If you’re in the propane marketing field, you’re likely aware of the sharp price increase of propane tanks lately. In fact, costs for tanks have doubled in the last couple of years. This is largely due to a shortage of steel, coupled with a higher demand for tanks. This means that even when someone can even afford to buy new tanks, they won’t get delivered for several months. This understandably puts retailers in a tough spot when they need to buy new tanks to keep up with business growth. Fortunately, there are some actions retailers can take to reduce the need to buy new tanks altogether. Take a look at the top four options to try at this time.
Make Sure the Tank Rent Is Worth It
As you think about your customers’ tanks, there are probably some that have used very little propane in the last year or two. They might pay tank rent, which may make it seem worth it to leave the tank on their property. But that’s probably not the case anymore now that tanks are at a premium. When you run the numbers, you might find it’s not worth it to only make tank rent, as you could make more money by putting the tanks in different locations that will actually use gas. That way, you’ll profit from both the gas usage and the tank rent, rather than just rent alone.
Think About Downsizing Tanks for Some Customers
While you’re taking a closer look at your customers’ propane use over the years, you might notice that some are using a lot less propane than they used to. This means they might have a large tank that’s not being used to its full potential—and this indicates that you’re missing out on profits. So consider replacing those larger tanks with smaller ones. That way, you don’t have to go out and buy any new, large tanks to serve new customers who plan on using a lot of propane.
Reconsider Loaning Tanks to Customers for Free
When you started your business, you might have loaned propane tanks to your first customers without charging extra so you could get their business by keeping costs low for them. But if you’re thinking about buying new tanks and don’t have the money to easily do this, now may be a good time to reconsider those free rentals. Let your customers know they’ll need to start paying for the tanks or you’ll need them back. You should start with the customers who use the least amount of propane.
Raise Your Rental Prices on Tanks
Finally, think about increasing your tank rental prices. After all, prices on new tanks have gone up considerably in recent years, so it makes sense that your prices for rentals should do the same. Otherwise, you’ll have trouble affording new tanks to keep serving customers, making it hard to grow your business or even keep current customers happy.
Basically, if you want to stay profitable and serve as many customers as you can right now—despite the tank shortage—you’ll have to make some changes to your business model. While in the past, you could have been more focused on making a profit largely through selling propane, now you’ll have to be more strategic when it comes to the tanks so you don’t have to buy new ones. This is just one way to maintain your profitability in this industry. At PT Risk Management, we have several strategies we use to help you minimize your risks and boost profits, such as through contract reviews and risk assessments. Contact us today to learn more about how we can help your company in the propane industry.