Tag: Janitorial Business Cash Flow

Janitorial Employees versus Subcontractors?

Who cleans your buildings? Your janitorial employees or subcontractors? Not sure what the difference is? Well, as a business owner you should know the difference and be committed to classify your cleaners correctly. It’s not difficult to determine and it would behoove you to do it right, thereby avoiding costly IRS penalties, fines and tax levies for unpaid payroll tax liabilities on misclassified workers.


CleanGuidePro blog post image

Over the course of 25 years in the janitorial business, this has been my experience…

An employee: If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees. Basically, if they answer to you, wear your uniform, use your equipment or vehicles, use your chemicals and you train them how to perform the tasks, they are definitely your employee. Therefore, you must deduct and pay the appropriate employee payroll tax liabilities of your state or jurisdiction.

There are numerous accounting software programs and payroll companies that can handle this for a nominal fee. They calculate the correct payroll tax deductions, write the payroll checks, file timely and accurate quarterly reports, such as 940’s, 941’s, UCT6’s, etc..

EMPLOYEE PROS:

  1. They do it your way! You hire your own people, train, supervise, inspect and personally control the quality.
  2. You know exactly who’s in your buildings.
  3. You make a higher profit margin percentage than using subcontractors.

A Subcontractor: If you can direct or control only the result of the work done and not the means and methods of accomplishing the result — then your workers are probably independent subcontractors (whose wages are reported to the IRS via form 1099). An example of using a legitimate subcontractor would be to pay another janitorial service company – (that has their own license, liability and workers comp insurance) – a percentage of your total contract revenue to clean a building.

I’ve used subcontractors on select projects and I’ve also been been a subcontractor for some huge national companies (on statewide cleaning contracts). I’ve made a legitimate and legally classified profit in both scenarios. But 99% of the time, I use my own employees…

SUBCONTRACTOR PROS:

  1. When you’re awarded contracts in other cities or states and the logistics and distance of the location behooves – (I just like that word) – you to use a local cleaning company.
  2. You just set the guidelines and expected results. The subcontractor hires their own people, trains, supervises, inspects and personally controls the quality.
  3. You cut one monthly check to your subcontractor, minus your profit.

Keep in mind my friends, whether using your own employees or a subcontractor to fulfill your contract service requirements, classify them properly.  (There are plenty of IRS guidelines and accountants to help you.) Want to sleep well at night? Pay the tax man correctly!



CleanGuidePro Successful Residential Cleaning bidderDrake

Overcoming Anxiety in the Janitorial Business

How do you overcome anxiety in the janitorial business? A better question might be, how do you overcome anxiety in life in general? As the old saying goes, if you tell anyone you’ve met that you’ve heard about their problem, they will answer by saying, “Who told you?”.

Anxious Janitorial Businessman

It has been clinically proven that fears (real or imaginary problems) in the heart of a person cause anxiety or worry.

First, let’s focus on the “real” stressful things in business that you can control. In business terminology we’re talking about Risk Management. In any business, things can go wrong at any time any place. This fact alone can cause worry, but you can mitigate general anxiety just by practicing due diligence. Make sure you’re properly insured with liability insurance and workers comp. Stress safety with your employees via employee orientation, safety training and regular safety meetings. Maintain your vehicle and equipment on a set schedule. Pay your taxes promptly. Pay your employees fairly and treat them with honesty and integrity. Basically, if you do the right thing in business, your anxiety, stress and worry levels will all be decreased; Not totally eliminated, but dramatically reduced.

Okay, but what about the imaginary things you worry about? What if this happens? What if that happens? What if my best isn’t good enough? What if I fail? What if my health fails? What if _____ (fill in the blank)? I personally choose to replace my irrational, imaginary worries every day by renewing my mind with words of hope, life and peace! Isn’t it all about peace anyway, my friend? Peace is the antithesis of anxiety!

Let me share some of my favorite quotes to overcome anxiety with peace..

  • “Do not anticipate trouble, or worry about what may never happen. Keep in the sunlight.” -Benjamin Franklin
  • “I learned that courage was not the absence of fear, but the triumph over it. The brave person is not the one who does not feel afraid, but the one who conquers that fear.” -Nelson Mandela
  • “Be happy in the moment, that’s enough. Each moment is all we need, not more”.- Mother Teresa
  • “There is nothing that wastes the body like worry, and one who has any faith in God should be ashamed to worry about anything whatsoever.” -Mahatma Gandhi
  • “How very little can be done under the spirit of fear.”–Florence Nightingale
  • “Do not be anxious or worry about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God.” –Paul the Apostle
  • “Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? 26 Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Can any of you by worrying add a single hour to your life?” -Jesus
  • “The message is clear: If you don’t like your situation in life, don’t fret or worry – do something about it. Worry less, act more!” –Zig Ziglar
  • “Only Thing We Have to Fear Is Fear Itself”: FDR’s First Inaugural Address-Franklin D. Roosevelt
  • “You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. You are able to say to yourself, ‘I have lived through this horror. I can take the next thing that comes along.’ You must do the thing you think you cannot do.”― Eleanor Roosevelt

So I encourage you to overcome any business anxiety with (a) practical business risk management tactics and (b) through words of peace. That’s what’s worked for me…

 

CleanGuidePro Successful Residential Cleaning bidderDrake

Increase Your Janitorial Customer Retention Dramatically

Do you want to know how to increase your janitorial customer retention dramatically? Silly question, right? Of course you do! But what exactly is “customer retention” and how do you achieve it?  In practice, customer retention is less about you keeping your existing cleaning accounts and more about having your customers not get rid of you.

CleanGuidePro Janitorial Bidware - A proudly cleaned floorTo acquire new customers, you spend a lot of time, effort and money to market and sell your services. Once you get a new customer, that’s just the beginning; Now you have to keep them!

Don’t think for a moment that just doing the basics and going through the motions will retain customers. A Janitorial Service Agreement is a business relationship that absolutely requires you to be attentive, nurturing, caring, loving – (yes, I said it, love your customer!) – and to occasionally bite your tongue. And just like any other relationship, it has to be nurtured and developed this month and next month and the month after that…

You actually need to move from “Customer Retention” to “Customer Loyalty” to thrive in this business. There’s a lot to be said on this subject (and I promise to to do so in future articles), but for now, let me start with my core “Customer Retention/Loyalty Tips” that have served me so well for over 25 years in this great janitorial industry.

  1. COMMUNICATE: Right up front, when you do a walk through before preparing a proposal, make sure that you communicate with your contact about exactly what they expect. Do they have a checklist or do they want you to create one? Then, when you get awarded the account, make sure that you have a signed Service Agreement, spelling out the details and terms of your service. Customers understand the necessity of this document. Be on the same page on day one!
  2. SIMPLY DO WHAT YOU SAY YOU’RE GOING TO DO: Keep your promises! If your proposal stated that all waxed floors will be polished once per week, then do it. If it noted that return vents and blinds are dusted monthly, then do it. I know one national franchise that promises (on their proposals) to take all the trash cans outside and wash them every month. Of course, it rarely gets done. That task wasn’t required, but since it was promised, it became expected and was subsequently viewed as a failure to perform. If I had a quarter for every new customer that told me, “the last cleaning company didn’t do what they promised”, well.. I’d have a lot of quarters.
  3. KEEP THEIR BUILDING CLEAN: The #1 way to keep your customer happy and loyal is to keep their building clean! The #1 way to keep their building clean is to do regularly scheduled checklist inspections for quality control! It’s good and actually necessary for your customer to like you, but that alone will not keep you there. You need to consistently keep their facility clean and even exceed their original expectations. Go the extra mile, it will be well worth it. Strive to be a top service provider!
  4. THEY NEED TO LIKE YOU: Hear me out on this one. I’m not talking about a joke telling, fishing buddy (although, being “professionally” personable and friendly goes a long way towards customer loyalty). Instead, when they like the way you and your company take care of their facility, they will also like you! Yes, cliché, but take care of your customers and they will take care of you.
  5. BE PROFITABLE: You want to “retain” profitable customers. If you’re losing money on an account or just breaking even, then you will stop caring about the things that will make your customer keep you. They’ll probably drop you and you won’t care. Do all you can to keep your costs down and quality up. But if, for example, you start cleaning a private school with 200 students and 6 months later they’ve increased to 300 (which will increase your labor hours up to 2 hours a day), then it’s time to sit down and talk about a fair price increase. Even the Good Book says, “the worker is deserving of their pay”. That’s good enough for me.
  6. TRAIN YOUR EMPLOYEES: To provide consistent quality cleaning on an ongoing basis, your crew needs to know what to do. You need to have some type of training on cleaning techniques, chemical use, customer relations, safety, protocol, procedures, production rates, etc. A trained and competent employee creates a loyal customer!
  7. USE CHECKLISTS TO MANAGE “THE SYSTEM”: A checklist of exactly what is done each day is not just a good idea, but an absolute must to succeed. e.g. Individual employee checklists, area checklists, specialty work checklists, end of night supervisor checklists, monthly inspection checklists, etc. That’s managing a system that works!
  8. EMPLOYEE UNIFORMS/BADGES/NAME TAGS: At each customer location, project an image of trust, structure and professionalism. After hour customer accounts should still have company t-shirts with your name and logo. And higher profile accounts need to project a more professional image. Specifically, polo shirts with logos and khakis, with employee lanyard or company identifying name badges need to be worn. The more your customer sees your employees, the sharper they need to look!
  9. WHATEVER IT TAKES!: Commit to being that person that finds solutions. Every problem and situation has a perfect solution. Some tougher than others. Are you willing to fulfill a customer’s last minute, 4pm request to wax or polish floors tonight because their corporate boss is visiting tomorrow? Will you miss a little sleep or work late to provide a solution? Expect the unexpected! When another cleaning company comes “a courting”, they will say “No thanks, we’re very happy with our current cleaning service”. That’s customer loyalty!
  10. HAVE A SPIRIT OF EXCELLENCE!: If you have a mindset of “it’s good enough, they’ll never notice, everyone cuts corners”, I know 4 coats of wax would look awesome, but 3 is enough for tonight”, then you don’t get it. When I used to ask my Floor Techs how a job came out and they would say “good”, I would ask them “do you know who the enemy of excellence is”? It’s “good enough”. They quickly got the point! They then started sending me cell phone pics of every job, and yes it was excellent work! Average Spirit equals Average Business and that equals average customer retention. Excellent Spirit equals Excellent Business and that equals EXCELLENT CUSTOMER RETENTION!

Always remember to nurture your customer relationships. Make them feel cared about and appreciated. Your customer retention will increase dramatically and your customer loyalty will soar!

 

CleanGuidePro Successful Residential Cleaning bidderDrake

 

Janitorial Supply Sales Top Tips!

If you’re not selling janitorial supplies to your new and existing, janitorial cleaning accounts, you’re definitely leaving money on the table!

Janitorial Paper SuppliesWhen we use the term “Janitorial Supply Sales”, we’re referring to consumable janitorial products that you can sell to your customer. These are NOT the products that you pay for and provide to clean the building with, like glass cleaner, bowl cleaner, furniture polish, etc. We’re talking about the janitorial products your customer “consumes”, like toilet paper, roll towels, multi-fold towels, trash can liners, air fresheners, some chemicals and soaps.

Did you know that 35-40% of all janitorial companies sell supplies to their customers? Every customer you have will need and purchase these consumable products somewhere, so if you can provide them and make a profit, why not let it be from you?

Let me just touch on some of my top, time tested, Supply Sales Tips that have served me well in over 30 years in the janitorial industry:

  1. Why buy from you? Your customer usually gets their supplies from going to a big box retailer (like Sam’s Club, Costco, etc.), going to a janitorial supply store, a visiting salesperson or (most expensively) online purchases. The #1 reason to buy from you is convenience and time saving. If they have a salesperson coming to them, they may look more at price, but you’re still making it more convenient and saving them time by going through you and they have a single point of contact to streamline the process. Also, you stock the items for them.
  2. Where do you buy? Get your best cost price on these items by shopping around. There are many janitorial supply stores around and all will gladly give you price quotes. Tell them you are getting pricing quotes to resell to your customers. Ask them for suggestions to keep your cost down by using generic brands. Ask them for better pricing if (for example) you purchase 3 or more cases at a time. Ask for terms like 30 day pay to free up your cash flow. Asking won’t necessarily get you a yes answer, but not asking will definitely get you a no.
  3. How do you price items? Price it to make a profit! Don’t try to be the cheapest price all the time! Be the best value by offering peace of mind through convenience, time savings, hassle avoidance and reliability. Even if you buy a case of multi fold towels at a big box store for $19.95 and your customer could go get it themselves for the same price, you still resell it for $24.95. They pay for the time savings! I personally, usually go for a “minimum” of 20% percent profit or a minimum $5.00 per case markup. I usually go with whatever gives me the best total profit dollars. For example, a 20% profit on an item that cost me $15.00 would be a total profit of $3.00, so in this situation, I would go with the $5.00 markup and sell the case for $20.00. Remember, these are just recommendations on pricing. If you’re a seasoned veteran when it comes selling your customers supplies, or if you’ve found great low costs on items, you may be able to have much larger profit or a larger $ per case markup. Don’t be afraid to make a profit, you’re customers are getting the added service value of your time (i.e. standing in line to purchase, your gas for travel, your time cost shopping around, restocking, and so on).
  4. Establish your costs and pricing:  Keep track of your costs from different vendors and set your pricing for future reference and sales to new and existing customers! Our CleanlyRun Janitorial Bidding Software has a section for this (i.e. optional Supply Sales) that keeps records of your items, categories, descriptions, product #’s and pricing so you can easily give your customer a supply pricing proposal!

Grow your business and Increase your bottom line Profits with Janitorial Supply Sales!

CleanGuidePro Successful Residential Cleaning bidderDrake

Decrease Costs / Increase Your Bottom Line – Top Tips!

When you decrease your costs, you increase your bottom line! The definition of “bottom line” in business is, “The last line of a financial statement, used for showing net profit or loss.” O.K., sounds simple enough to understand what the bottom line is, but how do you increase it? The top two, hopefully, obvious ways are cutting costs and increasing revenues.

The purpose of this blog is to focus on only the cost cutting aspects of increasing your bottom line. I know cutting costs and saving money doesn’t sound as exciting as increasing revenues and hitting sales goals, but let me help you with that by giving you something to think about that should excite you about cutting costs and saving!

If you currently average 25% net profit on your janitorial accounts, let’s say for example that you make $500 net profit on a $2000 per month account. If you cut costs by $500 throughout your company, it adds $500 to your bottom line, just the same as getting a new $2000 per month account. With that in mind, every $1 you save is equal to $4 in revenue and every additional $1 in costs you incur requires $4 of revenue to produce. (Read that last sentence a couple of times to let it sink in!) In other words, that sparkling, bottled water delivered to the water cooler in your office each week might only cost you $65 a month, but you have to do $260 in sales to pay for it. I’m not saying don’t have water in your office, just something to chew on.

Of course, you absolutely need to be continually looking for ways to increase sales revenues, but running your operations smart and efficiently is the #1 way to decrease your costs and increase your bottom line within your existing customer base! There are many more, but let me just touch on some of my Top Free, time tested, Cost Cutting Tips that have served me well in 25 years in this great janitorial industry!

  1. Decrease Facilities : Sure, everyone wants a nice office including me, but make sure it’s a need to have and not just a nice want to have. Your customers rarely, if ever will come to your office and employees only come to your office to fill out applications and get paychecks. Employees can have checks delivered to job sites and can even fill out applications at the job site. Keep in mind a $3000 a month office requires $10-$12,000 in monthly sales to pay for it. When you can’t park your work vans in front of the house anymore and your monthly revenue permits, it’s probably time to look for a small office warehouse. Most cities have industrial parks that offer low cost, low frill spaces for very low rent.
  2. Decrease Labor Costs: You reduce labor costs by increasing production rates, thereby decreasing payroll costs. This is done by workloading the labor in your building correctly from the start, using and fine tuning your cleaning methods, i.e., Team Cleaning, Zone Cleaning or a combination of the two. This will increase your hourly production rates and decrease your payroll labor costs without cutting your employees hourly rates. If you just start cutting hourly rates to save money, you destroy morale and you can bet quality and customer satisfaction will be casualties as well. Remember the workman is worthy of his /her pay!

    By the way, the crux of my CleanGuidePro Janitorial Bidding Software is its popular Workloading and Pricing screen. You can’t decrease your costs unless you can see your costs, and that’s what this innovative screen enables you to do!

  3. Decrease Inventory: Have a “just in time” inventory. Full warehouses look nice, but floor wax, bowl cleaner, toilet paper, multi fold towels, etc., just sitting in the warehouse costs money from day one (or on day 30 if you have vendor terms). I tried to never have more inventory in the warehouse than I could use or sell in 30 days. Don’t run out, but don’t overstock!
  4. Decrease Delivery Costs:Deliveries to job sites are necessary, but costs money. Fuel and labor costs add up quickly! All deliveries should be coordinated to accomplish multiple deliveries and tasks. For example, coordinate multiple supply deliveries to job sites on the same day if possible. You can even have your traveling floor crew drop off supply orders, paychecks, etc., at various sites along their route. $20 of traveling labor costs saved 5 days a week is $430 a month saved!
  5. Decrease Chemical Costs: Buy chemicals in dilutable, concentrate form to keep costs down. Chemical mixing stations are great also. Products like bowl cleaner and stainless steel cleaner are usually sold “ready to use” (RTU), and cost a bit more, so shop around for good pricing.
  6. Decrease Insurance Costs :You need Insurance! General business liability and auto insurance is a must have. As you grow, your insurance needs grow. Business, auto, work comp, etc. Multiple car discounts, discounted work comp rates through payroll companies, discounts for bundling business and auto, etc. You can save lots of money here! A 2% work comp discount on a $50,000 a month payroll is $1000 a month saved! Shop around and ask for better rates.
  7. Decrease Sales People: I had to learn the hard way that salespeople cost money on day one. To pay someone $500 a week / $2165 a month to go cold calling and chasing leads requires them to sell $8-$10,000 a month just to break even. There’s nothing wrong at all being a salesperson and I consider it a top profession. In fact, I consider myself one and pretty good at it, if I don’t say so myself. It’s just that for janitorial sales the most cost effective, hands down, no close second is a targeted, direct mail marketing program. It’s cheap, very effective and will have customers calling your office every month to place bids.
  8. Decrease Cell Phones: I’m not sure why, but In the beginning I thought it was my responsibility to provide every manager with a cell phone. When (for a short time) I had salespeople, they got one too. I guess I figured if they’re talking business on a cell phone, I should pay for it. At some point, a long time ago, a light bulb went off in my head and I realized that just about everyone has and needs a cell phone and the few minutes they used them talking my business wasn’t saving them any money, but it sure was costing me a lot. Seeing personal, international call charges on my cell phone bill might have been the light bulb moment!

Remember, running your operations smart and efficiently is the #1 way to decrease your costs and increase your bottom line within your existing customer base!

CleanGuidePro Successful Residential Cleaning bidderDrake

Janitorial Cash Flow – Top Ten Tips!

The definition of Cash Flow is “The excess of cash revenues over cash outlays in a given period of time, not including non-cash expenses.” In layman’s terms, it simply means not only having more cash coming in than going out, but having that “excess” cash coming in when you need it!

For example, if you have $10,000 in revenue coming to you on the 20th of the month and $8,000 due in payables on the 15th, including payroll, what do you do? Do you simply tell  your vendors and employees, “don’t worry, you’ll get paid when I get paid” and expect them to be understanding? Sure, you’ll have a few understanding people, but DO NOT rely on people understanding your cash flow issues! Instead, take the time to create a cash flow system to eliminate the inevitable problems that come from paying late, i.e., employees quitting, vendor credit cut offs, bank overdraft fees, poor relations, credit score reductions and the list goes on and on.

If you’ve got bank lines of credit and can pay all you’re bills on the first of the month, that’s great and I’m happy for you, but I can bet that in the beginning you had to be very savvy with your cash flow to convince the banks to lend to you. Kudos and respect to you! But , remember, borrowed money is the most expensive money.

Let me just touch on my Top Ten free, time tested Cash Flow Tips that have served me well in 25 years in this great janitorial industry. Remember, it’s all about having actual cash on hand when you need it! It’s not easy, but it’s not hard, just have a plan!

  1. ESTABLISH CUSTOMER TERMS: DO NOT start an account and not know when you’ll get paid. My written terms were always billed on the 1st of the month, due on the 15th of the current month for the whole month. If they couldn’t do that, I’d bill them 2x per month, the 1st– 15th due on the 15th and the 16th -30/31st due on the 30th. Hear me, establish terms!
  2. ESTABLISH VENDOR TERMS: Once you’ve established terms with your customers, get with your vendors. If you know that customer payments come in on the 15th and 30th of each month, then set up payments with suppliers due on the 16th and 1st of each month with your vendors. Vendors WILL WORK WITH YOU if they simply know they can count on a payment date. Car payments , cell phones, suppliers, even rent landlords can all change due dates for you.
  3. ESTABLISH COMPANY BUDGETS: Know exactly what your numbers are. What’s your total monthly revenue and expenses each month? When are payments coming in and when are bills due?
  4. ESTABLISH A PERSONAL BUDGET: It’s true that “ the eye is never satisfied”, but have the discipline and restraint to live within your means.
  5. INCREASE REVENUE: No brainer, new customers equal more $Revenue. Continually be looking for more customers and have multiple bids out at the same time!
  6. REDUCE OVERHEAD and INVENTORY: A $2000 a month office requires $7-10,000 a month in revenue to pay for it. I’m not saying don’t have one, but customers don’t come to your office, so make sure it’s a “need” to have and not a “nice” to have. Work from a home office until it’s impossible any longer . Also, have a ”just in time” inventory on hand in your warehouse. Don’t have $1000 in floor wax on hand if you only use $200 a month. Use the other $800 to pay bills.
  7. DON’T FINANCE IT: Don’t finance a $4,000 new floor autoscrubber for 24 monthly payments and a total pay out of $5800, if you can buy a used one for $1500 cash that does the same job! Use your head!
  8. EDUCATE YOURSELF: Do internet searches on cash flow tips, read books on it, read blogs on it, then implement it!
  9. SUPERVISORY EMPLOYEES MUST PRODUCE REVENUE!: Make sure all supervisors, managers, etc., are producing monthly revenue! They should be filling in, cleaning buildings, delivering supplies, training new employees, solving problems, keeping costs down, etc. ! They should be the hardest working and most productive employees in your organization!
  10. REVIEW IT: Review your cash flow daily, weekly, monthly and make adjustments accordingly! Do it this month and the next and next and so on. BE DISCIPLINED FOR CASH FLOW SUCCESS!

 

Follow these simple guidelines and watch your Cash Flow in the right direction and most important, when you need it!
CleanGuidePro Successful Residential Cleaning bidderDrake