DALLAS — As Ben Franklin used to say, “A penny saved is a penny earned.” It’s a saying that guides many of us as owners in the drycleaning industry. Every day we monitor our labor costs, supply costs, and utility costs to make sure that we’re not wasting one penny that could be going to the bottom line.
Frequently, owners ask me questions about sales. How do I find new customers? How should I advertise to get new people in the door? How do I grow revenue?
I would argue that the best way to grow revenue is to make sure you save the revenue you’ve already got. After all, just like pennies, revenue saved is revenue earned.
To illustrate the power of revenue saved, or “revenue retention,” as it is commonly called, I like to think of revenue in a bucket. Pretend your bucket contains all of your revenue from the previous year, say $500,000.
For example, let’s assume you followed Ben Franklin’s maxim to the letter and managed to retain all of your customers from the previous year. That means you would have $500,000 in revenue — a full bucket.
Now, let’s say your marketing attracts 100 new customers each month and they spend an average of $100 per year. You would have $120,000 in new revenue.
Sales is up $120,000! Your bucket is overflowing!
Of course we as drycleaning owners often get distracted by the chase for new customers and we forget about our current customers. As a result, our bucket starts leaking and we retain only 75% of the revenue.
That means even before you start getting new customers, you’ve lost $125,000 of revenue. So by year end sales are actually down to $495,000.
Now that we know the dangers of the leaky bucket, the question is how do we keep it from leaking in the first place?
Check back Thursday fo the conclusion.