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| Thursday, July 29, 2010 |
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| [Saturday, September 30, 2006] |
| I need advice on how to structure a growing business with the bulk of our business being small accounts. We currently service around 50 accounts a week using route traveling teams. My wife and I each have a team and are starting to reach the "burn out stage". We find a lot of our accounts only require 2 people to complete a job in an hour or less. If you have a third or fourth person with you it is wasted time. We also have a few accounts that take 4 to 10 man hours to clean.
I want to structure the business where each account is supervised, but we do not have the margin to hire a supervisor yet. I have placed unsupervised staff in accounts in the past, but have lost them due to quality issues as we where unable to free up our time for effective follow up visits.
We currently have a very profitable business, but we are at the point where, if we want to grow any further, we have to hire another working supervisor who will reduce our profit margin. I don't feel our business can support this yet.
What is the best way to structure my business with so many small accounts, averaging a $1000/month each?
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| Family Business Issues - Steve Schwoob |
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Answer #1:
To take your business to the next level I would offer five suggestions. But first; if you have 50 accounts at $1,000 a month, you are grossing $50,000 a month. Unless all your accounts are underbid, you should have enough to hire a supervisor. So, I am going to assume that not all of your accounts are doing $1,000 a month and you have a lot less to work on.
1. Start converting to self-directed work teams. In other words, start insisting that each team can work independently and pay them accordingly. They should be able to self-inspect and manage the account on their own. Place on standby any team that does not meet these qualifications, and pay well the ones who do.
2. Hire extra custodial staff to replace you and your wife. Begin inspecting the buildings yourself. You don't need to be in each account every night, just often enough to enforce accountability. Even a short 20 minute visit shows your concern. Use a scored inspection card and rate each account at least twice a month. A repeated failing score qualifies the cleaners for replacement.
3. Consider a ratio of 1 hour of account supervision for each 16 hours of custodial labor. Enter the account with a spray bottle and duster as you walk thru and inspect. Let your workers know you are serious about quality. Perform a touch up where required and point out any serious quality breaches.
4. Let your team know you are there to support them and to make sure they have all the required tools and supplies. Reward superior performance with a meal or even a periodic day off with pay. Years ago, I would clean a building once a year to give the worker his or her birthday off with pay.
5. Solicit feedback from all your accounts on a regular basis and improve communication channels with your staff.
The account that takes 10 hours a night should require 3-4 workers. On the other accounts, two workers are just right. Finally, consider bidding on larger buildings so you aren't spending a tank of gas every night motoring about town.
Gary Clipperton
www.nationaproclean.com
(719) 598-5112
gary@nationalproclean.com
Answer #2:
Unlike your first advisor, I am going to take you at your word and accept as a fact that you are grossing $600,000 annually. On small accounts, your margin could well be 15% -20%, much better than with those larger contracts that offer 3%-5% because everyone is fighting over them and driving the prices down.
That breaks down to a possible personal income of up to $120,000 a year, maybe more, since you have one cleaning setup in each truck ($600 x 2 = $1200) instead of one setup on each job ($600 x 50 = $30,000). Of course, not all of your accounts need to have a setup on site, but certainly the larger ones do so that a work crew can come and go independently of others, who perhaps travel among several accounts each evening.
My point is that, even when a business is growing, we, as sole proprietors, tend to increase our personal expenditures along with our expanding income. We believe we have a profitable business without ever understanding that profit is what is left over, after expenses and personal income, to put back into the business to finance its growth without incurring debt. To say it another way, we need to establish for ourselves a fixed income each month, with all excess money going into an account to fund business expansion.
For illustration only, let’s say you are now, after paying for labor, supplies, equipment, overhead, vehicles, and other business expenses, paying yourselves $120,000 annually. Could you live comfortably (or even uncomfortably) on $80,000 a year while using the other $40,000 to pay a supervisor who could unburden you from the nightly route running and free you to gain even more accounts? In a short time, you would be back to the $120,000 level, allowing you to repeat the process, if that is your desire.
Keeping this in mind, while following the suggestions given above, is the way to build a business rather than own a job that leads to burn-out.
Lynn E. Krafft, ICAN/ATEX Associate Editor
lekrafft@juno.com
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| ICAN representative |
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