Don’t Let Tough Economic Times Sway You into Taking On Ill-Fitting Accounts (Part 2 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?”Textile/Uniform Rental: Steve Kallenbach, American Dawn, Los Angeles, Calif.
The answer to this critical question lies somewhere between an economist, an industry/business expert and perhaps a soothsayer.
Parts of our economy have been negatively affected by the obvious banking and real estate issues, as well as the fallout from the larger perceived economic crisis.
I can offer a simple “12-Step Program For Survival In A Down Economy.”
Step 1: Keep a cool head. Economics run in cycles. What goes up will come down. What comes down will go up. The question is usually not about the direction, but rather the timing.
Step 2: Assess your current business. Are you doing a major portion of your business in sectors that have been heavily affected by the economic issues: banking and real estate services, or housing construction? If so, put a pencil to the worst-case scenario so that you realize the amount of business you may have to replace.
Step 3: Target new growth businesses in sectors that aren’t as vulnerable to the economic conditions. For instance, when automotive sales are down, automotive service typically increases.
While certain dealerships are being shut down, this is not the case with independent automotive service locations. Of particular interest should be those shops that specialize in fuel-efficient automobiles, as gas prices have had a major effect here.
Another target area might be healthcare textile services, whether on a large or small scale. This area of the economy continues to grow despite troubles elsewhere. Hotel and restaurant linen remains stable, even if the usage per location has gone down due to economic factors.
Find your best areas of growth with the least amount of recent shrinkage and target them. Target areas of business that will utilize your core merchandise, not special apparel or textiles. Make sure you have reuse in other accounts, should the account be lost. This is more important in our present-day economics.
Step 4: Pay closer attention to your accounts receivable. If you see an account paying more slowly, make a visit. Discuss it face to face with ownership. Work with them, but know what you’re getting into.
Step 5: Run credit reports on all current suspect accounts. Look closely for credit collections, litigations, etc. Make sure there are no surprises should an account “go down.”
Step 6: Run credit reports consistently on all new accounts, even COD accounts. You want to see that they are creditworthy and rated as such by a legitimate organization (TRW, D&B, etc.). Don’t take marginal business from a credit perspective. Make sure you know why they quit their last service provider. Was unpaid credit due the cause?
Building new revenue simply for the sake of the size of your top line will end up biting you if you don’t pay close attention to creditworthiness.
Step 7: Take inventories and check usage against invoiced textiles. If you have overstock or overcharging with unneeded inventory levels, it’s a good way to get yourself a competitive situation. In times of perceived economic crisis, most of your accounts will welcome competitive offers. Proper inventory usage is a higher priority to your customers at times like this.
Step 8: Measure your lost business due to “shrinkage” — business that is being reduced by usage by item line. This area of concern will sneak up on you.
A restaurant averaging 2,000 napkins a week is now using 1,500 a week due to its slowdown in business. The account is stable, but just using a little less. This scenario accounts for a lot of lost business in our industry, but we typically don’t track it. We usually just track new accounts, lost accounts, new items, and lost items.
Put a measurement on shrinkage every week and add it to your account replacement revenue needs so that you have an actual barometer of what you need to be writing each week.
Step 9: Consider investing in one or more additional sales representatives. They can pay for themselves every week, especially if you’re replacing the shrinkage over and above your normal new sales.
Step 10: Assign someone outside of the service department to systematically make phone calls to every single one of your accounts. Check your service levels or other needs. Again, it’s in times of perceived economic crisis that most accounts will welcome competitive offers, so your service levels need to be at their highest.
Step 11: Use all of the information you gather to renew your account contracts. This is not a good time to have expired contracts in your accounts.
Step 12: Talk to your key suppliers. Find out where their highest rate of growth is. Their areas of growth are economic indicators within our industry. Those of your vendors that are supply partners will help you target new business, since it will likely benefit them as well.
Service can be measured by meeting customer needs in quality (as they define it), proper inventory usage levels, good merchandise, and customer contact (account penetration).
History tells us that the economic issues we currently face will definitely turn around at some point. If you rebuild your business in this economy, just think how strong you will be on the upside!Chemicals Supply: Kevin McLaren, Dober Group, Woodridge, Ill.
We’ve all heard the saying, “You have to spend money to make money,” but chasing bad business in an attempt to grow the business will only end up costing you money.
A friend in the compliance industry used to say there are two ways to make money — to obtain new money and to hang onto the money already in hand. His prophetic wisdom from the 1990s rings true today as we manage the money invested to grow our business.
With the cost of plant utilities increasing and exhibiting instability, and petroleum prices recently reaching all-time highs, the cost to process existing business has already impacted us all.
This impact must serve as a first step in the decision tree to pursue new business. If the business opportunity is local to the plant, or is on an existing route, then an extra stop wouldn’t add significant fuel costs to reach the location or labor costs tied to driving to and from the route/plant. Conversely, prospective customers in an area you’re not currently servicing will add fuel and labor costs to the service investment.  
Similarly, the costs associated with the laundering and finishing processes inclusive of steam, natural gas, electricity and water may directly impact the profitability of taking on the prospective customer.
If the textiles to be serviced are the same as other textiles being processed, that’s great news. There are more pounds of a similar classification, with little impact to the dynamics of the work mix.
Conversely, our industry is seeing a number of new textiles gaining entry into the market. Should the prospect desire the latest in textile innovation or a specialty textile classification, perhaps microfiber or high-visibility apparel, then the launderer will incur additional processing costs.
A second step in the decision tree is whether the new customer’s textiles will co-mingle with the current work mix.
Similar to co-mingling of the textiles being serviced, are there any additional labor requirements that are requested or required by the prospect? Certain users of textiles deemed “critical care” have special handling requirements that are designed to maximize the cleanliness of the returned textiles.
Would the textiles need to be folded in a secured area of the plant? Do the textiles require special sorting, bagging or other packaging that is unique? Determining if the textiles serviced for the prospect would require any additional or special touches in finishing and during the customer-readiness process is a third step in the decision tree.
An additional consideration is the prospect’s financial value. Is this potential customer being pursued because it may provide a “quick hit” of revenue, or does it have needs that fit your business model?
What is the risk-reward potential on the investment that will be made to obtain the business? Is the prospect looking only for the lowest-cost provider, and what is the chance that the new business may be lost to a lower-cost provider after you initiate your service?
Conversely, does the prospect fit your business model? Might this customer serve as your springboard into a new setting that was already in the planning stages, or might this customer lead you to other business within a larger, multicustomer corporation?
If your business model has already committed to the “spend money to make money” investment, now may be the ideal time to approach this opportunity.
Growing the company’s top line without looking at the bottom line doesn’t make business sense. By focusing on customer location, co-mingling of textiles, processing touches, customer integrity, and your business model, you can maximize the potential to grow your money in hand.Linen Supply: Bill Kartsonis, Superior Linen, Supply Co., Kansas City, Mo.
I remember a famous Dirty Harry line from the movie Magnum Force: “A man needs to know his limitations.” A company needs to know its limitations, too.
Once you understand both your capabilities and limitations, then you can take advantage of all reasonable opportunities.
The difference between a small business and a larger one is that a small business can be fleet on its feet, able to change directions quickly to respond to different circumstances.
If your plant is set up to handle multiple types of soil, then you may be able to take on heavier-soil items, such as food-and-beverage linens. But if your capability is only to wash such items and you don’t have enough ironing capacity, I wouldn’t recommend taking on this type of business.
Another opportunity that needs careful consideration is washing customer-owned (COG) linens. Our plants have always operated on a system in which each batch is identified. But many plants are designed to process linen supply or co-op bulk linen, where all items are common and come from only one owner. When these plants attempt to process separate accounts, bad things can happen.
Customers are not happy when you “lose” their linens by mixing them with others. A different mindset is needed, which requires reorienting all plant staff.
There will be many opportunities during this time of economic challenge. One is to serve hotels that come to the realization that their laundry is an out-of-date expense. By outsourcing, they can turn their linen expense into a pure variable cost.Click here to see Part 1 of this story.


Digital Edition

Latest Classifieds

Industry Chatter