PEMBROKE, Mass — A regular (recurring) customer brings in $500 volume a year. While that fact isn’t a surprise to Laundromat owners, it should be ingrained on every operator’s brain. That’s $500 a customer, year after year after year.
The patron comes in every week and spends $10. Ten dollars times 50 is $500. He or she might do this through wash/dry/fold business. She might do it by doing her family’s wash. She might buy snacks. She might have extra work, such as the dry cleaning of comforters. But $500 goes into the till.
Moreover, on the margin, each extra $500 yields a disproportionate amount of profits. Since all fixed costs—rent, occupancy expense, administrative, labor, capital expense—are accounted for, only variable costs increase. That’s pretty much utilities, which typically are 25% of costs. So, 75% of this new revenue goes into profit. With every new $500 customer, $375 (75% times $500) turns into profit, Three new customers yield $1,500 revenue and $1,125 profit. Ten new accounts fill the profit troth with $3,750 over-and-above-the-usual bottom line inflow. That’s serious cash.
This is a different mentality from a retail store or even a restaurant. Those businesses can’t really estimate how much each customer brings in because purchases are irregular in most cases. Yes, a few customers are recurring, but 80% are not. Therefore, a retail store or restaurant works on one sale at a time. You, on the other hand, are building relationships. Relationships with a capital R.
What does that mean to you? First, it means that every customer is important. Perhaps important is not the right word. You should treasure every regular customer. Yes, you already know that. But viewed in terms of the $375 lost profits, that’s real money. Now, one doesn’t go around the Laundromat looking at each customer as 375 one-dollar bills. No, the person is a human being with family, problems and a distinct personality, and you treat the individual as such. But behind that scrim of personhood is serious profit.
Second, you should consider setting up goals in such specific terms. If you could bring in 10 new accounts this year, you would make $3,750 more profit. If you could bring in 30 more customers, you would increase profit by $11,250.
This bottom-line thinking is a real motivator.
Third, it means you should maintain a continual program of winning new customers. Every chance you get, promote your business. Be your biggest booster. Look for new ways to increase business. Be aware of market changes. For example, if a competitor closes up, go into immediate attack to win the lion’s share of the business.
If you had nothing else to do—if your hired staff operated the business—you might spend all your time walking around the neighborhood, soliciting business. Stand in front of apartment buildings and approach people exiting. Go into corner grocers and start a conversation. At gas stations, approach customers filling up. This is not such an outrageous idea. Here is a scenario:
Owner: Hello, my name is Joe, and I own Joe’s Laundromat on Grand Street. Do you ever use a Laundromat?
Prospect: Well, frankly, I go to the Laundromat on Market Street. We’re older, and it’s a bit closer.
Owner: I hope they really treasure your business. We would. We appreciate all of our customers and view them as family. You know, if you came via Atwood Avenue, we’re just about the same distance. And Wednesdays is Senior Citizens Day, when we give every senior a free dollar-off coupon. A lot of seniors congregate at our store. I bet you’d know several of them. So you might consider trying us.
Our machines are all top-of-the-line and new. We have an attendant there all the time. I believe there is no attendant at that Laundromat on Market. It makes a difference. You’ll never have the problem of losing money because a machine isn’t working right. You’ll never get frustrated with a machine that doesn’t work. Let me give you this two-dollar coupon as an incentive to try us. You won’t be sorry.
Have that conversation 20 times a day and you will win significant patronage. How much? That depends on how good a salesman you are. But say you win one new customer a day. And you spend five days a week out in the marketplace. That’s 250 new customers a year, or $125,000 revenue—but more important, $93,750 profit. How would you like an extra almost $100,000 profit?
Now perhaps you don’t have all day to walk around your marketing area and make personal appeals. So, seize every opportunity you have. For example, in the supermarket, if your next-in-line neighbor looks like a prospect, make contact and press her to try your Laundromat. When you see people sitting outside a building sunning themselves, approach them with your sales spiel. Urge your employees to become promoters. And continue to do all the other things to win new business.
Seize on clever marketing opportunities to promote the business. Conduct event days to bring activity to your store. Gain as much free publicity as possible. If it happened, a newspaper article on your attendant finding and returning a $100 bill found in a customer’s pants builds your credibility. Engage area business in cross-marketing.
Now you might be thinking that your plan looks wonderful on paper but you’re too busy running your business. Well, consider what could happen if you hired a person to work three hours every morning to do your work, and free up your time to solicit. If you pay the person $10 an hour for 15 hours a week, that’s $150 a week. One new customer covers the expense 2.5 times. So perhaps that’s where you should be some of the time—out there in the marketplace chasing business. There’s just no better way than the personal approach.
Hard? You bet. But you can rev yourself up for the challenge. Just keep in mind that every new customer adds $375 profit.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].