Fuel & Used Trucks Prices SOAR! [What it means for your lawn business]

Hey, everyone, I'm Mike Andes and this is the Business Boot Camp podcast. Today we're going to be talking about how rising fuel prices and the cost of used trucks is going to dramatically change your business. And we need to stay in tune. What's happening with the CPI data that was released today from the government? Let's talk about it and what how it's going to affect your lawn care business.

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And on all the rest of it, very, very scary stuff. That that's going to be the news headline. Now, month over month data, in my opinion, is much more important. So we're going to jump into the actual data today. We're going to actually look at the BLS document, the summary that they give for the CPI data. But the 0.6 is actually lower than the month before, which was 0.8. So it's actually a good thing that that's why the market today, like growth stocks actually did good, is because we're starting to see the month to month data, the, the inflation data that's just cpi. Consumer Price Index tracks the prices of things the consumer. We're starting to see that actually come down. Even though it's very high, it's starting to trend down, which was expected. We expect this to be transitory, but I want to zero in on the two things that are actually driving this inflation, the majority of it, and that is used vehicles and energy prices, most, most importantly gasoline and how it's going to affect our landscaping business. So I'm going to Go ahead and open up. Let me go ahead and just share the screen here. I'm going to go ahead and open up the actual consumer price index summary and let's go through it together and zero in on some stuff that you might not see on the news because not anything fancy or flashy. So there's our 5% year over year data. There's our 0.6% inflationary number over the course of the past month. This is the month over month data from the preceding month. And then this is the 12 month adjusted since May of 2020. So as we go down here, there's a, the ones I want to point out here is number one, gasoline right here, 56.2% increase in the price of fuel, gasoline over the past 12 months. You can see it really spiked in December, January, February. And we've seen that at the pump, the price of fuel going up. And for many of us in the lawn care, landscaping industry, we, we run trimmers, mowers, trucks, et cetera, everything running on fuel, unless you've already adapted the battery technology, which by the way, that's going up too. But when we look at gasoline, the price is going up significantly and affecting our profit and loss statements. Now I want you to focus near here at the bottom. Used cars and trucks over the past 12 months, 29%. But this is what I want you to zero in on. Over the past two months it went from, it went 10% up in April and then 7, 3, 7.3% up in the month of May. So literally we're on almost a 20% increase in the price of used vehicles in just the past two months. So let's talk now about what caused this. Okay, so we'll probably come back to this document a little bit here I want to talk about before we jump out of the document. These are the, this is my point here. Look at the 12 month data, 29% here. And then we look at energy and more specifically the gasoline inflation of 56%. Those are the big ones. When you look at like things like food over year over year, it's like 2.2. You know, we look at other things like electricity, you know, 4, 5, 6%. What's really driving these numbers are transitory things that I feel are going to go away. That's why I don't believe there's going to be hyperinflation. I do not believe we're going to see 8, 9, 10% inflation. I only it's going to happen. The reason is because these things that we're seeing in the fuel and used car markets are going to work themselves out over the next five to six months, in my opinion. So let's go ahead and dive deeper into what these numbers are not telling us. And that is, why is this happening? Let me go and remove the screen. So why is the. Why are used car trucks prices going up? The number one is there is a semiconductor chip shortage. Semiconductors are used in the production of new vehicles from Ford, gm, Dodge, every single vehicle made the day. Now you say, well, why does that affect used vehicles? Well, if you put a constraint on the production of new vehicles, then the price of the used vehicles gets inflated because now people can't go buy a new car. And at the same time that there's a chip shortage caused from this, the supply chain issues that happened because of COVID and we had the Suez Canal, like that's getting blocked now. You block the whole world trade for a week or two. Like when that stuff starts to happen, it puts pressure on the supply chains. And now you got like Ford, Tesla, they're shutting down. They were shutting down their plants like a week or two because there was nothing they could do. There was not enough chips to actually make enough vehicles. At the same time, they had supply chain issues. And there was a problem just even getting a steel, like steel for the vehicles to make it. There was a steel shortage for some period of time. And not only did you have a supply issue, you had a demand issue. Demand was going up at the same same time that that supply was going down. When that happens, the price is going to go through the roof. What was causing the increase in demand was the fact that now people were moving to the suburbs outside of the cities because of COVID And now they need a car. They used to use Uber. They used to use Lyft. Well, now they're buying a vehicle. So it's putting even further demand on the new car market. And there's nothing there. There's not enough supply. So what happens? You used car prices go up. Also what happened last year when Covid happened and people stopped traveling is these rental cars, the rental car companies ended up selling their vehicles because now the value of those used vehicles was significant. They actually were making profits on selling used rental cars to the public because there was a shortage. And that's what happens when you have supply go down. Demand goes up. Price now goes up. People, they sell. So they sold in order to get through Covid. They sold it off of their inventory. Well, now all of a sudden people are traveling a Lot like the price of airlines, you can look at the CPI data is going up, people are traveling again, people are renting cars again. So what's happening? Those rental car companies are now trying to buy, they're trying to buy cars. So even putting further supply issues and more demand on, on the car market and the production of new vehicles. For example, in April, if you look at the CPI data, 16% increase in the price of rental cars. In May, 12% literally like 30% increase in the past two months in the cost of a rental car. And if you travel last year versus now, it is so much more expensive to rent a car. Everything with travel people because of the pent up demand and amount of people that are now going into these markets with money and willing to pay a premium price. I think there was like 90 new airlines. I saw, I saw a headline somewhere, 90 new airlines started in 2021. Because there's gonna be a massive demand. And so those prices will come down. It's a natural supply and demand curve, supply and demand issue. And that is if price goes up and it becomes really profitable to now have an airline, guess what, there's gonna be more competition, there's gonna be more supply coming in the marketplace and that price will eventually come down. All right, so that was used trucks. Why is there, why are trucks so expensive right now? That's why. Those are some of the reasons. Not all of them, but some of them. Fuel. Why is fuel so expensive right now? There's a bunch of reasons going to this. The Colonial pipeline a few weeks ago had a hacker, you know, hacking group come in and they paid them a ransom via Bitcoin to basically get them to allow them to turn operations back on. But that week or two of delay caused a massive fuel shortage in some parts of the country because the Colonial pipeline supplied so many people with fuel and that caused the price again, supply dipped. What happens? Price goes up. Okay. And so, you know, demand went up too because people are now filling up canisters in the back of their truck with fuel. And so the price went up again. The Keystone pipeline. Today they confirmed like that that's no bueno. Not happening. The Keystone pipeline is not happening. And pipelines reduce the cost of fuel typically because it's more efficient to build a pipeline and transport fuel in a pipeline than it is to truck fuel back and forth between places. It's very inefficient, it's very expensive. And guess what? At the end of the day, the person at the pump is going to pay for that. Extra cost. And right now trucking is very, very difficult to get truck drivers. Truck drivers are in a massive demand right now. And with the whole unemployment benefits and the pandemic unemployment assistance and the plus up that's been given to people on unemployment, it's very, very difficult now to find those drivers to transport that fuel across the country. There's no pipeline in the making. Even the current political environment in terms of taking away the rights to, to have certain areas for oil and rich resourced areas that started with this new administration, it's going to continue. Fuel prices are going to stay high and that's why alternative energies like companies like Tesla or nphase, I'm very bullish on even companies like Neo and China that I'm looking at and, and Sunpower and Sundial, a whole bunch of other companies, they're invested in this green energy movement because the price of fuel goes up. It's going to allow these other, especially if there's regulatory credits and tax credits being given if you use alternative energy. And so all of this puts the price, puts pressure on the price of fuel. That's why we're paying, what is it, 56% more on gasoline now than we were 12 months ago. And not to mention the fact that I was talking to some people.

And they worked in the pipelines, are not in the pipelines in the oil fields. And they said look, the, the hardest thing right now is just getting people to come back to the oil field. They laid all these people off and they don't want to come back. What does that do? That increases the price of producing the oil. And again you're putting pressure on the supply and demands just as high, if not higher because now people want to go travel. It's going to cause the price to go up. So I really feel like both of these things, the used car market, used vehicle market and fuel prices are somewhat transitory. I feel like fuel is going to be expensive for the next few years and prices probably in the foreseeable future. However, I really feel like used trucks are going to eventually even out. Eventually the chip shortage will be like, the supply will catch up. There'll be AMD and Micron and all these other companies will eventually ramp up production. The fact that they will meet the supply needs, you'll get Ford and GM making their trucks again. That will resolve itself eventually. Like in September when the unemployment assistance drops off. You're going to get people to go back to trucking. You're going to get people back in the oil fields, back in the oil rigs. And that supply issue, I feel, will resolve itself somewhat now the colonial pipelines back up. And I really think that come September, a lot of these labor shortages are going to be somewhat resolved. I'm seeing a softening already. And so the bottom line, from all the stuff that we shared today, there's a few things I want you to take away. Number one is the labor shortages that we have experienced and are still experiencing today. I feel we're going to start seeing a softening. There's opportunity right now to h hire people that have not had work for a while. Some of them came from the airline industry, Some of them came from the restaurant industry. Some of them, you know, they were just unlucky with what everything that happened last year. They got an unemployment, maybe they had a kid, maybe they moved and they just haven't got back into the workforce. There's an opportunity there. Some people say, I don't want to hire people who haven't. Haven't been taking free checks from the government. Okay? But there are people that actually had circumstances, and there's going to be opportunities to hire them if you are ready and willing and able to. To hire them now. So that's opportunity number one. The next thing is you got to think about the fact that used trucks are extremely expensive right now. We used to spend no more than five or six thousand dollars per truck on our fleet. Now we're looking at least at 12 to $15,000 for a used pickup truck. That is no better than what we were spending the same truck half even two years ago. So we haven't purchased trucks in the past few months. It's been crazy. You could almost go buy a new. A new one for to the used one. It's ridiculous. And so what I would be challenging if you're a lawn care landscaping industry, is can you get by with your current truck setups without needing to buy more trucks right now? Can you wait six months? Because I really believe in six to 12 months, the prices will become more reasonable on the used truck side because the new truck side, with the chip shortage being decreased, in my opinion, over the next six months, there will be a price softening. So what would I be doing? I'd be trying to wait till this winter, try to get through the rest of this season without buying more trucks. What does that mean? Maybe potentially, instead of going and buying a new truck, maybe you double up the amount of people inside of one truck Instead of having a. So, you know, five solo guys going with five trucks. If you're going to hire sixth one. Maybe instead of buying a sixth truck, you just put that person inside of the existing crew. Existing truck going out and double up again. Why would I want to go get another truck when it's going to cost me more? And in six months it's going to be worth less, even more. And the fuel prices are through the roof. Why would I want to go buy another vehicle driving around all day long when fuel prices are also inflated? Oh, and by the way. Yeah. The cost of. Let's pull this up. It's in here somewhere. I was reading. Let me pull this up. The cost of insurance has gone up like 16% in. In the past 12 months. Let me really quickly find this right here. Car rentals, increasing this. Car rentals. Here it is. Vehicle. Motor vehicle insurance rose 16.9% over the past 12 months. What that means is your trucks that you are now purchasing at an inflated price and being fueled at an inflated price also are going to cost 17% more on insurance than they did a year ago. The prices of things are going up and we've talked about what that means in terms of your pricing and your need to make sure you are consistently raising your prices to stay up with the rate of inflation. We've talked about what this labor shortage is going to do and that this is an awesome opportunity. I felt like this was going to happen more in August, right before September. But we're already seeing a softening across our system of people being able to find hires. We're getting people applying for working now without us having to advertise. That's not in all markets. But I'm starting to see a softening across the locations of Augusta Lawn Care. We have locations pretty much across the whole country. I'm starting to see locations and pockets where people are applying without ads. That was not the case two months ago. Two months ago we could not get people to show up at command center for Augusta Lawn Care for anything. And now in the past couple weeks, we've hired 10 people and seven of them are going to be high quality their training. They're ready to start next week. We've been training them for the past few weeks. They're going to be great. That was not the case a couple months ago. And so I feel like there's a softening. I feel like as we go into July and August, there's going to be an opportunity to pick up people that have been displaced, been on unemployment and before their unemployment assistance runs out, they're going to be looking for work because the music stops on the game of musical chairs and the music has been the fact that free money has been pumping out from the government. And eventually the music stops and everyone's going to be trying to find a chair to sit on. And right now the smart people are trying to find a job sooner than that. So my takeaway can you make your truck stretch just a little bit further this spring into next spring, throughout the winter, buy your next vehicle and can you take advantage any possible way right now of the softening labor market? It's not soft yet, but going into July and August, I think there'll be great opportunity for the businesses that got through Covid, got through all this inflationary stuff, kept their team together, and the people who laughed at me about profit sharing and using P4P to be able to give some ownership to the employees, they're the ones who lost out because their entire team went on unemployment. This is the time where it proves to have a good team culture and pay profit, have profit sharing, have pay for performance where they feel somewhat like the harder they work, the more money they make. This is when that's important. It's not important when everyone wants a job and people are lining up, but when there's pressure for them to leave because the government's giving out money, you better make sure you have a strong culture. On Mike Andy's Business Boot Camp podcast. I hope that was helpful. CPI data came out today. It was fun. We'll see in the next episode.