Connecting the dots: From operating efficiency to enterprise value

I love the Southeastern & International Propane Expo. Vendors and industry participants gather to network and explore all the shiny new things – products, services and ideas – available on the exhibition floor.

My exploration focused on technology tools, driven by necessity as much as curiosity, because I was searching for this column’s topic. After a while, the booths started to blur together: routing screens, tank-monitor displays, customer portals, dashboards and lots of promises that better information would make better operators. I found my topic in that blur, but it took a little dot-connecting.

The first dot is today’s propane operating systems. There were plenty of options to explore, but they all shared a common theme: operating efficiency. I don’t just mean it is easier to have customer information, route planning and tank levels at your fingertips. I mean today’s systems give propane marketers real-time insight into critical, day-to-day operating KPIs, including delivery efficiency, service efficiency, run-out rates and tank levels.

The second dot is enterprise value. It was not on display in the same way, but there were plenty of people at the convention helping propane marketers think about whether it is time to sell their business. And they talked about enterprise value a lot. It is a surprise to absolutely no one that propane businesses are not valued merely on gallons, delivery efficiency or run-out rates. They are valued on durable cash flow, often expressed as a multiple of EBITDA.

The third dot is customer value – the dot that connects operating efficiency to enterprise value. It is also the dot missing from most dashboards. If there is a single propane KPI dashboard that fully connects operating efficiency, customer economics and enterprise value, I missed it while wandering the convention floor. Fortunately, propane marketers can use existing, commonly available tools to build that system.

Here is how:

⦁ Your propane operating system. This is where you measure delivery efficiency, run-out risk, tank utilization and monitor penetration as well as route performance.

⦁ Your website and call-center tools. So often overlooked, these tools capture the top of the funnel and the customer experience: leads, forms, quote requests, referrals, phone calls, campaigns, complaints, missed promises, response times and customer reason codes. These are more than just service records – they are also early retention warnings.

⦁ Your general ledger. Your general ledger captures information – and in many cases calculates KPIs – often not found in your propane operating system, including CSR expense, marketing, technology, plant and office cost, back-office expense, bad debt, depreciation, working capital, EBITDA and cash flow. But to be useful, it must be configured for management reporting, not just financial or tax reporting. That means customer types, locations, classes, product categories and disciplined chart-of-account mapping. This may be the hardest part because most financial reporting is built for accounting or tax reports, not managerial accounting – or cost accounting, for boomers like me.

The final layer is a spreadsheet-sync or business-intelligence dashboard that pulls these systems together. Dots connected.

An enterprise-value-focused dashboard should answer three questions: Are we operating efficiently? Are we creating customer value? Are we converting the activities that drive operating efficiency and customer value into enterprise value?

Does your dashboard answer these questions?

Christopher Caywood is a board member of Guardian Propane Partners LLC. Contact him at ccaywood@guardianpropane.com.

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