How Cleaning Companies Screw Themselves

Episode 18.

Ray

Joel, one of the things that we often hit on is dealing with new business owners, new cleaning business owners, folks who are interested in starting their business. Some folks just think, “Hey, I can do this. It’s easy. I can get started.” Technically true. But what business structure would you suggest (for) a brand new company? It might be one or two people. What should they do?

 

Joel

That’s a very good and important question. Now, I am not an attorney. I’m going to say that right out front, but just general business knowledge is that you have things like called the DBA, Doing Business As, LLC, Limited Liability Company, and then you have your corporations. What I would say is, get to know what those three different terms mean and the importance of the liability that each of them has when you’re doing business as yourself, and it’s the lowest barrier to entry into the world of business, but your liability is going to fall back on not just company, but it’s going to fall back on you. In a nutshell, a limited liability company means that just what you invest basically in the company. And then with some caveats, there can be still some things that come back on the business owner in their own personal world. But it’s limited amount of risk. And then a corporation. As long as you don’t pierce the corporate veil, which means that you start mixing money between home and business, so to say. Talk to an attorney about the structure that best works for you.

 

Joel

But then when you go out and work. I know a lot of companies will say,”Oh, well, I can go purchase a company that’s all encompassing”. And realize that individual company owns the contracts. Or if you get into a subcontracting situation, because once you get there, a lot of subcontracting type management companies call you and say, “Oh, we want you to clean this box store. This type of box store”. Whatever. They still own the contracts. So yes, you’re doing the work. You’re getting compensated for it. But when something goes wrong, you really have no control. Because at any moment they can say, “Hey, we don’t want you there anymore”. So, me personally, I like holding the contract myself. Going out. Finding the company. Getting them to sign a contract with my company and doing the work so that when there is problems, that you work with that individual company to create that stronger bond. But you own the contract, and that is the biggest difference with what some companies will do when they first start out.

 

Ray

Joel, a previous question we asked was what business structure for the new business owner, the new cleaning business owner. And you touched on contracts. Would you take a moment to cover service agreements? Because I know you and I have had long discussions about what’s included in that agreement and the importance of it. Because they can be unique to a customer.

 

Joel

There are a lot of things that you need to include in a service contract. And again, not being an attorney, you need to contact a business attorney, and they will probably lead you down the same path. But you need to have clear and concise who’s responsible for what? What are the specifications? What are the requirements of the job? What are the terms? When are you billing? When are you going to receive the money? What happens if you don’t receive the money? If a collection is company is going to get involved? Are you going to add to the amount? Do NDAs have to be signed? Because if you get into any type of government work or medical, it’s HIPAA. There’s different requirements that are going to be needed by type of industry that you’re going to be working in. So, it’s not just coming in and doing work. There’s a lot more to it. And I think that the new business owner doesn’t realize all these other steps that are involved. So, talking to a good attorney, getting them to review your service contracts to ensure that everything is covered. Things that you may not even be thinking of. You just say, “Oh, that’s my buddy Ray, and it’s his place. He’s always going to… He’ll always have my back”. When it comes to business, it may not always be Ray having my back. So, it’s having everything spelled out so that when something goes wrong, you have something to go back to and ensure that all parties are satisfied.

 

Ray

Now, we can edit this last part out. I’m going to say as a shameful plug, not for you or I. We both know a fantastic business attorney that is not only reasonably priced, but ridiculously good at spotting holes in service agreements. If somebody would like to talk to Dawson, we would be more than happy to make a referral.

 

Joel

I agree. They have helped me in the formation of two companies. They have helped guide me through all kinds of legal issues. And when it gets beyond what they can do, they make great referrals to other attorneys, the specialties that need to be serviced.

 

Dawson Law Firm