CHICAGO — Like almost every small to mid-size business, most dry cleaners have found themselves in survival mode for the past 12 months. The near-instant drop in business due to the coronavirus pandemic lockdown exposed underlying weaknesses in many companies, dooming some and leaving others reeling.
Now that vaccinations are allowing society to at least see the beginning of the end of the crisis, the logical question many business owners are asking themselves is, “What now?” With advances and innovations in cleaning technology, coupled with environmental concerns over aging machines and perchloroethylene (perc), many owners are finding themselves tempted to update their plant. If they do, they could be better positioned to take the market share of drycleaning customers looking for new cleaners after theirs have retired or gone out of business. But how can a cleaner balance the risk of spending hard-earned money with the potential profit of an as-yet unclear future?
Preparing for What’s to Come
“Our membership across the country has told us that, in addition to the financial challenges of this past year, one of the biggest challenges has been the inability to plan for the future,” says Sarah Crozier, communication director of Main Street Alliance, a small-business advocacy organization. “‘Uncertainty’ is the word that comes up over and over again. From a business perspective, uncertainty is a very difficult concept to deal with. So, wherever you can, make investments and plans, with flexibility and risk assessment factored in. It helps to deal with some of the uncertain times that we’re living in.”
When considering a capital investment in a company, the return on investment is crucial. If there’s no ROI, then the equipment was not a good addition.
“Quality machines reduce your utilities and your labor costs, which are most of your variable costs,” says Matt A. Lipman, sales representative for equipment manufacturer Union Drycleaning Products. “That’s where the new cleaning machines come into play because they can make you faster and more efficient. Also, if you’re doing your cleaning at optimum levels, then you can look for additional pieces to clean.”
One of the most important factors of ROI, Lipman believes, is the one element no one can buy — time: “With cleaners working fewer hours and trying to minimize hours of production to save on labor and utilities, they really need to look at time. New equipment can allow you to do a better job in less time, but so often people never look at their time when they’re looking at ROI.”
In addition to time, there are other advantages in updating or replacing aging equipment.
“You can have better solvent recovery for lower operating costs,” Lipman says. “There are also innovations like solvent heating and other advancements. You also have a lot more options for solvent. There are new solvents that do a better job cleaning, and, again, it saves time, so there’s a return on that.”
The ability of a new piece of equipment to pull its weight is a major factor that goes into loan qualification.
“We look to see the ROI as a key to profitability as well as sustaining the business,” says George Bednar, director of sales for NewLane Finance Co. “Speaking as a lender, we often look to see whether the new purchase will be a labor-saving or income-producing investment. What does it mean to go from a single-buck to a double-buck shirt press, or adding additional presses? What does that mean in terms of other aspects of the business? Will it be cutting labor costs? Will it increase piece work? Will chemical prices drop? The questions we try to understand are how this will benefit the business.”
Come back Thursday for Part 2 in this series, where we’ll examine the options dry cleaners have when it comes to financing an upgrade to their plant.