Four Reasons to Raise Your Prices Immediately
If I had a nickel for every time a laundromat owner explained to me why they couldn’t raise their prices, I could buy myself a nice little private island somewhere. Then again, that’d make for a brutal commute to Ohio.
But I digress.
Although there are several highly debated topics in our industry, pricing tops the list in my opinion. And, to be honest, I just don’t understand it.
As I’ve mentioned before, I started out with bottom-of-the-industry laundromats – and with much less capital than most – yet here I am, doing quite well with our chain of stores in Cincinnati.
Yes, there were quite a few pivots along the way, and even more “lightbulb moments.” But none of them were more critical than eventually realizing that not only could I raise my prices, but that I must raise them (and raise them aggressively at times) if I ever wanted to reach the top of my industry.
I learned this from many of my friends in the business, and they are winning in nearly every market across the U.S. So, I never really understood the mindset that certain markets are somehow exempt from this type of strategy.
Given that, I’d like to share with you my top four reasons why you can – and must – raise your prices.
Inflation
The first reason is that good ol’ pesky thing called inflation. Right now is a great time to jump on the inflation bandwagon as it barrels out of control around the world. However, the truth is that inflation has always been there – and it always will be.
The average rate of inflation can practically guarantee a 2 percent to 3 percent increase per year – yet we all know of laundromats that haven’t raised prices in eight to 10 years.
Today, we’re quickly approaching double-digit inflation. In fact, many economists believe that, if inflation was calculated using the same formula as in the 1970s, we would be experiencing record inflation like we’ve never seen before.
But let’s stay conservative. Even a mild inflation rate of 3 percent annually for 10 years is a 30 percent increase, not even accounting for compounding. Let that sink in. If you haven’t raised prices in a decade, you’re likely earning about 30 percent less, based on today’s “buying power.” As staggering as that sounds, I’d argue that a large portion of our industry falls into this category.
By default, not keeping pace with inflation quite literally means you’re falling further behind each year.
Team Building
Another hot topic is the ability to find, train, retain and reward amazing team members. Although our current labor situation is certainly beyond normal, we all know that building a great staff has always been an Achilles’ heel for most laundromat owners.
Since 2010, my employees have evolved from being a small, entry-level team of store attendants paid near minimum wage to a highly compensated staff with multiple layers of management.
When I first entered this industry, I was told repeatedly that the laundromat business couldn’t support multiple layers of management and, therefore, the owner had to work in the business and be the manager, among other things.
At one point, I believed it – until I started talking to some of the industry’s top performers. They explained that their businesses indeed had management in place. My curiosity got the best of me, so I dug deeper. Rather than just accept this common industry myth, I wanted answers, and I got them. Consistently, the owners who had the strongest teams provided the best customer experience and, of course, they charged accordingly.
Today, I boast an amazing team of nearly 40 employees. In our organization, we have attendants who earn $5 above our minimum wage, including their bonuses – and these are our lowest paid employees. I have delivery drivers and laundry processors who are paid significantly more. And my store managers, assistant general managers and general manager all would be considered well-compensated by most standards.
Additionally, they receive full health benefits, paid vacation, company laptops, company cell phones and vehicle allowances, among other benefits.
I’ve been able to afford these types of compensation packages for our rock star team members by doing one thing – raising prices. We’ve consistently raised our value proposition year after year and raised our prices accordingly every step of the way.
Best Locations
Have you ever heard it said that laundromats can’t afford the best locations with plentiful parking? Yep, me too.
But, again, our business essentially comes down to people and math. This falls under both categories. If you have great employees and a great location, you can – and should – be charging more for your services. Additionally, you should be able to spend less on marketing and advertising due to the increased visibility of a great location.
No one is suggesting building a laundromat in Times Square. But the fact of the matter is that everything in life is relative. I constantly remind laundromat owners that we don’t have to have the best location in town – but, if we want to be the best laundromat in town, that often begins with securing the “best laundromat location” in town.
Admittedly, this easily could fall under the chicken-or-the-egg metaphor, but it’s true. If you have the best location, you most likely will pay higher rent. However, this enables you to charge more for your services and also should allow for more volume as well.
Reinvest in the Future
This last reason could qualify as “playing defense,” but we all know that investing in the future is vitally important if we want to maintain our positions within our markets.
The laundromats that are still squeaking by with 20- to 30-year-old equipment pride themselves on not raising prices. But we all know they’re playing the short game, while we’re playing the infinite game of reinvestment. They’re simply trying to survive, while we’re attempting to thrive.
One of the best pieces of advice I’ve ever received was from my mentor, Steve Millman at H-M Company in Cincinnati. He advised me to always be reinvesting in my business.
“Sure, some years it’s smaller investments and some years it’s bigger ones,” he said. “But you must always be doing something to get ahead.”
That advice always stuck with me, because he didn’t say “stay ahead” – he said “get ahead.” To me, “getting ahead” suggests pulling away from others in your local market, while “staying ahead” suggests maintaining the status quo.
Whether it’s keeping up with modern technology and installing new equipment, putting in a new tile floor, or renovating a mediocre restroom, you must always be reinvesting in the future.
I’ve always sought to be better tomorrow than yesterday – to always be pushing the envelope. And, when I look at some of the best entrepreneurs in the world, that’s exactly what they do.
Why should we behave any differently just because we’re running laundromats? After all, in my mind, I’m not “running laundromats” – I’m building an empire so that we can serve and revolutionize our communities.
If we’re to do this effectively, we must keep up with or stay ahead of inflation, build and keep an amazing team, operate out of the best locations with the best parking, and reinvest in our future.
All of these require raising our prices – and raising them aggressively.
