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Five Numbers You Need to Know to Run Your Business

Karl Hinrichs |

The financial health of any business is revealed through financial statements — both income and balance sheets — as prepared by your accountant. It can be expressed in five numbers, and you should know them cold for each of your stores. These numbers reflect the profitability of your business, allow you to compare the profitability of your coin laundry to other stores and give you a benchmark value for your business.I don’t like numbers; I like quarters. If you feel this way, think about this: Does it matter if your coin laundry is making money? Does it matter if you’re losing money with your wash, dry, fold program? If you want to add more washers, wouldn’t it be nice to know what size of machines to add? What’s your store worth? Is stocking vending machines worth your time?Before we look at the numbers, have you ever heard of GIGO? GIGO is an old computer expression meaning Garbage In = Garbage Out. The concept states that the numbers coming out are only as good as the quality of the numbers going in. This means that accurate recordkeeping is mandatory for any business; it’s the only way to make intelligent decisions. How can you run a successful business if you don’t know what you’re doing?THE NUMBERSThe first of the five numbers is the coin laundry’s weekly gross income. This is the first question asked by any potential buyer, though it won’t be the last. It’s the benchmark by which everyone measures your business. This expresses how busy your store is and how much work you need to place in your store.The length of your lease is second most important number. Why? The value of your store and its cash flow are limited by how long the business will be around. A store with a 15-year lease has a much higher value than a store with only three years left on the lease. Why would anyone want to purchase a store with less than five years on the lease? When do you need to have a heart-to-heart talk with your landlord?Utilities as a percentage of washer and dryer gross is probably the most important operation number, and it’s also probably the least-used figure. I use utilities as a percentage of gross (UPG) to make sure that my machine pricing is in synch with my utility expenses. Vend prices need to keep up with your costs, and the most volatile expenses are the utility expenses. Utilities have a tendency to creep up and become a higher percentage of expenses, but by routinely checking the UPG, you can determine when and by how much to increase vend prices.Turns per day (TPD) is another benchmark. By monitoring your turns per day, you can determine how busy your coin laundry is and whether or not you need to expand or contract. By reviewing your TPD per size of machine, you can determine which size of machine you need to add for the best value. If all of the washers have similar TPD, then you have a great balance of washers. If your TPD is high on large washers and low on top loaders, then it’s time to consider pulling some top loaders and replacing them with a couple of large washers.Profitability on each sector of your business (self service; wash, dry and fold; vending; etc.) is the final number. Keeping track of each and every profit sector is just a responsible business practice. Why should you struggle to keep a wash, dry and fold business operating if you’re not making money? You might be surprised that the profitability of your vending machines is not what it should be, or you may have an inventory shrinkage problem. How can you tell if you have an inventory control problem unless you monitor your profitability of each sector of your business?These figures are the vital signs of your business. I have been in the industry since the ’70s, and it’s evolved from a “growth” industry to a “mature” industry. This means that whenever a new coin laundry gets built, its business has to come from another store in the market territory. Not every coin laundry can afford to be run or managed as a part-time business.To succeed today, you need to know your numbers and manage your business, both externally and internally. This means you need to know about all of the other coin laundries within your market, as well as manage your staff, control your expenses, control your inventory and make sure the store is the best it can be. 

About the author

Karl Hinrichs

HK Laundry Equipment Inc.

President

Karl Hinrichs is president of HK Laundry Equipment Inc. in Armonk, N.Y. HK Laundry Equipment and its predecessor, HK Sales, have been in business since 1967, serving both the coin and OPL laundry industries in New York and Connecticut.Hinrichs stated in the business carrying his father’s toolbox, and once he was old enough to drive, he was servicing and collecting for coin laundries. After college and some time as a research chemist, he returned to the laundry industry in 1980 and grew from from technician to salesman to manager to owner of HK Laundry Equipment.Hinrichs lives in Armonk, N.Y., with his wife and three boys. His interests are photography, sports and fundraising (usually on his recumbent bicycle) for worthy causes, including MS and ALS research. He is a long-time member of the Coin Laundry Association (CLA) and owns and operates several coin laundries.

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