Start & Run a Home Cleaning Business. Susan Bewsey

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      You won’t have a clear yes or no answer to all of these questions, but when you weigh your break-even numbers against them, you’ll see where the flaws are in your thinking. Or you may be able to take comfort from knowing that the numbers show that you have a wide margin of error before you have to worry.

      Your break-even point should be at approximately two months, when the full impact of your advertising campaign has taken root. Then the company should continue to grow. Effective advertising and advertising strategy is discussed in further detail in Chapter 5.

      3. How Much Should You Charge?

      Pricing is tied to marketing. What you charge your customer has a direct effect on your potential sales. If your price is too high, you may be cutting off clients from your market. If your price is too low, clients may assume that your work is of poor quality.

      Finding the right price means balancing profits versus market rates. Consider these factors:

      (a) How much does it cost you to provide your service?

      (b) How sensitive is the market?

      (c) What image do you wish to project for your business?

      (d) What does your competition charge?

      You must determine your hourly rate. What hourly rate do you need in order to maintain your cash flow? Suppose your goals are modest compared to a business like The Cleaning Company Inc., and you want to make $20,000 a year from your cleaning service. How many days will you work and how many hours in that day will be billable? There are 365 days in a year. If you plan on one month’s vacation time, deduct 31 days for a total of 334 days. If you also don’t want to work on the weekend, deduct 127 days (104 weekend days plus 23 vacation days exclusive of weekends) for a total of 238 working days. Let’s say you plan on six billable hours per day; six multiplied by 238 gives you a total of 1,428 billable hours per year. When you divide $20,000 by 1,428 you will see that you must clear about $14 per hour to make your desired income. To make sure that you clear $14, you must log enough hours to cover overhead and expenses.

      What is the going rate for a home cleaning service in your area or market? If the going rate is $7 an hour, there’s not much point in trying to charge $14.

      Remember, you must allow for overhead expenses; don’t undercharge. If your business grows to the point where you must hire employees, consider the additional overhead that will accrue.

      Develop a formal pricing plan: it will be invaluable when you need to meet with a banker or accountant to organize your company’s finances. For more about pricing for specific cleaning services, see Chapter 6.

      4. Keep Your Forecast Up To Date

      Your initial forecast is only the beginning. Once you begin billing your customers, there is an even greater need to keep on top of things. Set aside time each month to review your cash flow. How does your forecast measure up to the reality of running your business? Watch for client trends or requests for special cleaning services. Note other influences that affect your clients’ demand for your service. Is there a seasonal dip in the summer when people go on vacation, after the busy spring months when everyone wants spring cleaning? Do things pick up again toward December and the New Year when people plan to entertain? Monitoring when people request your service is important, and it will help your forecasting.

      Eventually, you will be able to forecast past your first year and begin forecasting for year two, year three, and beyond. The successful business owner always knows how financial commitments will be met; forecasting allows you to do that.

      5. Raising The Money

      Starting and running a cleaning business takes money. Without sufficient funds a business can quickly become tiresome and stressful. Be certain that you have enough money to start off your business.

      Your business start-up capital can come from a variety of sources: personal savings, relatives and friends, banks, government, and private investors are all possible sources. If you have enough money saved to meet your first year of expenses, this can be a good way to start. If you don’t, consider waiting until you have enough saved so that you can start your business with your own funds. Most new businesses are financed by the individual: The banks are not the major source of start-up capital.

      If friends or relatives will lend you the money, you can plan to pay it back from your profits. Your cash flow forecast will tell you whether this is reasonable. Be aware that there is always a danger in mixing money with a personal relationship, despite one’s best intentions. Consider whether your business is worth the risk of a friend or family member’s money.

      The bank is another source to approach for start-up funds. If you want to convince a bank to loan you money, do your homework. All your work researching and planning your budget can go into a business plan that you present to your banker. Banks also want collateral. The desire to help support small ventures exists, but so does the fear of risk. As a result, banks prefer to help businesses in forms other than loans: They may offer operating accounts, cash management systems, and other fee-based services. Bank managers can also be a source of advice and information on things like small business assistance programs.

      In both the United States and Canada there are government agencies that provide financial assistance to small businesses. In the United States, the Small Business Administration (SBA) offers loan programs for small businesses as well as business start-up information. Check your local telephone book for the office nearest you for the most current information. You can also call the SBA’s Small Business Answer Desk at 1-800-827-5722, or check online at www.sba.gov.

      In Canada, a variety of provincial and federal government departments provide money for small businesses. Your best source for information is the small business development branch of your provincial government.

      Since the government cannot compete with banks, any funding takes the form of loan guarantees. To be eligible, you probably have to prove that you were unable to obtain money from other sources. You’ll be expected to have money of your own to invest in your business as well. Even if your company is not eligible now, at some point in the future it may be. Any time spent investigating this source of funding is worthwhile.

      6. Your Business Plan

      Your business plan should describe the following in detail:

      (a) your company and its objectives,

      (b) how much money your business requires, and

      (c) how your business will repay the money.

      Include details about your own background and experience, as well as details about any other key people involved. A des-cription of your service, your marketing plans, and your cash flow forecast should also be included. Consult other business people about the best strategy to adopt. Your accountant can also advise you about the best way to approach your banker.

      If your first attempt to get a loan is unsuccessful, don’t give up. Ask your banker why the loan wasn’t approved; the answer may provide the information you need to get your loan approved the second time you apply. Was your business plan lacking information? Was your market research inadequate? Stick around and find out why you were turned down; it could be very profitable information.

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