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Coin-Op Owners: Know Your Operating Numbers

Howard Scott |

Being aware of ratios can keep you in control

PEMBROKE, Mass. — Your Laundromat’s operating numbers should be as easy for you to recite as your Social Security number.

What is your average daily revenue? What are your machine turns per day? What percentage is payroll to gross?

How much is revenue per square foot? How much does wash/dry/fold fund payroll? What percentage is your cost of operating supplies to revenue?

Has occupancy as a percent-to-revenue been rising or falling? Have utilities as a percent-to-revenue been rising or falling? If you own multiple stores, what are the answers to these questions on a per-store basis?

If you don’t know the answers to these questions, then you are operating blind and that is not a good way to go. Knowing these ratios helps you manage your business, enables you to make better decisions, and puts you in full control.

I know some operators who don’t know this information, nor do they care to know. One said to me, “As long as I can pull out $700 a week, I’m happy. I don’t pay attention to numbers. If there were weeks I couldn’t pull out this figure, I would get more involved. But, hey, if it’s not broken, don’t fix it. That’s my philosophy.”

Is that a good philosophy? Certainly not. While he might not stress out about the numbers, he might be missing areas that should concern him. If he rearranged matters, he could perhaps draw out $1,000 a week instead of $700. Maybe an employee is stealing from him, and he is totally oblivious to the deception. Or possibly he’s doing things wrong, which will cause him trouble next year. If he would examine these ratios now, such insights would help head off trouble.

Finally, there’s that wonderful feeling an owner gets by being in complete control. It’s the sense that one has mastered the basics and will not lose the grip of command. It’s the satisfaction of knowing where every dollar is going. It’s the feeling of being the master of one’s universe. It allows one to sleep well at night.

HOW THE NUMBERS HELP

Here are some examples of how it helps to know the ratios.

Example 1: You are achieving 3.4 turns per machine in Store No. 1 and 2.8 turns in Store No. 2. Obviously, the second store, the one with the lower average number of turns, is underperforming. Why is that so?

Is the location less than ideal? Are there staffing problems? Is there an issue with access? Is there a relationship between turns and operating hours?

What can be done to improve the turn? Should more machines be moved to store No. 2 to obtain the better turn? Can staffing be switched around to see how this affects turns? Does the store simply produce less?

Should you consider closing Store No. 2 and focusing on Store No. 1? Can some customers be encouraged to frequent the lower-performing store?

Such questions get the owner thinking, which will ultimately result in a solution. The bottom line: if one store achieves a 3.4 turn, the second and third stores should do as well. If they don’t, then something’s wrong.

Example 2: Wash/dry/fold revenue covers 50% of the store’s payroll. Is that good?

A friendly competitor tells the owner that the competitor’s wash/dry/fold volume covers 100% of payroll. Obviously the friend’s wash/dry/fold business is much more robust than that of the owner’s. Or is it?

Both stores do the same wash/dry/fold volume, but our owner’s attendant has to devote seven hours a day to wash/dry/fold and thus must work overtime to get all the work done. So, is our owner’s staffer inefficient? Is the competitor’s staffer super-efficient? Is the wash/dry/fold volume handled differently in each operation? Are the types of garments different?

Maybe the pricing structure used by our owner – 6 pounds at one price, additional poundage a second price – compared to a straight poundage price charged by the friendly competitor is the culprit.

Knowing these different statistics begins the inquiry that should result in some sort of decision. If one operator can cover his payroll with wash/dry/fold volume, then the other operator should, too, particularly where the total volume is identical.

Example 3: What does it mean when utilities percent-to-revenue is rising?

It clearly shows that costs are increasing as a percentage, a dangerous predicament. Has the owner not been raising prices enough to cover cost increases?

Are some utility costs escaping in the forms of leaks or inefficient power use? Is the mix of equipment inefficient, and is it time to purchase new, more efficient machines?

Has the owner been fighting to get the best deals, to take advantage of every pricing allowance? Are attendants not paying enough attention to utility usage?

Such an increase in utility cost percentage is a real cause for alarm. It won’t be too long before utility costs are 30% of revenue, completely drowning out profit.

Example 4: Is revenue per square foot within industry parameters?

If it is considerably below industry standards, then perhaps reconfiguring space will make it more efficient. You could build a wall and rent out the excess space to a small tax office or even a retail store. This action could augment your revenue significantly and realign your per-square-feet ratios.

This author knows a restaurateur who runs his business in the tiniest space imaginable. He hits an incredible ratio of volume per square footage by packing tables tight, by forcing strangers to sit alongside each other, and by keeping waiting diners lined up out front and taking orders while they are in line. While this goes against the industry grain, he believes this signature crowdedness is the key to his success. So, square-footage revenue counts.

Run a loose operation, and you risk missing these clues. There are benefits to being on top of your numbers.

About the author

Howard Scott

H&R Block

Industry Writer, Drycleaning Consultant, and H&R Block Tax Preparer

Howard Scott is a longtime industry writer and drycleaning consultant, and an H&R Block tax preparer specializing in small businesses. He welcomes questions and comments, and can be reached by writing Howard Scott, Dancing Hill, Pembroke, MA 02359.

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