I started a cleaning business at 19 yrs of age, and at 19 you have no money and assets unless they are inherited.

So as you could imagine no banks wanted to lend me money for my business or give me a overdraft.

I was then introduced by a business associate to Factoring.  Factoring is where the banks will lend you 80% on your invoices within 24 hrs. You do not need to have assets or cashflow.  The banks will lend the money on any business that has completed the work.

Here how it works;

You find a bank or merchant facility that offers factoring. Just google Factoring in your area/state and you will come up with a list of banks that offer this service.

Just like loans each bank offers different charges and offers, therefore, you meet with at least 3 facilities and obtain 3 offers.

You choose which bank/merchant you would like to work with and who has offered you the best deal.

Make sure you do your background check on the company especially if it is not a long term bank.

The bank will then assign you a customer account manager who will meet with you and show you how it all works etc.

The Basics

I invoice my clients fortnightly and some monthly.

I split up the fortnigthly invoiced clients so that I have invoices every week for cashflow.

The bank will only lend on completed cleaning work.

On a Friday I invoice the clients because the work is completed, prepare the schdule and send to the bank by midday.

I then request the 80% funds from the bank the next day and the money is in my account over night.

The Customers then pay the invoice to the bank, I make sure that the details of how to pay are at the bottom of the invoice and the bank account is the facilities account number and not my personal bank account.

When a customer pays, a receipt is sent to us so that we can record payment and the remaining 20% take the bank’s fee is left in my facility until I request the money.

I can view my facility online at any time and if there are funds available I can request funds.

The Pros

I do not have to wait for a customer to pay me before I can pay my staff or expenses.

Consistent cashflow, I do not have to worry about when inconsistent customers are going to pay.

I am able to confidently go about growing my business and not worry about when the cashflow is going to come in.

The Cons

Most banks will not allow you to pick and choose what invoices you put to them, usually you will have to put all of your invoices to them.

Why this can be a con is because some clients do pay upon receiving of a invoice, however. if you put it to the bank you then will have to pay a small fee.

The bank’s will now and again ring your customers to confirm the work has been completed. Sometimes customers will ask questions about what they are. I just tell them it is out bank facility, and everyone is happy with that.

It can be very costly, but you need to way up how much the cost compared to the pain of no cashflow and not being able to grow your business is.

Below are some examples in Australia of some factoring companies that I have personally used;

www.bibby.com.au

www.boq.com.au

Factoring is truly another great option for cashflowing your business – without it I would of had to bring in investors and possibly loose control of my asset – my business.

I hope you find this useful and are having a thriving business.

Take Care

Kelly

Leasing equipment is another option.  A lease is an agreement in which you pay to use a piece of equipment, but do not own it.  One of the advantages of leasing is when your business grows and expands, leasing lets you upgrade and add to your equipment list.  Another advantage is you can lease with little or no money upfront.  If you have to borrow money to buy equipment you may need to put out money that is needed in your business for other areas, e.g. advertising or wages.  Leasing your equipment can also help with your insurance enabling you to take on bigger jobs simply due to the fact you have better equipment, a higher insurance rating, meaning larger organisations won’t be so hesitant on employing your services in the fear that something might happen with your equipment.

Lease payments are normally fixed so it helps with planning your budget for the coming months to give you a clearer idea about your cash flow.  As well, specialist cleaning equipment isn’t cheap and if it breaks down you will be have to pay for the repairs not to mention the time waiting for it to be working again.  In most cases when leased equipment breaks down it is replaced immediately.  More importantly, leased equipment is tax deductible so it makes good business sense.

In today’s business world, image counts for a lot.  With modern equipment and clean vans and uniforms you and your cleaning team look the part.  This will go a long way for the professional image of your business.

Prior to starting you need to establish what cleaning services you are going to offer and the amount you are going to charge.   The pricing of your services is completely up to you, however, there are certain aspects you need to consider.  Reflect on your target market.  What type of customer are you trying to attract?  Conduct some research into what your 3 top competitors are charging for their services.  By researching your competition and considering your desired customers, you can establish a competitive price while making it affordable.  Also consider the superiority of your cleaning services when determining your pricing – what sets your cleaning business above your competitors?  What can you offer they can’t or why are your services worth employing over another company?

Your rates depend on the service being provided and the type of specialist equipment or trained workers you need.  You can also price per square foot.  Keep in mind the environment you will be cleaning because there are vast differences between cleaning a restaurant to cleaning a hospital ward and your price should reflect that appropriately. Size does matter in this business.  You might only charge $.10 per square foot in a 20,000 square foot building but charge $.50 for 1000 square foot.  Most quotes are priced per job or on a fortnightly/monthly basis.  Take into account the cost of your materials, how many man hours it would take and the travel time to and from the job.

A common error new business owners make is to set their pricing too low by thinking ‘the more customers I bring in the more money I will make’.  This is, in fact, just the opposite and all you are achieving by doing this is deflating the value of your services.   The key is to come up with a profitable service charge while keeping your customers happy and not feeling like they are being overcharged.  The most vital aspect – the satisfaction of your customers while making a decent profit.

Ultimately, you must exercise caution when determining your pricing and not sell yourself short.  You don’t want to acquire clients who expect a high level of service for low cost leaving you with empty pockets and working twice as hard to make ends meet. Remember you are in this for the long haul.

The simple pricing formula below will help as a guide:

§  Direct costs are the expenses you incur while doing your work – phone calls, materials, provisions, food, gas and your time.  Include in the direct costs your income plus any fringe benefits and the amount of unpaid hours you work while managing your business.

§  Overhead is the general expenses involved with your business.  Things like equipment, office materials, rent, promotion, marketing costs, utilities and administrative fees.  Operating as a home business, multiply your hourly wage two or three times to ensure your overhead is covered.

§  Profit is the sum left over after all your direct and indirect expenditures.  A majority of professionals suggest adding 15-20% or more.

I hope you are having a thriving Cleaning Business.

Kelly Broderick

In the business world it is realistic to say that at some time you may encounter an issue with cash flow.  This happens when the money going out surpasses the money coming in.  To safeguard your business it is crucial you build a solid cash flow system.  Begin by creating a sensible formula for estimating your monthly income.  Average out your monthly income amount against your monthly expenses.  Consider what payments are coming in, the amount of those payments and how they are received.

Business Checking Account

The most effective approach for starting a business checking account is to telephone a couple of banks and enquire about the services they provide.  Find out what minimum balance has to be sustained to avoid paying a service fee.  If you are going to accept credit card as a form of payment from your customers, ask the bank what the most cost-effective method is for you to do this.  I don’t recommend you allow credit card payments as it is more work for you and another facility you will have to set up and maintain.  In all my years of owning and operating cleaning businesses I have not encountered any problems through not supplying the option of credit card payments.  Bank fees can be costly, so be sure to consider your options and shop around for the best bargain.  Bank checks can be costly, so if you have a good printer you might choose to print off your own checks and save money.

I hope you are having a thriving Cleaning Business.

Kelly Broderick

I know I am talking a lot about this this week, but I did warn you all at the beginning of the week.

One of the most significant problems people encounter at the start of a new cleaning business is finding financing. You can get the funds needed for starting your business by using several different approaches.  Bank loans and self-financing your business would be some of the primary choices you have.  Look into your options so that you can find what method works best for your business.  Almost all small business owners begin with investing a substantial amount of their own money.  However much you choose to invest is your decision.  Getting your business started could take a lot more money than you already have.  Only a select few are able to avoid using their own money when starting a business.  If you are not in this group, seek out alternative financing options.

I do advise to use credit cards if you need to, however, make sure you have a low risk plan to pay them back.

I had to use several credit cards and borrow small amounts of money from my mum when i first started. If you do borrow money from someone always make sure you pay it back within an adequate timeframe.  That way then if you need it again they will most likely borrow to you again.

Because I was young and had no equity in a house, no bank would touch me. However, I discovered Debtor finance.

Debtor finance is where they pay you 80% of your invoices upfront when you invoice the client and the other 20% take the banks fee is paid when the client pays. This was actually the secret of how I cashflowed my business in the early stages of growth.  It is a little more complicated than the above but email me if you want to know more.
A lot of small business owners choose bank loans for attaining the financing they need.  Banks require certain legal and personal documents.  Be prepared with these before you attend an appointment with a bank manager.  The bank is most concerned with your ability to pay back the loan.   Banks are interested in loaning money to those that will thrive with their business, not go belly-up.  Be aware acquiring a bank loan is not usually that simple, particularly when you are only getting started with the business world.  Don’t feel discouraged if you are denied a loan.  There are alternative methods available for financing your business.

Would love to hear some more stories and tips from people of what and how they have grown there business.

I will share it with everyone if you send me an email.

Hope you are having a thriving Cleaning Business.

Kelly

I have dedicated most of the this week to talk about cashflow and finances within growing a business.

As I say “Cash is King” so you really need to understand the finances of a business in order to be able to grow the business.

More tips below;

Start-up costs are your outlay and expenditure prior to actually launching the business.  The items you will need for establishing a cleaning business can be extensive – equipment, marketing, licenses, advertising, etc.  Operating on a shoe string budget when you first start out is not as hard as you might think but you need to follow some necessary steps when you begin or you risk being short of funds and drying up your bank account.

A helpful suggestion is to invest as little amount as possible of your own money into the business.  Begin with your inside connections, people you know who may be happy to, and capable of, assisting you with your business.  For example, friends and family may want to pitch in by donating supplies and equipment.   If you are still in need after making use of all your inside connections then you should consider a bank loan.  If you decide to arrange a bank loan be certain you find one that offers a low interest rate with terms and conditions that match your needs.

You can start with a small investment in supplies and equipment until your business grows and you choose to offer more services.  It is wise to consider starting your cleaning business from home which will ensure you save a great deal of money on start-up costs.   Either way, it is a certainty that you will need to have some money to get your business up and running.

One of the most Common questions I get asked is how do I grow my business with limited equity or cashflow in the business.

Below is a question that i was asked just recently and I thought I would share it with you all today as it is so common for People.

“I have just watched your video and its very interesting. Our business is purely domestic cleaning and help at home for older people. Each of our clients has maybe one hour per fortnight so we are not dealing with big contracts. I am at the stage now where I know what we need to do and how to do most of it. I am struggling with how to meet the costs of starting to employ some of the many people needed to make the business function instead of doing everything myself. Do you have a simple excel template that shows how you know that you can afford to employ staff, move to a bigger office etc. My business model must be wrong as I dont see how we could ever afford to employ the people we need? Your advice would be very much appreciated”.

MY ANSWER:

Great question and cashflow is definitely the king when growing a business.

Go to my www.gocleanup.com blog if you have not already and download my book, with it you will receive a 12 month Profit and Loss Excel Budget.

You must complete this to see where you are with your finances in your business.

There are 2 options when starting a business

1) You have enough money/cashflow from day one to invest into your business and employ office staff etc from day one and build the business so that it becomes profitable.

Now we all know that not many people have enough cash to do this. But obviously this would be the ideal way.

2) You reinvest the profits into the business to continue to grow past the owner/operator status.

How you do this?

At the beginning you need to live on the bare minimum that you can afford to live on.

And then any extra profit you need to reinvest into the business.

If you are spending all of your current profits on your own lifestyle than yes you will never be able to grow because where is the money coming from to invest into your business.

So first thing first go do the budget of your current business (if you have not already).

It will show you if there is any profit to employ management staff etc.

I am not sure what profit margins you now work on for your business, but how I work is;

Say we charge the client $32 per hr

60% is labour (cost of sales) – $19.20

20% is expenses – $6.4 per hr

20% is profit – $6.40 per hr

So you need to work out your breakdown of your hourly rate and how you charge.

And that is what your Profit and loss needs to represent and your 12 month budget.

This is the model you need to work on. Basically when the sales/revenue increases so does the amount allowed for expenses(offices etc) and profit.

I hope this helps you let me know if you need anything else.

Kelly

Having a website is vital in this technology advanced world plus it is a great way to gain the competitive edge by getting your name and services out there.  Prior to beginning your business, it is wise to have your website up and running so you have a place to direct potential and current customers.  A website enables you to display fundamental information regarding your services to the public at anytime of the day.  For instance, a customer may be curious as to what you do, how you can be contacted, where you are at, what your business hours are, etc.  Your website provides this vital information.  In addition, it provides further support for your customers allowing them to contact you through alternative means (e.g. contact forms online).  Try to offer an estimated online quote.  If you offer any kind of specialist cleaning that is not freely available by other companies in your area, make it known.  Put any accreditations on your site.

Your web site should look professional and be easy to navigate. There are basic pages you will need:

• Home page

• Your Services page which lists all the services you provide.  A good idea might be to add some before and after photos of cleaning performed.

• About Us page gives clients a brief history of your commercial cleaning business.  Be brief but to the point.  Remember this is your business and livelihood so a little personal information about yourself and why you got into the business is beneficial.

• Products Page if you plan on selling items or products.

• Client Testimonials will go a long way to showing credibility.

• Contact Page.  Make sure your contact page clearly lists all the ways clients can get in touch with you.   The basic contact information usually displayed is telephone office number, fax number and email.

Many web providers on the Internet will host your site for no cost. Some of these are:

• http://angelfire.lycos.com
• http://www.free-web-site-page.com
• http://geocities.yahoo.com
• http://www.filesanywhere.com
• http://www.dreamwater.com

As with your business logo, a cost-effective method for retaining help with the design and content of your website is to employ someone from www.elance.com, www.rentacoder.com or www.guru.com.

If given the choice, working from home is a better option than renting or buying business premises and fortunately when starting a cleaning business there is no need for a fancy office or external facility.  There are many advantages when operating from your home (home-based business) – lower overheads, less travel time and greater flexibility with balancing work and family life.  Working from home saves the cost of leasing premises and you can also write off part of your home mortgage and utilities as business expenses.  Additionally, with the advancement of modern technology and communication means (internet, email etc), working from home is a viable option for many business owners.

Prior to establishing your business at home, there are some practical issues you should think about like equipping your workspace, health and safety, equipment and chemical storage, etc.  You will need to take the appropriate steps to meet the requirements of health and safety legislations.   Drawing up a list of what you will need is the first step.

The costs of operating your cleaning business outside of your home are far greater than a home-based business.  There are numerous factors that will influence your selection of location and premises.  Some important points you should consider are:

§  Location – Do you need to be located close to your customers or suppliers?

§  Is there ample parking for customers/employees/visitors.

§  Do you intend to lease or buy your premises?

§  What features do you premises need to have (e.g. equipment and chemical storage room)?

§  Are the premises suitable for your long-term needs (business growth/expansion etc)?

§  What is your budget – can you afford to rent or buy?

It is also wise to check out the neighbourhood and surrounding business you will be working near.  The conditions for a commercial lease can run for as long as two to ten years at a time.  For someone who is new to business this may seem a little overwhelming.  Make sure you negotiate the terms and conditions of your lease and don’t settle.  Keep searching until you find the perfect location for your needs and budget.   It is important you make an informed decision keeping in mind the costs and inconvenience of relocating.

As with any business, you will need to know the legal necessities and abide by the relevant laws for running a business in your county or town.  Be aware that laws differ from country to country.  You will need to choose a legal structure of business when you become a business owner.   Choosing the correct legal structure that matches your needs can help protect you from risks, reduce your taxation liability, save you time, minimise paperwork and avoid government regulation and unnecessary “red tape”.  Conversely, if you choose the wrong legal structure you could end up paying more tax than necessary or be swamped with paperwork and government fees.

For each structure there are advantages and disadvantages.  In order to find out which structure best suits your business needs consider both the advantages and the disadvantages in relation to your personal situation and the objectives of your business.  Whether you start-up as a sole trader, a partnership or a corporation, the costs and risks are quite different.

Spend time to go and seek advice from professionals, like a lawyer or accountant. (Please Note: Legal structures and their lawful requirements vary significantly from country to country so it is important you seek legal and financial advice in your state of residence.)

The legal structure in which a business operates depends on many variables including the number and relationship of the people involved in the business, the length of time the business is planning to run, expected income from the business or the activities of the business itself.

The three most common legal structures are Sole Trader, Partnership or Company (Corporation).

Sole trader

A sole trader (also known as a ‘sole proprietorship’) is an individual who runs the business on his/her own.  The sole trader structure is the most straight-forward and least expensive option of structuring a business.   The main advantages of operating as a sole trader are the ease with which it can be started, the owner’s freedom to make decisions and the distribution of profits (owner takes all).  The most serious disadvantage is its unlimited liability.   If you are a sole trader you are responsible for all business debts. If these debts exceed the assets of your business, your cred­itors can claim your personal assets–home, automobile, savings account, and investments.  In addition, anyone who chooses a sole trader structure should be prepared to perform a variety of functions from operations to sales.

Partnership

A partnership is an agreement in which two or more people become co-owners in a business.  Partners are jointly responsible for all business debts and profits and share control of the business.  The main advantages of a partnership are that the business can draw on the skills and abilities of each partner and utilise the part­ners’ combined financial resources.  The main disadvantages are that as a partner you are re­sponsible not only for your own business debts but for those of your partners as well.  Should your partner incur debts or legal judgements against the business, you could be held legally responsible for them.  Also disputes among partners can create problems. Unless you and your partners see eye to eye on how the business should be run and what it should accomplish, your business will be in trouble.   Starting a business with a partner requires you both to agree on the goals and the direction of the business.

Company / Corporation

A company (or corporation) is a more complex form of business structure.  It is a legal entity separate from its owners, the shareholders of the company.  Unlike sole proprietorships or partnerships, it has an existence separate from its owners.  A corporation offers some unique advantages – limited liability: owners are not personally responsible for the debts of the business, the ability to raise capital by selling shares of stock and easy transfer of ownership from one individual to another. The main disadvantage can be summed up in two words: taxation and complexity.  You must pay taxes on both the income the corporation earns and the income you earn as an individual. Along with this, corporations are required to pay an annual tax on all outstanding shares of stock. Given its complexity, a corporation is more difficult and expensive to start than are the sole proprietor­ship and the partnership.