Surviving a 4-Year Downturn - Operating in the Black

 

by Anthony Analetto
Originally Published in AutoLaundry Magazine 

 

Interview with Mike Black of Valet Car Wash in Guelph Ontario

 

If Mike Black’s name sounds familiar, it should. As a past president of the International Carwash Association and Canadian Carwash Association, Mike has been actively working to help other carwash operators improve their businesses for as long as I can remember. Finding himself at the hopeful end of a four-year weather related downturn, Mike has managed to navigate Valet Car Wash through this difficult period to post record numbers in the last several months. Valet CarWash, with two flex-serve locations both offering aftercare services, unlimited self-serve wash bays, and express-exterior tunnels, is a prime example of everything that is right about professional car washing today. They’re beautiful locations, and what Mike has done to build and retain his business during the downturn is insightful and inspirational.

I want to extend my deepest appreciation to Mike for taking a few minutes to share his ideas on surviving a prolonged downturn for this article. Regardless of what type of wash you’re running or your current weather or market conditions, you’ll find some lessons on operating in the black from Mike’s experience. Below are some excerpts from our conversation.

Analetto: During a prolonged slow down due to weather or some other reason outside of your control, what’s the single most important recommendation you have for operators to survive?

Mike Black, Owner of Valet Car Wash in Guelph Ontario: As you know, along with most washes in the Northeast, we have gone through 4 years of hell. Now, having just posted our second highest monthly car count in 19 years at one of our locations, I feel like we’re waking up from a bad dream. So far, for the first few months of the New Year, we’ve had the highest car counts in our history. Having washed a few cars, I feel more comfortable talking about how to not only survive a slowdown that’s outside of your control, but how to actually come out of it stronger, and with a larger share of your market. But before I get into all of that, my first recommendation is probably what you’d expect – you’ve got to cut every expense that makes sense.

The other day however, when a colleague called to ask how much I was paying for a drum of drying agent, I realized that there’s a lot of room for interpretation on “what makes sense” when talking about cost control. I don’t know exactly what I pay for drying agent and it’s honestly not my primary interest. I have my equipment dialed in to deliver a consistent wash, have long term relationships established with detergent suppliers, and know to the cent how much it costs me to wash a car at each service level. There’s only so much time in a day. When your business is off, putting forth a lot of effort to shave pennies on variable expenses like detergent doesn’t make much sense. You’re simply not washing enough cars. Personally, I’d recommend first getting control of your labor expense. Each night I get an email with a detailed summary showing my hourly labor cost per car. I adjust my operation accordingly and couldn’t run my business without this information. After that it’s important to see if you can acquire better financing from private lenders. Once that part of the business is in order – spend every ounce of energy coming up with ways to get people on your property to get a car wash.

I’m a boater. When people ask me about surviving a long downturn in business I tell them to imagine they’re out on the water and the boat springs a leak. You most likely won’t have the tools or material to stop the leak. The best you can do is slow down the water rushing in enough so that the bilge pump can keep up with it. As long as you can do that, you’ll stay afloat.

Analetto: You mentioned looking for sources of refinancing. Where should an operator looking for this type of lending start?

Mike Black: First, understand that there are people out there who’d be happy to invest in your carwash. There are two sides to everything, and a recession is no different. On the one hand, money is tight, hard to get from traditional lenders, and operators are struggling under debt payments.  On the other hand, because of the low interest rates on invested money, there is tons of private money out there looking for a secure place to invest with a decent return. I'm talking about private individuals, charities, trust funds, estate money, and the like. These people can't survive with a 1% return from conventional investments. If you look, you’ll find some that are more than happy to take your property as security with a 7 - 9% return on their money. Interest rates may be slightly higher, but in many cases terms are longer, they are not looking for much of a principal return, providing you extra flexibility to stay afloat. By using contacts such as lawyers, accountants, real-estate agents, and even customers - you can find these people. We replaced two of our bank loans with private money last year. That move saved us over $200,000 a year in payments and eliminated the tedious reports and projections that the banks needed.

To be completely honest, I started keeping an eye out for alternative financing years ago when we had just opened two washes. I kept a list of potential lenders. I’d think of a person or different financial avenue and follow up. One financing opportunity I found was with a local credit union. With a little work, you will discover that a carwash can be a very attractive proposition for the right lender.

Analetto: What marketing activities were most effective in driving traffic to your car washes during the 4-year slowdown?

Mike Black: There’s really no magic bullet. You have to do lots of small stuff and keep figuring out new ways to get people onto your property. I remember stapling 1,000 business cards with a coupon code for a free express wash to copies of our wash menu. Driving to every realtor office I could find, I’d walk in, ask how many agents worked in the office, and leave a free wash for each of them.

A carwash is dominated by fixed costs, meaning that, to a point, it costs me the same amount of money whether I wash cars or not. Giving away free washes certainly has a downside, but it helped me keep the floor wet, and worked to continuously build our customer base. Now that the weather has changed, other operators I talk to are having decent months, while we’re breaking records! I attribute our current situation to all the work we did when business was off.

Analetto: Would you mind sharing some of the other advertising activities that worked well to get people on your property?

Mike Black: Especially now that the recession is in full swing, it’s important to realize that it’s not only the carwash industry that’s getting hurt – everyone is looking to hold onto their customer base. It’s important to search for advertising opportunities. One example I remember was with the newspapers. Running regular ads was expensive, and whenever we did run an ad, more often than not it would rain. Then, one local newspaper started holding auctions. Local businesses could auction a product or service for free. The newspaper kept the proceeds, and gave the business the full retail value of the auction in advertising credits. We auctioned 11 unlimited wash passes with a retail value of $4,000. Customers learned about our unlimited wash pass program from the auction, it cost us very little, we got 11 new customers, and a $4,000 budget to drive traffic with advertising in the paper. Everybody wins. Now we’re doing this with several other newspapers. Some of the local radio stations have also started a similar program where every Wednesday they have an online sale of gift certificates at 50% off. We donate a $100 gift certificate, get visibility from the auction, and $100 in free advertising on top of it. Basically, the rules have changed. There are a lot of other companies in the same boat – struggling to stay afloat.

We’ve been able to run cross-promotions with other local retailers where we offer coupons to each other’s customers. One of the local oil change centers has driven so many people to us that we’re now giving a free car wash with every oil change. The other thing that’s big is bartering services. If you need your place to look good, but can’t afford landscaping, try giving a local landscaper free passes that he can give to his customers. You’ll pick up more business from their customers, and your site will look more inviting to draw in more traffic.

Also, don’t underestimate the huge upside of offering fleet accounts. Whether it’s Joe’s Plumbing, or Mary’s Catering, we go out and bang on the door of any business with a truck that comes onto our property. Once they sign up, they get a free upgrade to the next wash package, a fleet card programmed only for the wash they select, and convenient monthly billing. Small businesses understand the value of keeping their cars clean but need to control cost. By being able to deliver a tremendous value, we get a regular customer that’s connected to the community and loyal for life.

Analetto: Wow – you just threw out example after example of marketing promotions to drive traffic, is there one common thread that ties everything together?

Mike Black: Yes. You have to build value. We did a package called the “Econoclean” which gave an $8 discount on interior services on Tuesdays, Wednesdays, and Thursdays. Normally $28 for an interior super clean with an express wash, the discount made this package only $20 which has been a magic number. These normally slow days are now some of our busiest. People stop in and ask “Don’t you have some special promotion today?” Everyone is looking for something. When you deliver a great value they talk about it.

We’ve had similar success with our “Kruz Klean - Unlimited Family Wash Pass”. Rather than try to control the pass to a single vehicle, we let customers register two cars for our middle package at $29.99 for the month. Kruz Klean has become a brand within the brand with its own logo and sticker. When the customer puts their card into the automated attendant it gives them a special menu with significant discounts. And now I’m going to other retailers and asking them to give my Kruz Klean customers exclusive discounts. The customer gets a tremendous value, and I get to sleep easier knowing that the revenue from the pass now pays the mortgage at one of my properties whether I open or not.

Analetto: You’ve told me before that you never changed your hours or closed early during the last 4 years that were slow. Can you tell us how you managed to do that?

Mike Black: At the end of the day it comes down to the customer service. At Valet, rain days are “practice” days when we do our training, maintenance, and preparation for the next “game day”. Except Christmas day and on the occasional brutal snow storm when we’ll close an hour early to get employees home safely, we never shut down. We were so slow at times over the last 4 years that we had to create training programs just to keep busy – but we’re in a better position now because of it.

Today’s customer is often tired and in a bad mood. If he can leave your site feeling like a winner, with respect, having received a great value – that’s the Holy Grail. When you deliver that level of customer service, you’re not competing for a carwash, you’re competing for the $10 that customer has in his pocket to spend on feeling good that day. We may be educated in carwashing, but the slow times are a chance to read, learn, and train in customer service. You’ve got to train in the downtime to educate yourself and your employees to be ready for the next “game day”.

Analetto: You’ve talked a lot about getting people on your property. What have you been doing to get more revenue from them while they’re there?

Mike Black: The real question is what haven’t we done. For us, vended drinking water has been a great seller. We installed a free standing, self serve, RO water filling station with an ozone rinse for the cap & bottle, put out a great big sign on the road that we refill 5 gallon jugs, and customers pull right up. It’s convenient for parents who can back in and fill the jugs while the kids stay in the car watching TV. And when a local business stops in to fill 10 jugs at a time, we’re out there asking if they use our car wash, free coupon in hand.

Windshield wiper blades are another great add-on. We offer free installation and when a customer buys blades we make a big production out of it. The attendant pulls out a tape measure to double check sizing, puts a towel down on the hood, lifts the wiper arm and places another towel on the cowling. By the time we’re done, the next customer in line is asking us to replace his blades too!

Analetto: So what’s next? What are you doing now to be better prepared for the next slowdown?

Mike Black: The most important thing I’m doing is building ways to communicate directly with my customers. You’ve got to embrace the new stuff. You’ve got to get onto Facebook and the other social networking sites. I don’t do this myself, my employees do! My job is just to make sure it gets done. We also recently signed up for a text marketing service. Customers subscribe by sending a text message to a number we advertise to receive special discounts. Once we get the database built up, we can send a promo to every subscriber’s phone in a matter of seconds. Now when it’s pouring rain, I can send out a text message with a code for a free set of our discount wiper blades with an interior detail. Once on my property I might be able to upgrade their wiper blades to our premium brand or possibly offer additional detailing services. Most important is that I’ll have an opportunity to make that customer feel good about getting their car detailed on an otherwise wet and dreary day.

Conditions like weather and economy are outside of our control. What you have to remember is that everything you do during a downturn can put you in a better position when things improve. Over the last four years, it seemed at times like we weren’t getting anywhere. Now it’s obvious that everything we did prepared us to take advantage of the change in weather we’re getting now. As difficult as these times are, a good operator will come out more successful at the end because of what he does during the downturn.