Friday Numbers

Friday the CFO had me do a quick report for Gutheim. Gutheim runs a group meeting for laundries like ours across the country so we can compare and contrast. Gutheim wanted to know for the upcoming meeting how our add-“men” and quit-“men” numbers were doing. He wants 2007 and 2008 numbers and then Jan-April numbers for this year and last and then April numbers for this year and last.

I crunched the numbers and damn if it didn’t look like I had simply copied some bureau of labor statistics from some federal government report. 2007 and 2008 showed drop-offs of 10% to 15% but the recent numbers were showing drop offs of 50%. Our goals this year was to stay even growth wise. In the past our goal has been a modest 5% or so. Our expectations though are to shrink this year. But we don’t want to shrink too much. Goals are always set to exceed expectations.

I didn’t like the numbers I cranked out but it was satisfying in its own way to produce numbers that had stark reality written into them. It’s not often that the numbers you crank out are so attuned with the reality in the rest of reality.

Ok so this post is a bit of a take-off of Don’s post. Working the earth is taken to be down-to-earth. Well it can be if you write like Don. So if he can just write about his day job and be respected around here, why can’t I. Oh yeah Jeff, you do that!

continue reading after the jump

But really I’m not far off the mark here. The we I refer to above is a third generation family owned industrial uniform rental and laundry that’s been doing business since 1921 and in the same location, on Chicago’s west side, since 1927. “We” saw this neighborhood go from being solidly Jewish to struggling Black. Martin Luther King had an apartment less than a mile away and the owners came in from the suburbs to personally watch the property after the riots of 68 caused so many places to burn.

The first owner was a Scot and a member of the Machinists union. The second was a liberal Republican while the latest is a Reagan-Bush Republican. But he’s probably a lot more liberal than he’s willing to admit. He works honestly with his unions and makes no attempt to get rid of them. His work force, down now to 85 from a 1980ish high in the 300’s, is a very diverse one of whites, blacks and Hispanics.

Our competition is mostly the big national billion dollar corporations like Cintas and Aramark. We can compete because we have real people that answer the phones and work to solve your problems. We can compete also because we have stayed on top of information technologies, from bar-coding our garments to working with a software house that specializes in companies around the country like ours to provide sophisticated applications. I’m an in-law in the business. I was doing computer consulting when I married the current owner’s sister. I was willing to take a cut in pay in exchange for decent and flexible working hours and for the opportunity to work in a place where I could see the results of my work and most of all where I wasn’t a cog in a giant bureaucracy. It was a trade-off that has paid off well for me. It was im many ways a lucky break. It was also a level of security that became obvious with the dot com bust.

So the name of the game for us is long term planning and constant improvement. Our president, no CEO for us, lives and dies by the business’s success. He can’t really run the business into the ground and then walk away with a huge bonus. He’s got a personal stake in the business. A very personal stake. His father is still alive, still looking over his shoulder as it were.

So long term planning means investments in new machinery and a major over-haul in the way we do business to make some major improvements in how we operate. The plans have been around for several years. That’s what long term planning will do to and for you. So it meant borrowing money. And some of the borrowing was to be based on some real estate we would no longer be needing. Real estate that we would have preferred to sell, but now can’t.

We got an offer for a loan from the Bank of Scotland, the one that recently got taken over by the government of Great Britain. But they hemmed and hawed so we went back to our local bank here in Chicago. They couldn’t match the other bank’s deal but a deal you can’t get is no deal at all. So now here we are in the midst of a “depression” borrowing a ton of money when credit is oh so very tight and the future very very dim. Did I mention that a major part of our business is based in manufacturing, manufacturing that is being steadily moved over seas to China and where ever?

But that’s what you have to do if you are to stay alive. Our hope is to be better at what we do than the other laundries and pick up the pieces that they drop.

So here’s a final irony. I mentioned our difficulties with getting credit right. Well what has been one of our owner’s big efforts of late? Collecting past due amounts from our customers. That’s right, we are taking credit out of a credit crunched economy.

As for music, well my wife and I were supposed to go to Katerina’s tonight to hear Erwin Helfer, legendary Chicago blues pianist. But we’re getting too old to make a 10pm start time.

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Jeff Wegerson

15 CommentsLeave a comment

  • It seems like things are at a breaking point.

    1) Sales are down 50% in the first quarter.
    2) Businesses can’t get credit from the banks to ease the cash drain caused by lost sales.
    3) Businesses therefore hoard cash by delaying payables.
    4) Because everyone is delaying payables, everyone pressures the other guy to speed up what they owe, but receivables slow down anyway.

    It all ultimately stems from the loss of credit, the lifeblood of the economy. Businesses find that liquidity management and cash flow projections become paramount, and never mind long term growth projections.

    What will it take to restore credit to the levels we saw in 2007? Renewed, massive consumer borrowing against their home or stock portfolio is the only hope, because there is no way businesses are going to start paying wages at a 10% real growth rate (growth in salaries after inflation) since businesses aren’t generating anywhere near that in sales and profit growth (the US has nothing really to sell to anybody).

    The Fed is trying to reignite even a modest housing market recovery but it is pretty much hopeless. There is too much mortgage and other debt to pay down first. So it looks like we are going to be stuck with 50% cuts in revenue for years to come. It’s possible your business may survive in such an environment if you really have an ability to innovate, keep costs down, and out-maneuver the big guys.

  • believe it or not, I live about four blocks from the plant on Congress. (yes, I must be crazy)
    can you get me a discount? 🙂

    I was under the impression that laundry service in Chicago is like garbage pick up; it’s an extortion racket. Sign this 3 year contract at X price, and within the year your same inventory/service will be 2X. (I’ve just deleted the majority of my rant; now about that discount? )

    as for music, let me invite ya out to Honky Tonk Happy Hour at the Empty Bottle, Fridays 5:30-8. free admission, cheap booze, cheaper women. not quite Erwin Helfer though

  • Haven’t you heard the worst is over? Recovery is just around the corner. Just look at all those green shoots.

    I really think you can set the failure of the Obama admin to the date when they decided to give trillions to the banks instead of to the regular economy.

  • I would encourage others to do the same. Thanks for writing Jeff. I appreciate the insight. Part of the reason I started frequenting the Agonist is because of the folks with market experience sharing their insight on economics. And I enjoy Don’s insight on the food industry. It’s good to get input from people working in different industries.

    As for your company shoring up on invoice time, that seems to be the norm. We had a major client go under. It was no big surprise. We saw it coming, they saw it coming, industry saw it coming. We tailored back on their invoice period to only 10 days so we wouldn’t get hit too hard when bankruptcy finally did hit them. We’re still working with them and look forward to working with them once they get reorganized.

    A suggestion that we’ve implemented with some of our best clients that we want to keep and not loose to competitors, but who want discounts in these trying times: Rebates on invoice periods. If the client pays in full within the normal 30 days, we cut them a discount check for 10% of the payment. If they pay in full within 15 days, they get a 15% rebate check.

    Clients love the fact that they could potentially save 15%. Hell, they can save 10% just by paying on time. Sad thing, rough figures for the past 6 months, one client could have saved $200K by taking advantage of the system, but only managed to save $10K. So even when you try to help companies, they still falter. But we’re trying our best to help them and work with them.

  • Keep posting on the day to day, good stuff.

    I would post about my experiences with the traders at the CBOT/CME, but mostly they’re just a-holes 😉 That was a short post.

  • I’m just thankful I don’t own a business. The more processed and greasy food people eat the better it is for my profession. I’ll never run out of people dying from cancer to care for (sounds awful, but it’s true – take it as advice :-D)

    Tolerating prostitution is tolerating abuse and torture of women and children.

  • A superb post as well as the accompanying observations!

    I’d like to share a quote from the respected economic writer James Grant. In the February 6, 2009 edition of his Interest Rate Observer he wrote:

    “We now imagine a table set with crystal and china. And we imagine a tipsy diner announcing that he will yank the clean cloth without toppling a single glass. He does not succeed. And neither will the central banks succeed. They will fail to withdraw the funds they have inserted in the deft & timely way they promise. THEY MIGHT NOT EVEN WANT TO IF, BY CHEAPENING THE VALUE OF MONEY, THAT CAN LIGHTEN THE BURDEN OF DEBT” (My emphasis).

    With the groaning debt levels in this country, and the inablility of political process to provide significant (debt) relief, is this our only forlorn hope? Thanks, JB

  • Thanks for the response. It was a bit of a lark that I tossed it off. I’m glad folks found interest in it.

    As for continuing, I’ll give it my best. But a lot of what I have to say is here. But then maybe I’m not giving myself enough credit. (groan)

  • We do provide real services. Yes we do try hard to get five year contracts and yes we count on regular price increases of 5 to 7% a year. It’s the nature of the business. Cintas does it. They come in with a low low price that they then raise it regularly. So we have to swim in those waters.

    We are talking industrial uniform rental here, which may be different than the kind laundry service you are thinking. But you seem to have it right.

    Discount? Well sure, just sign this 5 year agreement. 🙂

  • A friend used to do technical support for traders’ workstations. Some of them would hover over him and calmly explain what happened and help him, and others would stand there screaming as millions of dollars flew past. He learned to ignore the screamers, because… they would not be there long. The calm guys could take it, and they did not flame out.

    “Turning Japanese I think I’m Turning Japanese I really think so da-da-da det det det det” – The Vapors

  • Sales in luxury department stores are here down 10%. Sales in hard discount stores are up. Especially movie theaters are doing better than ever. Sales in lunch bars which serve construction workers are down, but other report no change. Sales in autos etc. are down in double digits. Real estate brokers do fine because volume is up. Bankruptcies are about at ten year high – mostly small construction related companies. Some smaller retail stores have bankrupted. Usually they had started few years ago and their business was not yet properly established.

    Baltic Dry seems to be 2544 and the stock market was right on economic recovery. Russian stock market is up 55%.

    –Sell Texas to China!

  • in Australia are doing well, a quick google car sales way down, business up, a quick wander through the local mall last sunday seemed to indicate the big stores low on stock, but the small shops were busy.

    Last month, RBA governor Glenn Stevens admitted the country was in recession by nearly any measure. However, there have not been two consecutive quarters of GDP shrinkage, the technical definition of a recession. The economy contracted 0.5% in the final quarter of 2008. March-quarter GDP numbers will be released in early June.

    NAB survey

    I enjoyed ‘Fridays Numbers’ – post again!

  • A few of them learn to use their bullying tactics to push the markets around to their liking, because their bank or hedge fund allows them to play with enormous positions.

    Some of these then learn to game the system and they start manipulating the mark to market and valuation processes. Their bullying stifles any questions from management, who are in love with the profits being made. Those who do question where the profit is coming from are ridiculed or made to shut up, because senior management doesn’t want to hear from them.

    This is the way in which major frauds are perpetrated. In every financial fraud you find secrecy and complaisant management and regulators turning their eyes away. If it is a bank or a hedge fund, the perpetrator is a classic bully. This seems to be the pattern for Joseph Cassano at AIG. If you are the owner of the firm you don’t need to do much bullying, but you definitely need intensive secrecy. This seems to be the pattern for Bernard Madoff.

  • and specialize.

    Ed, Haydn’s previous plant manager, started his new marine business last fall. Initially, we were worried because Ed wasn’t beating the bushes to drum up business. He was too busy erecting his building on the same property as his house. Haydn seldom advertised and neither will Ed–word of mouth is how most marine jobs come about.

    Since boating is a luxury sport, sales of new boats have almost completely collapsed and prices for used ones decreased radically. People are keeping what they presently own or buying used, translating into repair work. All woodworking equipment was transferred from Haydn’s sold building in late September along with the tri-axle launching trailer. The used equipment would have fetched pennies on the dollar at auction and most were still in good operating condition. Plus Haydn needed someplace to go to fill his days–he’s a very active person and wouldn’t abide retirement well.

    Ed has no employees and Haydn accepts goods and services in exchange for work that he does for Ed. Ed launched our boat Friday. The barter system works well in recessions.

    We’re confident Ed’s repair business will succeed as long as he keeps it small until the economy picks up. Ed and Haydn worked together for more than twenty years and have a great deal of expertise between the two of them.

    The lifetime of fibreglass boats has not been established. Engines, mechanical, plumbing, electrical, fibreglass work and interiors can be a profitable venture particularly when there’s no payroll.

    People with expertise will always be in demand regardless of tanked economies.

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