Close

Note to Dry Cleaners: Keep Track, Stay Profitable

Howard Scott |

PEMBROKE, Mass. — You’re in business for the long haul, probably. Ten, 20, even 30 years. One New England dry cleaner recently sold his business after 42 years. That’s a long time. Unfortunately, memory is short. So keep track of your performance on a yearly basis. Over the years, it will help you see where you have been and, more importantly, where you are going.

What kind of figures should you keep? Well, annual sales, for one thing. Nothing tells you how your business is progressing like sales. But that isn’t the only story. Keep track of number of employees; break it down by full-time and part-time. Employing 10 full-timers is a lot different than two full-timers and eight part-timers. The total hours in these two situations is vastly different. Poundage is another helpful figure. How many pounds your shop produces states a lot about your plant efficiency.

If you do shirts in-house, that’s another figure to keep track of. After all, your shirt operation is a profit center (yes, you expect to make money on shirts) and you want to know where you stand. Employee turnover is another important observation. How many people did you go through this year in order to fill your full complement of slots? Finally, it would be good to know the number of lost customers.

How do you obtain these figures? Sales will show up on the monthly books. You can get employees from the payroll statements. Poundage comes from your cleaning machine records. The shirt figure can be gotten by a computerized tallying of all appropriate pricings. For instance, if you price shirts at $1.95, gather all the $1.95 billings in a year. You have to calculate turnover by adding up total employees in the payroll records and contrasting that with positions. Admittedly, lost customers is a soft figure. It is less objective, but a good guess could be made each month. You could run a computerized list of the customers who haven’t been back in six months. This would provide you with a reliable “guestimate” of lost customers.

Where would you keep these figures? Something like a hardbound bookkeeping volume that you can buy at a stationery story would be best. After all, you’re taking a business history, and you will not want to lose this book. But, if you prefer, a steno notebook is adequate. Whatever you do, don’t keep individual sheets of yearly totals that could disappear.

The benefit of this permanent effort will become apparent. The purpose is to compare and contrast, to spot trends, to catch weaknesses, to spot changes. And you only can do that with an analysis over time.

In fact, you might want to graph out results on empty pages of your book. You might discover things you wish you never dreamed possible. For instance, 10 years ago, you went through 13 people to fill your nine slots. In the past two years, you’ve gone through 20 and 23, respectively. What has happened? Are you getting crotchety in your old age? Are workers less willing to work these days? Have the demands of the positions gotten more stressful? Are you doing less training? Analyzing why individuals quit or were fired may point to the answer.

Why would you go through this work of keeping up figures? Don’t you have enough paperwork already, what with all the government compliance forms you deal with? You keep these records to remember and to understand. As we all know, it is easy to go along, year after year, running the business and as long as you’re making a living, just continue. After 10 years, you could be falling into destructive patterns of behavior. Keeping a book on stats forces you to confront reality. Hopefully, you’ll review these stats each year to make sense of what’s going on.

For instance, sales have steadily risen to $600,000 in the first eight years, but for the last three years have remained flat. What happened? you ask. If sales rose for the first eight years, why aren’t they continuing to rise now? Is it because your drop store volume has declined? Are the area demographics changing? Has a new competitor gotten a stronger hold of the marketplace? Has employee turnover been overly high? Have you neglected to keep up your store appearance?

Of course, you know sales have become flat without the help of your book (you live it and see business is flat every day), but examining the figures will give you perspective. Perhaps you didn’t realize (or have forgotten) that up until three years ago, sales had risen 20% every year. To go from a 20% increase to a zero increase is a major change. It can’t just be market saturation. Something must be wrong with the way you’re doing business.

You see that shirt production has gone down steadily over the last five years. Comparing those numbers to today, shirt production is exactly half of what it was. That’s terrible, and you are shocked that shirt numbers are so low. In fact, you might never have realized the decline was so severe unless you kept it charted. You might now be at the point where doing your own shirts is no longer economically feasible. Possibly you should job out your shirt volume to a wholesaler. Or, conversely, pick up four or five wholesale accounts that will get your production back up. Your profit margin won’t be as high, but at least, you will be in profitable territory with your retail shirt volume.

You see over time that your employee turnover has gone from 1.3 to 2.5. Wow! For every slot, you have to go through 2 1/2 people. That’s a lot of firing and hiring and training. That’s also a lot of staff dissonance, through which your customers become annoyed at dealing with someone new every time they come in. That’s replacing someone almost every month either through firing or resignation. Thinking back to last year, sure enough, there were six or seven people who walked out on you and never came back. Maybe you have gotten cranky. Perhaps you should step back and not be so intense. Possibly your people management skills are getting rusty when dealing with young staffers. Yes, you want things done right, but having to constantly bring in and train a new person is not a good thing. The point is, you need to get turnover down to where it was five years ago. Otherwise, you might become a burnout statistic.

Keeping track in a book is the way to keep your memory alive and not fall prey to acquiescence of the status quo. This book will help make you vigilant, or at least not let you forget as long as you review it from time to time.

And a final reason for keeping this book: At the end of your career, you can present this record to your grandchildren as your way of showing that you are proud of what you have accomplished.

About the author

Howard Scott

H&R Block

Industry Writer, Drycleaning Consultant, and H&R Block Tax Preparer

Howard Scott is a longtime industry writer and drycleaning consultant, and an H&R Block tax preparer specializing in small businesses. He welcomes questions and comments, and can be reached by writing Howard Scott, Dancing Hill, Pembroke, MA 02359.

Advertisement

Digital Edition

Latest Classifieds

Industry Chatter