The First Attempt – Propane Tank Home Delivery

I had a clean slate with nothing on it.  I had decided to embark on this journey and now I didn’t know what to do.  I was trying to think of some business that I could do in my spare time that would solve a pain that people have.  I remembered when I lived in DC (we had just moved from there back to California less than a year ago), I loved the propane tank delivery service that delivered propane to my door.  I love to grill because it’s a simple way to make a tasty meal.

My wife refuses to learn how to turn on the grill so I am the official griller at my house.  I always hated going to get new propane and carrying the new one home in my car — convinced the car would blow up — and then hauling it to the grill to change the tank. When we moved to DC, I remember my mother-in-law and I driving all around DC and the Maryland suburbs looking to find a place to buy a new propane tank.   

One day I was dropping my kids at pre-school and saw a yard sign for Propane Taxi. I looked them up and realized that they would deliver propane directly to me at about the same cost as going to a place that sells it and schlepping it back home. I found great satisfaction in ordering a new propane tank online every few months, putting the old one on the porch and a new one arriving.  

I decided that this might be my first Side Hustle.  When we moved back to California, I realized that there was not a similar service here.  The first thing I did was look for a local Small Business Development Center (SBDC) in my area.  When I had worked in Silicon Valley at Intuit, we partnered with SBDCs and it’s the best kept secret for entrepreneurs.  They give you business advice at no charge because the government funds the initiative to help drive new small business.  Check out this link to find one near you:

https://www.sba.gov/local-assistance/find/?type=Small%20Business%20Development%20Center&pageNumber=1

I went two times and met with a consultant named Clyde.  He gave me very specific information on how to start a business in California, what forms I needed to fill out, fees I needed to pay etc.  I kept those notes and refer to them through my Side Hustle Journey. I spent a few months obsessing about the idea, wrote a business plan but finally decided the following:

1. It would be too hard to do as a Side Hustle with a full time job since I wasn’t willing to do the deliveries/pick at the crack of dawn or at night

2. The margins are so unpredictable, someone local could drop their prices to undercut me and possibly put me out of business.

3. I wanted to find a Side Hustle that was home based and/or that I could still make money when I was on vacation.  I opted not to do the propane delivery service but it got my creative juices flowing and it made start this Side Hustle Journey.

Below was my Business Plan.  I put an X where I had put people’s names.  Feel free to “borrow” any of it but please send me a note in the “contact me” section so I can cheer you on.  I still think there is a “there there” with little or no competition but I just didn’t have the time or energy to put towards it to make it work.  

Goals:

• Make a little extra income in the local market but the main goal is to create a business model that I can replicate and franchise (i.e. run local business for 6-18 months to develop processes, work out kinks and collect data to be able to move to Stage 2).
• I want my son to learn technology (creating websites etc.), see how a business works and have responsibility of doing some real work.
• I want to learn how to run a small business for this and/or future businesses.
• I want to create a business that has residual income and that I can have flexible hours with little to no travel.  Ideally, I would make this my main job (with flexibility) in the next 3-5 years making at least what I do now but work towards being able to step away for extended vacations and/or scale down hours while having other people run it but I still make money.
• Allow me to keep the company or sell the company at a nice profit.
• I want to have fun!

Mission statement:

We are a customer service business and will be known for treating the customers with respect.  We will fill the need in unmet markets by delivering and disposing of propane tanks and other products to residential customers.

Competitors:

There are companies that deliver professional tanks but the only obvious competition for residential delivery is Propane Taxi

Propane Taxi- “Stop lugging that tank”. They are a privately held company founded by Jason Sablof.  They were founded in 2006 , based in Sterling, VA, when Jason realized there was an unmet need for residential propane delivery.  The current CEO is Scott Balwinksi. They operate in cities on the East Coast, South East and Central US (i.e. Philadelphia, DC Area, Atlantic, Dallas and Austin).  Nothing yet on the West Coast.

• They have their own facility in Sterling, VA.  Unclear what they do in the other cities.
• Charge $24.99 for exchange delivery and $58.99 for spare/new tank (at least in DC where we were customers).
• They pay their drivers “up to $30/hour”.
• Forklift Propane Exchange
  • Can’t find pricing on website.  Looks mostly commercial.
• Local competitors
  • Kamps Propane
    • Say they deliver in Sacramento and Placer County but the website also says San Jouquin, Yollo and El Dorado Counties.
      • Website is not great- looks like they deliver commercial tanks but only do residential tank refills at their refilling stations.
      • Can’t find pricing anywhere on website.
• This market is ripe for competition.  It is a first mover business so timing is important.
• Most of the other propane delivering companies are gas companies who deliver mainly commercial tanks.

Stage 1:  Start local business

• Start business with delivery in Davis, CA and Woodland, CA.
  • Things to do
    • Find propane distributor
      • Blue Rhino would be ideal since they are national and Franchisees could go to one of their outlets
      • Pick up Propane
      • America’s Gas (Home Depot uses them)
    • Or find the cheapest tank exchange local place to pick it up
      • Home Depot
        • Costs $19.97 for exchange and $49.22 for new
      • Costco
        • Don’t do refills on tanks
        • Have WSN Import 20 lbs.- empty tank $24.99
      • Target
      • Uhaul
        • $3.19 per gallon
    • Or do tank cleaning and refill ourselves then re-label
      • All Star Rents (Davis)—they refill at $15.99/tank. This seems like the best option so far.
    • Want to re-label it with our label, not theirs.
    • Figure out costs:
      • Local SBDC
        • NEC SBDC Capital Region, One Capitol Mall, Suite 300, Sacramento, CA 916-319-4268
        • Meeting on 5/25 with Clyde at in Rancho Cordova.
      • Attorney
        • Do I need one?
        • Talk to X (friend who is a tax attorney)
        • Ask X who she uses
      • Figure out a name
        • Good Dog Propane
        • Good Dog Propane Delivery
        • Good Dog Delivery
        • Propane to you
        • Propane and more
        • Deliver to your door
        • Deliver to you (already food delivery that is “wedeliver2you”)
        • Propane delivery
        • BBQ to you
      • Incorporate company
        • Bizfilings
        • Incorporate.com
        • Intuit
        • Etc.
      • Look at other software options
        • G Suite by Google
      • Buy domain name
        • Go Daddy
      • Find branding person
        • Would love to have dogs in our ads and have my dog be the poster dog
        • X has one (get her name)
        • Upwork.com
      • Website creation
        • Wix
        • Intuit Websites (Homestead)
        • Word Press
        • Weebley
      • Payment solutions
      • Figure out CRM and email apps
        • Do they integrate with
          • website
          • mobile app for scheduling
          • payments
        • Can they track data and allow you to drill down?
          • Dashboard for national vs. franchisee?
          • Hours worked vs. revenue
          • Marketing data
            • Open rate
            • New customer spend
            • Repeat customer spend
            • Track referrals
            • How many emails before purchase/upsell?
            • Option to use credits
            • Track Birthdays
      • Figure out financials
        • QuickBooks
      • Figure out taxes
        • TurboTax
      • Research how much Intuit can do of this (i.e. Small Business Starter Bundle):
        • Incorporate
        • Website creation
          • Homestead
        • Credit card payments
        • CRM (QuickBase)
        • Mobile apps
          • 3^rd party developers
        • Small business finances
          • QuickBooks
        • Taxes
          • TurboTax
      • Research Franchise tradeshows and look at attending in 2018
        • Franchise Expo
  • Create business in website in summer and early fall
  • Launch business in fall
  • May need to hire a delivery person to handle if I can’t do before work or on weekends
    • UC Davis student

Stage 2: Franchise business

• Hire someone to handle all the deliveries in the Davis/location
  • Pay by drop off not by the hour i.e. $5 a delivery.  Since everything is ~20 minutes away at the most, they could do ~5 deliveries an hour if they are efficient
• Find 1-2 beta Franchisee sites and offer significant discount (or waive upfront cost) but Franchisor will still get revenue share
• Find a few Franchisees
  • LinkedIn?
• Franchisor:
  • Owns customers
  • Does national marketing
  • Gets ~20% of all gross revenue per Franchisee
• Franchisee:
  • Fills out NDA before first conversation.
  • Must have car, valid license and insurance.
  • Must be able to lift ~50 lbs.
  • Will have rights to a specific radius of their house (i.e. 10 miles).   If they want to negotiate more, that is up to the Franchisor to decide i.e. could be more in rural and less in urban.
  • Pays upfront an initial low fee (i.e. $7,500) to Franchisor and then a commitment to spend another amount (i.e. ~$1,000) for local marketing in the first 6 months (must show receipts).
  • Has 6 months to get gross revenue to $X/month (i.e. $1,000).  If not Franchisor has option to buy back Franchise at $X (i.e. $5k) and the Franchisors has exclusive rights to customers.
  • If company is sold, Franchise has option to buy their territory and rename it for $X (i.e. $50k).  They keep customer list but customer list is also owned by Franchisor and may be sold to new owner.   Make Franchisee agreement tight on this with a non- compete clause that is broad i.e. “cannot get into any home delivery business”.  If Franchisee starts a competitive company in this or any similar space, put legalese that they agree to have to pay a large penalty of $X ($100k).  If they take the customer list for any other business venture without Franchisor authorization, we will sue.
  • If they Franchisee uses the customer list for anything other than the Franchise, they have to have it approved by the Franchisor and pay the Franchisor a % (i.e. 15%) of those gross profits.  The Franchisor is able to contact customers directly when there is a question of the list being used for other business purposes.
  • If they refer another Franchisee, they will get either an amount in cash (i.e. $5k) or double to triple that in points that can be used to purchase additional products or services (ie.$10k marketing or merchandise credit).  This will be paid out when the referral operates successfully for 6 months (have specific data- i.e. they must ramp up to at least $1,000/month in gross sales in 6 months).
  • Must commit to advertise locally- could be town paper, school paper etc (print or online), grocery divider, booth at local festival etc.
  • Must do at least 1 donation to local school or sports team – minimum $100/year.
  • Must do 1 volunteer activity in community and wear company shirt
  • Must order and pay for logo shirts.  Delivers must wear company shirt at all times.  Can wear with jeans, shorts etc.
  • Must order company car magnet.  Must put magnet on car or truck when delivering.
  • Must order branded table cloth for shows and volunteer activities.
  • Gets X number (i.e.100) tank labels and then buys the rest at or slightly above cost.
  • Must not use religious or political references or anything regarding guns, pornography or tobacco in marketing.
  • All Franchisee marketing must be approved by Franchisor
  • Must treat all customers with respect regardless of race, gender, sexual orientation, nationality, religious affiliation, income level etc.  If Franchisor gets excessive complaints from customers (need to figure out how many) regarding any discrimination, Franchisee could lose their license.  This will all be in the contract.
• We’ll have a “Franchisee in a box” that will get them started when they sign on.

Franchisee partner program:

·      Tiered program

o   Bronze

o   Silver

o   Gold

o   Platinum

·      Everyone starts out as a Bronze and has to work their way up

·      Ways to work your way up

o   Monthly gross revenue

o   Local marketing spend

o   Referring new Franchisees

o   Customer acquisition

o   Increase in average customer spend

o   Points

·      There will be a point system for Franchisee’s to earn points.  Call it something catchy like “ProPoints”. Examples for acquiring points are:

o   X points for each new customer acquired

o   X points for each local marketing above the initial required amount

o   X points for each volunteer activity in local market that was company branded

o   X points for attending a local trade show

o   X points for referring a new Franchisee

o   X points for mentoring a new Franchisee

·      Points can be used for

o   Logo’d merchandise

§  Shirts

§  Car magnets

§  Table cloths

§  Water bottles

§  Bags

§  Pens

§  Refrigerator magnets

·      Each level will advantages

o   Bronze

§  Just basic things included as will be outlined in initial agreement (i.e. 1 free shirt, 2 car magnets, 1 branded water bottle).

o   Sliver, Gold and Platinum

§  Need to flesh this out but Franchisees will be given things at higher levels i.e. more marketing to their territory paid for and delivered from the Franchisor; better placement and possible extra advertising on Franchisor’s website; in person visit from CEO to congratulate them and brainstorm on business development .

General principals

• Customer service is key
  • Thank you notes after each order (either email or handwritten).
  • Emails or mailed cards for birthdays (with discounts).
  • Refrigerator magnet left with tank at first delivery.
• Customer gets first order for free by putting sign in front yard for 2 weeks.  Will be spot checked and if sign comes down before then, we’ll charge credit card full price.
• Delivery fee will be added into price of tank i.e. tank at retail outlets costs ~~$19.95-$23.95, our tank will cost $.27.95.
• Must have tank to spot specified by 7am the morning of delivery.  If not, will still deliver but charge the new tank price and refund difference upon new tank pick up appointment less a service charge (i.e. $5)- Propane Taxi won’t drop off a tank if the tank is not left outside so I think this is a competitive advantage.
  • i.e. New tank costs $49.95 from Blue Rhino and $63.99 from Pick Up Propane vs. refill tank will cost ~$26.95
• Customer will get discount (i.e. 1/2 off refill tank) for future tank with every referral who purchases.
  • Or we figure out a credit system (would need to build this into a CRM system i.e. QuickBase can do this)
• Considering charging for:
  • Weekends
  • Expedited delivery (next day or same day)
  • Grill hook up
• Marketing will be simple
  • Mainly referrals
  • Signs in yards (get discount)
  • Local marketing
  • Emails to customer base and purchased lists
  • LinkedIn
  • Google
  • Groupon

Data:

• How much gross revenue does the average Franchisee make per work hour?  i.e. each 5 hours/week ~$500/month.
  • Get this data from our business.
  • Get 2 beta markets (let them start for free or just the $5k for local marketing).
  • Get data from emails
    • Open rate
  • Get data from orders
    • Month that they purchased
      • Send reminder emails in ~5 months for new tank

Stage 3:

• Hire office manager/marketer to offload work from me and allow me to be flexible, vacation more and work remotely.
  • Can live anywhere
  • Pay nominal hour fee but bonuses for acquiring new business, improving processes or finding new Franchisees
  • Take over bookkeeping
  • Take over marketing (mainly email marketing)
  • Pay amount (i.e. $25) for finding per new customer in existing markets
    • Can find local lists
    • Can create national campaigns with existing lists
    • Come up with other ideas?
  • Pay a decent amount (i.e. $500) for finding each new Franchisee
  • Pay a spiff (i.e $100) for every idea that saves the company at least 10 times that and/or for new marketing ideas that will generate revenue.
• Consider adding new products
  • Grilling equipment
  • Grilling spices
  • Water tanks
  • Branded BBQ covers
    • College names
    • Sports teams
    • Family name
  • Propane tank monitors (Kamps Propane has this)
  • Branded tank cover (for grill and water)
  • Tank cover for spare tank
  • BBQ grills
  • Smokers
  • Water delivery? (check local markets)
  • Other ideas
    • Mosquito control
    • Partner will local or national business to deliver i.e. Ace Hardware to deliver
  • Partner will relevant businesses for discounts and revenue share
    • Food sellers (i.e. Omaha Steaks, Nugget, Safeway etc.)
    • Grill manufacturer (i.e. Weber)

Stage 4:

• Consider selling the business.
  • Customer list would be valuable.
  • Would allow Franchisees to buy me out.