All the planning in the world cannot help you sell more gallons when Mother Nature does not cooperate. When winters are warm, temperatures are what affect your sales. NOT planning, pricing, service or marketing efforts. There is a way, however, to generate revenue during a warm winter… Hedging the volume through “option purchases” on the number of heating degree days (HDDs) in your area.
Now that the winter is behind us, dealers are reflecting on how things went financially and how to shift gears for the remainder of the year to get back on track with their annual profit targets. Before you can decide how to pivot, you need to know what target to aim for.
Basis Risks are Here to Stay... For the past 30 years companies have been offering pricing programs (fixed and capped), to give their customers peace-of-mind, maximize company sales margins, and minimize customer attrition.
Weather hedging (for fuel dealers) can best be described as a method to recoup some level of the lost fuel delivery and service profitability that otherwise would have been earned in a warmer than normal winter. They are financial derivative tools designed to counter that hackneyed refrain of helplessness we so often hear: “Hey, we can’t control the weather.”
Many factors are conspiring to squeeze you this winter and the impact could be significant. The good news is that owners and managers have time to plan before the chilly days return and your need for cash to support seasonal operations grows again.
As retail prices increase, customers who are on pricing programs are shielded from price spikes. Sure, it costs money to be on a cap program, and you might have to be on a budget plan AND have a service contract. But the savings… Caps are intended to protect customers from price increases and allow them to benefit if prices fall. It does come with a cost (the costs to hedge the cap), but those costs are an investment that can yield fantastic results! Dealers who offer caps and hedge them (properly) meet their profit goals and earn a good...
Is a “steady basis” a thing of the past? Will it return to normal? When might it happen? What if my supplier doesn’t offer me a fixed diff? What if I don’t want one? All of these questions are “top of the mind” as we plan for next winter.
Imagine if all of your customers were new customers. We all love new customers. They are excited about us and we are about them. We have no receivables or service issues with them, and they have never complained to us about anything. Most importantly, they are bringing us revenue that we didn’t have before. There…
The world has changed and it will never be the same. We will be facing more uncertainty over the next few years than ever in our lifetime.The COVID-19 pandemic is not only a health crisis of gigantic proportion—it’s also an imminent restructuring of the global economic order. We are in an essential industry, selling products and services that people will continue to need, but the future is unknown. Are you ready?
In recent weeks, fuel dealers had been lamenting the impact on earnings from an unusually placid winter stretch, with hopes buoyed in some respect by very favorable commodity prices. But seemingly overnight, the COVID-19 scourge which was critically impacting other parts of the world suddenly became very real. Now a pandemic, the virus impact has…
