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March 7, 2013
Manage the R > E Flow

PEMBROKE, Mass. — You should know all your costs like the back of your hand

PEMBROKE, Mass. — Running a dry cleaning business is not rocket science. It is a matter of adopting and living by one simple principle: the inflow must be greater than the outflow.

Simplified, it’s R > E, in which R equals revenue (inflow) and E equals expenses (outflow). But then the rule gets a bit complicated. It doesn’t apply to end-of-year results, it applies to every day you open your doors. For most, that means 270 to 360 days a year. Every day you’re open for business, the inflow must be greater than the outflow.

If it isn’t hard, why then do so many dry cleaners either limp along without much success or fold up? The answers vary:

February 19, 2013
Over the Fiscal Cliff for Tax Savings (Part 1)

ARDMORE, Pa. — Package renews more than 50 temporary tax breaks through 2013

ARDMORE, Pa. — The so-called “fiscal cliff” tax package recently signed into law renewed more than 50 temporary tax breaks through 2013, saving individuals and businesses an estimated $76 billion. For the owners and operators of small- and medium-sized dry cleaning businesses, there is good news and bad news contained in the fiscal cliff tax laws.

First, the good news: greater certainty in taxes. The owners and operators of dry cleaning businesses have grown used to many longstanding tax breaks but they also have had to get used to the uncertainty of whether they will be renewed each year.

On the downside, in addition to a 3.8% Net Investment Income (NII) tax and a 0.9% Additional Medicare tax that, thanks to the Health Care and Education Reconciliation Act of 2010, began in 2013, many dry cleaners and laundry owners discovered they are subject to new taxes. Single individuals with incomes above the $400,000 level and married couples with income higher than $450,000 will pay more in taxes in 2013.

September 25, 2012
Maximizing Your Dry Cleaner’s Value (For a Sale or For Yourself), Part 1

SAN FRANCISCO — If you are not actively selling your business, you are actively re-buying it yourself every day

SAN FRANCISCO — Owners often ask how to prepare their dry cleaning business for an optimum-priced sale. Generally, the answer is the same as the answer to an entirely different question: “How can I improve my business?”

To optimize the value of a business, make it the best it can be. Is that an oversimplification? Yes. Is it true? Yes.

IF YOU’RE NOT SELLING, YOU’RE BUYING

Whether you are preparing your business for an arm’s length sale, for a transfer to the next generation that you hope will be as passionate about dry cleaning as you are, or you have no sale planned, you are still preparing the company for a “sale” at some value.

If you are not actively selling your business, you are actively re-buying it yourself every day. You are making a conscious or subconscious decision to continue to exchange your capital investment, time, effort and equity (whatever the current value) for ongoing ownership of your company.

Optimized value benefits you whether you sell or not because the business is more valuable as a profit generator over the long and short terms.

April 30, 2012
Changes in Repair or Replace Tax Rules (Part 2 of 2)

ARDMORE, Pa. — Are certain expenditures currently deductible or must they be capitalized

ARDMORE, Pa. — In an effort to resolve the controversy over whether certain expenditures made by a drycleaning business are currently deductible as repair expenses, or whether they must be capitalized and deducted over the life of the underlying business asset, the Internal Revenue Service has finally released new regulations.

The IRS’s long-awaited expanded regulations for determining whether an expense must be capitalized because it betters or improves tangible business property or equipment, restores it, or adapts it to a new and different use, will have a significant impact on every drycleaning business that acquires, produces, or improves its tangible property. 

In addition to clarifying and expanding the current rules, the new regulations create “bright-line” tests for applying the repair-or-capitalize standards, provides guidance for accounting for—and disposing of—repaired property, as well as clarifying other aspects of the repair/capitalize dilemma.

April 26, 2012
Changes in Repair or Replace Tax Rules (Part 1 of 2)

ARDMORE, Pa. — Are certain expenditures currently deductible or must they be capitalized

ARDMORE, Pa. — In an effort to resolve the controversy over whether certain expenditures made by a drycleaning business are currently deductible as repair expenses, or whether they must be capitalized and deducted over the life of the underlying business asset, the Internal Revenue Service has finally released new regulations.

The IRS’s long-awaited expanded regulations for determining whether an expense must be capitalized because it betters or improves tangible business property or equipment, restores it, or adapts it to a new and different use, will have a significant impact on every drycleaning business that acquires, produces, or improves its tangible property. 

In addition to clarifying and expanding the current rules, the new regulations create “bright-line” tests for applying the repair-or-capitalize standards, provides guidance for accounting for—and disposing of—repaired property, as well as clarifying other aspects of the repair/capitalize dilemma.

January 4, 2012
Fight Trim and Pay Fair Share of Taxes (Part 2 of 2)

PEMBROKE, Mass. — Tax time is here again. Before I give you some tax tips, I want to tell you to pay your fair taxes. I know that not all of you do.

Having said that, you should take full advantage of legitimate deductions.

Some Available Deductions

Basically, profit determination is a process of starting with revenue and deducting all expenses and costs from all activity that went into creating that inflow stream. Any amount of expenditure is deductible if it helped you, in any way, shape or form, to run your business.

Don’t forget to include:

October 18, 2011
Deductions: Get ‘Em While You Can (Part 1 of 2)

ARDMORE, Pa. — Thanks to the 100% “bonus” depreciation write-offs created by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, many dry cleaning businesses are discovering that capital investments in equipment, machinery and other business assets are more affordable today than ever before. Remember, however, the 100% bonus depreciation write-off is available only for qualifying purchases made by dry cleaning plants and businesses in 2011.

Those dry cleaners that have hesitated or postponed making capital investments because of the recent economic downturn might now want to consider how the combined use of incentives and the 100% bonus depreciation can substantially reduce the cost of capital investments. Even funding those new-equipment purchases is easier—at least for a while.

February 17, 2010
Use Tax Time to Take Stock

Tax season is here, and what are you going to do about it? “Don’t bug me,” you say, “I’ve got a business to run, orders to get out, employees to motivate, customers to satisfy. My accountant handles everything.”

Okay, but remember, you’ll spend extra money on accounting when you should be watching every expense carefully. More importantly, you’ll miss a great opportunity to build a keen understanding of your business.

April 9, 2009
Drycleaners Cut Payrolls as Sales Continue to Fall, Survey Says

CHICAGO — Drycleaners across the country cut payrolls as sales continued to drop in February, according to a recent AmericanDrycleaner.com StatShot survey. Drycleaners in the West continue to experience the worst declines, and in response, they’ve cut payrolls the most of the four regions polled.

November 19, 2008
Prepare for Tax Time Early

Most drycleaners take their paperwork to their accountant just before the April 15th deadline and hope for the best. But by being proactive, you can fine-tune the outcome, anticipate cashflow needs, reduce the chance of penalties and lower accountant fees.