Getting Down to Business

By Jeff Gardner | Nov 18, 2011

In the last half-decade or so, servicing commercial accounts has been the largest growing single segment of our industry in many markets across the U.S. More and more store owners throughout the country are getting involved at some level.

Why? Because it’s an additional revenue stream that offers laundry operators a great deal of flexibility. Whether your store is fully attended or unattended, you can offer a commercial service. You can do it part time, or you can do it full time. There is a rather low barrier to entry.

When people ask me about getting into the wash-dry-fold business but aren’t really sure about it, I always suggest they try their hand at a simple commercial account first, as a way to stick their toe in the water and test out the drop-off laundry segment for themselves.

Advantages of Commercial Accounts

Perhaps the biggest benefit of doing commercial work is its predictability. You can plan for it.

For example, let’s say you own a small, unattended laundry in a rural area. You may go into the store once a week to collect and do routine equipment maintenance. Perhaps you also have a friend who owns a business that requires laundry services. That would be an ideal first customer. You can pick up the commercial load on your way into the store for your weekly visit, do that laundry while you’re collecting the store and working on the equipment, and then return the laundry on your way back home.

That’s the beauty of commercial accounts. If you choose to do it that way, you can pretty much dictate your labor needs, you schedule and how much time you want to devote to it.

It’s very flexible when compared to a residential wash-dry-fold service, where you’re just waiting for customers to come in. With a traditional wash-dry-fold operation, you’ve got to be attended for that certain period in which you tell customers you’re available for dropping off and picking up laundry. You have to fully staff such a service right out of the gate.

Ultimately, commercial laundry is something that can happen once a week, once every other week or whenever you choose. It’s scheduled. You can plan around it, and you can plan your labor for it. It’s like clockwork. And, if you choose to grow this segment of your business, that’s something you can plan for as well.

As a whole, the biggest disadvantage of residential wash-dry-fold is that you simply don’t know when the residential customer is going to bring in their laundry. You can’t run a wash-dry-fold business Monday through Friday, from open until 3:00 in the afternoon, when your equipment is (for the most part) sitting idle. You can hope to run your wash-dry-fold business during that period, but there are no guarantees.

On the other hand, you can plan fairly accurately when you’ll run your commercial business. That’s probably the biggest benefit to running commercial laundry, because it allows you to earn extra revenue without inconveniencing your store’s bread and butter – your self-service, walk-in customers.

Another huge benefit of doing commercial work is that an account, in general, will be asking you to launder garments and items that that are all basically the same – all the same color towels, all the same fabric linens. Of course, this simplifies the cleaning and stain-treating aspects of the job; you can attack the entire load, as opposed to washing smaller bundles or individual garments.

Typically, you don’t have to inspect every individual garment or item. It makes it very easy from a spotting and stain-treating standpoint. For example, if your client is a hair salon, all of the stains are going to be basically the same. Therefore, you can treat them accordingly.

One of the other benefits of commercial laundry loads being similar is that it allows you to plan your labor costs much more accurately. You’re not folding a bunch of kids’ clothes at one time. You know what you’re getting in – and folding towels requires a lot less time per pound than folding a load of kids’ clothes, and then sorting and organizing them, and putting them in a presentable package.

It’s all the same type of stuff, so it’s generally a lot quicker and more efficient to finish the process. In fact, some commercial accounts don’t even need to be folded; you can just remove them from the dryers, stuff them back in the bag and deliver them.

All in all, the efficiencies of finishing a commercial product after it has been washed and dried are generally a lot higher than with residential wash-dry-fold.

One Disadvantage

The only disadvantage of commercial accounts is that – unlike with the self-service and wash-dry-fold segments of your business – you may not get paid immediately. What’s more, although it doesn’t happen often, you may not get paid at all, given the current state of the economy and especially if you’re dealing with smaller businesses like massage therapists or hair salons.

Getting Started

After deciding to take on commercial accounts, the first concept you’ll need to embrace is one of working with another business. As mentioned, you have to be prepared for business customers that are not necessarily willing to pay you immediately. Although smaller accounts may pay on the spot, as you grow your commercial business, you have to be willing to extend credit to these clients.

You have to be willing to invoice and keep some records of what you’ve done for the client. After all, it’s an expense item for your commercial customers. So, be prepared for a new, more intricate level of record keeping.

It’s also, depending on the types of clients you service, a whole new level of stain-treating and laundering. When you do commercial laundry, you’re expected to deliver a flawless product. That type of service is definitely achievable, but you have to understand the expectations going into it.

Of course, you also have to be willing to deliver and pick up the commercial garments and items. For smaller operations, this can mean the store owner picking up laundry in his own car on his way to the store. However, as your commercial business grows, you’ll no doubt want to consider acquiring a company vehicle for pickups and deliveries, as well as perhaps an additional employee to actually do the picking up and delivering.

When you first got into the self-service laundry business, you probably didn’t consider having qualified salespeople on staff or being a strong salesperson yourself to be of great importance. However, when you delve into the commercial laundry business, one of the things you have to be willing to do is put on your sales hat. After all, you’re going to need to go out and talk to other business owners and sell them on your service.

You’ll also have to create an ongoing relationship with them. That relationship might be with you, or it might be with a salesperson on your staff. In fact, there are laundry owners who have grown their businesses by hundreds of thousands of dollars a year in revenue over very short periods by putting on a commercial accounts salesperson on the street.

Along those lines, many in this industry think that, for attended stores, the labor associated with doing wash-dry-fold and commercial laundry is free, because the employees are already being paid to be at the store.

However, the reality is that it is not free; those employees focusing on commercial laundry cannot take care of your self-service customers as well as they need to or keep your store as clean as it should be. They can still greet the customers, but they’re not going to be able to help them carry their laundry in and out of the store. They’re not going to be able to interact with them as well when they’re doing a lot of wash-dry-fold and commercial laundry.

This is something I’ve noticed in my business. When we’ve grown to a certain point, I’ve had to hire extra employees just to maintain a certain level of service for my self-service customers.

Therefore, you need to budget those labor dollars into your costs. And, if you’re starting small, you need to allocate your own time and get paid for it, because you’re spending more time at that store.

The misnomer that the labor is free has led many to believe that the profit margin on commercial accounts is significantly higher than on self-service laundry, when the reality is that the profit margin is significantly less than with self-service business.

When you consider the labor – including pickup and delivery costs, time, etc. – the cost for doing commercial laundry is generally in the 50 percent range. And it may jump as high as 55 percent or 60 percent for high-volume accounts.

So, above all, never forget that you’re in the self-service laundry business first and foremost – and taking care of your highest-margin customers is crucial. Don’t hamper their ability to use and appreciate your store, because you will always make more money from the self-service customers than you will from commercial laundry.

That said, if you plan properly, commercial accounts can be a great additional revenue stream and an ideal way to grow your business.