Gallons Per Degree Day

May 2, 2019 | By: Energy Engine
Categories: Webinars

Join us for a groundbreaking 45-minute session that will provide needed insight into how to grow gallons despite warm winters.

Temperature is only one variable in the fuel profitability equation and likely not the most important. Yet dealers obsess about it and often BET on it… something known in financial circles as “budgeting on hope”. Why gamble on Mother Nature? Fuel dealers have the ability to make it colder. It sounds crazy, but after seeing this webinar, you will learn how to do it.

How Gallons per Degree Day Work:

Gallons per Degree Day is a crucial but overlooked metric that you should always be measuring. It is the only true indicator of weather impacts, growth, and attrition. There are only two ways to increase Gallons per Degree Day: allow for the weather to be very cold, OR sell more gallons. But if it’s mild, how do you sell more gallons when your high value automatic customers are obviously burning less?

The answer is the growing number of consumers buying their fuel “On Demand”. Capture new gallons from a segment of the market many dealers are ignoring (even though it makes up 50% of market demand). Incremental growth has the same effect as a dropping temperature.

Archived Gallons Per Degree Day Webinar:

Taking Advantage of Gallons Per Degree Day

Gallon per degree day is one of the most important metrics in terms of normalizing your business. It gives you a very good indication of your growth or attrition.

The weather has an impact one year over the next in terms of normalizing how a business works. Yet, you don’t hear about it very much. There’s an obsession about all the other stuff like gains, losses, gallons-per-hour, and profit-per-service-call, but the one thing that’s the most important — weather — doesn’t get a lot of attention.

A lot of fuel dealers focus on managing their businesses more tightly by using business intelligence or Microsoft Excel. Weather and gallons per degree day should be right up there near the top of the list. It’s a real eye-opener once you take a look at it and we’ve had people thank us for pointing it out.

So how do you improve gallons per degree day? Because obviously the more gallons you sell per degree day, the more volume and margin you have.

The answer lies in the new will call and call on demand (COD) customers.

Embracing Will Call and COD

We know automatic delivery customers are a cornerstone in this industry, but unfortunately, their total numbers simply aren’t growing at the rate fuel businesses need them to. They are a glass ceiling and you’re only going to sell so much fuel if you’re only in the automatic delivery space.

The idea here is to sell more gallons per degree day when it’s warm, but that requires some new thinking around a profile of your business.

Let’s take a look at an example of the impact of changing your focus.

Let’s use 600,000 gallons for January. That’s roughly a 3 or 4 million gallon company. That’s what they’re going to do in January — around 1100 degree days which is an average between the Northeast and the Mid-Atlantic market. For a 3 or 4 million dollar gallon company, they’re roughly around 550 per degree day in gallons.

That 550 keeps your whole business and staff intact, but if you increase that number to 750 by utilizing the new online customer (this is quite modest, but we’ll use 750 because this is a real-world example of a company who embraced the on-demand space), you end up selling 750,000 gallons in January.

We know dealers who do multiples of this 150 extra, but that’s only because they’ve embraced the on-demand market after a bit of a struggle to get there in terms of their philosophy. Now, they’re delivering 750 in January. That equates to 1400 degree days so they’re able to “make it colder” simply by adding incremental volume to their business even when it’s warm by embracing a new breed of customer.

So, you can control your growth if you embrace a part of the market that’s growing. You maintain your gallons per degree day and the impact is the same as the weather being 20% colder than it actually was.

Take advantage of gallons per degree day — utilize the new heating and oil customers — modify your philosophy. Growing gallons can be that simple.