By Deborah Rechnitz CMA CMC
As the economy slows down, small business owners, including drycleaners, must take stock of what they do and, more importantly, why they do it. A great many people will not take the time to adapt to the times we're in. These people will just continue to discuss the slowdown and spend time and energy analyzing the slowdown, but take no action in their own operations to adjust to the slow down. These companies may be left behind. Profit margins will shrink, if they have not already begun to do so. Debt payments will become more and more difficult to meet. Bankruptcies will increase. Taking no action or the wrong actions can be devastating. However, taking the appropriate action may set you on a road to success that will last far beyond the current economic slowdown.
A time for evaluation. It is time to reevaluate what the customer wants and whether or not we are giving it to them.. Do they want dry stores or routes? Do they care if it is a plant or a dry store? We can no longer assume we understand our customers and know what is best for them. It is a little like bringing up children. If we continually tell them what it best for them, eventually they get tired of listening and finally rebel to follow their own needs and wants. At the same time, if we move in new directions in our businesses, some of our choices may be wrong. Wrong choices in poor economic times may result in the downfall of some companies. We must perform a very careful examination of our external environment and our internal strengths to better ensure that we will make the right choices.
Major, strategic questions must be answered. As volume falls, stores that were once marginally profitable will start to show clear evidence of losing money, without allocating any corporate overhead. Routes with drivers, sales staff, and transportation costs in excess of 40% will begin to drain company resources. Plants, frequently the most profitable types of operations, where staff is guaranteed 32 or 40 hours of pay, will now begin to show lower profits. It may be time to seriously rethink your policies and practices.
Every other aspect of the company must be evaluated in the same way. For instance, we have continued to add packaging to the product. There are certainly real and perceived advantages to building a total package -- company name, company image with company colors, tissue for garment protection in transport and in the customers' closets, and covers for protection of dirt and dust in the stores and again, in the customers closets. Our customers are diverse. There are now those who want as much packaging as we could give them. There are others who would prefer no extra packaging at all, including some that would rather have no poly. This increasing demand for individualization will force drycleaners to struggle to meet these various needs. The potential for real cost reductions will provide an additional motivation to consider packaging changes. Those owners who can solve these challenges will save money and potentially win customers in the long run.
Expenses, particularly labor and utilities costs, are rising just at a time when volume may be falling. This is nearly the worst of all scenarios. This combination will require our strength and creativity to overcome. Our efforts must be redoubled to bring real automation and efficiencies to this industry. The technology exists. It will take a few progressive operators to bring this technology to the industry. The early innovators frequently will also have the greatest benefit. Utility costs will require reevaluation of our equipment purchases. No longer can decisions be made almost solely on who can service the equipment. We must also consider which models and manufacturers offer the lowest energy usage. "Black boxes" -- those boxes claiming to provide great savings without ever revealing quite how they work -- will begin to emerge. Your curiosity combined with the opportunity for saving money must be weighed against your natural suspicions.
Diversification reconsidered. Again, in a shrinking economy, drycleaning volume alone may not be enough to support the overhead in a company. One possibility is to shrink the overhead -- that's very hard to do if the overhead being supported is primarily family related. The other alternative is to expand the products and services provided. Are you just a drycleaner or are there other, similar, but diversified product lines, that are part of who you are or who you need to be? The size of the pie may be shrinking and the number of people wanting a piece of the pie is growing. If you get less than before of a shrinking market, then there must be other markets that need to be pursued. There are several markets that were aggressively pursued in similar circumstances, during the 1970's -- coin laundries, uniform rental, leather and in home carpet cleaning. There are new areas such as duct cleaning, in home alterations, and nursing home support services. Each area has tremendous challenges. Each business has its unique issues, competitors, and rewards. Each must be investigated and balanced against your existing internal strengths. Where there is a match, take some positive action. For instance, if you already have truck routes, perhaps expanding into home drapery and carpet cleaning is again appropriate. If you have excess laundry capacity, perhaps NOG (not our goods) processing is a viable opportunity. The potential opportunities begin to emerge once you start looking beyond today's operations.
Published in the American Drycleaner, March 2001
