TAMPA, Fla. — Dramatic changes are starting to take place in the hospitality industry, as hotels begin to recover from the long recession that plagued the industry and so many others. These changes, says Glen Phillips, owner of international consulting and engineering firm Phillips & Associates, can mean new opportunities for hotel laundries to gain business in unexpected ways.
Phillips spoke on Developing New Business in the Hospitality Industry at the ALM educational conference earlier this year, detailing recent shifts that point to increased growth in this area, and highlighting ways that laundries can take advantage of that growth.
“There was a lot of money spent on hotel laundries and a lot of over-capacity in that area,” Phillips says. To make use of production capacities that are more than needed for their own facilities, hotel laundries are beginning to form business relationships that allow them to take on outside work. On the flip side, some properties are looking for ways to outsource laundry services and reduce their overall operational burden.
So how can operators begin to profit from these changes? For Phillips, it’s all about careful planning and projecting. He explains that a solid business plan can help hotels identify potential new markets and seek a steady stream of new customers. Commercial laundries, too, can use a business plan to get a piece of the newly available business.
CREATING STRUCTURE
A good business plan resembles a building structure, Phillips says, in that it has a strong foundation, a solid structure and, finally, a roof on top that brings all of the elements together. In terms of content, the “foundation” should include an executive summary, a description of the company or business, and an explanation of the products and/or services.
Next, operators will need to come up with a description for the project and tackle things like management, ownership, marketing strategies, technological advantages and a production/operating plan to form the “structure.” All of this is topped off by the “roof,” which should include information on financial details, capital expenses, operating pro formas, balance sheet items and two-year cash flow projections.
Sound overwhelming? It doesn’t need to be, according to Phillips, if you follow a logical sequence in developing your plan.
First, start by developing several basic measures: the total annual processing load by pieces and pounds, the number of operating hours per week, and the hourly production requirements. From there, you’ll be able to come up with estimates for space, equipment and staffing requirements. That information will lead into what the projected costs related to those elements will be.
“All of that funnels down into your final financial profile,” says Phillips. “And it’s that financial profile that really means the most to a banker.”
Don’t worry that producing estimates will sometimes feel like a shot in the dark.
“It would be nice if we all had crystal balls,” says Phillips. “We don’t. So you just have to take an educated guess.”
Another tip: Don’t neglect to take “soft costs” into account. Phillips defines soft costs as those related to extra elements of a project that might not be apparent at first glance. In the case of new equipment, for example, you would want to consider the costs related to installation, rigging and electrical work, among other things.
WRITING IT OUT
Once you have all the information you need, it’s a matter of buckling down and getting it on paper.
“None of us likes to write,” says Phillips. Still, do your best to make the business plan thorough and convincing, and be sure it includes an executive summary that’s “hard-hitting, interesting and persuasive.”
Before you go to any bank, be sure you’re confident in the information in the production plan and the financial plan specifically.
“If you don’t cover all of the costs in the situation, I guarantee that someone else looking at the report along the way will bring it up,” Phillips warns.
Finally, be aware that every business plan is unique. Some will need to be quite detailed, while others may not. Phillips says the business plan he proposes is just an outline, but in reality there’s no wrong or right way to develop a business plan.
“Develop the plan and then be diligent about working to that plan, because that’s the only thing that’s going to get you through.”
Miss Part 1? You can read it HERE.
Have a question or comment? E-mail our editor Matt Poe at [email protected].