Figuring out what to invest in, and when to do it, are often some of the most impactful decisions you make when running a business. However, the sheer number of options often leaves one feeling overwhelmed. One way to help mitigate those decisions is to develop a cash flow model so that you can see a comparison of the impact of your choices.
Upgrading your pumps is one of those impactful decisions, and we’ve gathered factors to consider when trying to understand the potential payoff from doing so. One example we studied showed that upgrading to new pumps that had media and EMV payment could generate over $70,000 in incremental profit in three years. In many situations, that alone is enough to cover the cost of the upgrades. That doesn’t even factor in the additional savings benefits from lower maintenance costs and enhanced fuel and data security.
Let’s check out the benefits of upgrading your dispensers to include media and EMV payment.
How will the investment impact my sales?
New pumps are generally credited with a volume increase of 3 to 7%.[i] On top of that, pumps with media allow you to promote in-store products. That means an increase in gallons and a tool to help generate higher in-store sales. If nearby competition has upgraded to ‘modern’ pumps and you haven’t, how many potential customers might be passing you by? For our model, let’s assume you get a 5% increase both outside and inside. If you don’t upgrade, how much business could you lose over the next 3 years?
How will my costs change?
When thinking through any investment, it’s important to consider if it will make you more efficient, or if it will just add additional costs. From greater security against fuel theft and payment skimming to a warranty that will handle most maintenance costs, upgrading to new pumps offers many ways to help you save over time. Additionally, handling any volume increase should be manageable without adding new staff or other costs. As a result, any profit margin generated should fall straight to the bottom-line site profits. Industry data suggests that an inside sales margin of 28.8% is a reasonable number.
What is the impact on my businesses value?
Regardless of your long-term plans, the value of your business will always be important to consider. An increase to your fuel and in-store sales should translate into a higher value of your site, which then provides you peace of mind regarding your financial security.
Using a cash flow model to determine the impact of an investment on your stores profits and costs can help you make a more informed decision about when and on what to invest.
[i] There are a number of factors that impact the results you will experience based upon local market conditions.