Bootstrapping: The Dry Cleaner Way

Fri, Sep 3, 2010

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The Art of Bootstrapping – Guy Kawasaki

Istock_000000421328mediumI was going to write this, but Guy is saying most of what I’d like to say. Us dry cleaners are in a tough time now with the economy (I’m not), so you’ve got to conserve cash and bootstrapping is how it’s done.  Here is Guy’s bootstrapping article…

Someone once told me that the probability of an entrepreneur getting venture capital is the same as getting struck by lightning while standing at the bottom of a swimming pool on a sunny day. This may be too optimistic.

Let’s say that you can’t raise money for whatever reason: You’re not a “proven” team with “proven” technology in a “proven” market. Or, your company may simply not be a “VC deal”–that is, something that will go public or be acquired for a zillion dollars. Finally, your organization may be a not-for-product with a cause like the ministry or the environment. Does this mean you should give up? Not at all.

I could build a case that too much money is worse than too little for most organizations—not that I wouldn’t like to run a Super Bowl commercial someday. Until that day comes, the key to success is bootstrapping. The term comes from the German legend of Baron Münchhausen pulling himself out of the sea by pulling on his own bootstraps. Here is the art of bootstrapping.

  1. Focus on cash flow, not profitability. The theory is that profits are the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow. If you know you are going to bootstrap, you should start a business with a small up-front capital requirement, short sales cycles, short payment terms, and recurring revenue. It means passing up the big sale that take twelve months to close, deliver, and collect. Cash is not only king, it’s queen and prince too for a bootstrapper.
  2. Forecast from the bottom up. Most entrepreneurs do a top-down forecast: “There are 150 million cars in America. It sure seems reasonable that we can get a mere 1% of car owners to install our satellite radio systems. That’s 1.5 million systems in the first year.” The bottom-up forecast goes like this: “We can open up ten installation facilities in the first year. On an average day, they can install ten systems. So our first year sales will be 10 facilities x 10 systems x 240 days = 24,000 satellite radio systems. 24,000 is a long way from the conservative 1.5 million systems in the top-down approach. Guess which number is more likely to happen.
  3. Ship, then test. I can feel the comments coming in already: How can you recommend shipping stuff that isn’t perfect? Blah blah blah. ”Perfect“ is the enemy of ”good enough.“ When your product or service is ”good enough,“ get it out because cash flows when you start shipping. Besides perfection doesn’t necessarily come with time–more unwanted features do. By shipping, you’ll also learn what your customers truly want you to fix. It’s definitely a tradeoff: your reputation versus cash flow, so you can’t ship pure crap. But you can’t wait for perfection either. (Nota bene: life science companies, please ignore this recommendation.)
  4. Forget the ”proven“ team. Proven teams are over-rated–especially when most people define proven teams as people who worked for a billion dollar company for the past ten years. These folks are accustomed to a certain lifestyle, and it’s not the bootstrapping lifestyle. Hire young, cheap, and hungry people. People with fast chips, but not necessarily a fully functional instruction set. Once you achieve significant cash flow, you can hire adult supervision. Until then, hire what you can afford and make them into great employees.
  5. Start as a service business. Let’s say that you ultimately want to be a software company: people download your software or you send them CDs, and they pay you. That’s a nice, clean business with a proven business model. However, until you finish the software, you could provide consulting and services based on your work-in-process software. This has two advantages: immediate revenue and true customer testing of your software. Once the software is field-tested and battle-hardened, flip the switch and become a product company.
  6. Focus on function, not form. Mea culpa: I love good ”form.“ MacBooks. Audis. Graf skates. Bauer sticks. Breitling watches. You name it. But bootstrappers focus on function, not form, when they are buying things. The function is computing, getting from point A to point B, skating, shooting, and knowing the time of day. These functions do not require the more expensive form that I like. All the chair has to do is hold your butt. It doesn’t have to look like it belongs in the Museum of Modern Art. Design great stuff, but buy cheap stuff.
  7. Pick your battles. Bootstrappers pick their battles. They don’t fight on all fronts because they cannot afford to fight on all fronts. If you were starting a new church, do you really need the $100,000 multimedia audio visual system? Or just a great message from the pulpit? If you’re creating a content web site based on the advertising model, do you have to write your own customer ad-serving software? I don’t think so.
  8. Understaff. Many entrepreneurs staff up for what could happen, best case. ”Our conservative (albeit top-down) forecast for first year satellite radio sales is 1.5 million units. We’d better create a 24 x 7 customer support center to handle this. Guess what? You sell no where near 1.5 million units, but you do have 200 people hired, trained, and sitting in a 50,000 square foot telemarketing center. Bootstrappers understaff knowing that all hell might break loose. But this would be, as we say in Silicon Valley, a “high quality problem.” Trust me, every venture capitalist fantasizes about an entrepreneur calling up and asking for additional capital because sales are exploding. Also trust me when I tell you that fantasies are fantasies because they seldom happen.
  9. Go direct. The optimal number of mouths (or hands) between a bootstrapper and her customer is zero. Sure, stores provide great customer reach, and wholesalers provide distribution. But God invented ecommerce so that you could sell direct and reap greater margins. And God was doubly smart because She knew that by going direct, you’d also learn more about your customer’s needs. Stores and wholesalers fill demand, they don’t create it. If you create enough demand, you can always get other organizations to fill it later. If you don’t create demand, all the distribution in the world will get you bupkis.
  10. Position against the leader. Don’t have the money to explain your story starting from scratch? Then don’t try. Instead position against the leader. Toyota introduced Lexus as good as a Mercedes but at half the price–Toyota didn’t have to explain what “good as a Mercedes” meant. How much do you think that saved them? “Cheap iPod” and “poor man’s Bose noise-cancelling headphones,” would work too.
  11. Take the “red pill.”This refers to the choice that Neo made in The Matrix. The red pill led to learning the whole truth. The blue pill meant waking up wondering if you had a bad dream. Bootstrappers don’t have the luxury to take the blue pill. They take the red pill–everyday–to find out how deep the rabbit hole really is. And the deepest rabbit hole for a bootstrapper is a simple calculation: Amount of cash divided by cash burn per month because this will tell you how much longer you can live. And as my friend Craig Johnson likes to say, “The leading cause of failure of startups is death, and death happens when you run out of money.” As long as you have money, you’re still in the game.

Read more: http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#ixzz0ySIdp4KZ

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Dry Cleaners: Creative Mailings

Wed, Aug 25, 2010

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Watch this video and you’ll get some great ideas for creative and effective mailings to get route customers for your dry cleaning business:

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Dry Cleaner Couponing – Good or Bad?

Wed, Aug 25, 2010

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Watch this video and decide for yourself.

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Get Your Dry Cleaning Route Customers Involved Through Your Blog

Sun, Aug 22, 2010

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How are you engaging your customers? I use my blog as one of my tools. You can’t believe the comments I get from putting recipes on my blog. It doesn’t have to be recipes. What do you enjoy doing? Get a Flip-It Video Camera or use your smart phone like I did in this video.

You can go directly to see my blog and how I get my customers involved: http://colosicleaners.com/recipes/sweet-corn-risotto

I’d love to hear your comments.

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Are You Actively Converting Your Counter Customers To Route Customers?

Wed, Aug 18, 2010

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First of all, what is the purpose of converting and why would you do it?

You convert because a route customer will spend more money every month and stay with you much longer than a counter customer. This is a fact! I hear it all the time from my members.

So if you don’t convert, why not?

Conventional dry cleaner wisdom says, “They’re coming into the store now, why should I convert them?”

Conventional dry cleaner wisdom says, “If I convert at the counter, my store will look empty and that’s not good for business.”

Conventional dry cleaner wisdom doesn’t work anymore. Gone are the days when you open up a drop store and everyone flocks to it. Gone are the days when you didn’t have to do anymore advertising besides putting up a sign in front of your store. Those days are all long gone.

Here is “Today’s Wisdom”:

If You Don’t Convert At The Counter, Some Other Delivery Service Will Get Your Customers And Eventually You’ll Be Out Of Business!

I see it happening every day. I talk to thousands of dry cleaners every year and this is a common occurrence.

If you don’t convert at the counter, some other dry cleaning company will. You should be that dry cleaning delivery company, not someone else.

You MUST protect your home turf. How do you do that? Convert at the counter! And how do you convert at the counter?

There are several steps that I teach my members. The first one starts with you.

You must be convinced that this is a good strategy for your dry cleaning business. All my members tell me that they don’t see a drop in counter activity when they convert at the counter. For some reason, maybe that that your van is out and about, the store stays just as full and your volume doesn’t go down. So that worry of your counter customers seeing an empty store isn’t going to happen.

Once you’re on board, you’ve got to get your counter personnel on board to. You’ve got to come up with a very simple script that they can start using. Something like this:

“How would you like us to pick-up and deliver your dry cleaning to your home and it won’t cost you any more money?”

And then you’ll get some questions on how that will work. Take all the questions you get and come up with responses. Put together a little training manual for your counter people to study.

Now you’ve got to come up with an incentive plan for your counter people or they WON’T ask your customers to convert to the route. It’s human nature and that’s why you need an incentive plan.

I recommend $5 for every one they convert to the route. Pay them after the first pick-up from their home. And you can also have some contests or when they hit a certain number of converts, they get a bonus. Use your creativity and come up with something that all your counter people can get excited about.

What else can you do?

Get some buttons or t-shirts made for your counter people that say: “Ask Me About Our FREE Delivery Service”

Have a few signs made up for each one of your locations. Include a big picture of you (the owner) in front of your delivery van. And then start it out with this headline:

Ask About Our FREE Pick-Up & Delivery Service

And then go on to explain it.

Make sure and include a picture of you in front of your van. This is the most important part of the sign.

And the last thing you can do is prepare a handout that you can put on the counter explaining your pick-up and delivery service.

If your counter customers know that you’ll provide the same quality service as you do in the store and now you’ll deliver it, and it won’t cost them anymore, they’ll join your route in droves.

Converting at the counter is a very simple idea that all dry cleaners must adopt or they will lose customers to their competitors and eventually go out of business.

Start converting at the counter today!

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My Graveyard Of Marketing & Advertising Ideas

Fri, Jul 23, 2010

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I’d like to hear from you.

What are the advertising and marketing ideas that you’ve tried over the years that have NOT worked?

Before I give you some of mine, I must let you know that I was very successful in most of my previous 32 businesses (I know that’s a lot of businesses to start and I was 40 when I started my dry cleaning delivery biz, but I would change businesses when I wasn’t happy, kind of like I did with my 3 wife’s) with marketing. I learned in the mid eighties how to use “Emotional Direct Response Marketing” (EDRM) to get a constant flow of customers for my businesses.

And I used to consult with local businesses and get them lots of customers with EDRM. So I’m pretty good at this stuff. My starting point was probably up a couple of notches from yours; maybe not.  So with that in mind, here are my graveyard marketing stories:

Graveyard Idea #1: Flyers. I tried all kinds of flyers with my logo big and bold covering most of the flyer. I know now that flyers DON’T work. They never did. Just like brochures; they never work. They are confusing. I always use sales letter now. They sometimes work if you get the headline and offer right.

Graveyard Idea #2: Door Hangers. They’re kinda like flyers. I put out 1,000 of them and didn’t get one call. How about you–have you every put out a doorh anger? I know some of these dry cleaning supply companies stock door hangers. I wonder if they ever tested them to see if they work or they just had their advertising company make something pretty.

Graveyard Idea #3: Yellow Pages. Wow–was this a bomb! If you’ve got drop stores all over the place or your route covers the city you’re in, this might work. But the kind of ad that you should put in is frowned upon in the yellow page industry.  I was able to get yellow page ads for a plumbing client of mine to work very successfully. And we even got the yellow page company to ONLY charge us when someone called in.

Graveyard Idea #4: TV & Radio. I’ve tried everything in this business. You can get these to work if you have a large dry cleaning business and get the TV and radio stations to agree to only charge you per call. I have taught many non-dry cleaning businesses this technique.

Graveyard Idea #5: Newspaper. This is a tough one. Couldn’t get this to work in my little suburb in the local rag. I guess not enough people read it or don’t care about dry cleaning.

That’s enough graveyard blunders for this post. But I want you to understand that some of these might work for you and your market. These advertising mediums are only delivery systems. What you put together will determine if your campaign is successful or not.

With time and testing I could get all of these to work in our dry cleaning businesses.

I use my dry cleaning pick-up and delivery business as a marketing laboratory and I’m constantly testing new things for my 200+ members.

We have successfully conquered:

  • Bag Drops (WITHOUT door knocking as the final step. Others say they have bag drops, but they are just the warm up for someone knocking on doors.)
  • Postcards Mailings
  • Referrals
  • Day Care Center Marketing
  • Fundraising
  • Website Optimization (I show up 5 times on page 1 of Goggle for the top 3 search terms: dry cleaner yourtown, dry cleaners yourtown, dry cleaning yourtown
  • Google Places (Google Local) Kris Anderson, one of my members gets 5-10 new customers from this alone.
  • New Movers
  • Business Offices

And all of this is done WITHOUT a salesman. This all comes in automatically.

I’d like to tell me your Graveyard Marketing & Advertising stories below. Will you do that?

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Are You The CMO Of Your Dry Cleaning Business?

Wed, Jul 21, 2010

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Are you the Chief Marketing Officer of your dry cleaning business?

If you’re not, who is?

You need that job filled and you’re the one who should be doing it.

You’re NOT in the dry cleaning business, you’re in the marketing of your dry cleaning business. Gone are the days when you used to open up a drop store and customers would flock to you. There are dry cleaners on every corner now. And especially is this economy, they’re not just walking in your door, you’ve got to entice them.

And figuring out how to entice them is your job. You can’t pass this job on to anyone else. It’s your responsibility! It’s not your route managers job. It’s not some college kid you hired for the summer’s job. It’s not some part-time retired advertising executive’s job. IT’S YOUR JOB!!

Getting customers in your door or van is the most important “critical success factor” in your dry cleaning business.

I know… I know…. that you’re still in the plant and they need your expertise. I know that no one else can drive the van and service the customers like you do. I know… I know.

If you want to stay the size you are and shrink, do what you’re doing. If you want to grow your business, YOU MUST CHANGE!

David Whitehurst is a member of mine. He runs Champion Cleaners in Birmingham, AL. David went from 40-60 hours in the plant in his office down to 6 hours a week. His CMO office is in his home. He gets way more marketing work done now that he’s out of the plant. It took David about a year to make this transition, but he finally did it. He gets way more work done and his plants survive without him there overseeing everything.  And on top of all of that, his customers know him better. How? Through his email, letter and newsletter communications with them.

If you’re still in the van, make a plan to get out. If you’re still going to the plant everyday, make a plan to get out.

You are the Chief Marketing Officer or CMO of your dry cleaning company!

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How To Use Dry Cleaners Coupons In Your Dry Cleaning Business So That You Don’t Canablize It!

Tue, Jul 20, 2010

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I don’t like (I actually hate) using dry cleaners coupons–do you?

I don’t use them in my delivery business EXCEPT for getting customers. After my new customer uses their first coupon, they never, ever, see one again. Why? I don’t think price (as long as you’re not way out of the park) and coupons are what delivery customers are looking for. I think they are first looking for convenience and then quality. After that, I don’t think they care much about anything else.  This is assuming that you pick-up and deliver when you say you are.

I tried all kinds of dry cleaning coupon offers to get new route customers. I’ve tested percentage offers. I’ve tested, “tell me how much you spend in a month and I’ll give you that amount FREE to try my service” offers. I’ve tried $50 in FREE dry cleaning, $40 in FREE dry cleaning, $30 in FREE dry cleaning, just recently tried $20 in FREE dry cleaning and I’ve tried $10 in FREE dry cleaning offers.

Guess what works best? You’re never gonna believe it. Guess now?  Are you ready?

Believe it or not (and it’s not what I thought), the $10 FREE dry cleaning coupon offer works the best.

When I spent 18 months (four years ago) testing 17 different headlines and 7 different offers. Once I got it down to the headline that worked best, I started testing offers (or dry cleaning coupons) to see which one worked the best.

I started with the percentage offers and they bombed.

I then did the “how much do you spend in a month, I’ll give it to you FREE” offer and that bombed.

I then started with the $50 in FREE dry cleaning coupon offer. It worked OK, but I got lots of mooches. Gotta keep the mooches away, so I tested the $40 dry cleaning coupon offer next. Didn’t do much better than the $50 offer and still got lots of mooches.

I then jumped down to the $10 FREE dry cleaning offer and the new sign ups went through the roof! Why? I don’t know. Here is what I suspect: the other offers sounded too good to be true, and when it sounds too good to be true, it usually is.

And these FREE dollar offers were all with no strings attached. I didn’t say that you had to spend $20 to get the $10 off. You can’t do that. It’s too constricting. You want your offers to be as easy as possible so that it’s effortless for your new customers to sign up.

What happen to the mooch factor?

It went way down. I guess the mooches wanted more and I wasn’t giving it to them.

So how do you use this $10 FREE dry cleaning coupon offer?

First and foremost, my members use it in their bag drops. And then they use it in their postcard mailings, new mover mailings, referral programs and their ads. They use it in everything. The $10 FREE dry cleaning coupon offer works across the board.

And here’s a little trick, we don’t call them dry cleaning coupons, we call them gift certificates.  Dry cleaning coupons sound like you’ll always be using them, gift certificates sound like one time offers.

If you start couponing them right off the bat, that is what they will always expect and they won’t do business with you again until you coupon them again. Is that what you want? I don’t think so.

In the route business, price is NOT important–convenience, service and quality are!

I hope this helped. Leave me your comments below.

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Always Make Your Customers Feel Like The Most Important Person In The World!

Tue, Jul 13, 2010

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It doesn’t matter if they’re your biggest or smallest customers.  The smallest one should be treated like the biggest one.  Why?  Why not?  And you never know whom that small customer knows–it could be your “hugest” customer ever!

With one of my customers--Bubba!

How can you make your customer feel important?

  • Respond to all their phone call immediately.  You should be out of breath grabbing the phone and calling them back.  Don’t make them wait.  With the days of instant communication here, you can call them back or email them immediately. I prefer calling them back. You won’t talk to your customers that much, so every opportunity you get, talk to them.  And don’t forget to thank them for all their business over the years (or over the past few months).
  • Always treat your customer with respect.  This goes without saying, but I thought I’d mention it.  Treat them like you’d treat an old friend of the family.  Never get upset with them no matter what happens.  Give them the respect you’d like in return.
  • Always help them with their problems, even if it’s something you wouldn’t do.  You might even send them to a competitor for the part of the solution that you can’t cover.  And I would even call your competitor and set it up.  Tell them what you’re doing so that your customer gets a great reception.

I take every opportunity I can to communicate or talk with my customers.  I was out doing a bag drop yesterday within my route.  I knocked on a few of my customer’s doors and introduced myself and told them how much I appreciated their business.

Never underestimate your customers.  If you treat them like they’re the only one, you’ll have more business than you can handle.

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Do Dry Cleaning Post Cards Work?

Tue, Jul 13, 2010

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First, let’s define what a working postcard campaign is and what is not.  If your mailing costs you $100 and you net one really good route customer, one that generates $100/month in revenue for you, is that $100 to acquire that customer worth it?

I’d say yes–wouldn’t you?

Now, if you printed the dry cleaning postcards yourself on your computer, printed out the labels, put the stamps on them and mailed them at the post office, it would seem like lots of work just to get one customer–wouldn’t it?

That is a lot of work. That’s why I NEVER do the work myself. I always hire it out. This way I can look at the results and only the results and not the emotional part of doing it and only netting one route customer from all that tedious work.  If I look at just the results, it’s a very successful campaign.

If in this same scenario, I mailed out 1,000 postcards every week and netted 10 -  $100/month route customers, I’m doing just great. Over the course of the year, I’d end up with 500 route customers generating $50,000/month in revenue or $600,000 in revenue/year and it cost me about $50,000.

Let’s cut the route customers revenue in half. So now, $300,000 in revenue cost me $50,000. Is that still worth it?  I’d say yes again!

And let’s go one step further; cut the customers in half to only 5 per week with same 1,000 postcards mailed.  That would only generate $150,000 in revenue and it would still cost me $50,000. Is that still worth it?  Yes, I think it is.  Now you know what your numbers are and what to expect to continue your postcard mailings.

Now that we’ve determined what we’d be willing to pay for a route customer, it makes it easier to start figuring the dry cleaning postcard thing out.

How should you design your postcard?

Here is what most dry cleaners do: they get their logo on the postcard as big as possible and hope that their logo alone will bring the customers in.

That’s not going to happen.

Or they listen to their postcard advertising rep and he say’s to do the BIG postcard because you can get lots of information on it. That was a great idea when no one was doing the big postcards, but not now because everyone is using the big ones.  And your postcard rep is leading you in that direction because he makes more commission because it uses more paper and more ink.

If everyone is doing the big color postcards, you should do the small “black ink” ones. Why? So you’ll stand out.

Now that we’ve determined that we should mail out the small black ink ones, what should you put on it?  I can tell you what will probably work, but you’ll have to test to really fine tune it.

1. Always have a big, bold headline at the very top of your postcard—NOT your logo. I know your logo is beautiful and you love it, but it will NOT generate any business. Your logo should be put on the address side small where the return address is.

Your headline should go something like this:

$10 Of FREE Dry Cleaning Just To Try My Dry Cleaning Delivery Service Out!

Each word should be started with a capital letter and the headline should be bold so it stands out.

2. Make them an offer. You just did with the headline I just gave you—“$10 In FREE…” The headline is 90% of the success of the postcard. If the headline gets their attention, they will read on. If there is no headline or the headline is boring, they will stop and read no further. You’re stuck in the mud if this happens. If you have a compelling headline, they will read the next paragraph. And if the next paragraph is good, they will read the next one and so on. Do you get the jest of this?

3. Always have a deadline. Nothing happens without a deadline. Department stores do it all the time—“One Day Sale ONLY!” or “2 Day’s ONLY” or “Until Midnight Tonight.” They all use deadlines to get us into their stores. If they didn’t use deadlines, it wouldn’t be a sale. You’ve got to do the same thing.

Under the headline you could say something like this: Deadline is Friday, August 20th.  It can be that simple. You’d be amazed the people that will call after the deadline asking if they can still get the offer. And of course you’ll let them have it.

Those are the three most important things to getting your postcards to work. If you miss one of them, your chances for success go to zero.

Headline—Offer—Deadline & Testing; they are the keys to a successful postcard campaign.

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