I posted my 2015 P&L last year and got a lot of positive response and had some great discussions. Here is 2016

[excusemydust]

One of my favorite things to do is "look under the hood" of other businesses. I got hundreds of messages in the past year from my previous post and I hopefully helped some people who are just starting out. I know I learned a few things. So why not do it again?

Some background to get many of the preliminary questions out of the way:

-We are a retailer and wholesaler of new and used tires.

-We have three brick and mortar retail stores and deliver wholesale tires to retail customers in a 250 mile or so radius.

-We own all of the real estate so most of the Rent on the P&L is actually going to the officers in the form of draws from a real estate holding LLC.

-We acquired a regional wholesaler in March 2016 which accounts for the increased payroll expense and the increased wholesale income.

- We had significant flood damage to one of our locations this year which accounts for the Misc. Income and much of overhead increase in the supplies and repair categories.

Happy to answer any other questions people have.

2015vs2016 P&L

*edit to fix potato quality pic

 

[scoey72]

@excusemydust Your advertising seems low for the size of your business.

What kind of advertising did that $4k represent? Do you not feel like the ROI on that was good enough to increase spending?

We're spending 28k on sales of 1.5M (which tbh I still consider light for a growing business), but our business isn't a local brick and mortar retailer so I don't have a lot of familiarity with local advertising methods and such.

 

[excusemydust]

@scoey72 We have spent a lot of money on advertising in the past but don't see a meaningful ROI. Because we are really selling a niche product (used tires), it is very difficult to target our customers. We can target new tire customers quite easily but it is very expensive and we find that those customers that we attract are not the right ones for our business model.

 

[scoey72]

@excusemydust very interesting, thanks for the reply.

Advertising for a local business, especially brick & mortar, likely involves very expensive (and antiquated) media such as paper flyers, mailers, newspaper ads, radio ads, etc.

-What have you experimented with so far?

-Who is your target market?

-What are the demos of that market?

I bet you could create some advertising that was highly specific and really get some good penetration on your target market.

 

[excusemydust]

@scoey72 In the early days we did a lot of traditional advertising, radio, flyers, etc. As I'm sure you know, that is no longer effective.

We have made some progress with Google Adwords, and Facebook promoted posts but it has been hard to quantify. I am by no means an expert on that stuff and probably should consider spending more on that in 2017. If you have expertise, I'd love to hear your thoughts. PM me.

 

[scoey72]

@excusemydust If you feel like your strengths are in other areas, perhaps hiring a local ad agency to run your campaign would be beneficial. Yes you'll pay a premium, but you won't have to spend your time learning everything, plus you will likely get better results since they are the experts.

The other option is, of course, to do it yourself. My recommendations for that would really depend on how your sales are allocated among your different revenue sources.

• For example, if you're mostly B2B, Facebook is probably not your ideal ROI. It would likely be something in the direct marketing realm.
• If you're targeting consumers, consider social media and other local media. Also consider your SEO and your presence on things like Google Maps and Yelp.
  • I know NOTHING about tires, but if I needed tires I'm probably googling "tire shops near me" and seeing what pops up, and then going from there.
    

Ultimately I think your best bet is to experiment. Set a budget and try different things and see what works.

 

[klove2010]

@scoey72 A business of that size should use an agency, they would be a few thousand dollars a month and could help in many areas like SEO, content marketing, local awareness advertising and finding the best ROI, and more.

It would lead to additional growth and easily offset the expense in addition to having expertise and freeing up time vs. learning, testing, and doing it yourself when time could be limited. Time is very often money.

 

[zjchristianjesus26]

@excusemydust Are you spending on search and retargeting? Those would be the best to target people you know are in-market (or at least considering it).

 

[excusemydust]

@zjchristianjesus26 That is where the money that we are spending on advertising is going but it has its challeneges and I haven't educated myself adequately to use it more effectively.

I have chosen to focus on controlling my Cost of Sales instead as that is where my expertise lies. However, it shouldn't have to be an either/or. I could definitely do more advertising.

 

[mikael85]

@excusemydust Sell more wholesale tires

 

[excusemydust]

@mikael85 That is the plan. Our retail locations are all pretty mature now so we don't expect to see huge growth in the future. We have no plans to open more retail locations due to the time and effort it takes to grow and manage them.

Wholesale, on the other hand, is very scalable and we only have one serious competitor on the region. Most of our time and capital investment is going to growing this side of the operation in 2017.

 

[airforce1]

@excusemydust I would do a profitability analysis by individual tire model rather than just wholesale, new and used. Take your worst 10 tire models and ask yourself why they are at the bottom and fix it if possible. Do this every year or even 6 months and it will amaze you.

 

[excusemydust]

@airforce1 Used tires are not such a simple formula. You cannot simply order the sizes and brands that are in the highest demand. You buy the product in bulk and receive a "mix" of sizes and brands. If you are a heavy buyer, which we are, you have some ability to cater what you get but you are always going to get a certain percentage of your incoming product that you cannot immediately sell. This fluctuates from season to season and from supplier to supplier. Because of this, developing an applicable pricing model is not easy.

We are more similar to liquidators than we are tire wholesalers. We maximize the value of the inventory that we receive through retail sales and liquidate the rest of the inventory through wholesale.

 

[confusedkid95]

@excusemydust So the plan is more wholesale tires this year. How scalable is it? Do you have to deliver the tires? At what point to you have to hire more employees to keep growing wholesale? What capacity are you running at now? What is the true contribution margin of the wholesale business line? Is wholesale only local or is it possible to go further than that? Would expanding wholesale compete with your other business lines? Retail used etc

 

[excusemydust]

@confusedkid95 Lot of questions, lets see.

Wholesale operation is easily scalable. We are currently running at about 75% of what we are capable of for wholesale but adding capacity is very simple. We could triple this year without any dropoff in the process or in customer service. Once we have to start adding more salesmen is when it becomes a little more difficult but not prohibitively so.

Wholesale alone is at about a 30% gross margin. It brings down the overall gross margin but increases the volume because it allows us to funnel more of the premium size and grade tires into our retail operation.

We deliver out 250 miles or so with our own trucks. Anything farther would require either semi trucks and trailers or third party shippers. Its doable but we have significant room for growth inside of our range. We do not sell wholesale to competing retail operations in a certain radius of our stores so it would only minimally affect the retail side. The benefit of more wholesale volume to the retail volume far outweighs the downside.

As with any volume operation, as we scale, our product cost and operational overhead both shrink as a percentage of gross sales so the more we do, the better the financials look.

 

[confusedkid95]

@excusemydust As sales increase, profits usually increase even more. Definitely increase profits before you think about selling the company. They like to look at multiples of profits for valuation. Also try and sell the company in the good days. Don't wait until things slow down to start looking for a buyer. I'm interested in getting into small business ownership so this is all interesting to me

 

[excusemydust]

@confusedkid95 No plans to sell anytime soon. As long as no as my or there and I are actively running it, the good days should continue. We have two other ventures as well that may or may not become more prominent in the future.

I've done several startups and two acquisitions now. If you need any advice, I'm happy to help.

 

[chingyb11]

@excusemydust Along the lines of /@junkerjorg, have investment background looking at public and private cos.

Was interested to see some actual financials posted. But, to really give any thoughts, need balance sheet, cost of acquisition, little more historical data, etc. No need to post those, but just giving an idea of stuff that ran through my head as I was looking at income stmt.

Thanks for putting this out there; interesting.

 

[excusemydust]

@chingyb11 Yeah, you are correct that this doesn't give a complete picture of the business. I'm not really looking to provide that much detail. Just a peek to provoke discussion and perhaps help those in the early stages of growing a small business.

 

[ravisingh]

@excusemydust Thanks for posting

I'm not liking the 20k a year on landscaping, that's over six figures in 5 years

How complicated are your 3 locations landscaping? Can't low rung employees cut the grass once a week when it's slow ? Does it include snow removal ?