Episode 187 – Starting a Janitorial Company With Good Cashflow
Starting a Janitorial Company & Staying Cash POSITIVE!
Episode 187 Mike Jackson Richmond, VA Office Pride
On today’s podcast/ blog, your favorite host- Mike Campion coaches Mike Jackson. Mr. Jackson is the proud owner of the Richmond, VA Office Pride franchise. He talks about starting a janitorial company living in his van and building a seven figure operation.
Life is good for Mike now. But starting a janitorial company was not always a bed of roses. One of the big challenges he faced early on was cash flow.
KEY POINT: Profits are important but CASH and cash flow is king- especially when starting a janitorial company.
Many owners don’t understand the difference between profit and cash flow. They think they are the same thing.
Profit is how much money you earn on your profit and loss statement.
Cash flow is the cash you have available to pay bills.
Avoid hyper focus on profit and not enough attention to cash flow.
Key Point: You can have a profitable business that go bankrupt due to lack of cash!
When starting a janitorial company or maid service, many new owners think they have to do the work first and get paid later. Commercial contracts often ask you to accept contracts on terms such as “net 30” or “net 60”. This means you would get paid 30-60 days after you submit a bill and/ or perform the work.
When you are just starting a janitorial company or maid service, payment terms may not seem like a big deal. They can jeopardize the health of your company. You can’t pay employees with “profit”. You need to get paid so you can meet your companies financial commitments.
When you are smaller, payment terms don’t seem like a big deal. As you grow and start billing more and more every month, cash flow can crush you. You effectively become a bank to your customers.
RESOURCE ALERT: For more great stuff on positive cash flow for your cleaning business click HERE
Mike explains how he helps his Accelerator members and 1 on 1 clients get paid in advance. This ensures they are cash positive instead of cash negative. The faster you grow- the bigger impact this will have.
When starting a janitorial company, we are typically a small percentage of our customers overall expenses. Generally just one or two percent of their budget. Large companies might have a policy to pay vendors as late as possible to maximize their cash flow. This puts you in the position of being a bank. You are “loaning” them your expenses, payroll, payroll taxes, gas, etc every month if and until they pay their bill.
Cleaning companies are typically much smaller than their clients. Because of this, payment terms are typically far more important to you then they are your customers. Often if you just explain to them that you are a smaller company and you require payment up front to best serve them, they will accommodate you.
Be transparent. Don’t let your pride make you act like a big company that doesn’t care about cash flow. The reality is, the bigger the company, the more they understand the importance of cash!
Another strategy is to offer complimentary upgraded service for customers that pay in advance. You can also offer a small discount. Typically, if you take good care of your customers and explain how good payment terms are important to you, they will be happy to pay in advance. Check out the Accelerator Group if you want scripts and templates of exactly how to do this.
KEY POINT: For cash flow and just about every other challenge you run into starting a janitorial business, creativity is the key!
In addition to all of this amazing cash flow wizardry, Mike Jackson takes a moment to share his wisdom in growing a multi million dollar company in the…