Content about Credit card

March 26, 2013

Taking Advantage of Opportunities to Upsell

ADDISON, Ill. — Distributor highlights opportunities to upsell without putting pressure on your customers

ADDISON, Ill. — Super-size it. Would you like peppers? Would you like to add cheese?

This is a common concept adopted by restaurants nationwide. Although the phrasing may differ, “upselling” is a familiar concept to American consumers. Most restaurants offer a good product without the extras, but eateries and other businesses have found that consumers like being given the option to make their own choices about the type of product or service they want. This in no way means the original product or service is inadequate without the add-ons.

What does this mean for our industry? Let’s take a look.

Although there have been many Laundromat innovations in recent years, the two most valuable, in my opinion, were:

The ability to offer additional service options on vended washers and dryers.
The ability to offer an alternative payment method such as card systems and its effect on the industry.

I would like to focus on these and explain how they tie together.

UPSELLING IN THE LAUNDROMAT

Several years ago, washer manufacturers introduced the ability to offer additional services to customers for additional vend price. Long before that, they offered the ability to sell hot and cold washes for a different cost. Competitors that did not have these sophisticated machines kept their prices low, ultimately reversing customers’ perceptions of the new pricing structure. Today, we have the ability to offer a quality wash, and customers who feel they will benefit from an extra wash or extra rinse will pay more for what they perceive is a superior wash result. This is upselling with no pressure on the customer to pay more money unless he or she chooses to add services.

This is a powerful tool to increase volume. For many years, we in the industry have been trying to figure out how to increase our revenue by giving customers choices they want, which increases revenue without the perception of increased pricing. I will show what this means in dollars and cents when we talk about the card systems.

Most manufacturers have an ability to offer these options, but each does it in a slightly different way. Additional service options have to be made easy to understand and easy to use, but this doesn’t mean you provide less service and make it up in add-ons. We have to learn from industries that are successful in marketing upselling options. We need to offer good results at a fair price, plus the ability to let our customers decide if they want to spend more. It’s their choice.

CYCLE OPTIONS + CARD SYSTEMS = MORE REVENUE

Another way to add choices into the Laundromat is by utilizing a card system. These systems, which began as an alternative to accepting coins, have been available for many years. They have come a long way. Card systems are used today by owners who want to operate their businesses with all the advantages that most retail businesses offer. I’m going to touch on a few of these advantages, but this is really just a small representation of the benefits of managing a card-operated laundry.

First, card systems build loyalty. Once a customer uses a card and leaves a balance on it, they will more often than not come back to your Laundromat. The ability to accept credit cards and to use penny incremental pricing helps keep your vend prices in line with your utility costs. There are a variety of marketing programs available to help increase your volume. Coupon programs give laundry owners the ability to offer rewards directly to the customer without an attendant and without fear of coupon fraud.

Card systems can also provide the ability to account for revenue and employee hours. Reports are available that reflect business revenue totals, individual usage, customer information, income by the hour, equipment usage, and average money spent per visit. This is just a small sample of the information that is available.

I have been able to gather reporting to solidify the value of the extra-wash and extra-rinse options. My family owns and operates three laundries with equipment that has these add-ons available. The stores are located in different geographic areas and have differing ethnic demographics. A report from one of our stores shows equipment usage over a five-month period.

The numbers focus on extra-wash/extra-rinse usage and what it means in terms of additional revenue.

The 80-pound washers processed 4,112 loads, of which 1,498—or about 36% of the total number of loads—used an “extra” button. At a 50-cent upcharge per load, an additional $749 was collected from the six machines.
The 30-pound washers processed 13,180 loads, of which 2,908—or about 22% of the total number of loads—used an “extra” button. At a 35-cent upcharge per load, an additional $1,017 was collected from the 16 washers.
The 40-pound washers processed 10,999 loads, of which 2,859—or about 25% of the total number of loads—used an “extra” button. At a 40-cent upcharge per load, an additional $1,143 was collected from the 14 machines.
The 20-pound washers processed 11,877 loads, of which 2,662—or about 22% of the total number of loads—used an “extra” button. At a 30-cent upcharge per load, an additional $798 was collected from the 12 washers.

That adds up to $3,707 in additional revenue for this store in five months. Extrapolate that to a year and the added revenue comes to $8,899. The numbers speak for themselves, and that’s on top of the normal vend prices! Keep in mind that these were customer choices; they made them of their own free will. That’s upselling.

In my experience, that kind of additional revenue (80%) goes to the bottom line. Without a card system, our stores would not have the tools to properly evaluate those numbers and help make any future equipment purchases.

Talk to your distributor about the options that are available. Evaluate this information to see if these innovations will work within your budget. In today’s business climate, any advantage that will help a business grow must be seriously considered.

I have heard many excuses for not moving forward with new innovations. The list would be so long, it would take another article to cover them all. The reality is, without these advantages, your business may struggle. Your choice.

August 30, 2012

Building Better Business Credit (Part 2 of 2)

ARDMORE, Pa. — What steps can a coin laundry owner take to improve the creditworthiness of his/her business?

ARDMORE, Pa. — Things go a lot easier when potential lenders, suppliers and partners can decide to take a risk based on a laundry business’ credit history and capability of repaying obligations. With strong business credit, a business can borrow at a lower cost, with more favorable terms. In fact, many small businesses with good business credit have discovered it is possible to get loans without an onerous and often embarassing personal guarantee.

Obviously, business credit is quite difficult to get. For any small-business owner, navigating the credit and lending world can feel like a vicious Catch-22. Most commercial banks and traditional lenders are reluctant to loosen their purse strings until would-be borrowers have proven themselves with a strong credit history. But it’s difficult to develop that good record when no one will lend in the first place.

TRADE CREDIT

Suppliers often allow their customers a grace period before requiring payment for the goods or services they provide. This is called vendor or trade credit and it permits every laundry business to generate at least some revenue from sales before they have to pay for the supplies, goods or products. Vendor or trade credit is also often easier to obtain than bank credit because it doesn’t require collateral. Unfortunately, trade credit can be quite expensive.

Terms of 2% 10 days, net 30 days (2% discount if paid within 10 days, the net [full] amount due in 30 days) translates into a 36% or 37% annual interest rate if the cash discount is foregone. While trade credit may be appealing to laundry businesses looking to save money, beware when opting to take these discounts.

BUILDING MORE CREDIT

It is important to remember that business credit cannot be built overnight. Everyone should think about the business credit of his or her laundry operation from day one. Having access to credit can help any business adapt to changing conditions and position itself for success. But what steps can a coin laundry owner take to improve the creditworthiness of his or her business?

Always pay on time. An operation’s ability to repay loans promptly has the greatest impact on its credit score. On-time payments are the most direct way to improve a credit rating.
Ensure creditors regularly report the operation’s payment history to the credit bureaus. If timely payments to suppliers and lenders are not included in its profile, the laundry business may not get the credit it deserves for paying bills on time. It goes without saying that the credit profile should be monitored at least twice per year to ensure that all vendor payment relationships are included.
Maintain good personal credit. After all, well-managed personal finances can indirectly impact the business’ creditworthiness. Personal and business credit ratings are separate, however, and do not directly affect one another.
Contribute to the business’ credit profile. The more information provided to credit bureaus, the more robust its credit profile will be. In addition, wherever possible, choose suppliers and vendors that report their experiences to credit bureaus, which will also help boost the operation’s profile.

As already mentioned, the best place to start building or rebuilding business credit is with suppliers. Many types of suppliers, including major brands, extend lines of credit that give businesses the opportunity to finance purchases and conserve their cash.

In addition to goods and merchandise for resale, a laundry business can obtain products such as office supplies, computers and marketing materials with payment terms ranging from net 30 to net 60 days. Of course, the focus should remain with applying for credit with suppliers that provide products and/or services needed on a regular basis, in order to make regular purchases using the operation’s credit line. By paying invoices on time, every laundry business can build a credit history and increase the operation’s creditworthiness.

With a strong business credit report, a coin laundry owner can stop relying on personal credit to qualify for needed financing. Because creditors, lenders or suppliers can now easily determine the operation’s risk level with a business credit check, qualifying will be a much easier process.

Building business credit can also improve a store owner’s image, protect the owner’s personal credit, limit liability, and increase credit capacity since businesses can obtain 10 to 100 times greater financing than an individual. But the time to think about credit for your laundry business is now—before it is really needed.

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a financial adviser for advice regarding your particular situation.

Click here to read Part 1!

August 28, 2012

Building Better Business Credit (Part 1 of 2)

ARDMORE, Pa. — With stronger credit, a business can borrow at a lower cost, with more favorable terms

IN THE BEGINNING

When a business issues or extends credit to another business, it’s referred to as “trade” credit. Trade, or business, credit is the single largest source of lending in the world.

Information about trade credit transactions is gathered by the credit bureaus to create a business credit report using the business name, address and federal tax identification number (FIN), also known as an employer identification number (EIN). The business credit bureaus use this compiled data to generate a report about a company’s business credit transactions. In many cases, those extending credit will rely on that business credit report to determine if they want to extend credit—and how much credit they’ll give.

The major business credit bureaus that compile and provide copies of the reports are:

Dun & Bradstreet (dnb.com)
Experian Business (experian.com)
Equifax Business (equifax.com)

Unfortunately, because information provided to the business credit bureaus is submitted voluntarily—no business is required to send it in—the credit bureaus may never receive much, or even any, information about a coin laundry business’ credit transactions. In fact, many businesses go for years racking up business credit without any of it being reported to the credit bureaus.

ESTABLISHING BUSINESS CREDIT BASICS

Fortunately, there are a number of proven strategies that can help establish the credit worthiness of any laundry business and gain recognition from the credit reporting agencies:

1. If not already incorporated, forming a corporation or LLC (Limited Liability Company) to operate the laundry business, and obtaining an FIN or EIN from the IRS should be considered. Corporations and LLCs afford business owners liability protection, and a business credit profile can be created that is separate from the owner’s personal debts.

2. Every laundry business should be registered with some, if not all, of the business credit bureaus. Dun & Bradstreet (D&B), for example, is one of the main business credit bureaus and maintains its own business credit score. An established business with an EIN can begin the process by applying for a free DUNS number. The number is how lenders will determine the operation’s creditworthiness (most business credit card and lending companies will ask for a D&B number during the application process).

3. Apply for a business credit card. Although most major credit card companies require that cardholders be in business for at least two years before they will extend credit, there are many small, local banks that are more accommodating to small businesses. They may be even more accommodating if an owner or manager is savvy enough to set up a business bank account with them!

Even though the laundry business may not require more credit cards to finance its operations, it should still apply for more business credit cards. In business, the 5-3-2 rule is key—a business’ credit record is not considered established and solid until it has at least five trade accounts, at least three credit cards, and at least two small loans fully paid off.

4. Comply with all business requirements. Not being in compliance with local, state and federal rules, ordinances, regulations and laws can raise red flags with both credit bureaus and those who grant credit. Potential red flags include such things as a lack of a business license or a phone line. Many suppliers will not grant credit to another business that hasn’t taken the steps to set the operation up with the proper licenses or meet local, state and federal requirements.

5. Financial statements and a professional business plan are a necessity, particularly in today’s economy. These documents are also required by many credit grantors.

6. Finding companies willing to grant credit to the laundry business without a personal credit check or guarantee is also a good strategy. When a supplier grants a business credit, it is important to ensure they report the payment experiences to a credit bureau. This step can help build a business credit report as well as provide a financial foundation for the operation.

7. Manage debt so the laundry business, large or small, won’t experience trouble making payments, which will negatively affect its credit score.

8. Monthly payments to credit grantors will keep a business credit profile active.

9. Get a website. It may not seem like a must in building or maintaining business credit, but D&B now shows and lists websites on credit files. Many banks also use the fact the operation has a website as a positive factor in determining the creditworthiness of a borrower.

Check back Thursday for Part 2!

December 14, 2011

Nine Things You Need to Know About Business Credit (Part 2 of 2)

CHICAGO — Recent developments in our troubled economy have served to dramatize how credit can be a valuable friend or a dreadful foe. Used sensibly, credit can be a powerful asset in your business life. Use it carelessly and it can become your worst enemy.

You may not need to use credit every day, but when you need it, you can’t afford to have the door closed in your face. Here are nine ways to put credit to work for you and your laundry and not against you:

Consolidating Card Balances Is Not a Cure

You’ve seen the advertisements: “Consolidate all your credit cards debts into one low-payment loan and we’ll negotiate with your creditors to reduce your debt.” Don’t believe it.

Once you allow yourself to get into unmanageable debt, there’s no easy way out. Debt consolidation may sound like an easy cure, but many professionals and business owners have discovered that so-called debt consolidation led them down the road to an even more burdensome debt load.

“Consolidating debts may be only digging yourself into a deeper hole,” says certified financial planner Brent A. Neisner. “Before you take that step, you should ask yourself how you got into debt trouble. Overspending almost always involves emotional and psychological issues that aren’t going to go away by treating the symptoms.”

Eliminate Receipt of Pre-approved Offers

Those pre-approved credit offers that find their way into your mailbox represent a temptation for identity thieves who might try to open new credit accounts in your name or the name of your business.

You can opt-out by visiting the official Credit Reporting Industry website or by calling 888-567-8688.

Be Aware of Differences Between Debit and Credit

While there are many similarities between debit and credit cards, the differences can significantly affect the cash flow in your business.

It’s easier to qualify for a debit card than a credit card, because there’s no credit involved. When you use a debit card, you must already have the money in your business account at the bank. Your purchase is debited to your account electronically as soon as you make your purchase.

Using a debit card is almost like using cash. Unlike writing a check, using a debit card saves you from having to show identification when you conduct a transaction. Having a debit card not only frees you from carrying cash, it will be more readily accepted than checks where you aren’t known.

However, debit cards carry their own set of disadvantages that you need to know about. Unlike credit cards, debit cards give you no grace period for paying your bill. The money is deducted from your account immediately each time you use it.

Keeping your account in balance can be a problem. It’s easy to misplace a receipt and forget to notate the transaction in your check register. That can result in overdrawn accounts and financial penalties.

While you get protection from liability due to fraud on both credit card and debit card purchases, debit cards do not offer the same protection as credit cards in the case of defective or unsatisfactory merchandise. With credit cards, you may dispute errors or unauthorized charges and withhold payment until the matter is resolved. With a debit card, your money is irrevocably spent the moment you complete the transaction.

If you pay off your credit card balances in full each month, the last thing you need is a debit card. You’re now enjoying up to 30 days of free use of someone else’s money. This is “using the float,” the period between the purchase date and when the money is actually withdrawn from your account. In this case, you should congratulate yourself on your financial acumen and hang on to those credit cards.

Never Co-mingle Business and Personal Funds

Not only is mixing your business and personal finances an open invitation to problems with the Internal Revenue Service, it complicates your recordkeeping and cash flow management. You should maintain separate business bank accounts and make all of your business credit purchases on a separate business credit card.

Some experts compare unwise use of credit to use of drugs: It can offer short-term pleasure in exchange for long-term pain. Once the “credit monster” gets his hooks in you, it can be painfully difficult—and sometimes impossible—to free yourself.

However, credit in itself is not harmful. Used skillfully, it can be a profitable tool for managing your business affairs. Use these tips to help make credit one of your business assets, not one of your liabilities.

Click here for Part 1.

December 8, 2011

Nine Things You Need to Know About Business Credit (Part 1 of 2)

Be Aware of Your Credit Report

If your credit score is “good,” it will be easy for you to get credit when you need it. If your score is “bad,” you may find it impossible to get credit from anyone.

If you are operating your store as a sole proprietor or partnership, it isn’t possible to separate your personal credit from your business credit; your score for both will be the same. To learn more about how your credit score is calculated, visit www.ftc.gov.

The three credit reporting agencies (CRAs), Equifax, Experian and TransUnion, are required by law to provide you with a free copy of your credit report once every 12 months at your request. You can order your free report online at www.annualcreditreport.com, or by calling 877-322-8228.

If your business is incorporated, you may want to register with Dun & Bradstreet using your legal business name. Registration will provide you with a DUNS number, a unique nine-digit sequence recognized as a universal standard for identifying and keeping track of the more than 120 million businesses in the D&B database. There is a fee for this service, but a DUNS number will help to establish your credibility with suppliers and vendors.

Improve Your Credit Score

You can improve your score by:

Paying your bills on time. This is the smart way to handle credit. Late or missed payments are a sure way to lower your score and incur hefty late fees and finance charges.
Avoid large balances. Outstanding balances larger than about 25% of your credit limit are a red flag to financial institutions.
Avoid closing out an account and transferring the balance to another credit card. This can hurt more than it can help. Each time you close an account, you lower your overall credit limit. Thus, your existing debt becomes a larger percentage of your credit limit.

Avoid the Minimum-Payment Trap

Whenever possible, don’t charge more than you can pay off in full when your monthly credit card bills arrive. When you pay the full balance on your credit card bill each month, you’re taking advantage of an interest-free loan from the card issuer. That’s the smartest way to use a credit card.

If you make only minimum payments on a significant balance, it can take years, and sometimes decades, to pay off the full debt. Once you fall into the “minimum-payment trap,” it can be difficult if not impossible to dig your way out.

Don’t Cancel Unused Credit Cards All At Once

If you have a number of credit card accounts but use only a few of them, it’s best to close out the unused ones. However, be sure to keep the cards that you’ve had the longest and cancel the newest cards. The CRAs like to see a long record of prompt payments. Too many new cards will tend to lower your credit score.

If you have more than one or two unused cards, spread out the cancellations over a period of several months. A rash of card cancellations in quick succession is another red flag for the monitoring agencies.

Think Twice Before Opening New Accounts

If you and your laundry don’t already have a long and favorable credit history, opening a new credit line will tend to lower your score. New accounts lower the average age of your accounts. That, in turn, affects your credit score.

Wednesday: Consolidating card balances is not a cure...

August 30, 2011

Cashless Systems: Q&A (Part 1 of 4)

CHICAGO — Making the decision to shift your store’s payment system from coin to cashless, or to a hybrid, can require a great deal of research and planning. There are implementation issues from the outset, and you need to be prepared to market your operation’s changes and educate your customers about the system’s benefits and how they can best use it.

American Coin-Op invites several manufacturers of payment systems to answer some questions that the average self-service laundry owner might have:

ACO: What are the immediate benefits to the laundry owner who decides to go cashless? What are the long-term benefits?

Kevin Hietpas, director of sales and marketing, Dexter Laundry:

By going cashless, a storeowner is trading one set of operational challenges for another. One item that many owners have reported as a major immediate benefit is that their collection time in the store is significantly reduced. With only one unit to collect and no change to handle, owners free up time to devote to other management and operational duties.

At the time of opening the laundry, or transitioning to a cashless system, owners should plan on devoting time to educating attendants and customers on use of the system. Some customers might be resistant to (use) the new system, and making the transition as smooth as possible with friendly help and support will make sure that the laundry doesn’t experience a loss of customers.

Amy Gitlin, president, ESD:

Cashless to some might mean not accepting coins, only smart cards, in your Laundromat, while cashless to another would mean eliminating coin and bills from the Laundromat (and) using credit/debit cards as a means of conducting store transactions. Either way, a self-service laundry owner would reap a number of immediate benefits.

By removing coins or other currency, one eliminates the temptation for theft or vandalism—this also includes employee theft. Another benefit is the reduction or elimination of collecting coins and bills. In addition, the laundry’s customers would benefit from the convenience of not needing to find and carry heavy coins. Instead, they would simply carry their smart card or credit cards to complete their transactions.

By going cashless, your customers are apt to utilize more machines, especially your large machines with higher vend pricing. Your customers will continue to benefit using their bankcard (either credit or debit) by earning more loyalty rewards/benefits associated with their card of choice.

The long-term benefits are easier accounting practices for laundry owners and continued customer convenience.

Michael Schantz, president, Setomatic Systems:

We believe that going totally cashless is no longer in the best interest of the laundry owner. We have been developing these types of systems since 1995, and over the last few years it has become evident to us that a hybrid system is more advantageous to the storeowner than a totally cashless system.

The average Laundromat user does not want to purchase a card that can only be used in your store. Offering the Laundromat customer the convenience to pay with any method they choose is what drives more customers to the laundry.

Our credit card system allows customers to pay for their wash by using coin or their own credit or debit card. No unhappy customers walk out the door because they don’t want to buy a card.

It is true that the storeowner has the convenience of never collecting coins in a totally cashless system, but he or she should be looking to maximize revenue. To do this, you need to give your customers the added benefit of paying by credit card or coin.

The consumer has been conditioned to pay by credit/debit card for even small purchases like a cup of coffee today, so why should they not have that convenience in a Laundromat?

Steve Marcionetti, product manager, Card Concepts:

The obvious immediate benefit is the time savings and the safety of having central collection. What many people don’t think about is what you can do with the time that was once dedicated to pulling quarters from machine.

For many operators, collecting is the primary reason for visiting the store. With collection reduced to only a few minutes, this time can now be used to pay closer attention to the details that make their store attractive to their customers. This is a great opportunity to take some time to speak to the customers in the store and find out what they like or don’t like about it. Taking this extra time to focus on “marketing” the store rather than just collecting has both short- and long-term benefits.

The more obvious long-term benefits come from two important factors: penny incremental pricing and float.

Having the ability to properly price your equipment and maintain a fair profit margin regardless of the increases in utility costs will ensure consistency. Too many coin operators resist increasing vend prices because they lack the flexibility of penny incremental pricing and ultimately lose profit when their utility costs rise. Only when the costs have risen above what they can tolerate do they consider increasing vend prices, and often it’s too late.

Float is the unspent value that is residing on customers’ cards. For example, most customers will add $20 to their card but only spend $16, taking the remainder home to use on their next visit. Two huge benefits here: First, the storeowner gets to hold that money in their account until the customer returns; second, this unused balance is a “loyalty” factor that will encourage customers to return to the store rather than visit a competing store.

As the owner of four Laundromats myself, I can personally attest to the validity of these two benefits. They have made all the difference in the success of my stores.

Ryan Carlson, director of marketing, WashCard Systems:

There are two reasons to go completely cashless; neither of them benefits the consumer. We have to be clear about why an operator wants to go cashless. The first is security. We’ve got clients who want to eliminate all cash collections from machines because they can’t carry a big enough gun at their store to feel safe. They want to centralize all the money collections into a locked, secure, separate room.

The second one is for an off-site operator, someone who is a “serial” entrepreneur who owns lots of different businesses and the Laundromat is where they’re planning on not spending any time. They hire employees as attendants, and all the attendant does is clean (the store) and educate people on how to use the card technology. You cannot have an unattended store and be 100% cashless; it does not work, period. You use the cashless system for accountability, to eliminate any opportunity for employees to handle money.

Tomorrow: What are some basic questions a laundry owner should ask when considering a cashless store?

To learn more about payment systems:

Card Concepts — laundrycard.com
Dexter Laundry — dexter.com/laundry/products/management/
ESD — esdcard.com
Setomatic Systems — setomatic.com
WashCard — washcard.com

April 13, 2011

Multihousing Laundry Industry: The Same, Only Different (Part 2 of 2)

June 30, 2010

Are 'Hybrid' Stores the Wave of the Future? (Part 1)

November 18, 2009

The Idea Exchange (Part 2 of 2)

September 30, 2009

It’s In the Cards

July 24, 2009