What to Expect When Your Cleaning Company Reaches $250,000

Episode 22.

 

Ray

Joel, we’re back. We’re talking about benchmarks in dollar amounts for new business owners. First one was at $100K.

 

Joel

Yes.

 

Ray

Next one, you laid out as 250?

 

Joel

About $250,000. It’s a little bit more than the $100,000. Once you get to the $250,000 in billables, now you’re looking at you’ve got probably a couple of managers working for you. You might have several field employees. You might have some full-time, some part time. And you’re still working in the business at that time. As much as you want to work on the business to help it grow, you might be still working in it. Pulling extra shifts because someone called in sick or whatever. And you really don’t need a lot of bank financing at this point. You can probably still put enough money aside in your business that’s going to allow you to reinvest into the company to buy the equipment as needed as you bring on new work. You’re going to hopefully be out there networking with other businesses. And you might find some other smaller businesses that are either downsizing or have lost some work or getting close to retirement. I found a lot of those early on that I was able to buy a lot of used equipment at a fraction of the price of buying new.

 

Ray

How did you track those folks down?

 

Joel

People I’ve known in the industry, just networking, being introduced to people. I know we talked about it in another segment where sometimes what you think as a competitor is not really. Because they do a slightly different version of the cleaning than you do. I mean, it’s cleaning, but you use the same type of equipment. But maybe they have a different vertical. So, with the downsizing after the pandemic of so many different companies, part of it was maybe they had a real big building, and now they had half of what they used to clean. Now they have this extra equipment. They may not have a warehouse to put it in. So just knowing some of the players that are out there and keeping in contact with them, you’re then able to purchase some used equipment from people because they don’t want to store it. That’s lost money. That’s tied up. And as a business owner, if I can get a brute barrel to roll around for trash or a restroom car or a decent backpack vacuum that still runs really well, I can buy it for pennies on the dollar as opposed to buying everything for full price.

 

Ray

Now, in going from that position, again, $100K to $250K, as you’re making that transition, knowing people in your area who are in the industry, who’s getting rid of what, who’s retiring, maybe who’s perhaps even moving some old equipment. Perhaps buying some gently used.

 

Joel

Gently used is a good word. Even talk to your JanSan providers Where you’re purchasing product. I’m not talking Amazon. I’m talking about warehouses that are set up to support our industry because a lot of them will sell a company that’s growing brand new equipment. They will take some equipment on trade that’s gently used. They run it through their mechanic to oversee everything. Maybe they got to harvest some equipment because it’s just really not resalable. But those parts off of it are good, and they rebuild other pieces. And then they will sell that type of stuff to a smaller company, again, at a fraction of the price of a new piece. So, a burnisher I bought used years ago. It was a $2,500.00 brand new. And I picked it up for about $800. When they delivered it on a skid to my building, I was like, wow, that looks brand new. I mean, it really did. And it worked just fine. And I’ve had no issues with it over time and everything else. So, looking at that gently used market as you’re growing, because you don’t have to have new everything.

If it’s working well and you can pay half the price of a new or a little less than half, and it works just as well, why not? And it helps you extend your money.

 

Ray

Now, one other question I wanted to ask. Joel, in regard to that, again, that span from $100K to $250K. What other challenges should that business owner expect? One of the things we talked about is they’re wearing four or five hats, at least around the 100K mark. What are they looking as far as challenges? What to expect?

 

Joel

The biggest challenge is because by the time you get to a quarter of a million dollar account, you are not just hiring family and friends anymore. You are hiring people that you don’t know and extending and sticking your neck out saying, “Oh, I know Joe, or I know Sally, or I know Maria.” And you really don’t because they just came to you via an application process. So, spending money on either getting yourself or someone within your company qualified to be a true HR person or something that I’ve done has gone out and found a company that helps support us and train us so that we do most of the work ourselves. But when we get stuck, we go and we talk to them about sticky situations or what are the current laws, what has changed from year to year, month to month between the state and the federal, and having that individual continue to update us throughout the month and throughout the year when there’s changes that affect our business. And I would say that’s probably one of the biggest things. That you are now getting into people you really do not know. I recommend doing background checks. And we also do a pre-screening for drugs on a four-panel basis because we live in New York state here, and we can’t pre-test now for marijuana.

 

Joel

But those are the types of things that you have to start thinking about because those are the people that you need to place into buildings and that trust that you’ve earned from those clients. And you want to continue on a level that the trust can be extended.

 

Ray

Fantastic advice, Joel. Thank you.