Part 3 in a series
As we continue our series on setting up a new
wholesale shirt laundry, let’s read the diaries of two
drycleaners that have ventured down this path. You should be familiar
with what I’ve been discussing during the past few months. If you
aren’t, check out my columns in July and August. If those issues
aren’t around, check out the back issues on www.natclo.com
Consider these two scenarios that depict opposite
ends of the cost spectrum:
One of these guys has put himself into the shirt
business in a very conventional way. The other has used a much more
business-like approach. Who do you think will succeed?
Scenario #1: Just
to be a wise guy, I’ll call it Doom Shirt Service.
Scenario #2: Just
to prove that I sometimes must wear a sales cap, too, I’ll call
this one Tailwind Shirt Service.
Location
Mr. Doom: Doom
starts off in the back of his drycleaning plant in the area that used
to be used for something else. Rent is “free” and no
manager is needed as Mr. Doom plans to run it “on the
side.” He doesn’t actually admit that to himself, though.
Mr. Tailwind: Tailwind
strikes up a deal with a local commercial laundry whose business is
floundering. Rent is a bargain at $550 per month. Furthermore, he
struck up a deal to buy utilities from them. Although Mr. Tailwind will
visit the plant twice a day, he won’t be there 24/7, so
he’ll make his employees accountable.
Business plan
Mr. Doom: We’ll
get some accounts and then see how it goes.
Mr. Tailwind: There
is a strategic plan to offer quality and service at a price that is
competitive with what a drycleaner will probably spend to do his own
shirts, but we will absorb the headaches that they would incur. We
expect that this will be our key selling point. It will take time to
prove that we mean business.
The strategy will be to sell quality and service.
We believe that price is what you sell when you have nothing else to
sell.
Equipment
Mr. Doom: The
cousin of a friend of a guy in our association knows somebody that is
selling their “low-mileage” 1995 Unipress DAYV (yikes!) for
$3,000. How cool is that?
Doom was doing “wetcleaning” long
before it was called that, so he already has a front-loading washer
that will get him by until get things going.
Mr. Tailwind: I’m
in the shirt business! We spent a month researching the equipment out
there. We arranged visits with four cleaners in another state, then
drove 300 miles to press shirts on the five brands of machines that
they operated. I was amazed at how different the machines were!
Surprisingly, the machine that I thought I liked
the best turned out to be tough to learn on and supposedly a mechanics
nightmare. That was warning enough for me.
My choice was quite clear after all. The machine
that I became sure I wanted was one that had never considered. I spent
about $1,000 during this two-day excursion, but I am thrilled with what
I learned! It sure looks like I’ll be saving that $1,000, over
and over again, every month for the entire time that I am in business.
The hunt for the best price is on and although I don’t like the
debt that I will carry, I figure that the money would be spent in other
ways (maintenance, labor, utilities) if I had bought the wrong thing. I
did the same sort of thing for my washing equipment.
Marketing
Mr. Doom: All the
other guys in town are getting between 95 cents and a dollar per shirt.
They surely must be making money. Otherwise, why would they do it?
Because I am the new kid on the block, I will need to be a bit
aggressive in order to get customers. I’ll “low-ball”
everybody and come in at 90 cents per shirt, 85 cents if the customer
is a real “heavy-hitter.”
I have an advantage over others because the
drycleaning business is right there and can “carry” the
shirt plant until it gets going.
Furthermore, I got a great deal on my equipment.
That’s gotta be worth a nickel or a dime a shirt. It’ll be
pretty hard to figure out my cost per shirt because the whole business
is so tightly woven into the drycleaning business, but surely it is
less than my competitors, “I got no overhead.”
Mr. Tailwind: This
is the toughest part. I want my product to sell itself. I don’t
want to get customers because I’m cheap, I want to get customers
because I’m good at providing what they pay for: quality and
service. The trick is getting them to bite. I’ll offer shirt
service FREE for a week, maybe two, but then it will be full price.
I figure that I don’t want to give anybody
the impression that I can do shirts for 90 cents.
Any attempt to raise the price in the future will
look like pure profit, even if it’s after an introductory period.
If I introduce a new customer to my company by
offering shirts for 90 cents, when I try to bump it to $1.20 it will
look like I was doing shirts at cost and now want to make 30 cents per
shirt. A disagreement will ensue. Anybody getting shirts done for free knows that you
are investing real cash to prove that you are the best.
My accountant feels that I need to do X number of
shirts per week in order to break even. My business plan has me
increasing volume at a steady pace. I will be in the red for about two
years.
My customer retention rate will be very high
because I am giving customers what they really want, not what they
think that they want. They have always thought that what they wanted
was low price and standard quality. We firmly believe that they want
excellent quality and service that is not unlike having an on-premise
laundry and are willing to pay if you deliver on your promise.
We figure that we could either lose money by
cutting corners, lose money by charging too little or
“invest” money while we build volume and reputation. Only
the last option has a light at the end of the tunnel.
Logistics, workflow, systems
Mr. Doom: I went
with “waste-proof” tags to mark-in the shirts. This is
smart because I’ll economize on supplies. I won’t be
wasting tags, You know, using a strip of seven tags when I only need
four.
See how I’m thinking ahead here? Then
I’ll use a different color tag that will indicate the day of the
week that the customer wants the shirt back and I’ll have a
unique “code number” printed on each tag that will indicate
what store sent me the shirt.
Good thinking, huh? That way if we mis-sort a
shirt, we will know where the shirt comes from. That store will just
ask the customer if this is their missing shirt. I’m a genius.
Mr. Tailwind: It
was so easy to get roped in on sales talk that preached the
conventional methods of mark-in, work-flow, assembly and logistics.
Even though choosing one tag over another provided some sort of
theoretical savings on supplies, something was amiss.
The key to being better in this business is
getting more for less. That is, more productivity and profit for less
labor dollars. Surely the key had to be in managing labor. We became
convinced that the major cost of establishing and maintaining a shirt
laundry was labor cost because it is so labor intensive.
The major cost is not setting up the laundry
itself. Only one of the workflow systems seemed to be in total
agreement with this. The Tailwind System looked at the big picture and
reasoned that all procedures should be designed around a central theme,
that theme being the paramount need to have maximum possible
efficiency.
Every other “system” seemed so
fragmented and not tied together that “system” is hardly
the appropriate word.
Furthermore, software for running a wholesale
shirt laundry is available. We could do anything that we wanted with
this flexible system, all the while affording fast, efficient assembly
with low stress and no mistakes. There was no second choice.
Quality and service history
Mr. Doom: Well,
it’s OK and getting better. I’ve been telling my customers
that the problems that they complain about have been fixed. When they
were complaining a lot, I spent a bunch of time in the shirt department
and saw that Betty Ann, my star presser, was working very hard. I have
come to be sympathetic to her plight. She has been saying that the
shirts just can’t come out any better than this. She’s
right. When I try to press shirts, they come out worse.
I can’t believe that everybody wants all of
their shirts back the next day. There are way too many shirts to press
on Tuesday, so I’ve been telling them that it takes a little
longer to do a good job. It has only happened a few times when I had to
make a special trip to deliver a late order. Obviously, they
didn’t need them all of the other times.
One customer complained because I sent over that
shirt loose with no invoice attached. I can’t believe that he
complained about that! I know that it came from his store because of
the code that I have printed on them. All he has to do is ask the
customer if it’s his shirt. He was saying something about trust
and credibility when I hung up on him. What a pain he is! I don’t
need him. I have lots of other people who want to come to me. For 90
cents a shirt, they get a heck of a deal!
Mr. Tailwind: It
sure isn’t easy to do a good job all of the time. In fact, it is
an extraordinary challenge. It takes so much attention that I wonder
how anybody does shirts “on the side.”
I had to be very tough on my manager. He once said
something like “Shirts don’t come out any better than
that” and “you can’t check every shirt.” I
thought that I was going to have to fire him for a while. He insisted
on thinking like other shirt launderers; the old “what do you
expect for a buck?” attitude.
I figured that my time was best spent
re-programming him. It didn’t take long. I didn’t pressure
him to be profitable. That would cause him to cut corners. I pressured
him to give good quality and good service. I was convinced that
profitability would come with time.
The most rewarding thing was not losing customers.
Actually, we did lose two who left for a better price and then came
back within a month. That really boosted our confidence!
Giving great service was easier than we had
expected. The wholesale shirt laundry software generates, on demand, a
list of orders that are due. If we religiously complete those orders
first, we won’t ever falter. We also give a lot of credit for
giving good service to planning.
Some of the equipment salesmen insisted that a
double buck shirt unit could “easily” do over 4,400 shirts
per week.
They said “You’ll be able to press 110
to 120 shirts per hour for 40 hours. If you get two set-ups like this,
you’ll be good for years of growth.”
Something about this didn’t sound right,
even though the mathematics made sense. I recalled those plants that I
visited had more equipment than that and they were struggling to get
done on the busy days.
We heard a consultant say that you will process 55
percent of all the shirts that you’ll do in any given week on
Monday and Tuesday. This was the key to giving good service.
As an example, if we had gone with two double buck
setups to do, say 8,500 shirts per week, the reality would be that
we’d be doing over 4,600 shirts between Monday and Tuesday. We
would be working 12 hours on those two days.
I am sure that this would have led to some kind of
problems, if not with service, then certainly “bang and
hang” quality.
We sized our plant, not to do x-number of shirts
per week, but rather 30 percent of that number per day.
It cost a lot more money that way, but we are able
to give the service that our customers expect and they are paying a
premium for it.
Growth
Mr. Doom: My
accountant told me that I needed to do 3,000 shirts to break even. That
was so easy! Instead of charging $1 like I told him I’d do, I
“temporarily” cut the price to 85 cents. I was at 3,000
shirts within three months.
Mr. Tailwind: My
accountant told me that I needed to do 6,000 shirts to break even. That
was so hard! Everybody wanted a price break but I stuck to my guns. I
didn’t want to sell on price, I wanted to sell on quality.
Even though I offered that “free” week
of shirts, they were hesitant to drop their current shirt laundry for
fear that I turned out to be less than I promised. Also, they feared
that I’d be extra-attentive to their shirts during the trial
period and then quality soon would slip to a level that is basically
like everybody else’s.
When folks did bite, they started out giving me
half of their shirts, then by the end of the week, they were giving me
everything.
The best advertising (no surprise) was
word-of-mouth. When drycleaners got together at meetings and socials,
my customers would say things like: “My shirt guy isn’t
cheap, but all of my problems are gone now that I’m with him. The
customers are really noticing.”
This is the break that I need. It just goes a bit
slower that I’d like. I wonder why nobody believes me when I tell
them that we do a “perfect” shirt and deliver everything on
time.
Financial consulting
Mr. Doom: Huh? I
already have an accountant. He’ll tell me how I’m doing.
And if he tells me that I’m losing money, I’ll know that
I’m not really losing money. After all, I pocket some cash all
year long. I’ll tell him about that so I don’t look like a
moron.
Mr. Tailwind: Much to
my surprise, the more people that I talked to, the more it became
obvious that those that paid big money for financial consultants were
the ones who had no red ink on their P&L. There was surely a
connection.
I figured that if my accountant told me that I
lost money last year, he would be telling me about 51 weeks too late.
Overview
Mr. Doom: This
business sucks. Customers expect a perfect shirt, they want everything
back right away, they complain when you try to raise prices, they are
always threatening to go elsewhere.
It is way too busy on Tuesdays. If we stay later
to finish everything, my employees complain. If we quit
“early,” before everything’s done, my customers
complain.
I have learned, after losing some key employees,
that it’s better to let the customers complain.
If the employees are complaining, they make my
life miserable. They do a lousy job and then don’t come to work
the next day. I hired a couple of “helpers” to keep them
contented.
If the customers complain, they will probably
still give me shirts the next day. If they don’t, I can easily
replace their volume in no time. Letting the customers complain is the
better of two evils. They are easier to replace than employees.
Mr. Tailwind: This
is a tough business, but it’s starting to pay off. By making the
right investments initially, we had the room and equipment to grow
without taking on additional debt.
The deal that we made to buy utilities was very
important. This kept our utilities expenses from crippling us as we
were growing.
Critics said that we should “just do what it
takes to get in the business” and then grow if things work out.
That surely sounds like good advice, but it sounds full of negativity.
We never doubted for a second that we would
succeed because we knew that the customer’s needs were not being
met when we entered the business. Those needs being simply quality and
service at a fair price.
Everyone else in the business was putting price
first, then trying to figure out how to do things right afterwards.
This surely sounds wrong, because it is.
Many of our advisors suggested that we avoid the
business altogether. We did, in a sense. We avoided the business as
they knew it. We believed that re-inventing the wheel was most
appropriate in this business.
There is no doubt that cash flow was virtually
non-existent at first, but we went into this knowing that this would
happen.
After all, what startup business doesn’t
struggle at first? Things are supposed to be tough at first and then
get easier when reputation and goodwill are established.
No one else seemed to agree with this at first. We
also knew that a common reason for business failure is growing too
fast.
These failures are often a result of borrowing
from tomorrow to meet the needs of today. Establishing a plan at the
beginning kept us from growing too fast and it kept us from borrowing
more money to re-invest in the business.
We fantasized about raising our prices to keep
growth in check. We didn’t have to do it, though, but we were
always ready.
If I had to do it all again, I suspect that I
would do nothing differently. I think that the one singular advantage
that we had over others in this business is that we truly, honestly and
wholeheartedly believed in ourselves and in our concept.
If we had second-guessed ourselves during those
lean times, we may have given in to the temptation to cut our prices in
order to build volume faster.
It seems, in retrospect, that some potential
customers bided their time, fully expecting us to come back and attempt
to close a deal with a low-ball price. It never happened.
We had a virtual “waiting list” of
customers that we figured to tap if we lost a customer. It never
happened.
Surely the oddest thing that happened is that
nothing happened. We prepared ourselves for fierce competition. We
expected our business philosophy to be copied, but it didn’t
happen.
Oddly, everybody else still seemed to believe that
our basic business principles, in spite of our successes, were wrong.
Oh, well.
Epilogue
Mr. Doom: For sale:
Shirt laundry.
Mr. Tailwind: I
think that I’ll do this again in another city 100 miles from
here.
If you do what you’ve always done,
you’ll get what you’ve got.
Donald Desrosiers has been in the shirt
laundering business since 1978 and is a work-flow systems engineer who
provides services to shirt launderers through Tailwind Shirt Systems,
867 Spencer St., Fall River, MA. He can be reached by phone at (508)
965-3163 or by e-mail at tailwind1@attbi.com and he has a web sites located at: www.tailwindshirts.com and www.dondesrosiers.com
