The Problem Chris Mendez knew he had to do something to fix his floundering dry-cleaning company, Clothes Dr. He opened his first store in 1995, and within seven years had three storefronts and his own dry-cleaning plant. But as the company grew, Mendez lost control. He didn't know how to manage a large number of employees and found himself running from store to store when workers failed to show up for work. Nonetheless, in early 2003, he bought another three storefronts for $400,000. It was too much to manage; that year, he lost $130,000 on revenue of $1.2 million. Mendez mortgaged his house and became so stressed he couldn't sleep. Finally, in 2005, he made a bold decision: He would close his retail stores, invest in a Web-based tracking system, and promote his company online. Instead of the expensive storefronts, he would run a pickup-and-delivery service. He bought software customized for dry cleaners and a new truck, and he launched a branding campaign. By January 2006, the Clothes Dr. website was up, and he had closed three stores and purchased another vehicle. He reduced his employees from 21 to 18, started paying his drivers on commission, and turned a modest profit.

What the Experts Said "You don't build up a route on the Web; you do it by knocking on doors," said Sid Tuchman, former CEO of Tuchman Cleaners, who advised Mendez to invest in hiring smart salespeople. Nora Nealis, executive director of the National Cleaners Association in New York City, said investing in new technology was not enough; Mendez would have to train his employees to help build the brand. And Jim McCann, CEO of 1-800-Flowers, encouraged Mendez to add cleaning services or products to make his stops more profitable.

What's Happened Since "My accountant is proud I'm not losing $130,000 a year," Mendez says. In 2007, he finished the year with $840,000 in revenue and turned a profit. Sales at the stores were stagnant, but delivery revenue was up 40 percent. He now has three vehicles and two stores, with one 1,400-square-foot production center that services them. Mendez says the 18 employees are "the best crew I've ever had."

What's Next Mendez and his father, who has run a dry-cleaning business for years, are combining businesses and have just found financing for a $2 million, 8,300-square-foot plant, which will include a storefront, cleaning facilities, and a drive-through operation. Eventually, Mendez wants to sell Clothes Dr. franchises.