Originally posted – Mar 11, 2013
As a self-service laundry owner, you’re no doubt always looking for new ways to bring in more business, to grow your market and to increase your profits.
Of course, a great way to boost profits is by cutting expenses. After all, even if business is booming, out-of-control costs can quickly gobble up your hard-earned profits. To that end, we asked a number of successful store owners to tell us how they’ve been able to cut costs and save money at their stores, as well as in which areas of their laundry business they would you never – under any circumstances – cut corners or skimp:
Bowling Green, Ohio
Every year-end, I conduct a complete analysis of what expenses the store encountered and how I could go about lowering those costs. Three of the top costs for most laundromats are:
Lease: You probably have the least control over reducing the cost of your lease, but with the past few years of economic downturn, owners have been successful at renegotiating their leases and getting reductions in their payments. It never hurts to ask; you might not get a reduction, but your inquiry might help when your lease is up for renewal.
Payroll: It is what it is, but is it what you need? Do you need to be attended as many hours as you currently are? Could you have less on staff and still keep a clean store? Is there a way that you could alter shifts to get more coverage, but still able to handle your wash-dry-fold business? Some owners will work more hours themselves to reduce payroll costs, where others would rather pay someone to keep the store clean. This all comes down to individual preference. However, if you use a payroll service, you should get quotes each year from competitive services. I recently did this and am now saving 46 percent on my payroll processing costs.
Utilities: This is one area that owners have some control over. Reducing utility costs can range from inexpensive insulation to expensive equipment upgrades. In the past four years, we have seen the price of natural gas plummet, and it looks to stay at favorable levels for a while. However, where one utility goes does down, another goes up.
Many owners are seeing large increases in water/sewer and electric rates. From the inexpensive side of cutting utility costs, an owner should start with the basics, such as insulating all water lines and hot water tanks, adding insulation to the building, adding weather-stripping to doors and windows, and caulking and sealing around doors and windows. From the expensive side of utility savings, you can upgrade to high-efficient HVAC, hot water heaters, washers and dryers. However, before replacing all of your equipment, be sure your older equipment is running at optimum levels. Make sure your dryer ducts are clean and you have plenty of makeup air, and be certain your washer drains and water lines are not leaking. Another approach to utility savings would be to, with capable equipment, manipulate the wash cycles to lower the water level or eliminate a rinse from the cycle.
Other ways to cut costs:
• Do as much of the maintenance yourself as you can. If you don’t know how to do a certain repair, at least be there when the mechanic does it so you can learn.
• Buy supplies when they are on sale. Many distributors will have an open house where they sell soap and parts at a discount. Plus, by picking up your parts and soap during the open house, you save on shipping.
• If you do a lot of newspaper advertising, you can get discounted rates by contracting to buy an allotted amount of space in advance.
• Bundle your internet, phone and cable service.
• Get several quotes on business, medical and vehicle insurance each year to make sure you are getting the best deal.
I pride myself in a clean, bright store with operable equipment. Therefore, I pay what is needed to keep the store clean, the lights bright and all of the equipment in top shape.
The quality of services should never be compromised. To reduce utility costs, some owners will lower their wash levels too much or eliminate a rinse from the wash cycle. This can be done, but when the owner goes too far and starts to reduce the quality of the wash, customers will notice. Provide a good quality wash and dry service, and charge what is needed to maintain a quality store.
A. Douglas Rickard
Van Nuys, Calif.
I’m a partner in three laundries – one is coin-operated and the other two are card-operated. My focus has been on the coin laundry, which had 40 toploaders that we have replaced with frontloaders; we now have only eight toploaders left. In addition, we replaced a line of toploaders with additional folding table space, which the customers love – and we haven’t missed the revenue. We also have modified our lighting and our boilers to more energy-efficient alternatives.
All of our laundries are fully attended, and I would not change that fact to save money – good attendants mean a pleasant experience at the laundry.
The Image Center
I look at every expense category and vendor once a year, including credit card fees, cell phone bill and trash collection. I will bid out every vendor every three years, no matter how satisfied I am with the service. Not that I will leave for price, but I must know the price in the current competitive market. I always find something and save, and I am happy with a $5 to $50 a month savings; many times it is much more than that. Focus on the little things, because it all adds up.
North View Express Laundry
I’m in the apparel business, and I’m also a commercial real estate investor, so the laundry business is a sideline for me.
As many laundry owners know, it’s getting more difficult to make a profit in the laundry business due to many costs that are beyond our control, specifically utilities.
I acquired a laundromat in a real estate transaction approximately seven years ago. The equipment in the building was at least 50 years old and tired. I re-tooled the entire laundry. I installed new washers and dryers and saw my utility costs go from almost 49 percent of sales down to under 20 percent. I spent approximately $200,000 on the renovation and paid it off in seven years.
About two and half years ago, I renovated another facility and invested approximately $550,000, which included the building acquisition, and I have been achieving the same results as it relates to utility savings. The customers love it, and the business continues to grow month after month.
For me, the answer for me is simple: rebuild old, tired facilities with new and improved equipment, and watch your customer base and profits grow.
Market Square Laundry
We have successfully switched our phone and WiFi service, saving about $25 a month. Our trash hauler kept increasing the bill via fuel surcharges, so we found another company with a guarantee of no surcharges, saving more than $60 a month. I’m looking into online payroll, which will save more than $1,500 per year. The total annual savings from all of these should be more than $2,500.
I have been on a fixed rate gas distribution contract since 2010. The commodity portion cost floats, so with natural gas costs having gone down by 50 percent, this has saved me a bundle.
However, there are some items I will not skimp on. Those include marketing, customer service and keeping the equipment in top condition.
Wash ‘n Wire
Shelburne Falls, Mass.
I boosted my bottom line by focusing on:
Employee hours: I cut costs last year when I decreased my attendant hours from seven hours daily to four. My store is open from 6 a.m. to 10 p.m.
Water usage: I have three toploaders, but I’ve gotten rid of five of them. While some customers insist on toploaders, I try to explain why frontloaders are better and cheaper – for them and me. I charge the same price for my 20-year-old toploaders as I do for the 2-year-old frontloaders, in hope of deterring usage of the toploaders. When I replaced the toploading machines with frontloaders, my sewer cost went down by $1,000.
Utility costs: I use energy-efficient bulbs, insulate, etc. I haven’t gone with solar panels yet; I’m waiting for the price to go down and the benefit to go up.
Keeping records: I use QuickBooks, and I also keep an Excel chart, which shows me each machine’s daily usage. It helps me know which machines I might want to buy next time. Although it doesn’t really save me any money, it keeps me informed as to what’s working and what isn’t.
In addition, although I personally haven’t received any grant money, I know other small-business owners who have had great success with this for things like installing solar panels.
By contrast, there are certain costs that cannot be avoided:
Working equipment: Nothing is worse than customers losing money; they may never return.
Customer service: The customer comes first. Even if an equipment issue is a case of customer error, it’s critical to reimburse any money lost. We’re unattended, but I will personally call a customer as soon as I find out about a problem. Nine times out of ten, the customer thanks me and never comes in to collect; the ones that do are happy and come back again to use the laundromat.
Attendants: I pay my attendants to greet my customers and to clean every day, so I don’t need a private cleaning service. To cover their wages, I offer wash-dry-fold and drop-off drycleaning services. I pay minimum wage, but I also give my employees a large bonus at Christmas and occasionally pay them extra for exceptional work. What’s more, my attendants can do their own laundry free once a week.
The one big savings that both of our stores enjoy is having all newer equipment. All of our washers are high-extract and all of our dryers are high-efficiency. From the low water usage on the washers and low gas usage on the dryers, we see about a 9.6 percent on expense for our utility bill.
There are so many corners that several laundromat owners cut, and some may feel this is not an issue – at least until a new store opens in their town and does it right. Then, it’s too late.
Therefore, we keep the machines, the floors and the restrooms clean. Our walls are regularly painted, and there is a lot of overhead lighting. The lighting makes the inside look clean and also helps with security.
We keep our machines working, because working machines are what makes us money, not when they are tagged out. Some stores will have a number of machines out of service all the time; this shows that the owner doesn’t care about the business or the public.
Also, with both of our stores, we are attended every hour we are open. We believe in high customer care and want to be there to help and answer any questions our customers may have.
Brite ‘n Clean Washateria
Corpus Christi, Texas
One of the ways I’m able to cut costs is being able to repair and maintain our equipment and building. Being able to service the machines has definitely helped me save money. However, if I am unfamiliar with a certain type of repair on a washer or dryer, I won’ hesitate to call our local repair service to get his expertise and watch him repair the machine.
For me, owning the laundry is my part-time job, so I would never want to cut corners when it comes to my employees. Because I have another job and sometimes bigger priorities than the laundry, my attendants help me by taking care of the place and keeping it clean for our customers. Also, having employees I can trust allows me to know that the store is in good hands, thus enabling me to focus on my full-time job.
I purchased an existing laundromat, including the building, and initially ran it exactly like the previous owners – until I caught up with the learning curve and started “tweaking.” Here are some of my more notable cost-cutting accomplishments:
1. I do virtually all of my own maintenance, as the previous owners did; however, I’m learning when to call in the professionals and spend money on quality. I got tired of fixing the previous owners’ “quick and cheap fixes” and found myself spending more money and time in the long run than if I had just done it right to begin with.
For example, because the previous owner was able to get them cheap, the facility was equipped with T12 fluorescent light fixtures. I would replace bulbs and ballasts myself and deal with brittle lens covers, thinking this is what one does to save money – meanwhile, paying my electric bill, oblivious to my lighting costs. Finally, I spoke to my electric utility provider, which had an incentive program for businesses to upgrade to T8 or T5 lights that would nearly cover the cost of the fixtures. I just had to pay a licensed electrician to replace the lights and get a permit to do the work.
Not only do I have confidence that the work was done properly, but the light fixtures were paid for and my store is significantly brighter with the new lights. Plus, my monthly electric bill went down noticeably.
2. I also used to pay a bookkeeper to do my daily books. It was costing me a fortune. I finally took the bull by the horns and learned how to do it myself. I still pay a bookkeeper for a quick look each quarter, to catch any mistakes I’ve made. And I pay an accounting firm to do my year-end and income taxes. I’m embarrassed to say how much I used to pay, but now it’s only a fraction of that – and I’m on top of my business in a whole new way.
3. The previous owners used to sell individual boxes of soap. I had to keep inventory and constantly place orders to be sure we didn’t run out. I also would buy liquid soap by the jug for our wash-dry-fold service. I would catch sales here and there, stock up and sometimes even run out. It was costing me more than it should have, and I was putting in way too much time just on soap.
I finally did some research, and now I buy liquid detergent and liquid fabric softener from a distributor in 56-liter plastic drums. We use disposable containers to sell just the right amount of product for a wash load. These days, I only need to order once every quarter, and my net cost is lower.
Despite finding ways to save here and there, I wouldn’t even think about cutting corners on the following:
1. Attendants. My attendants serve three primary functions: (1) they look after our customers, (2) they keep our laundromat clean and (3) they handle our wash-dry-fold service. Another secondary function is security. The cost for me to pay for security and janitorial would be more than my net cost of having my own staff, which brings in revenue with the WDF. Not only am I saving money on janitorial and security but I’m making sure my customers are well taken care of. I feel I would risk too much by cutting corners on staffing.
2. Hot water. It’s absolutely necessary to this business, and it’s expensive to produce where I live. The previous owner used to shut the hot water boiler off. Not only is this wrong on many levels but I believe it led to the repeated failure of that vital system. Furthermore, he bought a cheap boiler from a manufacturer that eventually went out of business. When I took over, I nursed that boiler through thick and thin to keep our hot water flowing. I finally saved enough money to replace it with a more reliable and efficient one. Now I don’t have to worry about getting replacement parts, since it is built by a reputable manufacturer. I also don’t have to worry about my customers not getting hot water. I’m glad I spent the money, and I will never mess with it, trying to save money at my customers’ and, ultimately, my own expense.
3. Accounting help for taxes. Time and time again, I see business people trying to save money by doing their own taxes. Perhaps it isn’t a difficult task; however, I want to make sure that if I get audited, I have shown that I have taken reasonable measures to maintain and report accurate numbers. It also doesn’t hurt to have a professional, fresh set of eyes go over everything. I would hate to miss out on a perfectly good tax deduction because I didn’t know about it. For what I consider to be a reasonable fee, I have created three levels of defense to “cover my assets.”
I have added an airlock in the entrance way so that customers have two doors to come through; this way, when the outside doors open, all of the cold air or warm air won’t enter the building. I also placed a doorstop on the inner door, so if customers have several loads, they can prop it open and don’t have to open both doors over and over. This really makes a difference.
In addition, I removed all of the single-pane glass and put in high-efficiency glass. The front of the store is practically all glass, so this has really helped on cooling and heating.
I weather-stripped all of the interior doors that lead to unheated areas. I was surprised by how much cold and hot air came under the doors that lead to the boiler room and behind dryers. I also insulated between each dryer. In winter and summer, it used to really whistle between them.
I’ve also changed all the fluorescent fixtures to new electronic ballasts and installed occupancy sensors so that, when no one is around, the lights turn off. I also installed LED exit lights, which save approximately $40 a year.
We accept credit cards in our nine locations and have been happy with our current service provider. Last fall, I got a call from a competing provider who ended up quoting me rates that were considerably lower. I didn’t want to change providers, so I called our current provider and sent them the quote. A few days later, they responded, saying they would match the rates, which is saving us about $300 per month for our nine locations.
In addition, we used to drive Chevy Astros, which were discontinued several years ago. When Ford Transit Connects became available, we started switching over. The Transit Connects still have enough room for us, but get better mileage – 25 mpg instead of 16 mpg for the Astros. So with gas currently around $3.50 per gallon, we’re spending 14 cents per mile, rather than 21 cent per mile.
We also have a Toyota Prius on the road, which gets 45 to 50 mpg. So, if you can figure out a way to work out of a Prius, you’ll only have to spend about 7 cents per mile.
I picked up another tip from fellow laundry owner Brad Spink. We sold one of our stores to Brad a few years ago, and one of the things he did when he took over was to change the pest control service from monthly to bimonthly. We had always had the service come in monthly and never thought about doing it any other way. When I saw what Brad did, I changed our other locations to bimonthly – and we’re saving $26 per location every other month, or $156 per location each year.
JP Investment Strategies
Cutting costs while building our business is the biggest challenge we face. As entrepreneurs, it is our job to cut costs and charge as much money as possible without sacrificing our business. It is not easy to do in this business because most of our expenses are through a municipality or a utility company. The best way to defend against rising utility costs is to use less. There is no better way to save money in this business than to set up your business with new or newer equipment. Newer equipment will use less energy and cut repair costs while giving you more up-time on your equipment.
The more uptime, the more money you make. Customers will be more satisfied because they will not have to wait to use equipment.
Also, customers are willing to pay more money to use new equipment. This is a win-win situation. New equipment can be financed, and all of your savings and added revenue can cover the monthly note payment.
Other costs such as rent and labor are fixed as well. In some cases, a landlord will renegotiate your lease. I have not been successful in renegotiating my lease, but others have. It’s worth a shot. The worst they can say is “no.”
The costs you need to watch closely are insurance, supplies and parts. Your insurance policy is renewed every year. Every year, you should be shopping at least two other insurance companies for comparison. It is also important to shop the parts and supplies you purchase on a regular basis.
Suppliers will typically raise their rates twice per year. I am constantly looking for better ways to save money on supplies. I recently switched floor cleaners from Fabuloso ($8.97 per gallon) to a more economical brand, Festival ($5.97 per gallon). Both products have the same scent and concentrate. Also, stainless steel cleaner is very expensive. I have substituted cans of Sheila Shine ($8.95 per can) for generic bottles of baby lotion ($2.39 per bottle) from Target. These bottles will last longer than a can of stainless steel spray and they smell better.
Currently, I am looking for a new brand of bleach. The Home Depot generic brand is no longer available. The price was $1.55 per gallon compared to Clorox at $4.59 per gallon. These items and much more are easy to shop for. I have downloaded an app to my cell phone, which allows me to scan the bar code of any product, and it will shop the internet and let me know what other companies are charging for the same product. The internet is the largest resource of information and it’s right at your fingertips.
Complacency is the enemy in this business. If you become complacent, you will find yourself paying more than you should for these items. We are all in this business for one reason – to make money. It is our responsibility to spend as little money as possible while making as much money as possible.
One day you will want to retire and sell your coin laundry. When that day comes, your business will be valued higher if you cut your costs. For every dollar you save, your business value increases by about $4.
On the flip side, I would never cut corners on my equipment. I have seen store owners purchase smaller-capacity machines because they don’t want to spend the money. In the South Florida market, you need a lot of large machines to compete. Customers love the big machines, and that is your edge over the apartment complexes. I want to own the store that caters to large families, not the store that caters to single-person households. These large machines are your moneymakers. Every year I am seeing the trend of bigger and bigger machines being installed in stores. Eighty-pound washers are no longer the largest washers; today, distributors are installing 125-pound washers. If you’re not sure the size or the quantity of washers you want to install, your distributor should be able to provide you with a spreadsheet. I use the “go big or go home” philosophy, which means, if you are on the fence when choosing your equipment mix, go with the larger capacity.
Every laundry operation – just like every marketplace – is a little bit different. As a result, not all of the suggestions above will be right for your particular business.
However, to compete successfully, it’s more critical now than ever before to regularly examine how your money is being spent. Keep an eye on your cash, and stay flexible in your purchases. And, like the 12 owners who shared their stories, swing a prudent budget ax – cut where you can, but never when it directly affects your customers’ overall experience.