“It’s Killing Me” one client said to me this week regarding gas prices. With gas prices nearly doubling over the last year, and no end in sight for the incline, service business owners are shaking in their boots about how to tackle this problem.
Just how bad is it? I just checked this morning and at their highest location (California) the price is reported to be $4.57/gallon! Sheesh! What happened to the good old days?
Well, that’s enough moaning and groaning from me, let’s get some serious action on this problem. First, I know we are freaked out about what the news is constantly screaming at us about gas, and how it is affecting us, but let’s look at the numbers for our industry and see what it is really costing us. And keep in mind, that for the purpose of this article I am writing as though your company owns company cars and pays the costs, however even if you don’t and your staff is paid mileage, or they pay for the expenses themselves, they are worried about this and it is affecting their pocket books, and the perception of their financial stability every day.
How much does it cost in gas to travel to each home? Let’s assume you have a car that gets 20 miles to the gallon, your average travel is 7 miles, your local gas is $4.00/gallon and a team uses that car to go to 5 homes each day – that is a cost of an average of $1.68/client. Not as bad as you thought, right? That’s only 1.68% of revenue. But, figure that for 20 homes a day and you have a nearly $800/month gas bill, so I can see why we might want to make some changes.
The news is full of all of little helpful gas savings tips (http://www.edmunds.com/advice/fueleconomy/articles/106842/article.html ), but I am going to focus this article on big changes that you can make. You may think I am whacky, but give it some thought.
Go Biodiesel – Run your car on cooking oil??? Around the northwest where I live this is not a new idea (cause we’re born greenies), but it is becoming a surprising trend across the country. You will need a diesel engine vehicle, and then you are pretty much good to go from what I understand. There are several biodiesel clubs that can give you all the dirt on how this works. One advantage for us service business owners is the marketing opportunity to be running your business on “green” cars. Signage on the cars, press releases, participation in green business organizations, are all business boosting options. Some disadvantages are (1) Biodiesel congeals in low temperatures, so in winter months you will have to use biodiesel mix that is higher in actual diesel, (2) Some people say that your car will smell like French fries, although with the commercial grade fuels now that is not really the case, (3) You don’t save as much money as you might like since $3.50/gallon is still not cheap, and the cost food oils is increasing due to the high transportation cost to growers. All in all, I think it could be a brand shifting switch for your company to consider biodiesel.
FUEL COST – $1.00/gallon home mixed, $3.50/gallon commercially available
AVAILABILITY – Available most everywhere through private clubs and some stations
How Bio Diesel Works http://auto.howstuffworks.com/biodiesel.htm
Bio Diesel article http://www.eastoregonian.info/Main.asp?SectionID=13&SubSectionID=350&ArticleID=38119
Biodiesel buying guide http://www.biodiesel.org/buyingbiodiesel/guide/
Bio Diesel Car Guide http://www.biodieselamerica.org/biodiesel_car_guide
Go Electric – We are all waiting with bated breath for the new generation of long running electric cars to come out, but it could be years before you could really get your hands on some. Why wait? Did you know that you can go electric right now?! Yes, apparently you can convert any car to electric (though there are some that convert more easily than others). The savings for this kind of thing is big, with the cost per mile being estimated by conversion experts at 1.5 cents per mile (equivalent to $.30/gallon of a 20mpg car)! Wowee, I’m going to Disneyland!!! And with a conversion you are replacing your entire engine so repair and maintenance costs are eliminated as well. Some disadvantages though are (1) Finding a licensed technician, and waiting the several months that it takes to do the conversion could be tedious, (2) Registering your vehicle and obtaining insurance should be something thoroughly checked out for your area first before embarking on this. You are replacing your entire engine with a high voltage battery, and there may be some restrictions in your area about how this is handled. (3) For many outside of the service industry some disadvantages may be that the cars typically run at 45 mph or below, and can go only about 100 miles before needing to be recharged. However for the service industry, no problem because bopping between clients should be fine, I would think. (4) Lastly, the cost of a conversion can be hefty starting at a DIY price of $7000 or so, up to as much as $20,000 for the whole shebang. Another option is to buy an already converted car http://www.eaaev.org/eaaevsforsale.html . Call me crazy, but if I owned a cleaning company today I might do this just for the marketing power alone.
FUEL COST – 1.5 cents per mile (equivalent of $.30/gallon for 20 mpg car)
AVAILABILITY – EV clubs are nationwide, however already converted cars and technicians seem scarce.
RESOURCES – Electronic car conversion forum http://www.diyelectriccar.com/forums/
Electric car society http://www.didik.com/evlinkb.htm
Electric cars for sale http://www.eaaev.org/eaaevsforsale.html
Go Japanese – Japanese “Kei Trucks” are getting more attention these days and they are tiny utility trucks, that get around 50 mpg, and cost about $5000-$7000 a piece. Sounds great! Only one catch, for makes newer than 1980 they are not street legal in most states. Check with your state to see if they are able to be registered for road use. Dealers in some areas are buying the older cars by the container load and selling them in the US. The average Japanese vehicle apparently drives less than 5,000 miles per year, so even though the cars are over twenty years old their mileage is not so bad. I didn’t do a ton of research on this, but thought it was an interesting option, again for short in-city travel.
FUEL COST – 50 mpg averages $.08/mile
AVAILABILITY – You need to Google for a dealer in your area, and verify carefully the registration standards.
Kei Car article in Seattle http://www.king5.com/localnews/consumer/stories/NW_061108CNB_savemoney_cars_SW.204a26cd.html Kei cars
Kei car purchase http://www.minitufftrucks.com/about.htm
Go Used – When I owned my cleaning company we owned a 1990’s Geo, a not very fancy, tiny, get around town car, that got around 45 miles per gallon!!! The car was cheap, around $7000 new if I remember correctly. In fact during that time, when buyers didn’t seem to care about fuel economy, there were lots of very fuel efficient cars out. For example, the 2000 Honda Insight getting 70 mpg on the Highway, wow! Maybe you should be in the market for a great used car. Here is a list of used cars that range in gas mileage from 47 – 70 mpg on the highway http://www.autohopper.com/fuel_economy_cars/result s_gas_mileage.asp
FUEL COST – 60 mpg averages $.065/mile
AVAILABILITY – Available if you know what cars to look for
RESOURCES – Older car gas mileage http://www.autohopper.com/fuel_economy_cars/result s_gas_mileage.asp Search cars fuel economy or non-gasoline
Check the Prices – How close are you actually paying attention to prices at different stations in your area? I have noticed a price difference sometimes as much as $.20/gallon just by choosing a different station near you. Twenty cents is 5% of gas prices, and in our example above that could mean a difference of $40/month just by telling your staff which station to use. There are a number of places on the internet that compare gas prices by station. The figures are reported by other internet users so its not exactly scientific data, but worth a look. Check out your area Check gas prices http://www.gasbuddy.com/.
Add a Fuel Surcharge – Many companies across the country are doing it, and not just cleaning companies. Fuel costs are going up so everything from pizza to building materials is baring the cost. If a price increase is not feasible for you then consider a fuel surcharge so that your prices still look competitive, but you are compensated for the rising fuel costs. $3-$5 seems to be about the going rate.
Watch Your Consumption – Your gas bill is not the only thing that goes up with rising fuel costs, but also everything else. It’s a great time to get wise about reducing unnecessary driving and needless consumption. Make arrangements with your clients for backup vacuums and supplies so that extra trips are not needed in emergencies, consolidate closely located clients, use the post office to mail items to clients that you would normally deliver (like returned keys). Also, see what items in your budget that you could do without. Could you decrease your cleaning supply list, office supply list, or other extra products?
Take the Marketing Opportunity – I believe that with every problem comes opportunity. How can you make lemonade out of this situation? Could you use a “we’re all in this together” marketing angle to prompt neighbors of your clients to sign-up and share the transportation savings with their neighbors? Could you advertise your green vehicle solution? Could you change your service hours to meet easier commuting options (say a 4 day work week), and get lots of press for your unique green solution? Think big, and let me know what you come up with.