The REWORK podcast

A podcast about a better way to work and run your business. We bring you stories and unconventional wisdom from Basecamp’s co-founders and other business owners.

BONUS EPISODE

Dan Miller on Outsourcing

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Dan Miller of Mulberrys Garment Care talks outsourcing, bootstrapping, and growing slowly in some leftover bits we couldn’t quite fit into episode 14.


The Full Transcript:

Wailin: [00:00:00] Welcome to this mini bonus episode of Rework. Today we have a short conversation with Dan Miller who you might remember from the last episode. He founded a company called Mulberrys Garment Care after his dry cleaner left a bride’s garter from a wedding in his suit pocket leading to an embarrassing moment at an important meeting. I was surprised to learn that Mulberrys is not one of these gig economy startups. It doesn’t use contractors for its dry cleaning and delivery. Mulberrys has 120 employees in the Minneapolis/St. Paul area and San Francisco.

[00:00:32] I asked Dan why he structured his business the way he did and how he’s been able to do it without taking equity investment. Dan: [00:00:39] We want to reimagine the experience at every touchpoint. Well, then, the people that are connecting with our customers, whether it’s the person at the front desk, or a delivery driver or the person cleaning their clothes has to have a stake in the company. And has to have a stake in our success.

[00:00:55] So, what we did from the ground up was say. If you come to Mulberrys this isn’t just going to be a job. This is going to be a career and so, we offer 401K, health care benefits, and in doing that, that’s had a huge ripple effect in terms of making sure that people feel that they’re a part of something bigger than just doing a job. Which really kind of caveats to your second question, which is how do you afford that while bootstrapping?

[00:01:25] What’s funny about it is, I actually don’t think it’s an economic trade-off. I think that the customer retention gains you get by having people who care serving them and also the gains you get in terms of employee retention, in that you’re not retraining every week because somebody’s cycling through actually outweigh the costs associated with having to pay additional payroll taxes or some health benefits or that sort of thing.

Wailin: [00:01:57] Did it limit how much you could grow at the beginning, especially?

Dan: [00:02:03] My vision from the beginning was I wanted to be the nation’s leading dry cleaner and it’s absolutely true that if you are willing to outsource the whole thing, you can grow much quicker. So, we have competitors who literally outsource everything. They don’t do the cleaning. They don’t hire the drivers. They’re essentially just a layer on top. They provide an app or something. Or a website and that’s all they do. Our belief was that that’s a short-term win, so you can get into more cities faster that way, and that’s great. But, in the long run, they’ll lose because any time they’re going to match up with us the experience is going to be so distinctly different in terms of the service they receive, the cleaning quality, the turnaround time. The absence of issues like lost garments or other sorts of things. They won’t be able to sustain anything they grab by moving into a new market.

[00:02:59] We kind of think of ourselves out in California, there’s a burger chain called In and Out, I don’t know if you know them. But they took the approach of, we’re just going to do it right. We’re going to do really good cheeseburgers, really good French fries. We’re going to grow slow and we’re going to finance it cautiously, we’re going to pay our employees well, and so that’s really what we believe was the long-term strategy that was going to pay off.

Wailin: [00:03:25] Did it baffle some of the people that you might have talked to who were investors or other people in the startup and business world when they found out that this was your structure?

Dan: [00:03:37] Absolutely. Yes. And we still do not have outside equity financing. It’s all been debt financed. Mainly because of that. Because every time we looked into raising equity the things that investors, particularly equity investors wanted us to do were antithetical to really our approach, our mission. They said, well, why don’t you outsource all the cleaning, and then you can move into new markets faster, or why don’t you outsource all the drivers because then you can hire them faster and that’s not who we are. And we thought that once we started doing that, then you’re giving away the very competitive advantage that you’ve constructed. Then I’m going back to the very dry cleaner that I hated and next thing you know, my customers will have garter belts in their clothing.