We are in an industry which has seen downward gallons movement due to conservation and conversion to other energy sources. The use of the internet has changed the way consumers shop for a fuel company. One thing for sure is that our industry is in a crisis. When looking for a definition of crisis I found several sources, but all of them had one similar meaning.


The point of time when it is to be decided whether any affair or course of action must go on, or be modified or terminate; the decisive moment; the turning point.

In any crisis, there is an opportunity. I have heard it said that more millionaires were created during the Great Depression than any time in history. I believe the crisis we are experiencing in our industry is a great opportunity for innovative marketers to prosper and grow. Acquiring other marketers is a great way to accomplish your growth goals. Through this series of articles, we will explore the process of acquisitions and share some insights which will help you accomplish your goals and help you prosper for many years.

Acquisitions are all about a return on your investment. That investment is both a financial one and an investment of your time. Banks are currently very willing to lend money to most marketers at competitive levels which allow marketers to achieve substantial returns above lending interest rates. Even with continued conservation and conversions, home heating oil and propane will continue to be a source of energy for many generations in the future.

Recently I have had the opportunity to meet with several banks who are interested in lending money to companies for acquisitions. The banks were all aggressively seeking to lend money at very reasonable rates. They all stated that the home energy business sector is attractive to them as they see this sector as recession resistant. Banks still have some of the same concerns fuel marketers have. They are concerned about attrition from conversion as well as conservation. While they have concerns about these challenges, they are very supportive of companies who manage their business well and have a good track record.

While financial return is always the major consideration in acquiring a company, making an acquisition is a very rewarding experience in other ways. In addition to the great return on your investment, it is a morale booster for your employees. Employees like to see their company grow. They know that with a growing company they have more job security and an opportunity to advance their careers. Service technicians in particular appreciate less on call time which results from having more technicians to cover the needed hours. Many customers also appreciate the services that a larger company can offer such as more service technicians providing quicker response times, extended hours where they can speak with an employee and not an answering service and many times larger companies offer additional services such as air conditioning repair and in house installation of HVAC equipment.

There is a certain fascination with acquisitions in our industry and there is a misconception that all the acquiring is done by large multi-state marketers. Acquiring a business is a process which is very attainable for most marketers. The process includes finding a good acquisition prospect; calculating a competitive purchase price; structuring the offer for a smooth transaction; presenting the offer in a clear concise manner; navigating the closing process and transitioning the company successfully.

Remember that a crisis is a turning point and that turning point is an opportunity to bring prosperity and a bright future. A good strategic acquisition will help to bring future prosperity to you and your company.

Part 2 Industry Trends

I am fortunate to be able to attend many industry functions and while attending, I am often asked questions on acquisitions and company values.

Through this series on “Valuing and Acquiring Home Energy Businesses” we will address these questions to better understand how the opportunity to acquire fuel companies is an option open to most marketers in our industry. With a little bit of homework and a good relationship with your lending institution, acquisitions can become a part of your growth strategy.

It is important to understand how some trends have stayed the same and how some have changed over the last few years. Below are some trends we have seen in the current acquisition market for Home Energy Companies.

Asset Sales: As has been the trend for many years, almost all transactions include the purchase of assets and not the purchase of the stock of a corporation. This is a disadvantage for a “C” corporation. There has been some good news for C corps in recent years. Recent tax law decisions including the “Martin’s Ice Cream Case” have helped many C corps with regard to tax treatment sale of good will. Consult your tax advisor and if you are considering a sale in the next ten years, you may contemplate electing to become an S corp. now.

Property has become more desirable: Just a few years ago it was very difficult to include real estate as part of a transaction. Now, due to low interest rates and reasonable property values, many purchasers prefer to purchase property rather than lease property. Mortgage payments can be lower than lease payments in many situations. Bulk fuel facilities which are up to date with current satisfactory environmental studies and strategically valuable locations have increased in value. This is especially true for bulk propane storage. In addition, banks sometime prefer to have physical assets as part of a transaction to reduce the ratio between tangible and intangible assets.

Gallons are not used to Value Assets: Gallons may still be used as a payment method but they are not used to value assets or businesses. Companies are generally not valued on a multiple of gross fuel margin and they are usually not valued on a per customer basis. Assets are typically valued on a return on investment calculation. The most common method is a multiple of Earnings Before Interest, Taxes, Depreciation and Amortization (E.B.I.T.D.A.); otherwise known as Cash Flow or Operating Income.

Will Call Customer Values have Increased: As consumer buying habits have changed, purchasers are willing to pay more for will call customers if regular buying behaviors can be established. The key here is to see how many deliveries a will call customers is taking in a season.

Service and Diversified Revenue Streams have Value: As service departments have moved away from lost leaders designed to help sell fuel and more toward profit centers designed to service HVAC equipment, they will add more value to the company. This is also true of other diversified offerings if they can be shown to be profitable and sustainable as a separate business entity. It is rare that purchasers will invest in the potential of a new revenue line. There will need to be a good track record for profits.

Nervous Owners: Many owners are unable or unwilling to keep up with a changing industry. Conversions, conservation and increased competition have eroded profits. Many companies have been forced to downsize operations as gallons have decreased and many customers who were once thankful for the 24/7/365 service are much more likely to complain about the cost of fuel and services. Many owners are just not having as much fun as they once were.

Industry trends and willing lenders have resulted in an unusual combination of having a good supply of companies being offered for sale and a good supply of willing buyers. Our clients have received multiple offers over the last several years and sellers as well as buyers have been pleased with the overall transactions.

Part 3 Finding a Company to Acquire

Companies looking to grow through acquisition will obviously need to find the right company to purchase. The best candidates are companies who “look like you”. If you own most of your propane tanks, have service technicians, sell HVAC equipment, most of your customers on automatic delivery, margins are strong and you deliver in a twenty-five mile radius of your office then the best acquisition candidates will have similar characteristics and deliver in the same area.

Many times, however, you may be faced with opportunities where some of the characteristics are similar and some are different. Deciding what company is the right fit is sometimes a difficult task, but the first step is finding the opportunity.

There are five common methods used to find potential acquisition targets.

1) Develop Relationships with Owners: Picking up the phone, calling an owner and asking if they want to sell their business is not generally received very well. Asking them to have lunch to discuss the industry is a better approach. When I was more involved with purchasing companies, I would develop relationships over years not weeks. The sale of a business is an emotional decision in addition to a financial decision.

Attending industry association meetings and events is another way to begin to develop relationships. You already have a common bond as the challenges you face in everyday business are some of the same challenges they face.

2) Speak with vendors and other industry contacts: If you are looking to grow through acquisition, let people know. Vendors can be particularly helpful. Suppliers and other vendors don’t want to lose business if one of their customers is acquired by a company they do not do business with. They have already built the relationships with the companies and usually know who is getting close to selling.
3) Contact industry brokers: There are several companies in the industry like ours who help owners sell their business. Some owners just want a professional handling the business sale. Brokers in this industry use a targeted approach to a sale. We typically only contact prospective purchasers who we know are good candidates as we do not want to get word on the street about the company sale. If we don’t know you are a viable candidate then we may not contact you.
4) Advertise: If you pick up any industry publication you will see advertisements for companies looking to acquire businesses. The advertisements are typically from the multi-state companies as their target area is larger than a smaller acquirer. A better approach for a smaller company is to send a letter to the owner letting them know that you are looking to acquire businesses. Caution is advised in crafting the letter to make sure you are not offending an owner buy saying we want to buy them out.
5) Search the internet: There are several business sale sites on the web. Two that I have used are Biz Buy Sell and Merger Network . These sites enable you to set the criteria of the business you would be interested in and you get an email if something comes up.

It is a very rewarding experience to acquire a business and see your company grow. Good luck and good hunting.

Presenting an Offer

Once you have found a company to acquire, you need to structure an offer. A common method for calculating an offer is to look at your return on investment. Most purchasers are looking for a return on investment of between 12% and 30%. That may seem high when money markets are paying less than 1%, but there is a risk reward and purchasing a home energy company comes with some risk.

To make the calculation I would suggest that you look at your income statement or profit and loss statement and make conservative estimates of how the purchase will change your numbers. The first thing to do is calculate the projected gross profit. To do this you will need to multiply the gallons you think you will deliver by the margin you think you will have. To calculate non-fuel revenue, estimate the total non-fuel revenue and subtract the projected cost of any material (don’t include labor). Add the two together and that is your gross profit.

The next step is to project what your operating expenses will be to service the business. Look at each line item expense from your income statement and calculate how much more expense you will have for each line. Now subtract the operating expense from the gross profit and you have the operating income, which is often referred to as “Cash Flow” or “EBITDA” (Earnings Before Interest, Taxes, Depreciation and Amortization). There are other factors that may come into play such as capital needed to invest for items such as propane tanks and vehicles. We recommend working with your accountant to review the numbers before making an offer.

Cash offers are typically well received, but because of the risk involved in an all cash offer, the purchaser usually looks for a higher return on investment which means a lower purchase price. Earn-out offers based on performance are popular as it helps to minimize the risk for the purchaser. Earn-out payments can be based on gallons (retained gallons), gross profit or even EBITDA. There may be some tax incentives for a seller to take a longer payout.

Once you have decided how you want to structure the offer, you need to present it to the seller. Most offers are submitted in a non-binding Letter of Intent (LOI). This is a legal document which should be prepared or reviewed by an attorney. The LOI should spell out exactly what is being purchased and exactly how it will be paid for. It should also address items which are adjustments to the purchase price. Some adjustments are vacation accruals, service contracts, inventory, and prepaid expenses. Other items to cover are non-competition terms, employment contracts, consulting agreements, and other items that have been discussed and agreed to by both parties.

An important item is accounts receivable. Most purchasers want to collect the receivables and either remit them to the seller or buy them as part of the transaction. This gives the purchaser continuity with the customers.

A detailed LOI will help the transaction to go more smoothly as both parties know up front what to expect. The LOI is basically an outline of what the closing documents will be. There will be additional items to negotiate in the closing documents, and that subject is covered in the next article in the series.

Due Diligence and Closing the Transaction

Once you have identified a company to purchase and the seller has accepted your offer, you need to do your due diligence to make sure the information represented by the seller is accurate. There are many areas of due diligence, including Financial (gallons, margins, service revenues, expenses, accounts receivable, etc.), Environmental (Phase 1 & 2 studies etc.), Compliance (DOT records, SPCC Plans, tech licenses etc.), Operational (Vehicles, Computer Systems, Equipment, Sales & Marketing, Payroll etc).

During this process the buyer should get to know the intricacies of the new company. You should ask about employees, customers, vendors, and general operating procedures. This is where you get to learn more about the company than the numbers on the spreadsheet. I also recommend sharing your plans for transitioning the company with the seller. Having the buyer and seller on the same page will create an easier transition.

If you uncover discrepancies in what was represented when the offer was made, or you find that your assumptions when you made your offer have changed, this is the time to discuss any changes with the seller.

Once you have a comfort level with the due diligence, it is time to present the closing documents. In most transactions the buyer’s attorney presents the closing documents to the seller’s broker or attorney. In very large transactions the documents are sometimes presented by the seller.

All transactions will have a Purchase Agreement and there may be separate agreements for Non-Competition, Leases, Property, Throughput, Employment and Consulting. Don’t think that you are done negotiating after you finish the due diligence. There are legal terms in the purchase agreement which will still need to be negotiated, typically between the attorneys. Items such as Indemnifications and Representations & Warranties are two sections which seem to get a lot of attention.

Non-Competition agreements are very common in the home energy industry and the time frame can typically range from three years to ten years. In my experience, a five year non-compete is the most common.

Many times within the closing document phase of the transaction, the purchase price is allocated among the assets. Many buyers prefer to have a higher value on vehicles, propane tanks and equipment so they can depreciate the assets over a shorter period than the customer list value which is typically fifteen years. Sellers typically prefer not to have a large allocation of the purchase price on non-competition or consulting agreements as it will typically be taxed as ordinary income, as opposed to capital gains. Owners of “C” corps are usually an exception. You should always check with your accountant to see how the allocation will affect the net proceeds of the sale.

It is common in the Home Energy Industry to sign the closing documents and transfer ownership the same day. Another way to close on a transaction is to sign the closing documents and have a settlement date a few days or weeks later. In my opinion a settlement date a few weeks later has some advantages. The time lag allows the buyer to complete certain items such as burner service inventory, vehicle inspections, and employee paperwork. From a seller’s standpoint, it is almost impossible to keep the sale quiet when strangers are coming in to do inventories and employees are asked to run all the reports needed for the settlement. The lag time also allows the buyer and seller time to prepare a customer letter if they decide to send one announcing the transaction.

Transitioning Your Acquired Company

You have just closed on your acquisition and it is time to combine the newly acquired assets with your business. This is an exciting time for you and your employees and a critical time to assure the success of the transaction. Remember, it’s not the customers you buy that are important; it’s the customers you keep that will make the acquisition successful.

There are many aspects to a successful transition. Some items you will need to address are the employee announcement, informing customers (or not), hiring employees, transferring account info, payment processing and vehicle registrations to name a few.

When the employees of the acquired company learn about the sale, they will be nervous about their future. I recommend holding a meeting with all the employees you intend to hire. In the meeting it is helpful if the seller thanks them for their service to the company, explains the reason for the sale and shares what he knows about the new owners and why they were the successful buyer.

As a buyer, it is important to let the employees know about your company and why you acquired the business. Assuring them that they will have a job is obviously important. I recommend having new employee paperwork available to be completed the day of closing. It is recommended that as part of the packet you include a non-solicitation agreement as a condition of employment. This will protect your investment as employees will typically be restricted from soliciting customers or employees if they leave your employment. Discuss this with your attorney for more details.

To send a welcome letter to the newly acquired customers, or not, is a common question. Every situation is different so let me share my observations. If the acquired company will operate under the same name, from the same location with the same phone numbers with fuel and service delivered from the same vehicles and no change in billing processes, then it is less important to send a letter. If the acquired company will move the customers into their existing operations then a letter may be recommended. A well written letter explaining the benefits of the combined businesses can be very positive. I recommend using a professional company to help craft the letter; it will be worth the investment.

Transferring account information is a key element to a successful transaction. Many larger transactions transfer account information electronically. This can be a complex process as different systems use different customer code fields which will need to be mapped over properly. Another option is to manually add the information into your systems. It takes a little longer, but you tend to get info in the format you need it.

Payment processing is an item that also needs to be addressed. Many customers are on an automatic credit card payment and the payments will need to be transferred to your account. Make sure your processor is notified quickly to avoid customer deposits going into the wrong account. Tracking payments is important to keep the accounts receivable balances accurate for both the seller and the customer.

It is an exciting time in our industry as we are faced with many challenges. Some companies will be unable or unwilling to face those challenges and other companies will continue to grow and prosper, many through acquiring businesses. Regardless if you are exiting a business or growing your business, the process should be one in which both parties walk away satisfied.

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We were very pleased to have such a knowledgeable and experienced company in our corner with the team at Cetane. It was obvious that they knew the best process and how to get the ball over the goal line. Their advice throughout the process was greatly appreciated and we thoroughly enjoyed working with them.

— Steve Lombardi, Brodeur’s Oil, Moosup, CT

Last July my brother drove from South Carolina to visit us. He spent five days on his trip, stopping along the way to visit friends. When he arrived, I helped him unpack his car and I saw that he had a Yeti cooler in the back of his vehicle. He drained out a little bit of water, but for the most part it was still filled with ice. He told me that he had filled the cooler five days before and he did not have to refill it with ice. I finally understood the $300 price tag for this cooler that held a lot less than the same size Igloo or Coleman I was using. I don’t think the ice in my cooler would have lasted two days in the July heat, let alone almost a week.

That cooler made me think about a recent renovation we had done at our home. We remodeled half the house, constructed a small addition and converted a garage to a family room. We basically added 30% more living space. We also added 70% more square footage of window space than we had in the half we remodeled. The new building codes called for R-49 in the ceiling and R-20 in the walls. As the framing was existing, the only way to meet the code was to use closed cell foam. I was concerned as this was new to me and I wanted to make sure we had enough air flow. My home was built in 1985 so there was insulation in all the walls and we had double pane windows.

As part of the remodel, the HVAC contractor did a load calculation and luckily, I did not have to enlarge my heating or cooling system. I was a little skeptical, but very pleased that this was not another cost overrun as most of the rest of the project was.

It’s been over a year so I have run through two winters and one summer and I was surprised that while I increased the size of the living space in my home by 30%, I actually reduced my energy consumption by around 10%. We have one thermostat so I have had to balance the system slightly by closing off vents in the remodeled area as it is warmer in the winter and cooler in the summer because of the new insulation (and windows) When thinking about my brother’s cooler, I realized that I was living in a Yeti house or at least half a Yeti house.

I have been working with home energy companies for over thirty years and I remember calculating average annual usage per customer. Depending on the area of the country, I have seen around a 1% to 1.5% annual conservation rate in that time. Some of the conservation was a result of new higher efficiency equipment installations and some was a result of homes being more energy efficient. Our industry promotes conservation and while everyone knows it is the right thing to do, we also know less gallons can mean less profit.

So, what’s a marketer to do. I have seen several successful strategies including:

  1. Diversification into propane auto gas, traditional motor fuels, and home services, including home performance audits, insulation, pest control, plumbing, electric and other services your customers need.
  2. Implementing an acquisition program to replace gallons by acquiring local competitors or expanding into nearby markets.
  3. Reduction of operating expenses by investing in cost saving technology and being diligent about examining line item expenses.
  4. Replace lost gallons through organic growth. I find that most organic growth comes from well put together electronic marketing programs revolving around internet search.

Those are just a few ways successful business owners have tackled the challenge of conservation and having their customers living in a Yeti house.

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We were very pleased to have such a knowledgeable and experienced company in our corner with the team at Cetane. It was obvious that they knew the best process and how to get the ball over the goal line. Their advice throughout the process was greatly appreciated and we thoroughly enjoyed working with them.

— Steve Lombardi, Brodeur’s Oil, Moosup, CT

When we market a business for sale, we often receive multiple initial offers. No two offers are structured the same so we often put together comparisons to try to get an apples to apples comparison. Below is a chart showing an offer comparison from five different buyers. We ordered the offers from left to right in our opinion of the best offers.

While Buyers prefer seller financing or earn out programs such as retained gallons, Sellers are always advised to get as much cash at closing as possible. As you can see below, Company A is an all cash offer and Company B would likely lead to a higher purchase price. Companies C, D and E were all good offers and higher than the Seller’s expectation, however when compared, it became a choice between A and B.

There are many non-financial factors that go into a Sellers decision on who to choose to sell their business to. There are employee concerns and overall reputation of the Buyer in the community. Those intangible factors must be taken into consideration, however the financial impact, especially for a retiring owner, is typically the starting point in choosing a Buyer.

So why should the Seller choose an offer that will likely result in a purchase price that is lower? It all comes down to risk. Anytime a Seller accepts an offer where they are not paid cash at closing, they risk receiving all the payments. The longer the payout period, the higher the risk.

The Buyer’s bank typically has a blanket lien on all of the Buyer’s assets and the moment the assets change hands, the bank has a first position on those assets and the Seller goes to second position or lower. The term used is that the Seller debt (payments still owed) is subordinate to the bank. If the Buyer falters financially, the bank gets paid first and the Seller waits to see if there is money left to pay them.

Successful Buyers understand this and often have acquisition lines in place so they can pay cash or mostly cash for a business. Is there risk for a Buyer? You bet there is, and that’s why it is important for a Buyer to do their homework on the Seller and make sure they are going to retain the business after the sale. Successful Buyers understand that if they lose a large percentage of the customers it is the Buyer’s fault. Buyers can also offer personal guarantees or first position on other assets such as real estate.

An interesting scenario we have come across is a Buyer who offered a straight retained gallon purchase but paid 80% of the projected amount at closing. That amount was guaranteed no mater what the gallons were. They also paid cash for the vehicles, propane tanks, non-compete and inventory. The total was slightly lower than straight retained gallon offers we received, but the security was better. The Seller felt that they were selling for cash and the Buyer felt they were purchasing on retained gallons.

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We were very pleased to have such a knowledgeable and experienced company in our corner with the team at Cetane. It was obvious that they knew the best process and how to get the ball over the goal line. Their advice throughout the process was greatly appreciated and we thoroughly enjoyed working with them.

— Steve Lombardi, Brodeur’s Oil, Moosup, CT

After years of preaching that companies can’t be valued by the gallon, owners are beginning to grasp the idea that companies are valued based on return on investment, usually in the form of a multiple of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) AKA: Cash Flow or Operating Income.

The valuation buzz at propane industry events is that companies are selling for 10X EBITDA. We have seen some record values being paid for companies and we even have it on good authority that values have reached as high as 10 X EBITDA. To better understand what that means, you need to determine what EBITDA you are referring to.

There are three basic EBITDAs. The first is the Seller’s EBITDA which comes from financial statements or income statements. Some adjustments are made for additional owner compensation. The second is the adjusted EBITDA which takes the financials and normalizes earnings by adjusting for items such as weather, related party rent, owner and family compensation, expensed items that should have been capitalized, onetime expenses and other items which would typically not occur under new ownership. Adjusted EBITDA is the basis for business valuations and the most commonly used of the three. The last EBITDA is the Buyer’s EBITDA. This calculation is done using the adjusted EBITDA, then projecting the Buyer’s results. A buyer may have operating synergies which would allow them to reduce expenses.

As an example, a company may sell for $5 Million with an owner EBITDA of $500,000. The owner perceives this as selling for 10X. When going through the income statement, the Buyer has reduced operating expenses items such as owner’s vehicle expenses, non-working family salaries, owner medical insurance, payroll taxes, 401K contributions and professional fees for owners such as owner tax preparation. The owner may also own the property and be charging themselves above market rent for tax purposes. Those items would all be adjusted and the Adjusted EBITDA may now be $750,000. This would be 6.6X EBITDA for a $5 Million purchase price. In addition, the Buyer projects that they can increase margin per gallon, consolidate a few positions over time, lower the insurance cost, bank fees, advertising expense and use technology such as tank monitors to operate more efficiently. This now brings the Buyer’s projected EBITDA up to $900,000. The Buyer is now paying 5.5X EBITDA based on their projections.

While EBITDA is a key measurement for valuing a company, there are many other aspects to consider. Those factors go into what the actual multiple includes. Does the company have real estate included which has a bulk storage facility? How old are the vehicles and will the buyer need to make further investments in vehicles and other capital expenditures? Is there a large percentage of Company tank ownership?

Let me give you an example. If there are two companies with identical EBITDA and Company A has an average of 6-year-old trucks, a modern office with three 30,000-gallon propane tanks, and 90% company tank ownership and Company B has an average of 15-year-old trucks, no owned real estate and 25% company tank ownership then Company A will sell at a higher multiple of EBITDA.

Another major factor is size of company. The larger the EBITDA the larger the multiple. A company with an adjusted EBITDA of $100,000 will sell at a substantially lower multiple than one with a $3,000,000 EBITDA. There are many other factors to consider such as exposure to natural gas conversions, competition, and union employees to name a few. A seller must also consider how a company is presented to potential buyers. A professionally presented company using a highly confidential managed process always brings a higher selling price with substantial tax benefits. What a Seller takes home after the sale is more important than the purchase price.

10X EBITDA sounds like a great valuation, but as they say, the devil is in the details.

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We were very pleased to have such a knowledgeable and experienced company in our corner with the team at Cetane. It was obvious that they knew the best process and how to get the ball over the goal line. Their advice throughout the process was greatly appreciated and we thoroughly enjoyed working with them.

— Steve Lombardi, Brodeur’s Oil, Moosup, CT

Energy company owners are typically very good at preparing their operations to service their customers. Vehicle fleets are always a focus as they deliver the products and services being offered to customers. Customer service training, robust technology systems, purchasing/hedging and a good marketing campaign are other areas successful markets focus on.

The one item most marketers tend to put off is their financial reporting. Many marketers wait until the end of the year for their accountants to tell them how they did financially. It’s a little like being in school, taking tests without getting them graded and then getting your report card for the year, ninety days after the class is over. I know I would have had some surprise grades in school if that were the case, and none of them would have been good surprises.

Rarely does an accountant give you better news than you were expecting. When we speak with owners and ask them basic questions like gallons delivered and margins per gallon, you would be amazed at the difference between their initial response and what we find after completing a financial analysis. For marketers who deliver propane for space heating or for companies delivering heating oil, not one has ever given us their gallons on a weather adjusted basis. They know volumes were up or down based on weather but most don’t know the relation well enough to spot trends in their business. Just as important, most don’t realize how weather effects operating expenses, except maybe delivery expenses. The same is true for how fuel costs effect operating expenses.

Please don’t get me wrong, many of the owners we work with are exceptional business people who run great profitable companies. They are focusing on the big items that have made them successful. I just want to point out that some extra focus on financial reporting can make your business even better. Once you set up the reporting, it is easier than you think to manage it. I was once told by one of my mentors that if you can’t measure it, you can’t manage it. Granted, you need to have some strategic improvisation in all business decisions, but setting up systems to manage financial reporting can open eyes to good and bad trends.

Our first recommendation is to put together a simple budget. What I mean by simple is gallons delivered by product, five or six gross profit categories, and operating expenses. Don’t get too detailed on expenses as a beginner. As an example, vehicle fuel or repairs does not need to be broken out by service, delivery, office, marketing, etc., on your first budget. You can get more detailed after you get the hang of it. Take your last year results, weather adjust the gallons and project what you will deliver for the upcoming year. Do the same for service or other revenue streams. I would recommend breaking out the budget by month and a few days after the end of each month, record the results vs. your budgeted numbers to see how you did. For any large variances take a closer look to see why you were off.

Once financial reporting becomes a regular business function for your company, you can continue to improve on it as time and needs dictate. Now instead of waiting until the end of the year to see how you did, you can get your test results back sooner and be able to pull up your grades (net income) before the school year is over.

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We were very pleased to have such a knowledgeable and experienced company in our corner with the team at Cetane. It was obvious that they knew the best process and how to get the ball over the goal line. Their advice throughout the process was greatly appreciated and we thoroughly enjoyed working with them.

— Steve Lombardi, Brodeur’s Oil, Moosup, CT