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Don’t Let Tough Economic Times Sway You into Taking On Ill-Fitting Accounts (Part 1 of 2)

“With the economy in the shape that it’s in, we’re looking for new business anywhere we can find it. But aren’t there times when serving certain accounts doesn’t make sound business sense? Can you suggest some criteria that I can use to weigh the pros and cons of providing textile services to a new account, whatever and wherever it may be?”Equipment Distribution: Scott McClure, Pellerin Laundry Machinery Sales, Kenner, La.
Many successful businesses use the term “win-win” when referring to their customer relationships. The business provides a valued service to their customers while making a fair profit. The same goes for the textile services industry. In the attempt to broaden new business and expand new accounts, we recommend the complete evaluation of several criteria.
1. Location – With transportation costs rising, we strongly recommend establishing a profitable service radius from your facility. Special provisions and exceptions can be made for customers that accept fewer deliveries per week or agree to store additional linen to lessen the long-distance driving burden.
2. Customer Size – If your laundry is set up for large COG (customer-owned goods) accounts, it may not be feasible to service smaller accounts due to load sizes, means of transportation (smaller vans vs. larger delivery trucks) and sorting/equipment capabilities.
3. Available Linen – Whether the linen service provider or the customer owns the linen, an agreed-upon par level needs to be maintained. We recommend establishing a minimum of four pars of linen. 
4. Hours of Operation – You need to consider whether your laundry’s current operation can handle the additional production demand without increasing the number of employees and/or hours of operation.
Many plants have found it extremely difficult to manage and maintain consistent productivity and quality in multiple-shift operations. Remember to allow time for preventive maintenance.
5. Special Needs – Does the new customer have specialty linens that require more expensive processing? Customers may require that linens be packaged in a particular way. Always make sure your equipment can process the linen to the customer’s expectations and needs.
6. Customer Satisfaction – There’s nothing wrong with looking at ways to expand your business, but not at the expense of losing existing customers. Make sure that you are proactive and maintain the customer service to which your existing customers have become accustomed. 
When considering expansion and growth, take a long, determined look at your plant’s operations. Making improvements in equipment and processing could increase your productivity; allow a reduction of employee requirements; provide better quality, which may allow you to increase your service rates; or reduce your utility consumption, resulting in lower operating costs and increased profits.Hotel/Motel Laundering: Neil MacDonald, Kauai Marriott Resort & Beach Club, Lihue, Hawaii
Our facility was built as an 844-room resort. After it took a direct hit from a Category Four hurricane, it sat dormant before being sold two years later.
The new owners renovated and converted 488 rooms into two- and three-bedroom vacation rentals that are serviced once a week. The remaining 356 are hotel rooms that require daily service.
Our volume decreased by almost half, so we were able to pick up additional work from our sister hotels and time-shares on the island and centralize our operation.
Managing a laundry that serves one hotel is easy compared to taking on different accounts. If you’re considering taking on additional accounts, there are some things to consider.
Do you have enough space to stage clean and soiled linen?
Consider your equipment size and determine if you have enough capacity to take on more work.
What system will you use to keep your accounts separate? How will you handle the materials? Do you have enough carts or slings?
You’ll need a truck or two and drivers. From where will you unload and load your work? What will the flow look like? Look at increasing labor and shifts as work increases.
Most importantly, consider what you’re going to charge for your services. Make sure all expenses are covered, including labor, benefits, supplies, equipment and vehicle depreciation, delivery expenses, vehicle maintenance, and insurance.
Will you charge flat rate by the pound, by the piece, or both?
Ask your potential customers what kind of service they would require. For example, if you were processing rags, would they want them neatly folded and stacked, or just loosely bagged? 
You’ll need to prepare a contract. The Association for Linen Management (ALM) offers a Resource Guide to Laundry Contracts that I consider a valuable tool.Commercial Laundering: Richard Warren. Linen King of Central Arkansas, Conway, Ark.
There certainly may be opportunities for increased volume and income. All laundries are pretty much in the same boat, however, and you may find that everyone is being more aggressive. If that’s the case, and your facility is timid, you may find the competition getting a share of your pie.
Are we ever justified in turning down business? I think there are good reasons to decline business.
In our industry, we constantly battle to attain adequate staffing. If you accept an account that has a special need, and can’t get the proper staff in place to satisfy that need, you’ll have an unhappy customer and more drama than you were planning on.
Considering any special needs when establishing price is helpful, but it doesn’t guarantee that staffing will be there when it’s required.
Another potential problem is delivery schedule. I hate to admit it, but I once had a customer that required me to make two trips there each day for a year.
When we added that customer, we added it to the end of the route. That was a problem, as this customer needed its clean goods earlier. We changed delivery to the beginning of the route, but the customer’s soiled goods weren’t ready for pickup at that time.
The customer made it clear that the delivery schedule was my problem. Its needs had not varied. The only thing that had changed was the laundry service company. If we couldn’t accommodate it, it would just go back to its old service company.
Putting this customer in the middle of the route changed things and made my existing customers unhappy. So, it was two trips per day. Taking on that account was a mistake.
You have to be careful about taking on all comers. You may accept several new accounts that aren’t quite a good fit, while assuming that things will average out when your volume increases. If additional volume doesn’t materialize, the laundry has a high percentage of business that it can’t service profitably. 
If your facility mainly handles large accounts, then adding smaller accounts may create a poor mix. If you don’t return anything on hangers, then you need to be wary of customers that require a large percentage of hanger deliveries. A new customer that’s five times larger than your average account will force you to get creative.
Some government contracts pay quite well, but will require you to have certain levels of insurance for your employees, recognize 10 or more paid holidays, and pay specific wages. These things will certainly drive your costs up. If you haven’t considered them when pricing, you’re in for a shock.
Regardless of the state of the economy, we can always be on the lookout for growth opportunities. Never be afraid to add pounds at any time, but let good business practices guide your decisions.Check out Part 2 of this story on Friday!

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