The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
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www.fueloilnews.com | FUEL OIL NEWS | FEBRUARY 2017 29 BY STEVE ABBATE BUSINESS OPERATIONS ENERGY COMPANY OWNERS ARE TYPICALLY VERY good at preparing their operations to serve their customers. Vehicle fleets are always a focus as they deliver the products and services being offered. Customer service training, robust technology systems, purchasing/hedging and a good marketing campaign are other areas successful marketers focus on. The one item most marketers tend to put off is their financial reporting. Many marketers wait until the end of the year for their accountants to tell them how they did financially. It's a little like being in school, taking tests without getting them graded and then getting your report card for the year, ninety days after the class is over. I know I would have had some surprise grades in school if that were the case, and none of them would have been good surprises. Rarely does an accountant give you better news than you were expecting. When we speak with owners we ask them basic questions about the number of gal- lons delivered and margins per gallon. You would be amazed at the difference between their initial response and what we find after completing a financial analy- sis. Of marketers who deliver propane for space heating or for companies delivering heating oil, not one has ever given us their gallons on a weather-adjusted basis. They know volumes were up or down based on weather, but most don't know the relation well enough to spot trends in their business. Just as important, most don't realize how weather affects operating expenses, except maybe delivery expenses. The same is true for how fuel costs affect operating expenses. Please don't get me wrong, many of the owners we work with are exceptional business people who run great, profitable companies. They are focusing on the big items that have made them successful. I just want to point out that some extra focus on financial reporting can make your business even better. Once you set up the reporting, it is easier than you think to manage it. I was once told by one of my mentors that if you can't measure it, you can't manage it. Granted, you need to have some strategic improvisation in all business decisions, but setting up systems to manage financial reporting can open eyes to good and bad trends. Our first recommendation is to put together a simple budget. What I mean by simple is gallons delivered by product, five or six gross profit categories, and operating expenses. Don't get too detailed on expenses as a beginner. As an example, vehicle fuel or repairs does not need to be broken out by service, delivery, office, marketing, etc., on your first budget. You can get more detailed after you get the hang of it. Take last year's results, weather-adjust the gallons and project what you will deliver for the upcoming year. Do the same for service or other reve- nue streams. I would recommend breaking out the budget by month and a few days after the end of each month, record the results versus your budgeted numbers to see how you did. For any large variances take a closer look to see why you were off. Once financial reporting becomes a regular business function for your com- pany, you can continue to improve on it as time and needs dictate. Now instead of waiting until the end of the year to see how you did, you can get your test results back sooner and be able to pull up your grades (net income) before the school year is over. l F O N As the founder and president of Cetane Associates LLC, Steven Abbate has been providing M&A advisory services for most of his career. In addition to his track record of completing over seventy successful transactions, he has consulted with and performed financial and operational evaluations on hundreds of businesses throughout the United States. Cetane Associates LLC P.O. Box 417 Kent, CT 06757 860-592-0089 office 410-404-3199 cell 410-510-1630 fax www.cetane.net When Do You Get Your Report Card? Customer service train- ing, robust technology systems, purchasing/ hedging and a good marketing campaign are other areas successful marketers focus on.