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www.fueloilnews.com | FUEL OIL NEWS | March 2014 23 BUSINESS OPERATIONS By Steven ABBAte, PreSident of CetAne ASSoCiAteS W e received a call from a company who told us that they wanted to sell their business. They were frustrated with the constant road blocks their bank was putting in their way, and they concluded that they had to sell. The business delivers around 1 million gallons of heating oil, and has a service department. After spending a couple of hours learning about the business, we recommended that they consider making some improvements to the business and we encouraged them to stick it out. If they ended up being unable to make the changes, we would look at putting the business on the market. We have made many of these suggestions to other owners, and we would like to share them with you in hopes it can help your business also. Credit Card Processing: They told me they were getting a utility rate but when we reviewed the statement from their processing company, they were paying over 3% and they did not take American Express. They also did not take Discover as they thought those fees were high. We encouraged them to speak with a processor who works in the industry. Most of our clients pay around 1%, all in, and Discover rates are closer to ½%. Budget Plans: As we discussed with them, this is a great way to improve your cash flow, help customers manage their home heating expense and improve the value of a business. The best program we have seen is the budget opt-out plan. We have clients who have converted more than 60% of their customer base to budgets, and many do not need to use their line of credits until December or January. Basically, you put all your accounts on budgets and ask them to opt out if they don't want to be on a budget. Caution: We highly recom- mend using a professional marketing company who can help you through this process to make it a positive experience for your customers. Automatic Delivery Accounts: The best way to approve efficiencies and the value of your business is to convert as many customers to automatic delivery as you can. When a will-call customer calls, we recommend you tell them "Can we put you on automatic delivery? It's free, and you can still call in if you see your tank is getting low." The biggest push back you will get is that they don't want a big bill when oil is delivered. That objection is an opening to get them on a budget plan. Automatic Credit Card: Putting customers on an auto- matic credit card program will improve cash flow, lessen price sensitivity and help get customers on automatic delivery and budgets. The credit card company becomes the bank, and you get an extra 10-15 days of float on oil purchases. ALL new accounts should be put on automatic credit card. When you ask for information about the house and the new customer, ask for the credit card number. Most people will just give it to you. You should also always ask if they have Master Card or Discover as the rates are typically lower than Visa. Margins: It's easy to say raise your prices to make more money; however, you need to stay competitive. The items above will result in the customer becoming less price sensitive and allow you to operate at margins where you can make the profit you deserve for the hard work you put into the business. Always try to keep margins as high as possible, even at the risk of an occasional loss. Take care of the squeaky wheel, but do not lower prices to your entire customer base if you get a price complaint. We also find it extremely helpful to make a list of custom- ers who complain about price. It is usually less than you think it is. Of course, there are many other ways to improve your business from investing into technology to diversifying into other revenue streams, but first you need to get the basics taken care of. Steve Abbate is the president of Cetane Associates, which provides hands-on merger and acquisition advisory services for privately held companies. Abbate has been providing M&A advisory services for most of his career. In addition to his track record of completing over 70 successful transactions, he has consulted with and performed financial and operational evaluations on hundreds of businesses throughout the U.S. Steven Abbate Cetane Associates LLC 4504 Stonecrest Drive Ellicott City, MD 21043 410-480-4930 office 410-404-3199 cell www.cetane.net Selling is not Always the Answer l F O N