Small Business Lessons Learned From Burning Down a Laundromat

The life of a small business owner is full of unexpected challenges. For example, very early on in my new life as a full-time entrepreneur, before I founded and became CEO of Patriot Software, my online payroll and accounting software company, one of my employees tried to dry chemical-soaked rags in a commercial gas dryer and blew up a laundromat. Talk about small business lessons learned the hard way.

Caution: Flammable Materials

No, my first business wasn’t a print shop, but we did make thousands upon thousands of copies on a printing press that guzzled ink. To keep the press clean and running, we had to use potent chemical cocktails about as flammable as rocket fuel. In fact, it might have been rocket fuel! Those chemicals turned our cleaning rags into tinder, which meant cleaning them was an important and purposeful task.

For the record, I told this employee that we had to keep the rags as far away from flames as possible—after a previous dryer he used “inexplicably” caught fire, no less. I stressed that the rags had to be washed multiple times, then hung on a line to air dry. Heck, I even bought this co-worker a clothesline and pins!

But, to take the tedium out of what must have felt like a very menial job, instead of a clothesline, this employee made a bee-line … for the laundromat just down the street from my company. There, the rags went in the dryers, the fumes found the pilot lights, and, BOOM!

The Day of the Accident

The day of the boom I got a phone call saying I should stop what I was doing and come to the laundromat immediately because one of my employees had blown up the laundromat. Though I wasn’t sure I’d heard correctly, I left nothing to chance and immediately hopped in my car and headed to the mat, where I discovered a scene straight out of an action movie.

Black smoke blotted the sky above a smoking building surrounded by cherry red fire trucks. Massive plumes of fire lashed angrily at the spouts of water brought to bear against them. Fire hoses all over the street, water everywhere, firemen running, flashing lights, sirens, barricades, and police redirecting traffic.

My employee did all this? My employee did all this?

I saw the rescue squad truck. I ran to it and poked my head in to find my employee. He had an oxygen mask on his face, and when he removed it, he had no facial hair. No eyebrows; no scraggly fuzz that used to be there. And his hairline looked like it was about half-an-inch higher. Beyond that he was all right, thank God. In fact, if you want to talk about miracles, despite the action movie wreckage and flashing lights, no one was hurt. Not. One. Person.

However, once I realized everyone was safe, the reality of the situation hit me. Hard. Because I was the employer of the individual who dried the rags that caused a laundromat to explode, I was liable for the damages.

Panic Strikes

A flurry of business variables flashed through my mind: cash on hand, our shoestring budget for small business, the cost of the laundromat—it all added up to one thing—my small business was toast.

Or was it?

I called my insurance agent and told him the story. He confirmed my thoughts and told me an employee playing laundromat demolitionist was a pretty grim turn of events. Regardless, he faxed me a copy of the insurance policy, which upon my reading was only full of bad, awful, and worse. But I wasn’t an attorney, so I passed the policy off to the company lawyer, who, unequivocally confirmed that we had no insurance coverage for this type of accident.

When OSHA inspected us, they issued violations with a few penalties and fines, but nothing terrible—that would come later.

Moment of Truth

My company made headlines in our local newspaper, and not the good kind. The fire marshal determined the cause of the accident to be our cleaning rags, and our company was pronounced guilty. Insurance adjusters estimated the cost to repair the laundromat to be $25,000. But we were running on such tight margins that, with just the lost productivity and current expenses, we were more than broke! We couldn’t have scrounged up $25, let alone $25,000!

Meanwhile, our insurance broker was giving us periodic updates on his conversations with our insurance carrier. He told us that it didn’t look good for us. Then one day, about 3-4 weeks after the accident, the phone call came. The insurance company decided that they would cover us for the accident, and they agreed to pay all $25,000. They told us that we didn’t have to pay anything; no deductible, nothing, nada, zip! I can’t even begin to tell you the tears of joy we shed, or the prayers of thanks we gave. We weren’t going to have to close our business! Our company could carry on!

A Life-or-Death Situation

But we weren’t out of the woods yet. A few days later, my employee who blew up the laundromat came into my office, looked me straight in the eye and said, “My mom and lawyer said that I could get money out of you guys for my trouble. So, how much are you going to pay me not to sue you?”

We couldn’t believe his boldness, but I also knew we didn’t have the resources to go into a full legal battle. I did the best I could, and told him my partner and I would think about it and get back to him quickly.

We viewed this as a life-or-death situation for the business. We knew we couldn’t deal with a lawsuit, so we needed to move quickly and sweep up every penny we could beg, borrow, or steal. We determined the maximum amount of money we could come up with in the entire world–which wasn’t very much at the time–and offered it in exchange for this employee signing a release form. When we presented the packet to him, he took it without any fuss. But, the most shocking part was, he happily went back to work, seeing nothing wrong with what he just did!

At this point, I felt safe in thinking that the madness was over. We’d corrected our errors and learned our lessons, the laundromat could rest in peace, and I could get back to running my business. No more surprises, right?


Procrastination Leads to Painful Small Business Lessons

A couple months later I received a cryptic statement from the State of Ohio’s Bureau of Workers’ Compensation mentioning various codes and small dollar amounts that were being charged to my company. I didn’t know what the charges were for, nor what to do about them, so, like so many other entrepreneurs, I threw the statement into a file folder and decided that I’d figure it out later.

A month later, I got another cryptic form with a different dollar amount. Then I got another one the next month, and the next, and the next. Over the next 6-8 months, I received more of these, with dollar amounts of $103 here, and $88 there, and $79 here, etc. It was time to chase down the problem.

I called the State of Ohio’s Bureau of Workers’ Compensation and discovered that my employee, the one who burnt down the laundromat and asked for cash to settle out of court—and was still working at my company—had been seeing a chiropractor who was charging everything to our workers’ comp code.

I asked my employee into my office. I asked him how his back was. “It’s great” was the response. I asked since things were great, why he was still going to the chiropractor? The answer was “The chiropractor told me that I have to come several times a week. I didn’t know that I could say ‘no’ and stop going. The doctor told me to keep coming, so I’ve been doing that. But my back has been fine for months.”

I called the Ohio Bureau of Workers’ Compensation. They said that there’s nothing that they could do about the visits, but they did mention that my employee’s chiropractor visits had totaled over $10,000. $10.000!

Speaking of doctors, I felt like I needed one when I heard a $10,000 bill was heading my way. Shame on me for not dealing with the cryptic forms right away. Another small business lesson learned by way of an exploding laundromat.

Once I solved the workers’ compensation issues, the Laundromat Incident was officially closed. The laundromat was rebuilt. I purchased more insurance. The explosive employee was healthy and had found employment elsewhere. And a chiropractor got part of his Florida condo paid for with my workers’ comp number. … But it was finally over.

The small business lessons of the story:

1) Make sure you have lots of insurance (Commercial General Liability Insurance, Commercial Property Insurance, Worker’s Comp Insurance, etc.), because you never know when a freak accident will happen.

2) “Inspect what you expect.” Even though we told our employee to wash and hand dry the rags AS FAR AWAY FROM FLAME AS POSSIBLE, he did not listen.

3) Make sure that you convey just how important “menial” jobs are to your operation. Someone has to do the dirty jobs, but that’s not an excuse to do them poorly. If your employee feels valued and knows their role is important, they’ll put more effort into it.

4) Don’t throw IRS small business forms that you don’t understand into a file folder with the excuse that you’ll deal with them another day. They can really add up on you!

5) Make sure you’re following all the rules that apply to the type of work you’re doing! Be safe; be vigilant.

6) And last, but not least—never put chemical-soaked rags in a gas dryer!


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