Store Owners Share the Economic Indicators and Metrics They Use to Gauge the Health of Their Laundry Operations
As an entrepreneur, you likely fulfill several roles to keep your business running smoothly – and perhaps none is more crucial or daunting than that of financial analyst.
Where does your business really stand? Can you truly afford to carry out all of those big plans you had in mind for 2015? Can you afford not to?
These are the types of questions that keep countless laundry owners tossing and turning at night.
How do you know if you have “extra” money to invest in a second store, to buy new equipment or to pull the trigger on that new delivery service?
Things might seem to be humming along in your business, but how are you doing – really? Your positive “gut feeling” might be spot on; however, there’s no substitute for concrete numbers when it comes to measuring your business’s financial health.
This month, we reached out to a several successful laundry owners to find out exactly what types of numbers, metrics and other indicators they use to personally take the temperature of their own operations:
Brian Brunckhorst
Advantage Laundry
Oakland, Calif.
When we entered the self-service laundry business 12 years ago, none of the equipment manufacturers were offering any real revenue modeling capabilities, unless you wanted a card system. So, I created a spreadsheet for each of my stores, which tracks the income for each machine on a daily basis.
Each time we do collections, we literally collect each machine in a separately labeled gallon freezer bag and then update the spreadsheet. This spreadsheet then projects what the monthly revenue will be, as well as several other indicators that we can look at to judge how well we are doing.
Over the years, equipment and income reporting has improved significantly. Today, each of our stores sends us daily, weekly and monthly revenue reports detailing how much the stores are making and how much revenue is being generated from each machine with that capability. On a weekly basis, this information is transferred into our spreadsheet (since not all of our equipment at every store has the reporting capability) when we do our collections.
The indicators we are most concerned with are gross income (GI), turns per day (TPD) per size of washers, overall turns per day, average pounds of clothes washed per day, machine usage (grouped both by time of day and day of the week), customer reviews on Yelp and Google + and, of course, the most important one – net income (NI). We look at each of these indicators at least once a month and some of them on a weekly basis.
While it might seem like a lot to be looking at, each indicator gives us some insight into the overall picture of our business. The leading indicators are the gross and net Income. The GI tells you if your business is expanding, contracting or stagnate. The NI is the bottom line profitability of the business and, ultimately, helps determine its value. TPD is useful to tell you whether your store is being under- or over-utilized. The industry average for TPD is between three and five.
Looking at how each of your machine sizes are doing will tell you if you need to do some advertising targeted toward one size of machines or if you need to run a special. If the turns are greater than five, it might indicate that the price is too low. Monitoring the average pounds of clothes washed per day tells you how much volume your store is processing and can give you an indication as to how busy it is. Likewise, monitoring machine usage by time of day and day of the week (if your machines will report this information) will tell you which days and what times of the day you are busiest; this can help you determine staffing levels. Monitoring reviews from sites like Yelp and Google+ gives you customer feedback and lets you know their perception of your business. If you are doing something wrong, this will tell you.
In business, the bottom line is net income, so we are always trying to increase this number on a year-over-year basis. Our target is to have net income increase by 5 percent each year. Our gross income target is a 10 percent increase each year. This is necessary to outpace increased costs. We try to achieve five turns per day for each washer size – and, while it would be nice to never receive a bad review, our realistic goal for reviews is 4.5 stars.
How we respond to all of this information is dictated by the indicator. For example, gross income is something we always want to maximize, but how was it achieved?
Was it customers bringing in large loads or small ones? If the average pounds of clothes remained constant, you can look at the TPD per size of washers to help answer that question. If small washers are being used more often than big washers, it’s safe to say that customers are coming in with smaller loads. This could mean the large machines are overpriced or the small machines are underpriced. It could also be a result of an ad or special that we are running to draw customers to the smaller machines. We use advertising and specials to bring in new customers. We then, over time, adjust machine pricing to reach a balance in usage (measured by TPD) between machine sizes. We also look at machine usage per day to determine the peak days. Then, on the slow days, we run specials to draw in more business.
Lisa Varandas
Plaza Laundry & Cleaners
Hazlet, N.J.
I use Excel spreadsheets to track my daily sales by category – coin-op, wash-dry-fold and drycleaning. I also keep weekly and monthly spreadsheets and compare those to previous years.
Weekly, I compare this year’s numbers to last year at the same time to see how I’m trending and on which areas I need to focus.
By comparing sales by category to the previous year, I can effectively see if the marketing strategies I’ve established for each of my core businesses are working. If not, I can redirect my efforts and try something different to drive those businesses.
I always want to beat last year’s numbers, even by small margins. It’s all about doing better than the year before. If I see a continuing downward trend, I look at marketing or specific promotions to turn that aspect of the business around.
Tom Rhodes
Sunshine Laundry Centers
Vero Beach, Fla.
Besides looking at my P&Ls for each location each month, I also closely monitor my gas bills and the water and sewer portion of my utility bill.
With the gas bills, I look at both consumption and dollar amount per therm.
As far as water and sewer, I remember falling asleep at the wheel, figuratively speaking, and not calculating my water and sewer cost per 1,000 gallons of water for about six months at our laundry in Okeechobee. As a result, I missed a hefty price increase, and by the time I realized it, six months had gone by and my total utilities as a percentage of sales had risen from 24 percent to 29 percent. Once I realized it, I quickly raised all of my vend prices, but figured that oversight had cost me about $3,500 in net income for that six-month period.
I also physically read the water and gas meters toward the end of the month and compare it to previous year’s consumption, as well as total sales. Our operations manager does some collecting of the large machines for us, and this is a way I can keep tabs on things.
I enter our total coin box sales onto a spread sheet for each laundromat on a monthly basis. Some months, I have one more collection than another, but this is another quick “snapshot” barometer I use to gauge our business. Having seven stores, it always amazes me how much spread there can be between stores. One store of ours is presently down 2 percent, while the others are up 5 percent to 10 percent. An alarm goes off in my head, and I know now that I need to do some closer examination at that one store to figure out if sales are down because of the economy or because of an operational issue – such as a bad attendant, too many machines out of order, attendants shuffling people out the door too early, etc.
Tracking my turns helps me figure out which machines are due for a price increase. Generally, the more that machine turns, the quicker I am to raise the price of that machine.
My POS system allows me to quickly compare our wash-dry-fold business to prior years. I check our YOY figures monthly to determine any trends and to see if I have any quality control issues with our attendants.
I also use the Coin Laundry Association’s new Make Your Move quarterly report (available to CLA members) to see how my business is stacking up to the overall economy.
What’s more, I annually call the utility authority to get the water consumption figures for all of the laundries in my trade area. That way, I can quickly see how my water business is doing compared to my competitors. Of course, when crunching the numbers, I have to keep in mind any equipment changes my competitors have made. Also, it should be noted that some local authorities won’t divulge those numbers.
Those are the main barometers I use to get a quick pulse on my business.
Colleen Unema
Q Laundry
Bellingham, Wash.
Every Monday, I print out my P&L, Cash Snapshot and Balance Sheet from QuickBooks – just to see where I’m at. Monthly, I calculate the turns per machine and activity per day of the week, as well as the pounds of drop-off laundry we did and what it cost to process those orders.
I look for three things: (1) an increase in the number of customers, (2) an increase the frequency of customers who own their own machines but come in with their larger items, and (3) an increase the number and amount of loyalty card recharges. As far as business benchmarks, I have a set goal of turns per month, cards sold per month and machine income per month, as well as keeping utilities at 12 percent of gross revenue or lower.
I incentivize my attendants to educate our customers about what they can wash, how to wash it and how to save money with a prepaid laundry card. We also hold events that are specifically designed to drive traffic during slower days of the week/times of day. Customer service is the key to reaching all of my benchmarks. My attendants are paid a commission on “Drop & Dash” and “Marketplace” sales; when they reach their personal goals, they earn bonuses.
Vincent Caputo
Capncaz Laundry
Glendale, N.Y.
Weekly, I add the pounds from the washing machines and dryers to calculate my walk-in business. For my drop-off and drycleaning segments, I add the weekly sales from a notebook I keep in the store; my attendants log every drop-off laundry and drycleaning sale in that book.
I also check the usage on my utility bills to see if it corresponds with my sales for the period. If my sales were up, I expect my utility usage to increase. I compare my weekly sales to prior weekly sales.
The utility usage indicator tells me if my business has been growing or shrinking. If my sales were down for the period but my water usage was up, it typically indicates that I have a water leak somewhere, and the usual culprit is a partially clogged or warped drain valve that’s passing water through.
Mike Lavin
Gulf Gate Laundry
Naples, Fla.
I compare weekly totals from year to year, noting any special events such unusual weather or holidays.
My other heavily relied upon metric is washer classifications – toploader use trends versus 20-pound frontloaders, or large machine revenue versus small machine revenue. This has helped me to properly adjust my machine mix.
I also track the frequency of machine repairs. As a personal rule of thumb, if repairs to a particular machine exceed four times per year, it’s replacement time.
Joshua Prager
JP Investment Strategies
Sunrise, Fla.
The health of my self-service laundry business begins with the gross income, which I monitor weekly. Taking my weekly income figures and comparing them with the same week of the previous year – or sometimes even the same week two years prior – enables me to compare “apples to apples.” My laundries don’t fluctuate very much, maybe 10 percent to 15 percent between seasons.
If I see consistent trends (up or down) throughout equivalent weeks, I ask myself the following questions:
• How is the cleanliness in my store?
• How are my machines holding up?
• Have any competitors closed or opened?
• How is my pricing compared to my competitors?
All of these factors play a part in my gross revenue, and it’s important to stay on top of the business and figure out how to improve.
The end of the year is when I analyze my net profit. Have my profit margins increased or decreased, and what is the reason for this?
• Have my utility rates increased or decreased?
• Have my insurance premiums increased or decreased?
• Have my repair costs increased or decreased?
As an entrepreneur, staying on top of your laundry business is critical. Sleeping at the wheel opens the door for potential competitors.
Hank Walter
Whale of a Wash
Shepherdstown, W.Va.
Each Saturday – after all of the collections for the week are posted for all 11 of my locations – I check revenues compared to last year… month to date, year to date and year over year (365 previous days). I quickly get a snapshot of the systemic (same store) and organic (new store) sales comparative results.
Basically, it gives me the progress the new stores make in relation to the older laundries. It provides utility percentages, to show if we’re keeping up with our vend pricing. And it indicates gross margins at each location against asset value.
Annually, I calculate turns per day at each location and net revenue per overhead unit (which is a similar metric route operators use to calculate profitability). However, I’ve never used those figures productively, because I haven’t sold the business yet.
Albert Touron
Sudz Coin Laundry
Sunnyvale, Calif.
I advertise with Yelp and Google – and each week I receive an email telling me how many people looked at my ad, called, got directions and visited my website, along with other helpful information for tracking customers.
Leland Waite
Waite’s Laundry Centers
Mobile, Ala.
Of course, watching the dollars is most important. However, I also keep an eye on daily door openings, which may sound crazy, but it works. My security system tracks every time my store’s door opens in a report.
For instance, in February, the door opened an average of 332.85 times per day, where the highest previous average was 309.15 times a day. Perhaps not surprisingly, my sales were up in February.
Ron Kelley
EZ Coin Op
San Jose, Calif.
When I collect, I compare weekly revenues with the prior year. Next, I’ll do the same for my wash-dry-fold revenue, followed by vending revenue. Then, I’ll compare quarterly income and expenses to the previous year to look for any dollar and percentage changes.
Regarding economic indicators, I observe several different ones. For instance, I’ll regularly look at the traffic in the morning and evening. I’ll look at the number of cars in shopping center parking lots and watch weekend traffic around the large malls. These indicators tell me what the local economy is doing – I’ve found them to be excellent barometers as to what’s going on with employment and local spending.
During short economic downturns, my business will actually increase. However, during prolonged downturns like the recent recession, after the first two years business will start to drop as people move out of the area due to the high cost of living.
Daryl Johnson
Giant Wash Laundry
St. Ansgar, Iowa
Primarily, I like to keep an eye on total sales. Secondarily, I watch turns per day per washer and dryer size. We track our collections twice weekly and conduct a year-over-year comparison twice a month – making notes as to what’s happening with the price of fuel and other economic indicators. This helps us to see any customer trends, as well as to determine which machines require replacing.
Each January, we set goals for new revenue and profit, based on the economic climate – and we track our progress throughout the year. Based on these goals, perhaps we’ll alter our prices to move customers to certain machines.
Bob Meuschke
Family Laundry II
Kansas City, Mo.
I worked in management for McDonald’s for more than five years, and that is one company that’s absolutely nutty about numbers. I’ve used a lot of what I learned there in my laundry business.
I’m also a bit of a numbers nut, and I’ve designed all of my own reports to work for me and my business. I keep records on a weekly, monthly and yearly basis.
In my marketplace, I contact some of the apartment complexes to track their vacancy rates. I also keep a close eye on the local apartment complexes’ on-site advertising; for example, if they really need renters, they will have signs up touting free rent, free deposits and so on. Of course, the lower their vacancy rates, the less they’ll offer prospective renters.
At month’s end, I will compare it with the previous month – both my walk-in and wash-dry-fold business; I keep the two segments of my business separate, because wash-dry-fold represents 35 percent to 40 percent of my business. Next, I look at the numbers for that month in the previous year. Then, I look at both the month before and after from a year ago to spot any trends.
Clearly, this isn’t an exact science – many of our customers are not on a regular laundry schedule because they live day to day on whatever funds they have at the time, as well as how many dirty clothes they have.
Neal Shapiro
Chicago, Ill.
My wife and I purchased our store within the last year. My professional experience is in engineering and manufacturing, while my wife’s experience is in teaching, as she owns and operates a preschool program.
We’ve certainly used metrics in our other businesses. Coming from the manufacturing sector, you can imagine all of the metrics we used to measure performance and progress.
Having not been open a year yet, we don’t have a lot of comparative analysis for the laundry at this point. So, the first metric I rely on is talking with our attendants frequently and asking how they think the business is doing.
Our employees have been here a long time. They know the customers and the business and –although this metric is very subjective and somewhat intangible – one of the things we were acutely aware of when we bought this store was that it had been neglected by the previous owners, and a lot of customers left to go to other laundries.
Job One was to get those customers back, so we frequently ask our frontline employees how we’re doing. It’s a simple question, but you’d be amazed at the information it elicits. Often, little things make a difference to customers.
From there, we look at our financial numbers. We’re a card laundry – we collect money three times a week, and we track those collections. Let’s say we collect on Monday, Wednesday, Friday; we know what our collections are on every Monday since we bought the store, as well as every Wednesday and every Friday. We track it by the week – and we track Monday versus Monday, Wednesday versus Wednesday, etc.
We track turns, and currently we’re just under seven.
We also track our utilities as a monthly cost, as well as a percentage of sales. We had targeted 15 percent for utilities, but we’re currently running almost 25 percent; of course, part of that equation is being located in Chicago, where water is very expensive.
Michael Finkelstein
Associated Services Corp.
Danville, Va.
There are several different benchmarks and reports. I’m not going to say I’m report crazy, but there are many reports that can tell you different things.
With several laundries to follow, we track revenue daily, so I’m able to follow the money that comes in. On Fridays, I get a report that shows me the expenses going out – whether it’s from a payroll standpoint, accounts payable and so on. I’m looking at store collections, changer funds, other receipts, etc. That gives me a weekly balance that shows how much money I have in collections and disbursements.
Every day, I look at my daily account balance sheet, where I see what goes in – and, by the end of week, we’re reconciling that.
I also receive a weekly report on a smattering of probably 20 percent to 25 percent of my stores; this report indicates their gross income. In addition, every day I track the credit/debit card activity in my stores – how many transactions by location. I can even look at it by machine type.
For instance, the report might show that we had no transactions on a particular 80-pound washer. In that case, I can call the store to see what’s going on. It keeps me in tune with my business from that standpoint.
I also receive a quarterly report that shows my gross and net incomes, along with a utility analysis. I’m able to look at the stores where I’m making changes; for example, if I’m installing tank-less water heaters, I can see how that impacts the utility costs. Or, if I re-lamped some of my stores, how did that impact my electric bill?
You want to look at your turns per day. However, due to the size of my business, I’m not in a position to do that, so I look at the health and viability of a store, based on the revenue and the expenses.
When I’m looking at a store, I’m looking at the net income. Can that store stand on its own? Personally, I don’t want the rent to be more than 25 percent of the gross, nor do I want my utilities to be more than 25 percent of the gross. Can I raise prices at a store? What impact is a price increase going to have on the gross? If I raise the price by a quarter and don’t lose volume, that’s a good thing. Those are the kinds of numbers I have in my mind.
Based on that, I’m able to classify my stores as A, B, C and D. Of course, those designations can change over time. For instance, we might remodel a laundry, and it can jump from being a C store to an A store. Or an A store may have a competitor open up down the road, and now that laundry becomes a B store.
The truth of the matter is that you want to know how your top stores are doing. As a multi-store owner, I always want to make sure the stores that bring me to the party are in tip-top shape.
Mark Murray
Adrian Image Center
Adrian, Mich.
First, I watch the cash. I watch sales over time. I break down the types of equipment that gets used, and I calculate my utilities as a percentage of sales – both total and individual utilities. I also watch my competitors to see how they’re doing and how they’re running their businesses, against how I’m doing.
I keep an eye on the state of our local economy to see how we’re doing in our market, versus the rest of the industry (our market is down, but the industry is not). I always watch for store cleanliness, the number of out-of-order tags on my machines and the quality of staff interaction with customers.
I look at the current price of cars and Big Macs, as well as few other consumer markers, to be sure I’m raising my prices with the overall inflation picture – even if my own costs are down as a result of new equipment or increased sales. And I read the advice of other store operators on the CLA’s online Open Forum to see what they’re doing.
In other words, I don’t get complacent. If today is a good day, tomorrow may not be. I need to stay on my game or get out of the business.
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