Did you know that numbers are Sexy?
Its super important to know your actual numbers in your Cleaning Business :)
When I first started my cleaning business. I had a basic knowledge of what I thought my numbers should be. But I really didn’t know what they really were supposed to be.
I never took an accounting course in college, there wasn’t a manual that they sold that told you at the time, in any book store or online, you just had to figure it out along the way.
And I can tell you that the money at the end was almost always reserved to taxes owed at the end of the year. It was never as much profit I wanted it to be.
How many of you have had this dilemma?
You start off okay, because you were slow, then you hit a growth spell with lots of new clients and then somehow along the way the last 2 quarters exceed last year number and now you owe. A lot!
Then you beat yourself up for not paying Quarterly.
B-U-D-G-E-T-I-N-G yes I know. But you don’t know what you don’t know.
So I had a basic knowledge of what my expenses where and what money I earned but beyond that I really didn’t have a clue as to what I need to look at in my budget to actually grow.
How I became a Seasoned Cleaning Entrepreneur
It wasn’t until I hit year 3 in my business that I realized that I needed to do some tweaking to my annual budget. I kept increasing the gross income, which was good and usually it was over 10% (standard business model for all traditional businesses)-from the prior year always the goal in any business?
But I knew that I couldn’t keep relying on word-of-mouth from my other clients. I needed to figure out how the numbers worked. How to grow with intention. At the time the cleaning industry wasn’t as popular as it is now and the information to do so was very limited.
And right now many of you may be doing this type of business model...
You are charging by the hour and are telling all your clients what that hourly wage is. You get calls and you are reiterating to them what your hourly rate is.
You advertise what your price is on everything, every form of print, your website and I bet you are also sending a team of 2 or 3 employee’s into every home.
Am I right?
Did you know that by doing this lowers productivity, increases labor and limits your scheduling. As in…how many homes can be cleaned every day. As in how much business you will bring in. As in your bottom line.
And at this stage in the game everything is all about the price and making sure you are having the quality and staying up the minute to make sure your clients are getting the value they have paid for. ( Admittedly I am guilty of this business model.)
I can tell you there were many who were clock watchers who made sure that we stayed to the very end. Or expected a discount or refund. In addition to the scolding that they gave you.
Many of them worked by the hour their whole lives and have now retired and don't know any other way to do business.
And then I have had clients choke over the price and try and shame you into submission in a variety of ways.
How dare you make more money per hour after all I’m a nurse and have 6 years or more of education and I never made that per hour!
How dare you make more money than me, after all it’s cleaning and everyone can clean!
For me it was all about integrity and honor. And I also thought that this was the most I could make. It didn’t even dawn on me that you could earn more for doing less. (Less time that is...) I just figured as long as I kept accruing more clients I would be ok and eventually make it to 7 figures.
Fact: Most Professional Maid Services never gross more than 500,000 a year annually. (Non-Scientific)
Then I sat in on a day long seminar while I was at a trade show and after speaking to a couple of Guru’s I realized that I was doing it all wrong. You could make a lot more money, have a smoother schedule with less drama with my employee’s and fast track to seven figures by tweaking your business model.
And you could do so in 18 to 36 months after you implement certain things into your business. Then I could be an absentee business owner. And who wouldn’t want that?
At that time my current numbers were like this:
30%-40% of every dollar earned was going to Labor, Payroll Taxes and Workman’s Comp. I also paid myself out of this percentage as well.
Pro Note:
For those of you who don’t know your Workman’s Comp Insurance is based off your Total Labor Costs (Payroll Taxes and Payroll itself.)
10% of every dollar earned went into Janitorial supplies, Office Space (Rent), Company Vehicles
30% profit
10-20% of every dollar earned went to marketing and marketing for hiring all of the workers that I needed to grow. And I was hiring a lot of them. My husband used to refer to it as the cleaning factory, all I did was turn and burn. Sometimes my turnover was over 100%.
Pro Note:
What to note is when you have turn over rate of 100% is that you have to pay the unemployment tax on every single on of them to the state you reside.
For example, in my state, I paid for the first 7500.00 of potential earned income tax for labor that they did or didn’t work to unemployment taxes.
What that means is that if you hire someone and they work 3 days make over 600.00 in those 3 days, then you have to 1099 them and then you have to pay unemployment tax for the first 7,500 that they would have earned.
So if they stuck around, AWESOME. If they didn’t then I was on the hook for in unemployment taxes. So some years my percentage withholding was 1.75% and other times it was as high as 4.25% of withholding taxes for each employee. Money that was the cost of doing business that I would never get back. All because I had a turnover rate from 100-300%! CRAZY huh?
How the numbers are supposed to work:
50%-55% of every dollar earned should go to Labor, Payroll Taxes, Training and Workman’s Comp
25% of every dollar earned should go to office space, office staff, Marketing, Supplies, Janitorial Equipment
20% profit. Remember if you do an owners draw you will have to pay 30% tax on all profit. So just hold that to the side.
Total 100%
So remember for a business to succeed, 100% sales, training, hiring and staff retention and quality control =Success.
Much Prosperity to your Business,
Shannon Miller
0 comments