PRI Magazine January 2013 : Page 80
WHILE acknowledging that eco-nomic conditions are still uncertain, respondents of Performance Racing Industry ’s 25th Annual Racing Business Survey were increasingly opti-mistic about 2012, when compared to the previous two years, and many even reported increased sales. When asked about gross sales volume for 2012 versus 2011, 41% reported that sales increased, 32% claimed that sales stayed about the same, and 27% noted that sales actually declined. This is a positive sign for the racing industry as would you describe your primary business? Q : How 31% of survey respondents in both 2011 and 2010 said their sales increased over the previous year. Regarding what these businesspeople expect for sales in 2013, an impressive 55% believe sales will increase, 37% expect sales to stay the same, and only 8% think their sales will actually decrease. Expanding into other forms of racing and taking on additional business services was a common theme in 2012. When asked to describe their primary business, the breakdown was 24% racing retailers, 18% engine builders, 20% both racing retailers and engine builders, while fabricators made up 18% of the respondents, and 20% claimed to be involved in other types of race-oriented businesses, such as marine performance, karting, warehouse distributors and more. When asked to describe their customer base, many respondents noted more than one market, so the results tallied to over 100% to account for the different types of continued on page 84 would you compare your gross sales volume for 2012, versus 2011? Q : How type of product or service contributes the most Q : What proﬁ t to your business? Retailer Engine Builder 24% Sales are the same Sales increased 18% 20% Retailer & Engine Builder Fabricator 32% Sales decreased 41% 18% 20% Other 27% • • • • • • • • • • Bolt-on products Race car building Exhaust components Cylinder head work Engine hard parts Dyno testing Engine building Engine rebuilding Fabrication services Installation services would you describe your customer base? (More than Q : How one answer provided.) do you project for your sales in 2013? Q : What would you describe changes in your customer base in general? Q : How 51% 48% Road Racing 31% Stock Car 26% Modiﬁ eds 16% Open Wheel Short Track 15% Dirt Late Model 15% Off-Road 14% Other 75% Drag Racing Street/Strip 80 Sales stay the same Customers decreased Sales increase Customers increased 37% Sales decrease 29% 29% 55% Remained the same 8% 42% Performance P f R Racing i Id Industry January 2013 | J
25th Annual Racing Business Survey Results
Meredith Kaplan Burns
Retailing within the racing industry continues to evolve, and motorsports entrepreneurs reveal how their businesses changed in 2012, and the methods they used to increase profit.<br /> <br /> WHILE acknowledging that economic conditions are still uncertain, respondents of Performance Racing Industry’s 25th Annual Racing Business Survey were increasingly optimistic about 2012, when compared to the previous two years, and many even reported increased sales.<br /> <br /> When asked about gross sales volume for 2012 versus 2011, 41% reported that sales increased, 32% claimed that sales stayed about the same, and 27% noted that sales actually declined. This is a positive sign for the racing industry as 31% of survey respondents in both 2011 and 2010 said their sales increased over the previous year.<br /> <br /> Regarding what these businesspeople expect for sales in 2013, an impressive 55% believe sales will increase, 37% expect sales to stay the same, and only 8% think their sales will actually decrease.<br /> <br /> Expanding into other forms of racing and taking on additional business services was a common theme in 2012. When asked to describe their primary business, the breakdown was 24% racing retailers, 18% engine builders, 20% both racing retailers and engine builders, while fabricators made up 18% of the respondents, and 20% claimed to be involved in other types of race-oriented businesses, such as marine performance, karting, warehouse distributors and more.<br /> <br /> When asked to describe their customer base, many respondents noted more than one market, so the results tallied to over 100% to account for the different types of Segments. Drag racing accounted for 51%, stock car was cited by 26%, open wheel short track came in at 15%, road racing was 31%, street/strip was cited by 48%, and off-road was noted by 14%.This year we added the categories of modifieds and dirt late models, which came in at 16% and 15%, respectively.Also, many businesspeople noted marine performance, diesel performance, drifting, karting, hot rods, truck and tractor pulling, vintage and street performance as their most popular markets.<br /> <br /> It appears that customers also are more optimistic, as customer spending for 2012 increased for 26% of these racing businesses, 37% seemed to spend about the same as the year prior, and 37% reduced their spending. This is good news, as last year’s survey featured 50% who noted that customers spent less, and the 2010 survey cited 49% of customers spent less compared to the previous year.<br /> <br /> More businesspeople observed that the number of their customers grew this year at 29%, compared to only 15% seeing this trend in 2011. The number of customers remaining the same as 2011 was acknowledged by 42% of respondents.<br /> <br /> Twenty-seven percent of respondents noted that they did not add any new companies to their inventory in 2012. But 36% added anywhere from one to three new companies, and 21% added four to six.<br /> <br /> So what products are selling well?Some of the most popular products and services cited were bolt-on products, exhaust components, engine hard parts, transmissions, suspension components, race car building, cylinder head work, dyno testing, engine building and rebuilding, fabrication services, installation services, labor, machine work and transmission services.<br /> <br /> Most of the survey respondents were from established racing businesses.Forty-three percent reported that they had been in business for 20 or more years, 9% had been open for 16 to 20 years, 17% had been in business for 11 to 15 years, 14% had been open for 6 to 10 years, and 12% were open from three to five years. Only 5% had been in business for two years or less.<br /> <br /> Successful managers have learned to address and overcome challenges in the business climate. So we asked about some of the most significant business challenges our readers have encountered in 2012.Competition from the Internet was the most commonly cited issue, followed by poor sales, competition from large businesses, cost of fuel, cost of goods, government requirements and red tape, availability of credit and inflation. Surprisingly, not many people noted the closure of a local track or elimination of a certain class at a local track as the main factors affecting their business last year.<br /> <br /> Regarding cost of goods and services, we asked racing retailers about how many inventory turns they complete in a year. Thirty-eight percent cited three to five turns, closely followed by 36% that turn inventory zero to two times, with 13% citing turns of six to 10 times annually.<br /> <br /> Addressing those who charge per hour for labor or service, $71–$80 was the most common amount charged, at 19%, followed by $61–$70 at 14%, and $81–$90 at 13%.<br /> <br /> We asked engine builders about how much they spend annually on research and development. Six percent claimed that they spend nothing in this category, while 23% each cited 1–5% and 6–10%.The next largest amount was 16–20%, noted by 20% of respondents.<br /> <br /> Shipping can be costly depending on the business type. Fourteen percent cited no shipping costs, while 47% noted that they spend between 1%–5%, followed by 23% claiming they spend between 6–10% on shipping costs.<br /> <br /> An overwhelming 85% of respondents noted they own shop machinery, and 38% of those businesspeople said that they plan to upgrade at least one piece of shop equipment in the next 12 months.<br /> <br /> Regarding employee matters, most of the respondents are smaller shops: 20% are one-person operations, 59% have anywhere from two to five employees, 13% have six to 10 employees, and 8% have 11 or more employees. When asked if any employees were let go in 2012 due to the economy, only 14% acknowledged that they did, while 27% noted that they actually hired employees last year.<br /> <br /> Helpful Advice <br /> <br /> We wanted to find out how our readers are making changes to their businesses to cut costs and increase profits. Some of the most popular answers include: Having a presence at the race track to sell parts and service; paying closer attention to the business, such as the profit margins, identifying where waste occurs, and closely monitoring costs; close out slow moving merchandise, even selling it on eBay; consolidate work areas; reduce inventory; downsize; expand product offerings; move into new markets; move into a different facility; fire unproductive employees; hire quality employees; increase social media and website presence; focus on customer service, such as have the owner personally call customers and check in with them.<br /> <br /> Other responses regarding the best business decision made in 2012 include increase marketing and promotion; bought new equipment, such as dyno, crankshaft balancer, welding equipment, CNC machine, and cleaning equipment; purchase used equipment instead of new; buy from a small distributor who is willing to work with smaller businesses; and train employees.<br /> <br /> One helpful adviser can be found in a manufacturers rep. But, only 22% of respondents reported that they work with manufacturers reps. Those who use reps’ services noted that they help by offering advice; providing knowledge about products, especially new products; offering technical help; referring customers; and working to get the lowest prices. However, with all types of service providers, ask for recommendations from other racing entrepreneurs, as some respondents reported that some reps they have dealt with did not provide the help they expected.<br /> <br /> Marketing & Promotion <br /> <br /> Many racing businesses do not spend much on marketing, as 15% spend nothing in this category, 39% spend between 1%–5%, and 39% of respondents spend only between 6–10% of their budgets. Of those companies that do advertise, 23% cited their website as the most effective, while social media followed at 13%, and race track signage is still effective with 9%. The majority of racing businesses rely on a tried-and-true marketing method, as 74% marked “word of mouth” as the most effective option.<br /> <br /> However, one powerful form of marketing is email, when used skillfully. We asked if our readers maintain a list of customers’ email addresses as part of their contact information, and 67% acknowledged that they did. Of those who did, only 25% noted that they regularly email their customers with news of sales, new products, new services, and other store events. More businesses are recognizing the affordability and effectiveness of using email to announce their company’s marketing message, as last year’s survey reported that 55% of respondents kept their customers’ email addresses on file.<br /> <br /> Relatively new on the marketing spectrum is social media. Forty-four percent of respondents use social media to promote their businesses. The most popular options are Facebook, with 94% of social media users choosing this as the most effective method, followed by YouTube at 34%, forums and chat rooms at 32%, Twitter accounting for 25%, LinkedIn with 15%, and blogs following at 9%.<br /> <br /> Websites are often thought of as established promotional tools now, but still only two-thirds of respondents have websites.Of those, 36% take product orders directly on their websites.<br /> <br /> This survey featured answers based on sales results in 2012, and was sent to 11,012 racing businesspeople via email and through the mail, which included retailers of race products, engine builders, race car builders, and warehouse distributors. A total of 686 company representatives completed the survey.<br /> <br /> BEST DECISION 2012<br /> <br /> We asked retailer survey respondents about their best business decision in 2012 that either cut costs or boosted sales. Here are some of their thoughts:<br /> <br /> • Bought used equipment instead of new, and paid cash instead of financing.<br /> <br /> • Changed the method used to collect money for projects.<br /> <br /> • Forget about blaming the economy, Internet, or whatever and focus.Being proactive in marketing ourselves to attract business.<br /> <br /> • I bought a new diamond hone— one that a lot of people do not have—and with that I have picked up work. And I have been charging more to do that service.