My first quarter (October - December)

As a District Manager, my main responsibility is to maximize profitability through strategic pricing of inventory. Universal Florida just experienced one of the worst quarters of both “stock outs” and “unsold inventory”. Although Florida is experiencing exceptional growth, Universal’s operational profits are far below the company average. In order to gain a better understanding of why Universal was struggling in these areas we reviewed, analyzed and re-built our cost structure.

We began rebuilding our cost structure by utilizing a break-even calculator. Using the break even calculator we successfully managed to more accurately forecast our costs and sales. We did this by reviewing the following: Fixed costs - costs that are the same regardless of how many rentals are sold and Variable costs - recurring costs that we absorb with each unit sold. With a solid understanding of these two variables and an idea of current general economics we were able to successfully set competitive prices.

Given Universal Florida’s poor sales record yet increasing economic growth, my team and I decided that “priced-based costing” was a suitable strategy for our profit growth plan. Price-based costing allows us to start with a price consumers are willing to pay when they have competitive alternatives. If competitive prices are low we simply whittle down cost to meet that price. This way if we experience new competition, we can lower our prices yet still turn a profit.

Here is how our numbers looked in our first quarter:

Capacity Utilization

July --------45%
August -----46%
September -51%
October ----62%
November --70%
December --76%

With an average weekday price increase of $2 per rental and an average weekend increase of $3 per rental we were able to increase capacity utilization at +8% per month. A good start but there is still room for more opportunity.

Monthly Net Income

Revenue from Weekday Rentals -----$12,864,074------- $12,864,074------- $12,584,420
Revenue from Weekend Rentals -----$2,489,222-------- $2,830,573 --------$2,971,493
Total Revenue----------------------- $15,353,296 -------$15,694,647 -------$15,555,913
Variable Costs -----------------------$6,278,379 ---------$6,449,054------- $6,561,964
Weighted Average Profit Contribution $9,074,917 --------$9,245,592-------- $8,993,948
Weekday Contribution ---------------$7,830,306-------- $7,830,306-------- $7,550,652
Weekend Contribution -------------- -$1,244,611--------- $1,415,287--------- $1,443,297
Vehicle Inventory Costs --------------$4,942,801--------- $4,942,801-------- $4,942,801
Net Profit Contribution ---------------$4,132,116---------- $4,302,791 ---------$4,051,148
Other Fixed Costs --------------------$3,295,201 ----------$3,295,201--------- $3,295,201
Net Income -------------------------- $836,915------------ $1,007,591 ---------$755,947
Accumulated Profit ------------------ $0------------------- $1,007,591--------- $1,763,538

In October we simply wanted to get a feel of economic conditions and competitor pricing so we lowered the price of rentals just below the competitions. This price changed allowed us to increase capacity utilization however, it did not benefit our net income. To make up for October's losses we increased prices in our higher market share divisions (Miami and Tampa). These price increases allowed us to make $1,763,538 to finish the quarter.

New strategy - keep prices slightly higher than the competitors in Miami and Tampa - we have more market share!!!