Big Picture Thoughts
It’s been 2 years since I opened my business and I’ve hit every milestone I set out at the beginning. Yes, I’m bragging a little. I have a functioning store and 2 employees. Last month (March) the business generated $14k in gross revenue and made a profit for the first time since the store has been open, which is only 4 months. And I’ve built a pretty good routine to where my days are now mostly on auto-pilot. Orders come in, we knock em out.
These last few days I’ve been thinking more about the big picture and how I don’t want to lose sight of it. I’ve learned a lot these last couple of years and I want to share my takeaways and plan out the next 2 years.
The Big Picture
My overall plan is to build a replicable model in Dallas and expand to other cities. The store I have now is not the correct model. The correct model requires the purchase of an existing laundromat, where the capacity is much higher than I have now. Labor should be the bottleneck, not equipment.
In my store now there are 2 washers and 3 dryers. I cannot add washers because the building’s drainage system cannot withstand anymore water going through it. In fact, we have to pause the washers so they don’t drain at the same time or else the store gets flooded. The equipment infrastructure by itself is reason enough to buy an existing laundromat, but there’s even a better reason.
One of my employees is a super star. This lady can do 180 lbs. of laundry in an 8 hour shift. This is more than double what my other employee or I could do in the same amount of time. But one day we were so slammed that I had the ladies take all the laundry to a coin laundromat. They knocked out 240 lbs. in 4 hours when they had access to unlimited machines.
The answer here is to have an entire laundromat at our disposal. I would say that is my ultimate 2 year goal.
Key Performance Indicators
When I started I thought that my most important metric would be net sales. Net sales does not include discounts, comps, refunds, or sales tax. It’s basically the total amount of money the business took in that belongs to the business.
Turns out I collect more sales tax than I pay out. When I outsource the laundry or dry cleaning, my vendors charge me sales tax, which I then write off of my own sales tax payments, since I can’t be charged sales tax for the same order twice. Thus, gross revenue (which is net sales + sales tax) became more important. For the first year of my business I focused on gross revenue.
But then over time I learned that there was another metric that was much more important than revenue, and that was cash flow. To a business, cash is oxygen. Mismanagement of cash flow is the number one reason startups go out of business. So far, my brother has kept the business afloat by investing money every time the cash started running out. That was huge. I also had 2 loans out but one of them was just paid off. That not only opens up more cash flow, it gives me access to a $10k instant business loan anytime I need it. In the beginning, access to cash is just as important as cash on hand. But that can’t be a long term plan. I’m in the process of jumping off that hamster wheel and building my cash flow.
And now a new metric is emerging as the most important: net profit.
Net profit not only dictates cash flow, it also dictates growth, both in advertising dollars and in the investability of the business. I definitely see net profit as the metric that matters most for the next few years.
Milestones
At this point I have a few significant milestones that I need to reach, but unlike the first set of milestones, I am less certain about the order in which they should appear. Except for the first one. It is crucial.
1 — Cash Flow
They say you should have 6 months of operational cash flow in the bank at all times. I take this to mean if there was no revenue, I should have 6 months worth of expenses in the bank. For my business, right now, that would be $60k. I’m working with $2k. And just in February my brother had to invest again just to keep the ship afloat.
I don’t think I need $60k but I do think that cash flow should always be growing. Right now it should never be below $5k and it should grow by a minimum of $1k a month.
My most urgent milestone and one I wish to achieve within 3 months is to have $5k in the bank.
2 — Outsourcing the bookkeeping.
I’d like to outsource the bookkeeping to software, namely Xero. There are a lot of steps involved in doing this, and I’m not sure if this is worth it yet. Right now I spend about 4 or 5 hours a month filling out my accounting spread sheet. That may seem like a lot but I like having that kind of focus on money. Entering every transaction manually gives me a better perspective on where the money is going. But as the number of transactions increase it is going to cost me more time and as the value of my time increases, I will not be able to afford doing the bookkeeping.
I need to switch banks to be able to use Xero, since it is not compatible with my current bank. That makes this milestone more complicated and less urgent.
3 — Business Hours.
Current business hours are haywire. The business hours are based on maximum efficiency. Delivery hours 11 am to 8 pm, 7 days a week. Store hours 10 am to 6 pm Mon-Fri.
It has to be this way because I cannot afford to pay someone to be at the store if there is no laundry to be done. So the store is closed on the weekends. But sometimes, it’s open. I know, insane. Ideal business hours would be 8 am to 8 pm — 7 days a week. Of course, the only way to get there is to have enough laundry churning through there that it requires an employee there at all times doing laundry.
So this milestone is totally dependent on sales. Right now we do roughly 80 hours worth of laundry a week. To hire another person, I’d need to add another 40 hours worth of work. A 50% increase in sales. I need to get this by the end of the summer as best I can.
4 — Break Even Point.
I have to accumulate roughly $30k in total profits to break even.
5 — Getting off the road.
This is a big one and one that is going to take quite a long time. I think this will require 2 full time delivery drivers. Honestly I think it will take dual purpose people. Meaning people will have to know how to do everything, managing orders, doing laundry, and doing the deliveries.
But yea, 2 more full time employees.
6 — Automating the store.
This means replacing myself completely. At this point I would no longer be working for the business, I would be working on the business. Doing this requires building a good core team over time.
7 — New Location.
Building the correct model is tantamount to my success, and I know the correct model requires a full scale, albeit small, laundromat. My current store can handle $30k a month in sales. And a full blown laundromat with 30–40 machines could handle 10x, $300k a month. Probably more. That’s a conservative estimate.
I’d like to have enough credit and enough cash flow to be able to purchase an existing laundromat within 2 years. I think on the low end, they are $100k.
That’s it for now. I’m going to try to write about my business more often.
This story is part of a series documenting the journey of a Dallas startup called Feather Laundry. For your reference here is the Table of Contents for the series.
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