CHICAGO — There are two separate skill sets that all owners of drycleaning companies need to have. The first, and most obvious, is the ability to clean and care for their customers’ goods. The second is the ability to effectively operate a business, keeping profitability front and center of all their efforts.
This second set of skills can be difficult for many because the mindset might not come as naturally to them as does the day-to-day routine of cleaning. However, without the ability to consistently turn a profit, it’s almost impossible to keep a business afloat for the long term.
One of the traps many dry cleaners find themselves in is not keeping pace with rising costs. They loathe raising prices, even though this is necessary at times to protect their profit margin. There are many reasons — many myths — these cleaners believe that tell them to hold their prices steady. For this three-part series, American Drycleaner has asked industry experts, along with dry cleaners who have discovered the benefits of appropriate pricing, to dispel some of these myths that hurt profitability.
In the first installment of this three-part series, we examined our first myth — “I’ll price myself out of my market” — along with ways successful cleaners have broken themselves out of that mindset. For the second part of this series, we’ll look at another justification some owners give for keeping their prices the same season after season:
Myth No. 2: “I Don’t NEED to Raise My Prices”
For cleaners who only consider their short-term needs — and as long their business is stable for the moment — the risk of potentially upsetting customers with a price hike might not seem worth it. This can be a short-sighted outlook, however, and one that puts their future in jeopardy.
“Businesses are not supposed to run at a break-even basis,” says Kermit Engh, managing partner of the drycleaning consulting group Methods for Management and the owner of Fashion Cleaners in Omaha, Nebraska. “If it is, it’s just a job — it’s not a business. You want a business that has value for the day you wish to retire. Keeping steady price increases, knowing what your costs are and controlling your costs are all imperative for operating a successful business.”
“I don’t think most cleaners will have the option not to adjust pricing if they want a sustainable business,” says David Dawson, a longtime industry veteran and principal of the Clean Expertise consulting group. “It’s critically important to generate profits that allow one to reinvest in the business. If you generate the capital necessary to employ productivity-enhancing equipment and technologies and support a brand-building marketing budget, future price increases become less urgent.”
“Every company, in order to stay in business, needs to make a profit,” says Randy Parham, CEO of Acme Cleaners, based in Orlando, Florida. “Your prices need to be set so you can do that.”
Come back Thursday for details on how Parham decides on how to set his prices — and how he knows when it's time to raise them.
Have a question or comment? E-mail our editor Dave Davis at [email protected].