The REAL Cost Of A Missed Used Motor Oil Disposal Service
The real cost of a missed used motor oil disposal service is staggering.
You have worked to build a team of the best technicians, purchased all of the top-of-the-line equipment, and put in place the most efficient procedures in place, but oftentimes the success or failure of an auto repair center also depends on the quality of the vendors use.
A single bad vendor can bring your auto repair center or car dealership service department to a stop. Here is how you calculate the real cost of a missed used motor oil disposal service:
Financial Impact of an Unreliable Vendor
For the purpose of this example, let’s say your used motor oil vendor is running a couple of days behind schedule, and as a result – your used motor oil tanks are full. Without a way to drain oil, you’ve now got to turn away customers that want an oil change.
The initial impact is immediate. Let’s say you charge $35 dollars for an oil change with an average profit margin of $12dollars per vehicle (35%). On the Low end, your shop may do an average of 15 oil changes a day, which makes for a total in lost revenue on oil changes alone $525 dollars, and a $158-dollar loss in profit.
Math to Calculate the Lost used oil change services revenue and profit:
$35*15= $525 per day. At 35% profit, that means you lost $525*35% =$158 in profit per day
The National Average for an oil change is closer to $50 dollars, and most shops can handle at least 20 cars a day just for oil changes. That equals $1100 dollars a day in revenue, and $385 dollars a day in profit. If your shop is bigger, those numbers only go up.
Your shops aren’t making the majority of their money on oil changes alone. The real money comes from up-selling additional parts/repairs. When you turn that customer away for an oil change, you’re also letting the opportunity for additional services and parts sales walk out the door.
Again, on the low side, let’s assume you have a $100-dollar opportunity to upsell additional services per vehicle. Profit margins on that hundred dollars are closer to 60%, and let’s assume you have a 50% closing rate. That all boils down to a potential loss of $750 in revenue lost and $450 in profit lost if you have to turn away those same 15 vehicles.
The Math to calculate the lost upselling revenue and profit :
$100 *15 vehicles= $1,500 revenue * 50% close rate= $750 lost revenue
$750 lost revenue * 60% profit margin= $450 lost margin
At this point, by turning away 15 vehicles for oil changes that include a potential upsell of $100 dollars because of a used oil tank, you’ve lost $1275 dollars in revenue and $634 dollars in profit.
The math to calculate the lost revenue and profits from not doing oil changes for one day :
$525+$750=$1275 in lost revenue
$184+$450 = $634 in lost margin
If your shop is closer to that 20-cars-a-day average, you’re looking at a revenue loss of $1700 dollars and a potential loss of $845 dollars a day in profit.
The Math: ($100 upsell * 20 vehicles = $2000 in revenue) * 50% close rate * 60% profit margin = $1000 lost revenue & $600 lost profit .
$700 in lost oil change revenue + $1000 in lost upsell revenue = $1700 in lost revenue.
$245 in lost oil change profit + $600 in lost upsell profit = $845 in lost profit.
In reality, your upsells are typically an average of $250 dollars. Using the same logic, turning away those same 15 cars costs you over $2600 dollars in revenue and roughly $1400 dollars a day in profit…
The REAL impact of a missed used motor oil disposal service isn’t just the one day that you can’t take customers. The real impact is the fact that they have to go somewhere else and you’ll likely lose their business. Losing a customer’s trust is hard to recover from, so the issue isn’t just the day you can’t service those customers – It is the LIFETIME impact of losing those customers.
The average customer gets 4 oil changes a year, and most people keep their cars for an average of 4 years. So, the lifetime impact of turning away 15 cars for $35-dollar oil changes with a potential upsell of $100 dollars in upsells ends up being $20,400 dollars in lost revenue and $10,140 dollars in lost profit.
The math to calculate the real lost revenue and profits from not doing oil changes for one day :
($100 upsell * 15 vehicles * = $1500 in revenue) * 50% close rate * 60% profit margin = $750 lost revenue & $450 lost profit.
+
$35 oil change*15= $525 per day. At 35% profit, that means you lost $525*35% =$184 in profit per day
*
4 oil changes a year
*
4 years of owning a car
=
$20,400 dollars in lost revenue and $10,140 dollars in lost profit.
For ONE DAY of not being able to do oil changes. Multiply those losses by the number of locations you have, and those numbers get staggering.
Keep in mind also, that for the purposes of these examples, we’ve gone with estimates on the low end of the scale.
One day of not being able to do oil changes with the numbers above multiplied across 10 locations is a total loss of $204,000 dollars in revenue and a loss of $101,400 dollars in profit. For ONE DAY of not being able to do oil changes.
Below, we have put together a full chart of exactly how much money you stand to lose by choosing the wrong vendors. These estimates are based on national averages, and you are welcome to compare them to the numbers your shops see.
At Quest, our mission is to make sure that you never have to worry about the prospect of having to turn customers away because of full oil tanks. We help tens of thousands of quick lube centers and auto repair centers, dealership groups’ service bays operate as efficiently as possible. We work with only vetted, top-notch service providers to make sure that the flow of cash into your location is a one-way path.
Contact Quest today, and let’s ENSURE that your locations are protected from the financial disaster of working with the wrong vendors.
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