their wallet to you? Hint; the answer is not related to your service department!
Decisions for your employees, your family, and for you:
This begs a fundamental question for marketers today; are you willing to invest in your business, look in the mirror and have a very frank and honest conversation with yourself and more importantly your family? Are you willing to make the hard choices about employees and services to secure your place in the future for you, your family and those whose families depend on you? The other side of the coin is to make the decision to get out of the industry and enjoy the fruits of your hard work while there is still value in the business you have built.
Your business is unique and needs a special look to maximize value and income:
You need to realize how trusted you are in the customer’s eyes and where this trust can lead. McDonald’s has made millions by asking the simple question would you like fries with that? To put it another way the customer’s wallet is open and you are not taking their money. There is no cookie cutter answer and some of the solutions are simple while others take time and investment but we firmly believe that together we can help transform your company from a marketer of a commodity product to a trusted supplier of essential services in the home.
We look forward to learning more about your specific situation and sharing how we think we can add value. Let us buy you a cup of coffee or lunch and begin that learning process today.
Change is not coming tomorrow or even next year but the process to change needs to begin now! Call us and lets get that cup of coffee and build your new future. Click here for us to contact you.
Talk to you soon …
Your Lake Rudd team,
Bill Overbay & Sean Cota