In the Know: Technology

In the Know is a monthly partnership between LP Gas magazine and Propane Resources. Our focus this month is on propane technology, addressed by Tamera Kovacs, financial consultant and industry expert in business valuations and sales for Propane Resources.

Photo: Digital Dispatcher

Q: What types of technologies do propane retailers need to implement at their operations right now, if they haven’t already?

A: Retail propane marketers need to implement technology they can and will use while also utilizing the information gleaned from that technology. It sounds like a flippant answer, but in reality it is true.

Most retail propane marketers have used technology to capture tremendous amounts of valuable information about their businesses, but they don’t actually use it to their advantage. And that’s really what technology is all about – making businesses more profitable.

For example, retailers have invested in routing and scheduling software to increase delivery efficiencies and decrease operating expenses. But how many retail propane companies actually track the number of company-owned tanks that have had no gas delivered to them in the past 12 or 18 months? This can add significant dollars to your bottom line. Why have a 500-gallon tank sitting at a customer’s location that is no longer using propane? A new 500-gallon tank costs in the ballpark of $1,000. This is not insignificant. Order a trailer load of 500-gallon tanks and it will set you back more than $25,000.

Most companies do a good job of performing gas checks but do not realize how valuable the gas check information can be to your bottom line. Take the appliance information from the gas check forms and put it into a usable system. Your most valuable customers are the ones with whom you already have a relationship and a tank at their location. Consumers dedicate a percentage of their expenses to energy. Make it a goal to increase the percentage of energy dollars your customers spend with your propane company rather than with the electric company.

Imagine if you knew the age of your customers’ water heaters and if they are propane or electric. How could you use this information for marketing purposes? For customers with electric water heaters, you could send information on the benefits and cost savings of propane water heaters. For those tanks more than 10 years old, you could market propane water heaters as replacements. It doesn’t matter what technology retailers use; what is important is tracking and using the information to maximize the value of your businesses.

The technology necessary to take businesses to the next level is often driven by customer desires. Do retailers understand their customers and what they want? The demographics of the customer base are a driving factor. The demographics of your staff are also a driving force for your technology investments. Are you able to implement the technology or data-mining techniques you want with the employees you have in place?

There are retailers who have invested significant dollars in technology and can run every imaginable report but still have no idea what the information is telling them or how to use the information to increase profitability.

Technology is ever evolving, and the company’s stage in life will dictate what types of technology investments the company should make. Understanding how your company currently utilizes existing technology and the goals you have established is critical to understanding what technology to implement. Understanding your business, your goals and your needs is the first step to determine which technology investment will provide the greatest returns.

Tamera Kovacs is a financial consultant and industry expert in business valuations and sales with Propane Resources. She can be reached at tamera@propaneresources.com or 913-262-0196.