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Seek Balance Along with New Business (Part 1)

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(Image credit: Alissa Ausmann)

“Can you suggest some criteria that we can use to weigh the pros and cons of providing textile services to a new account, whatever and wherever it may be?”

HOTEL/MOTEL/RESORT LAUNDRY: JR NORRIS, DELTA UNIFORM AND LINEN, ALBUQUERQUE, N.M.

My advice is to not get far from your basic business focus.

We focus on hospitality linen and explore all options for the discerning customer. High-end restaurants, fine hotels, bed and breakfasts, country clubs and finer properties are businesses we target. We did try healthcare to increase volume, and this was a disaster.

Healthcare is priced so low per pound that our production team has to focus on speed. Regarding hospitality, our production team is always focused on quality and attention to detail. To have the plant shift gears for healthcare jr norrisand then back to hospitality was difficult; both lines suffered. So we decided to increase our per-pound price, stay in hospitality alone, and market our service as being the best.

We watch carefully when investing in any products that are out of our normal linen rental line. If a new account requests an item we don’t carry, we offer some options to rent for a higher amount for a while until we recoup some of our investment, or they sign a contract that says they will rent it for X times a year or purchase it and we process it.

Also with a new account, we require cash on delivery for a period of time. This has saved us on some new accounts that went out of business early on.

Some new-account factors to consider are:

  • Is there additional cost?
  • Is sorting labor-intensive?
  • What is the material composition?
  • What is the level of colorfastness?
  • Are hems strong?
  • What are the needed washing/drying times?
  • Must the goods be dried separately?
  • Are the goods finished by tunnel drying or hand ironing?
  • Is the packaging plastic wrapping or string?
  • What is the cost if damaged?

Bottom line is don’t let any new business affect your current customers or your plant in a negative way.

COMMERCIAL LAUNDRY: TOM GILDRED, EMERALD TEXTILES, SAN DIEGO, CALIF.

While there may be no “magic formula” to determine whether or not to serve an account, there are certain criteria that can be used to make the decision tom gildredsimpler. One of the greatest challenges can be balancing aggressive sales efforts with profitability and operations.

Some of the factors that impact the viability of serving accounts, and should be considered, include:

  • The proximity of a potential customer to the plant as well as to existing customers you serve.
  • Pricing — including incremental pricing.
  • Volume of the potential customer’s business.
  • Item mix and number of items.
  • Seasonality — Are you in a market that has a lot of seasonal fluctuation? If so, this will impact hiring as well as linen purchases.
  • Weather Conditions — Certain climates affect the life span of the linen as well as how often you have trucks on the road. These factors can impact linen purchases (including how often you have to purchase to accommodate life spans) and delivery costs.
  • Is the customer COG or rental, and which type of linens comprise the majority of what you are currently processing?
  • Competition — Sometimes it might be wise to seize the opportunity, even if the profitability isn’t quite there, in order to maintain or grow market share.
  • Financial Need — The health of your business is, of course, a primary consideration, and sometimes you might consider a lower price per pound in order to make the entire operation more profitable.
  • Labor Force — Do you have the existing labor pool to facilitate the new business and service it well in accordance with your commitment to quality?
  • Capacity — The plant’s ability to process the new business is a key criterion, and it’s important to allow time for equipment maintenance, so bringing on business that creates a 24/7 processing situation can compromise the plant’s quality and ability to meet demand.
  • Quality — Will adding this business in any way compromise providing quality service and products to your current customer base?

Ultimately, after taking this list of criterion into consideration and weighing the value of the account, it should be easier to determine the right course of action based on the overall health and wellness of your business and not only the revenue to be gained (or price per pound).

TEXTILES: TOM LANGDON, ENCOMPASS GROUP, MCDONOUGH, GA.

There is an old saying in our industry: “Any order is a good order.” tom langdonOn the surface, that makes sense, as nothing happens until a “sale” is made or a contract written. But in reality, no business can be successful trying to be all things to all customers or trying to service all markets.

Let’s compare and contrast the healthcare and hospitality markets, as these are the two dominant markets in which readers may choose to take on new business.

In healthcare, the linen is just a necessity in delivery of the primary product. In stark contrast, linen can be one of the “key” areas to promote and brand hospitality product offerings to the consumer.

Another contrast is at the end-user level. The healthcare end-user is not using the linen by choice but rather is in the facility as a matter of need. On the other hand, the hospitality end-user participates by choice and expects an experience that is satisfying and memorable, and will often reward the provider in the form of repeat business. As such, the motivating factors required for the linen are vastly different.

As you drill down into each market channel, each has differences that separate them. They may be subtle or obvious, such as the difference between a 10/1 open end yarn, five pounds per dozen bath towel used in healthcare, and a 12/1 ring spun, 17 pounds per dozen bath towel used in the hospitality market. Each meets the customer’s requirements but are quite different in appearance, cost and processing.

Some laundries may find it easy to incorporate the needs of different market channels, while others struggle. Some guidelines that will help you determine which category you fall into involve attention to detail.

It all starts with the product specifications (you can’t get too detailed here). If you want to control the output, you must manage the customer expectations and select the right inputs.

So, if you are considering taking on new business outside your core competency, you may want to first do your homework. For example, in healthcare, there tends to be a lot of product standardization, which works well for commercial laundries. The opposite tends to be true in hospitality, where hotels use linen as a way to differentiate themselves from the competition.

The pros of expanding your reach are obviously new business. The cons can be a disruption to your incumbent business by reducing operating efficiencies and increasing operating costs.

Develop a checklist approach that includes each critical aspect of the new customer or business. Analyze its key drivers and ensure you are properly aligned to meet these needs.

Finally, I have revised the old industry saying to “Any profitable order is a good order.” Remember to keep your current customers satisfied while trying to grow business in these challenging economic times.

MEMBER AT LARGE: DOUGLAS STORY, SWISHER HYGIENE

Taking new business seems to be the first impulse of every sales person and, in many cases, even top management. But is it that simple?

douglas storyIn the 1980s, I read a book written by Akio Morita titled Made in Japan. The book was about his efforts to start his business, Sony. One takeaway has had a lasting impact on my thought processes about new business.

Sony launched the transistor radio into the American market after an American company decided that American consumers wanted “big radios.” In his efforts to sell the radio, he met with a buyer that wanted 100,000 units, an order worth almost as much as his company at the time.

How would you respond to a new customer that placed the kind of order that would double or triple your total sales revenue? Would you jump at this opportunity?

The company wanted Morita to price the radios in units of 5,000, 10,000, 50,000 and 100,000. His plant was capable of producing a little less than 10,000 units per month. Promising 100,000 units would mean expanding, hiring more people, and taking on long-term risk.

For 5,000 units, Morita charged regular price. For 10,000, he gave the largest discount. For items above 10,000, the price he quoted started to climb. Why would he do this? Charging more for higher volumes seems to be counterintuitive. But Morita was assessing the impact on his business for the short term and the long term. Sales would be great, but the risk to manufacturing and the money needed to comply with this account’s needs would endanger his business’ long-term health.

Taking this holistic approach, he developed a system that would satisfy the needs of the customer and the long-term needs of his company. He sold the customer using this method, and the long-term success of Sony has been well documented.

Morita’s example taught me to look at more than just grabbing the sale without considering its impact on your organization and its bottom line. I also believe that you should fully analyze your current customers in the same way, because all of us have a customer or customers that should be eliminated, or at least reassessed, so that your organization benefits.

Putting on new business is one of the most expensive actions an organization can take. It’s important that your business recover that expense and turn a profit (or cover expenses, for you non-profits) for the benefit of the company, its employees, its customers and the shareholders that depend on the health of the operation.

Check back tomorrow for Part 2!

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