Planning is Profitable

By Dan Kaus

Not long ago I read this thought about giving or taking advice: “We tend to overestimate advice on difficult matters and underestimate advice on the simple issues.”

Over- or underestimating advice is very possible, but I’m pretty certain that all too often we overcomplicate advice by what we do with it.

For example, there’s probably no thornier issue right now for fast lube operators, or anyone else in business, than how to maximize profits in a down economy. And coincidentally enough, there is no shortage of people ready to dispense advice on how best to “weather the storm” or to “seize on a profitable opportunity, which no one else sees.”

But of all the advice that’s given on improving the financial footing and profitability of a business, two simple truths seem readily apparent: First, you have to control what you’re in control of and, second, you must be prepared to take advantage of key opportunities. Even more apparent is the fact that neither of these two steps will occur without a plan. So, let’s talk for just a few minutes about planning for improved profitability.

Improving the profitability of your fast lube operation requires two types of planning. Strategic, long-term planning is essential to be prepared for growth, changes in technology, new product innovations and the like. Second, short-term planning, which focuses on issues of immediate concern, like improving car count, increasing sales or better cost controls. Both types of planning are essential, doing one at the exclusion of the other leads to bad tactics and ultimate breakdown.

But for the purposes of our discussion this month, let’s just focus on short-term planning (we’ll cover long-term planning next month). After all, the long-term course your fast lube business is sailing toward years from now probably doesn’t matter too much if your boat has a gaping hole in it today. To make sure that any potential holes are plugged, let’s target your plan at those two key elements: what you’re in control of, and the near-term key opportunities that you can take advantage of.

A Simple Plan That You Control

As I alluded to at the beginning, too often we think that if a problem appears complex, the solution must be equally complex. I think there are some people, oh, let’s say in Washington, who subscribe to that philosophy. Many times a simple plan, which can be understood and implemented to achieve improved results, is far superior to an intricate plan that is too complex to understand or put into action. Said slightly differently, a simple plan well executed is much better than a complex plan that sits on the shelf — even if that plan isn’t “perfect.” You can spend months trying to figure out the perfect plan when an “OK” plan would still move the needle and do it more quickly.

So, in beginning your efforts to improve profits during 2010, let me suggest focusing first on some given facts. These include the things you know, the things about which you can take some action. The list may include:

• Historical information about peak sales months.
• Historical expense and budget statistics.
• 2010 calendar of holidays and typical travel periods.
• A list of local events and traffic generators.
• News about traffic pattern changes and road closures.
• Knowledge of potential competitors entering the market.
• School and business holidays.
• Tax time, both national and local.
• Daylight savings time changes.

Now, if you know that list of key dates and time frames, and many others that you can add, then you also know when to implement actions like:
• Sales training initiatives for service staff.
• Direct mail or other marketing efforts.
• Changes to open/closing times.
• Staffing adjustments.
• Product promotions.
• Point-of-purchase programs.
• Facility and equipment upgrades.

What I’m suggesting is that if you have just two lists similar to these, you have the basis of a plan that can be used to help improve car counts, sales and controlling expenses, at key points over the course of the year. How? The items on these two lists can be scheduled out, tracked and planned for, on what might be referred to as an “Operations Planner.” By integrating the specific items on your lists with dates and time frames on your planner, and then highlighting those key periods, you will have an at-a-glance chart of profit improvement opportunities over the next 12 months. And very importantly, you won’t schedule upgrades or staff changes or marketing campaigns at inappropriate business cycles, like building upgrades during high volume months, which detracts from an opportunity to enhance profits.

Remember, profit improvement opportunities don’t just include periods when volume and sales can be maximized. Profit improvement must also include scheduled and planned-for cost control measures, on a weekly/monthly basis, as you consider potential expenditures, slow periods etc. Potential influences on the top line and line item expenses should be taken into account in your operations planner.

Finally, you might consider an operations planner in a desktop calendar format, which can be constantly in front of you, so that important time frames and key events are not overlooked.

Enhanced Opportunity

In addition to having “profit influencers” planned for and scheduled, your plan provides a great opportunity to maximize results. Because by knowing when the variety of influences on profit occur, you also know when the timing is best to initiate incentive plans for staff members in order to drive their best performance at the most opportune times.

For example, since you know when the greatest potential for high customer volume is likely to occur, then you’re also aware of when it’s likely to be most effective to offer incentives for record volume, record sales, or highest incidence of positive customer response. It would also be wise for such incentive plans, or performance-improvement efforts, to be scheduled on your operations planner.

If your staff is given targets and objectives at various times, over short periods, they will respond. Let them know the plan, why it’s important, and the specific short-term objective. They want to perform and will give their best when incentives are obtainable, worthwhile and are constructive to the overall success of the business that supports their livelihood.

Too Simple?

Can focusing your efforts on such relatively short lists possibly produce any noteworthy results? You might be tempted to say, “That’s just too simple; it has to be more complicated than that!” Well, let me just say that when an outrageously successful hamburger chain, located in the western United States was told by “experts” who’d done very complex analysis that focusing their efforts on similar short lists of operational basics “wouldn’t produce profitable results,” they didn’t listen. Incidentally, in one of the chain’s recent grand openings, the local Department of Transportation had to reroute street access to accommodate the lines of customers. Seems to me, that is a profitable thought worth chewing on!

DAN KAUS is workshops brand manager for BP Lubricants USA, Inc. He may be reached at daniel.kaus@bp.com. To learn more about Castrol products and programs in general please call 888.CASTROL or visit: www.castrol.com/installers