Monday, August 13, 2012

Carwash Safety Leads To Higher Profits

You may not be aware that carwashes with low incident rates earn higher profits.  It is a myth that your insurance will pay for all of the costs associated with a claim.  This is known as the 'Iceberg Effect' - those hidden/indirect costs.  The following is an illustration of a simple claim:

Incident - Employee Injury equals direct costs totalling $1,500

Using the formula developed by the National Council on Safety for calculating indirect costs on claims under $3,000:

Direct Costs x 4.5 =  Indirect/Hidden Costs
$1,500   x   4.5  =   $6,750

Then of course we add the hidden costs to our direct costs for a total claim of $8,250.

Here is how that affects your bottom line.  Assuming our wash has $300,000 sales with a $75,000 profit equating to a profit margin of 25%, you would need to generate $33,000 in Net Sales (Gross Sales less overhead/operating costs) to completely cover the total costs of the $1,500 claim.

Just think how many cars you have to wash in a given month to simply cover this 'Iceberg Effect'.

So what are indirect costs?  This is just a small sampling of them:

Lost time spent by supervisors investigating the accident
Lost time by supervisors completing paperwork
Lost time by clerical staff completing and following up on paperwork
Damage to tools and equipment that will need to be replaced or purchased new
Cost of training a new employee replacement
Loss of production and productivity
Loss of business due to damaged public image
Loss of efficiency due to break-up of crew
Failure to promptly service your customers
Lost time by other employees discussing the accident
Loss of productivity due to employee moral

As you read this remember that your competitor may already be aware of this.

A safe wash protects people and profits!