Multi Profit Centers Increase Your Profitability by Taking Control Of The Hidden Costs Michael Benmosche, CIC Mang Insurance Agency Originally published in Modern Car Care Magazine WATCH NOW - Explore Venture Capital

Impacting profits at car wash, lube, convenience store and detailing operations is a full time business. What is often overlooked are two key ingredients that help build that profit margin: a sound risk management approach, complete with safety strategies, and appropriate insurance coverage. Both are critical components that will drive sales and control costs for multi profit centers.

Think of your business as the dashboard of a car. If you reference the exhibit, all profits are impacted by four areas: Accident Prevention, Customer Liability, Policy coverages, Customer Satisfaction. Whatever you can do to control and eliminate these exposures, customer satisfaction increase and sales increase and costs are controlled. Think of the four dashboard indicators as you drive down the road. If these areas are controlled, then you will be operating at the proper rpm’s, with the appropriate speed to get to your destination: profits. If one of these items are not attend to, the lights will flash or worse yet, stay illuminated. That means trouble. Sales are reduced, profits tumble!

One of these indicator lights is affected by the insurance plan that protects you from financial disaster. The following are some steps to consider that should be part of the process in selecting the program that is right for your business:

1. Identify your exposure to loss. List the specific operations in your business that could be held liable in the event of a lawsuit. Whether you are a corporation, LLC, partnership, or an individual, each entity must be addressed. Include a list of all real property that could be damaged or stolen.
2. Determine what you can afford to lose. How much self-insurance can you assume without a major impact on profits.
3. Protect yourself with a risk management/risk transfer plan. Investigate various methods of reducing your chances of loss with a sound management plan. Some examples would be developing a safety management plan, drug free workplace program, management accountability plan, etc. As far as risk transfer is concerned, an example would be the use of a hold harmless agreement.
4. Insure the remainder. Keep in mind when you select an insurance plan, there are many different policies to choose from and its not one size fits all. It’s often more important to see what is excluded than to look at what’s covered. We have included a list of items that are usually excluded and can be added on request. This is not all-inclusive but will provide a sample of some of the most common coverage’s to consider.
5. Insurance is the last resort. Keep in mind that the idea of insurance is to pay for the catastrophe losses. It was not intended to be a maintenance policy. To protect the availability and the cost, it is incumbent on each operator to determine when a claim is appropriate.

There are some myths associated with the procurement of insurance. They are:

1. Insurance agents are mind readers. All too often, we expect that other people understand what we do as well as we do. This is simply not true. When you talk to your agent, approach them with the idea that you need to begin at the beginning. Include everything you can think of.
2. All insurance policies are created equal. It is our nature to think that what we purchase is the best. Making this assumption when it comes to your insurance portfolio can leave many gaps in protection. Many companies offer automatic extensions that appear to provide adequate coverage. But, a good deal of these may not carry the limits necessary to protect your business and often the policy language is not as broad as what is available. Be alert and an informed buyer.
3. An accident is an accident is an accident. Accidents simply do not happen in industry, they are caused. Accidents are preventable. Accidents should not be tolerated.. Look at your operation closely, examine trends in workplace injuries, liability incidents and of course what you do best: provide a clean vehicle, etc. Make your employees accountable!

Regarding accidents, adopt a zero tolerance. Create the culture change in your operation that sends the right message, we accept 0 accidents. If workplace goals are so easily attainable, such as a 10% reduction in workplace injuries for a certain period, or let’s plan for a reduction in slips, falls to 3 incidents this year, we simply are sending the wrong message. Accept nothing less than zero. Why is this so important? Accidents involve hard and soft costs. Those costs that are direct, usually appearing on a loss report or paid out of pocket by you. Soft costs, which are a significant portion of every loss, are additional costs (hidden) that increase the total loss from 3 times to 10 times the hard costs. These soft costs involve lost time by supervision, loss of efficiency, loss of production, etc. This is illustrated in the so called ‘iceberg effect’, illustrated.

One proven loss control technique that assists in reducing the probability of recurrence of incidents is an effective accident investigation program. This approach identifies the responsible conditions of incidents by focusing on the Equipment, Material and People and the Environment.

A more unique approach is to look at these causes of loss through value added (VA) or non value added (NVA) activities. Value added (VA) or Non-Value added (NVA) can help you address your approach to controlling costs through the ‘value’ your service provides to the ultimate customer.

VA activities are those certain processes/activities that are necessary to produce a product or service. The customer perceives some real ‘value’ through the activity. Vacuuming the inside of a car is value added. The customer does not necessarily concern himself with how it is done, what equipment is used, how many employees vacuum, but the customer is concerned that it is done, to his satisfaction. The actual activity of vacuuming provides value. Any other steps-those which are not necessary to produce the product or service is non-value added (NVA).

Look at your operations from a NA and NVA viewpoint. We need to strive to improve VA activities and eliminate NVA activities. Yes, it is a real challenge. By eliminating NVA activities and improving VA activities, operational problems are eliminated and the cost of producing that level of service decreases which in turn increases profits!

Effective management through good supervision of Equipment, Material People and Environment reduces operational hindrances, reduces operation costs, controls insurance losses and increases profits.

An important aspect of sound risk management is documentation. Consider documentation that will help assist you in the event of a loss. Keeping a journal or notebook and entering times walkways are salted to prevent slips, falls may assist in eliminating or minimizing loss. The issue is negligence and this is based on tort law, an unintentional tort. Negligence is the failure to exercise the degree of care that a reasonably prudent person in a similar situation would exercise to avoid harming others. A plaintiff must establish the following to proceed in a claim against you

• Legal duty owed
• Failing to conform to the standard of care required in the situation
• A casual connection between the negligent act and the plaintiff’s injury
• Actual loss or damage to the plaintiff.

A little documentation will go a long way in establishing your case. The goal is always to provide a safe environment, for our employees and customers.

An example of this is illustrated in one of our recent slip and fall incidents involving a customer. The use of a salt log turned a $20,000 loss into a $5,000 settlement. The Judge ruled that as a result of the documentation provided from the salt logs, there was sufficient evidence to conclude that the operator showed a concerted effort to minimize the potential hazard associated with the icy conditions at the premises. It does work!

So, what’s the bottom line? Is it realistic to accomplish everything we discussed? Probably not. But it is important that we recognize that the industry needs to find more profitable ways to operate. The addition of the many profit centers, the consolidators, the ever-changing needs of the public, the technological changes, all bring a host of new challenges. If you don’t adopt a better way to meet these changes, you can bet your competitor will!

Mike Benmosche
56 Clifton Country Rd, Ste 202
Clifton Park, New York 12065
518-383-2910 Phone
518-383-3642 Fax
http://www.manginsurance.com

mike.benmosche@manginsurance.com