LP Gas, February 2014
Want Your Propane Business to Deliver Better Results Share Delivering Results with your employees The columns in this book are the best of the best from the more than 100 articles written by Carl Hughes for his LP Gas Magazines Business Matters column You cant go wrong By giving your team members this book youll not only be sharing many of the tools necessary to succeed in your business youll also be supporting an important industry organization since 100 percent of book sales benefi t the NPGF Scholarship Fund How to build a great team I n the business world we often use sports analogies One of the most overused sports terms is team Its as if we think its fair to compare say the operational nuances Packers to our propane of companys the Green Bay then glean some operating team and satisfyingly meaningful conclusion As with a lot of simple quick analogies the comparisons are poor and we end up with nothing of value to help us run our companies In this column we will address how our companies can operate with the team approach if we understand what a team is why some teams work and why some teams dont work The problem with the sports comparison is that in so many ways the situations that define sports teams and our businesses are very different defined on each team is members team sport the number of engagement are of For example in a The rules say 11 on each side in football by rule also well defined one point is awarded for each soccer goal Plus the roles are clearly spelled out as to what a team member can and cannot do pitchers pitch OCTOBER 2003 Marketing Its everything you do M arketing is no longer just about what you say to the public about your product or service Its everything you say and do If that strikes you as odd think about your experiences as a consumer What attracts nothing another It might be retail store over you have you to a particular the friendly people of the store or inviting nature more than the Have you ever made a mental note that you would not return to a location because Successful companies dont just talk about their product or service Every single thing those companies stand for is reflected in what they say and do Your mailings Are they clear well written and informative Do they introduce Delivering Results Managing a Successful Propane Business The Best of LP Gas Magazines Business Matters Columns By Carl Hughes OCTOBER 2008 Growth at speeds of capital Th is book is a must for every owner and manager of an LP gas company KEITH MCMAHAN Tri Gas Oil Co Inc Former NPGA Chairman To place your order visit JUNE 2008 Assessing your debt needs www bestofbusinessmatters com Book cost 25 plus 495 shipping 64 It is not important that the team is quite happy together whats important is that everyone on the team works together hitters hit etc Even team goals are clear cut win In other words measurement of performance is easily identified for both the teams and individuals In the real world of our companies none of this is in place In fact the error that we make is to treat any small group within the company as if it were a team when its nothing more than a small group of employees with no rules or definition Yet we expect them to perform like the Yankees definition team by using this a real breakdown of what comprises skills that is committed Lets start with a group of people with complementary Any small to a common purpose for which they hold themselves mutually accountable MAY 2010 6 encountered because treated or simply way you were an employee the business did not appearance of appearance of the of the the meet your standards Successful companies dont just talk about their product or service Every single thing those companies stand for is reflected in what they say and do Although your signs may say were the friendliest propane company in the county or we treat our customers right is that really the case Is every single experience your customers have with your company a positive one If so their word of mouth can be a large part of your companys success Look at your operation with fresh eyes Pretend youre a customer and think about the ways you would interact with your company Your telephone responses Are all of your customers phone calls answered within three rings Is the person who answers the phone pleasant and customers questions answer 80 percent of your else If not then courteous Can that person transferring them to someone on hold or answer the phones and without putting them for those who a training program the retail your customers In you customer should implement right people talking with the make sure you have the verbal contact is made when business 50 to 75 percent of all propane initiates a call to you services that are helpful to your customers Do your statements take the opportunity to include a well designed statement stuffer on a regular basis Your office and showroom Although fewer customers come to the office The role of management in retail propane This is the third in a series on business topics inspired by the 20th century business management icon Peter Drucker R esults are obtained by exploiting 31 opportunities not solving problems Fixing problems only restores a broken situation back to normalcy it does not create new value This is certainly pertinent to our industry A retail propane company whose focus is primarily on the solving of problems is a company whose key management is not focused on the future and certainly exploit prepared to identify and not The first step is new opportunities to recognize that all efforts are not equal in their contribution to value creation Consider analyzing your time spent by separating all activities into these two categories How much time do you spend solving problems and how much time identifying and pursuing opportunities The operational demands of retail propane distribution are enormously distracting The ongoing needs of employees and customers along with the need to These are create problems that require solutions we ignore maintain fundamental equipment business that I am not suggesting activities of our increase companies do not grow and that retail propane simply putting out is What I am suggesting management spends all of its time in value if senior problem the repair The resolution of a particular problems the repair of an installation fires and solving poor hire with a new hire or replacing a previous state It is the pursuit of of a truck condition to its company only restores the economic your market that creates new value for opportunities in your Winners represent that vs losers activities analyze and select those business constantly those that no longer Management must company winners and shed the future growth of the MAY 2006 52 T he retail propane industry is considered capital intensive because in order to gain a customer we purchase and install an asset that we continue to own yet that asset stays in place as long as we have that customer The asset the tank is expensive but one that has a long practical life in decades The relationship between growth and our capital needs is linear in that every new customer requires a new asset which requires additional capital To grow we need access to capital Sources of capital There are two primary forms of capital equity and debt Equity capital has the primary characteristic of ownership rights Equity capital is at risk capital meaning that if the business fails the equity invested becomes worthless Types of equity capital include the original seed money founders equity used to start the retail propane business as well as private equity public equity and retained earnings company equity investment in a term applied to any new dates Since 1994 broad exit Private equity is a expected returns and expectations for with varying larger retail propane companies have accessed the public markets under the master limited partnership MLP structure to meet equity capital needs Debt capital requires the repayment of the amount lent over some specified period and includes a contracted interest rate Traditional commercial lending is the primary source of debt capital used in the propane industry This lending is generally asset based meaning a bank will lend money to a borrower based on a percentage of the residual or liquidation value of the asset being acquired The bank will take a lien on the acquired asset and use it as collateral in the event of default on the loan Lenders require a certain proportion of equity to be in place in order to make the loan with the equity being subordinate or secondary to the debt in the event of default Typically startup propane companies are seeded with equity capital from founding shareholders This initial risk capital is then matched with a lending Debt to cover operating expenses In the short term seasonality of retail propane there are months in which gross margin is below operating expenses 46 T he dramatic rise in wholesale propane costs has created serious pressure on everyone in the retail propane distribution business resistant Whether its customers higher prices difficulty to collecting larger bills or the overall pressure on net profits due to higher operating expenses and squeezed margins they all create increased capital needs For most that additional capital is met by some form of debt The reality of our current operating environment is that more capital is required to operate the same size business as in the past What we want to determine is whether the additional debt is normal for the situation and therefore manageable or whether the debt is growing significantly enough to indicate that something in our business is amiss Lets examine specific areas of the propane business that are requiring additional debt capital and determine if the situation is good meaning expected fundamental business is in need of that the or bad indicating and acceptable adjustments shortterm normal cycles Utilizing retailers these are does driven long as this debt For degree day is acceptable as debt to cover off peak expenses not creep into some permanent role throughout the year It is critical to understand that all annual operating expenses must be covered by total annual gross margin If your overall debt has increased throughout an annual period and a portion of that debt has gone to cover operating expenses your business is in need of a fundamental review Debt to purchase new trucks It is certainly acceptable to finance trucks needed to handle new customers as part of an overall growth strategy All book sales benefit the NPGF Scholarship Fund BROUGHT TO YOU BY
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