National Clothesline

Last month’s article about rising supply, energy and labor costs generated a great deal of interest. Many cleaners called to share their stories about the changes they have made to lower their costs and thus improve their cash flow.

Following is a sample of the changes they made in their operations.

Raising prices: Cleaners are selectively raising prices on their drycleaned pieces. The first thing they look at is pants because they represent more than 40 percent of all drycleaning pieces.

Next are shirt prices. The rule of thumb on shirts is “If you are not charging at least $2.15 per shirt you should be” (regardless of what you think your market will bear). Your customers will pay $2.15 for good shirts.

Discounts: Many cleaners have lowered the discounts they give their customers.

Routes: Many cleaners with residential pick-up and delivery have consolidated their routes to eliminate wasted driving time between stops. Also, these cleaners are aggressively adding route customers by soliciting the people who live between existing stops.

Sales volume: A few cleaners told me that they intend to improve their cash flow by increasing their sales volume. Take a look at your P & L (income statement) for the last six months. If your profits were 15 to 20 percent of sales then you are doing well. The downside is that if you add $1,000 to sales you will make $200. Lesson: If you cut costs by $1,000 you will add $1,000 to the bottom line.

Please note, when talking about cutting costs to improve cash flow, I do not mention profits.

Why?

As management guru Mr. Peter Drucker puts it, “There is no such thing as profit. Profits should be considered a cost of doing business. Profits are to be used in part to compensate the owners of the business (or stockholders) and to pay for future growth, the cost of capital, the cost of training new employees and the cost of staying in business every week.”

Drucker, the greatest business philosopher of the past century, died last week at the age of 95. His influence has gone way beyond the many large corporations who were his clients to small business consultants such as me who advocate his management ideas.

Many successful drycleaners I’ve worked with have implemented his management philosophies. His management philosophy is based on a few hard and fast core values that all successful companies must adopt and strictly adhere to.

The first core value requires a full understanding of the functional needs of each department. I imagine some of you are thinking this does not apply to you because you have only one department. That may be true but that department must fill the functional needs of the company.

Let’s review here for a moment the “functional needs of the company.” These are all the things we know and yet, also, the things we tend to forget.

For example, consider the Customer Service (Incoming & Outgoing) Department. This includes inspecting all incoming items for damage and potential problems. Outgoing means checking to make sure the right garments go to the right customer. It also includes counting the number of pieces going back to each customer.

These are the basic functions for your Customer Service Reps (CSRs), but how do you ensure that all CSRs are doing the job right all the time?

The next department is Production and so on. Once again, we all know what the basic functions are for each department. The big question is, how do we get our employees to do things right, all day every day?

Drucker says that information is the most important part of every business owner’s job. What does he mean? As an owner you need to ask yourself the following questions every day.

What information do I need to do my job better?

When do I need it?

In what format should that information be presented to me?

Also, who is responsible for providing me this information?

When you have answered the above questions you need to ask yourself: What new tasks can I tackle now and what old tasks should I abandon?

As you think about your company and the tasks that you must work on every day, you may be wondering who has time for all this big-company kind of planning. Good planning can be accomplished by any size company. Figure out how to make time to manage your company well — not just put out fires. How? Learn to delegate.

Delegating authority and responsibility to others is one of the most difficult things for managers and owners to learn. Delegating to others is not a talent you are born with. It is a learned skill. Make the time to learn this skill and apply it to your business.

Drucker on delegating: Delegating requires clear assignment of a specific task, clean definition of the expected results and a deadline. Above all it requires that the subordinate to whom a task is delegated keep the boss fully informed. It is the subordinates job to alert the boss immediately to any possible surprises rather than try to protect the boss against surprises.

Buy yourself a holiday gift – the timeless classic book on management by Peter Drucker, The Effective Executive. The paperback edition is available from Amazon for $10.85. Enjoy the book — and the holidays!