Learning from mistakes

March 1, 2007 By    

It’s often said that you should learn from the mistakes of others because you can never live long enough to make them all yourself.

That’s never truer than in the propane business, where dealers and distributors have plenty of opportunities to err while they master the art of personnel management, the science of equipment maintenance, and the mysteries of financial accountability while mother nature lands a mild winter that magnifies even the smallest mistake.

Several successful dealers and distributors gave us a rundown on some of the lessons they learned over the years so we don’t have to get our own education the hard way.

One of the big pitfalls in the propane business, of course, is growth. It’s wonderful to have, but it can be costly, as Todd Hunsucker can attest. Hunsucker bought what is now Alliance Propane in Waldron, Ark., from All Star Gas in 2005.

“From the day we owned the business, we’ve made a ton of mistakes,” he says honestly.

“For one thing, I thought I needed every customer that walked through the door. If they wanted propane, I wanted to set a tank. Here I am, two years later, wondering what I’m going to do about the minimum usage customer. In 10 years, the tank’s not even going to pay for itself. But that’s the one I thought I had to have.”

Bryan Milton, who started Comstock Propane in Sparks, Nev., in 2004 after 25 years as a manager for AmeriGas, agrees about the perils of jumping to set a tank for every possible customer.

“I’ve got plenty of new opportunities coming in every day, but you have to be selective. I interview every customer, give them a written estimates, then take my time,” Milton says.

He’s interested not only in the return on his investment from the customer, but also whether they’re going to be a good fit. “If somebody says they need it right now, there’s usually an issue with the existing gas company. I give it a couple of days to see if they’re the kind of customer I want.”

You can also be a bit too stringent when it comes to customer selection, according to Hunsucker. Troubled by unprofitable customers, he went to great pains to explain to his staff that they had to screen prospects a little better.

“I told the secretary that we just couldn’t afford to set a $500 tank for a customer with a space heater. It just wouldn’t pay. But this gentleman came in who had built a huge shop for his lumber business. He called those heaters hanging from the ceiling in his shop ‘space heaters,’ so the secretary very politely told him we couldn’t supply him. He was nice enough about it, but asked her for our competitor’s telephone number.”

It was a potentially massive mistake, but all turned out well in the end: “Thank goodness, a handshake and an apology on my part got the account after he’d bought only one tank of gas from my competitor.”

People Make Mistakes

Among the many variables you have to juggle very day, perhaps none is so complex as the people you manage. Who do you hire? How do you get them to come to work every day? And persuade them to actually work while they’re there?

These questions are only the tip of the iceberg when it comes to employee matters, according to Mark Callahan, the third generation to run Callahan’s Gas in Centreville, Md., who says he literally could write a book about hiring people.”

“I decided one time to hire the least knowledgeable person who came in so I could teach him and shape him and mold him,” Callahan relates with a rueful chuckle. “The smartest thing I did was make him sign an agreement that said he would owe me for his training class if he left within a year. The day he was supposed to go to class was the day he never show up again.”

Fortunately for Callahan, that day came only three weeks after the man started. “But three weeks was painful enough. I learned that lesson and moved on.”

Charles Bell, who has owned Bell Oil & Propane in Van Buren, Mo., since 1973, wasn’t quite so lucky.

“I hired a driver who was so bad I had to figure out his loads every day; how to load, what to drop here and there every day. After about a month or two, you should know where you’re going and what you’re supposed to do,” he recalls.

Bell put up with the man way too long, a mistake he readily admits. “If somebody works for you for a full year and doesn’t know anymore than when he started, he’s not good for your business,” he says. “This guy could just never learn. He didn’t apply himself, either.”

Personnel problems are compounded when you’re dealing with family members. Against his better judgment, Callahan once hired his younger brother.

“He was too young,” Callahan says. “I told him to take a year off after college – go have fun, go to Europe, go to the mountains and be a ski bum, but don’t come here to work. Having said that, I told him I’d hire him if he wanted.” Which he did. But there were still wild oats to be sown and today the younger Callahan is living in Dallas having fun.

“I told him I’d take him back but it wouldn’t be until after two years,” big brother says.

Investing in Equipment

Few operators make mistakes when it comes to buying new equipment – mainly because it happens so seldom and weeks of research and comparison shopping normally go into the decision.

Most dealers and distributors are like Callahan, who explains, “I research things way too much and make decisions way too slow, so I don’t make many mistakes when it comes to equipment.”

A common mistake, though, is trying to get another thousand miles out of a truck that should have been sent to the bobtail graveyard long ago.

“I keep things way too long and fix them way too many times,” Callahan says. “I’ve kept a bobtail running that I wish I hadn’t. I replaced the engine to keep it running, then compounded the mistake by getting it hydro-tested, so I was in it for another five years. Then the replacement engine caught fire, so I had to replace it again.”

Pushing vehicles past their prime is a temptation just about any kind of business can face, but one of the unique equipment problems propane dealers have is the array of conflicting state and local regulations just waiting to snag them. Hunsucker learned that lesson the very hard way.

“We bought a bunch of tanks from out of state,” he says. “They weren’t grandfathered in, but we set them anyway out of ignorance. We got fined. My big mistake was thinking that a tank was just a tank. It would have taken me five minutes on the phone to find out otherwise.”

Whether you’re running a start-up or planning to expand a decades-old gas business, cash – or the lack thereof – is the most frequent cause of problems, experts say.

“Working capital was the biggest problem I faced,” Milton concedes. “Managing for a major company, I never had to worry about money. You just worried about setting tanks and growing your business. I just never realized how much cash it took to get going. The money goes out the door like you would not believe. If you think you have enough money in your 401K to finance a start up, think again.”

And if you’re thinking about buying an existing dealership, don’t make the very expensive mistake Hunsucker made in hiring the wrong attorney.

“It cost me $40,000. We shook hands the day of closing, then got a call two days later saying that we hadn’t bought the license to sell gas in our county. It was a hard lesson. Our attorney just didn’t know that loophole,”

These are just a few lessons to be learned from the experiences of other marketers. Fortunately, you don’t really need to go to the same school of hard knocks. Ask a few of them what they’ve learned from their mistakes and you’ll hear about their troubles and triumphs, their goofs and their glories.

Just make sure that person knows the business. As Milton notes, “Friends and relatives and everybody else want to tell you how to do it. But somebody that’s in real estate doesn’t sell propane. Somebody who sells cars doesn’t sell propane.”

If you’re going to learn from some else’s mistakes, make sure they’re the right ones.

Donelson is a freelance writer and author of the book, Creative Selling (Entrepreneur Press).

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