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Business Class

June 25, 2009

The Business Side of Business. Plus, Dry Cleaning!

Business Etiquette Rules
Marc Tracy

bizbox.slate.com

Summary

A great column  over at our  Washington Post  brother site provides a new perspective on small businesses: namely, that it's a  busine

 A great column over at our Washington Post brother site provides a new perspective on small businesses: namely, that it's a business. What do we mean? Well, in all the talk about small businesses, and the passion involved, and the personal risks and rewards, what sometimes gets lost amid that din is the truism that the most passionately-run business in the world is unlikely to make you particularly happy if it also makes you bankrupt. Being happy with your business in part means doing well with your business. Sounds trite and obvious, but as we say, frequently this crucial aspect goes overlooked. We would definitely point a blaming finger at ourselves for this, too.

The column concerns a D.C.-area chain of dry cleaners. Why dry cleaners? Well, the husband-and-wife team that own them--there's a classic staple of a small-business success story--decided on entering the dry-cleaning business not out of any passion for cleaning people's clothes, but because it seemed like an awesome business model. You see, one of them used to perform audits for the IRS, and she knew what she was looking for. Columnist Thomas Heath sums it up:

First, stay away from businesses selling perishable goods; a downed utility line can ruin a freezer full of food. Second, avoid businesses that require lots of inventory, like clothing or liquor stores, where the owner must buy the goods upfront and hold them until sold. Finally, own a business where you get paid before you do the work, which means you don't have to chase the customer for your cash.

Theresa knew dry cleaning was a good fit when she sniffed around the books of a company that some friends were interested in buying. She also liked the fact that dry cleaning isn't seasonal, and that it is used by people of every income level.

Sure enough, their three stores enjoy an extremely favorable 25% profit margin. All told, with all expenses and even $2 million in start-up debt accounted for, Heath estimates mid-six-figure annual income for the couple.

The lesson here isn't that you shouldn't follow your passion. If you have your heart set on starting a high-inventory business--a hardware store, say--we're not going to tell you shouldn't, or that you can't succeed; you should, you can, and plenty do. The trick is merely to take whatever entrepreneurial passion you have and then temper it with rigorous business sense, and only then make the big decisions. All the passion in the world won't guarantee your success; and all the passion in the world without success won't guarantee you happiness.

Meanwhile, if all you want to do is enjoy the fruits of owning your very own high-margin business, then may we suggest dry cleaning?


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