What to Expect When Your Cleaning Company Reaches $1M

Episode 25.

 

Ray

We’re back, and we are talking about financial thresholds for business owners in the cleaning industry. We did $150K, we did $250K, we did $500K. We are now looking at… 1 million dollars!

 

Joel

$1 million dollars!

 

Ray

Okay. What is the business owner, the cleaning company owner, facing?

 

Joel

Hopefully, the business owner has realized that he should no longer be working in the business or she. One thing that they should be doing at the $1 million dollar mark as a business owner is to make sure that they’re not working in the business and that they’re actually working on the business.

 

Ray

Now, what do you mean when you say that?

 

Joel

That’s a great question. Working in the business sometimes means that you’re doing the work that you should be paying others to do. It might be, oh, so somebody called out sick tonight. I got to go cover that routine. Or the admin didn’t show up so you’re answering phones, or you’re doing your own taxes, or you’re doing your own payroll. There’s things like that you should actually offload and have companies do and alleviate those headaches. So, working on the business is now taking a look at the bigger picture, because now you’re at a million dollars in sales. You have to start considering and being able to forecast and look forward what’s happening and need to know things almost on a daily basis within a minute basis of where am I losing money? Where am I making money? What’s the lag? How long are customers taking to pay? How long (does it take for) product getting to my site? So, you’re looking at a bigger picture when you get to that million dollar mark. Well, part of the forecasting is also, do you have lines of credits with your bank that are deep enough? Do you need to go get a different loan?

 

Joel

Do you need to go out and maybe lease equipment rather than direct buy so that you have a monthly number that’s smaller. (That’s) so you don’t become cash poor because you’re going out and buying a $100,000 auto scrubber to use in a factory or in a school or something like that. Instead of taking that out in cash, now you take it and you’re only paying out smaller amounts of money on a leasing option so that you still can stay cash positive. Those are the things that you need to start considering. Sometimes because of rapid growth, that’s not always that easy. So now you might have to look at going into what’s called secondary paper. And that could be going to a Factor where you take a look at a bunch of invoices, you have a factor, give you a percentage. They take that off the top and your clients actually pay the factor, the full amount.

 

Ray

Okay, now, I know we said we were going to define it a ton of banking terms or money terms. But someone at the 100K mark just heard “factor” and they have no idea what you’re talking about.

 

Joel

A factor is a person who is going to basically give you money in advance for a percentage. What they are doing is you’re going to look at a lot of factors. Who is the client that you’re looking to take that invoice and have them give you money up front on? If it’s a customer they’ve never heard of, they’re probably not going to give you any money towards it no matter how big that invoice is.

 

Ray

So independent investor. All right, so we’ve gotten them to that mark, and we’re either approaching or we’ve just crossed that one million mark. It sounds like managing the day-to-day operations, needing to know information within a few minutes of what’s going It sounds like a lot of analytics. A lot of reports.

 

Joel

A lot of analytics, a lot of reports. There’s different programs and software that are out there that you can run your business on that’s going to allow you to see those analytics as they happen. Plus, by the time you’re at a million dollars, you better have management staff in place, too. You better have someone who’s dedicated to just your HR department. You better have somebody who’s dedicated to just the financial piece, AARAP, even if somebody that’s part time on a virtual basis or somebody who works within your company that you trust that has all the right acronyms after their name to be running that department. They should understand finance and the value of money and where you can borrow from. You’re going to have day managers, you’re going to have night managers, you might even have a project manager. So, you’re going to have people in place. Those are the people that are working more in the business than you as the business owner should be doing. And I can attest that that is a major stumbling block for a lot of business owners mentally. Because now they are giving up control of their business.

 

Joel

They don’t have total control now. Now they’re just managing it by looking at a bunch of numbers.

 

Ray

But it’s got to be different. I mean, there’s no way you’re going to operate at the million-dollar mark the way you did at 250K.

 

Joel

You cannot. But that’s sometimes one of the biggest stumbling blocks of an individual is they’re their own worst enemy because of things that have happened. Oh, well, somebody embezzled for me, so I want to handle all the financial stuff. Oh, somebody stole time for me, so I want to make sure I do all the payroll stuff. Things like that, because of experiences a business owner has had, sometimes makes them a little shy at allowing somebody else to run with that department.

 

Ray

It seems to me that while working with staff is a piece that we’ve talked about as far as HR services go, it seems to me that one of the things you’re pointing at is really having a sharp HR company to help you first vet the people who become your internal staff, the office staff, the support staff, the managers, has just become significantly more critical.

 

Joel

More critical or even people that have worked for you that you have trained and developed over however long you are, because now they also not only have the skills to handle those jobs, but they also understand your company culture. And sometimes being able to promote from within is a big mood booster. Not just for the in-person who gets that promotion, but for everybody that works within the organization. Because now they’re seeing that there’s a career path, particularly in the cleaning industry. Because when I first started in this industry, Actually, 40 years ago, I thought it was a dead-end job. It is far from being a dead-end job, but it took me many years to figure out it wasn’t a dead-end job. Those of you who are listening who may be a frontline employee right now, I am telling you, focus and start training, developing yourself, even at that level. I never expected to be an author, a speaker, an owner of a business. Oh, wait, I own two businesses. I’m looking to start others. But seriously, I never thought of that when I was a frontline employee many years ago.

 

Ray

Joel, it’s something you and I both talked about. There’s dirt everywhere.

 

Joel

There is dirt everywhere. It’s a dirty world, and somebody’s got to clean it.

 

Ray

Great advice, Joel. Thank you.