Polly and Dave Nemec chuckle over the fact that they knew little about the dry cleaning business and probably overpaid when they bought a small Stillwater dry-cleaning shop and laundry in 2001 called St. Croix Cleaners.
It wasn't so funny as the Nemecs scrimped to get through the 2001-02 recession and actually learn the ins and outs of the business.
Dave recalls that I'm-in-over-my-head-feeling. The business was stagnant, foundering in an out-of-the-way location in an ancient strip mall. And the recession didn't help as consumers cut back.
Although they sure couldn't have predicted it during the shaky early years, they now own one of the Twin Cities area's largest dry-cleaning businesses, with 18 stores and revenue of more than $5 million this year. And St. Croix Cleaners, with a newer laundry and operations center and a few acquisitions under its belt, has become a growing consolidator in an industry that has shrunk by more than half since 1995 to 140 independent dry cleaners, according to the Minnesota Dry Cleaners Association.
"It was probably five years before I felt that shadow of doubt go away and I thought, 'Yes, I can do this,' " Dave Nemec recalled. "I guess I'm fortunate that I am a little stubborn. I was always grabbing a wrench to try and fix things or subbing for an ill employee to save money."
Dave, 54, had quit a corporate software job in 2001 that kept him on the road and away from Polly and two young kids too many nights. Polly, 58, hung on to her corporate trust job at a bank. She was never crazy about washing clothes anyway.
The inadvertent dry-cleaning magnates, particularly Dave, started out with enthusiasm that was tempered by the reality of learning a new trade in a low-margin industry that also was buffeted by recession. And there was no paycheck for Dave for the first three years. Gradually he got the first store turned around and then slowly added a few more locations organically and through small acquisitions.
With their confidence increasing, the Nemecs decided to build a $2 million operations center, laundry and drop-off facility in the busier Oak Park Ponds shopping center in Oak Park Heights. The added capacity allowed them to handle business they acquired through the acquisition of a six-store dry cleaner called Nu-Life.
Then came the Great Recession.
"We had been going up and up," Dave Nemec recalled. "And then more sleepless nights. The bank wanted more equity in the project. We had to refinance the house to raise equity for the business. It was all more than I could handle. I needed to draw in Polly to do account management, leases, negotiations and more."
Polly quit her job, and seven-day workweeks were not uncommon by 2009.
Six years later, the Nemecs say they are making more money at their growing company than they once did from their combined corporate jobs.
In a nutshell, the secret sauce to success, including just hanging on for the economic recovery, is owed to:
• Hiring a seasoned manager, Duane Schumann, from a failed dry cleaner who helped them build their Treasured Garment Restoration business in the Oakdale plant. Although only 5 percent of revenue, the higher-margin business has a much higher average tab than the typical $25 per customer. Treasured garment care and hand-cleaning goes for about $100 an hour plus materials, with a focus on gowns and military uniforms, as well as costumes for theaters and mascot suits worn by the likes of the St. Paul Saints' Madonna the Pig and the Anytime Fitness Man.
• Gaining scale through the acquisition of White Way in 2010 from a retiring owner the Nemecs knew through their involvement in the industry association. The acquisition got the suburban-oriented St. Croix into the lucrative Minneapolis and St. Paul downtown markets and helped them increase volume by about 40 percent through their once-underutilized Oak Park laundry. Adding volume also helped the Nemecs become a preferred employer for 95 full- and part-time workers who are paid up to $16 an hour plus health care and retirement benefits, they said.
"We're doing better now than we were in corporate America," Polly Nemec said. "It also is fun and rewarding to see our employees and see them develop and work with customers."
• Embracing "green" dry cleaning from the outset by avoiding the chemical-cleaning agent perchloroethylene, or "perc." The Nemecs have been leaders in using cleaner solvents, which they say also attracted new green-oriented customers. They also have been leaders on an industry-raised fund, in cooperation with Minnesota pollution authorities, used for cleaning up generations-old sites where perc was dumped.
It's been an interesting ride for the Nemecs, who met in 1982 when they were performers in the Tommy Bartlett water skiing show at the Wisconsin Dells.
"I never would have dreamed that I would end up with Dave in a dry-cleaning business," said a laughing Polly Nemec, the onetime banker. "I didn't like cleaning clothes. And now I teach a course on caring for wedding gowns."