In the Know: Shift to an opportunity mindset

In the Know is a monthly partnership between LP Gas and Propane Resources. This month, financial consultant and business valuations expert Tamera Kovacs addresses the challenges and opportunities for propane retailers to refocus their businesses going into 2022. 

QUESTION: How has 2021 changed the propane industry for the better?

ANSWER: This year has bucked conventional practices and required many retailers to refocus their businesses. Some say these are challenges. Others call them opportunities. It’s the mindset that makes all of the difference.

Many retail propane operations have aging workforces. It’s not a new topic of conversation. But it seems an even greater obstacle in 2021 due to COVID-19 and a widespread labor shortage. The industry is experiencing increased benefit costs and difficulty finding qualified (or trainable) employees for affordable wages. The scarier situation might be the loss of knowledge mature employees will take with them when they retire. Let’s look at this as an opportunity to strengthen our industry.

Challenges:

• Finding employees who meet all of the qualifications or can be trained to do the job.
• Addressing wage discrepancies between new-hire wage requirements and the rest of your workforce.
• Capturing or retaining years of knowledge as employees retire.

Opportunities:

Seek employees who can be groomed in the office or on the dock to move into positions initially restricted by the Department of Transportation or hazardous materials requirements. Drivers and service personnel who understand customer interactions and the computer systems are well rounded and improve communication.

The propane industry has always competed with other driver-focused companies – most notably, UPS, FedEx and Amazon. Now, those companies are having trouble finding employees, and they don’t require hazmat. Trained employees who have their CDL and hazmat qualifications are valuable assets. Take the opportunity to reassess your staff, the wages they earn compared to your market area and the impact to your business’s profitability.

Say your business delivers 1.0 million gallons, and you make $0.75 gross margin. If you give each of your five drivers a $1.00 an hour raise (assuming no overtime), you increased your wages by $10,400 annually or .0104 cents per gallon. If you pass this wage increase to your customers, your average customer using 600 gallons annually would pay $6.24 more per year or $0.52 more per month.

Many industry veterans with a wealth of knowledge would like to retire or work part time, an amazing opportunity to transfer knowledge to the next generation. Set up training classes or other solutions to build a stronger workforce for the future.

This year, growth opportunities are coupled with added difficulties – particularly supply chain and cost challenges. These challenges are significant, but many business owners lose focus when times are good and profits are high. Now is the time to refocus your business, reassess costs, reevaluate returns, shift operations and determine what profitability looks like.

Challenge or opportunity: The choice is yours.

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

Featured homepage image: iStock.com/Kris Hanke