Big Business Thinking

A New Monthly Column on How You Can Use “Big Business Thinking” for Strategically Pricing Your Laundry to Maximize Profits

As my fellow laundry owners receive this month’s issue, your customers’ kids are back to school and your distributors are having their fall shows. You might consider this time as a “New Year” for the self-service laundry industry. In this light, I am pleased to have been invited to write a new monthly column for The Journal. Our focus for the next year or so will be on strategic pricing to maximize profits.

Pricing is one of the most important, misunderstood and emotional issues facing laundry owners. Determining your personal pricing strategy encompasses a large number of hot button topics, such as buying new equipment, cards-versus-coins, dealing with your competition and exit strategy. Most important, proper pricing strategy must reflect your personal mindset as both an entrepreneur and a laundry owner.

I will be elaborating on many of the themes touched upon during my seminar at the “Clean Show” this past June in Las Vegas. Over time, we will undertake a detailed examination of each type of pricing strategy available, and the pros, cons and best practices for your implementation of each.

For this inaugural column, let’s frame the issue. While this industry is unquestionably unique, exciting and profitable, a vended laundry is essentially a standard B2C service enterprise, with significant existing competition, low barriers to entry and, in most places in America, a low growth rate. Few owners take the time to rigorously study their business, rather than their laundry. This is especially true for those who have been in the business for some time, already making money and thus concluding they must be doing the right things.

Owner-operators who can recite from memory the length of each wash cycle on their front loaders and tell you today’s price for hoses and belts at each of their local parts houses can rarely also tell you their turns per machine row last quarter, their fixed expense margins or the variable utility cost of their dryers.

Without knowing such things, these owners are incapable of correctly pricing their machines to maximize profit. It is my argument that it is highly unlikely that such owners are maximizing their profit opportunity, either in the short- or long-term. And if you’re not making money at all, you should be even more receptive to learning a new way of thinking about your business.

The first 15 years of my career were spent as an investment banker and investor—far outside of the self-service laundry industry—advising and working hand-in-hand with dozens of large and mid-sized public and private companies.

During this time, I reached the conclusion that while most small business owners have many admirable traits, such as fearlessness and a 24/7/365 work ethic, the truly successful ones add a secret ingredient, which I call “Big Business Thinking” (BBT).

By this, I mean incorporating into their business an analytical approach and using tools like detailed financial analyses, budgets, business plans, SWOT matrices, marketing plans, and competitive analyses—all essentials that most any big business considers standard operating procedure.

I have had the privilege of meeting literally hundreds of laundry owners across the country the past five years, first as CEO of the nation’s largest independent chain of laundries and then as president of the nation’s largest independent laundry developer, broker and equipment distributor. Successful laundry owners share a common trait: They understand that the laundry business is a business first and a laundry second, and incorporate BBT when making decisions.

Though there is clearly no single answer to the question, “What is the best way to price my store?” there is definitely a common framework for objectively and quantitatively determining the best answer. While each store and owner may be as unique as a snowflake, they all look the same from a distance, and they all consist of the same basic chemistry.

A primary goal of this column is to introduce you to some BBT analytical tools so you can make the best strategic decision about pricing your individual store. Some overlapping themes (reinvest in your store, customers like big machines, keep your store clean, etc.) will be brought up during this series, but always in the context of the decision making process for your pricing strategy. We will also discuss when it is appropriate for these operational cliches to actually be ignored.

Just because you’re in a mom-and-pop industry doesn’t mean you have to use mom-and-pop thinking.We will pick up next time with a detailed look at the most important mechanism in your analytical toolbox, Return on Investment.