An experienced business owner sent me an email yesterday to demonstrate (and help me issue a warning) about how newer business owners can get caught up in the frenzy of taking on every job just to build volume. Many times we see the numbers, we see the potential “big star” that we would like to add to our reference list and instead of looking at the reality of these estimating opportunities, we see only the $$$ and glory. This is especially true of residential companies venturing into commercial cleaning. Unfortunately, coming back to reality and uncovering the real cost of doing business with these giants is a rude awakening for most.
In his email, this business owner sent me the specs for a chain of national banks and was approached to act as the local subcontractor for the national janitorial service provider. The detailed specification sheet was 5 pages long. Service was to be 3 times a week in buildings from 3500 sq ft to 18,000 sq ft. Included with the specs was the amount that would be paid to a subcontractor for the cleaning. As my business owner mentioned, he had not seen prices like this in 30 years! Now it is a fact, that there are times when pricing can be negotiated in subcontracting requests. Most times however, that is not the case.
When I reviewed what the national janitorial company was paying for the work and broke it down it looked something like this: a 3500 sq ft bank @ 3 cleans a week for $161 a month. Doing the simple math, we calculate a payment of approximately $12 per clean. ROFL. The same kind of numbers prevailed throughout the specs. The fact that there were 50 locations from which to choose makes little difference when every one of them was a loser. Oh and by the way, they paid a premium of $7 more a month if you provided the consumable products. My business owner who has been around this block before, didn’t have to think more than a few seconds before he responded with a resounding NO thank you.
My point here is that business owners who are in a growth and expansion mode often come to me with bidding opportunities that are far and away out of their expertise and management levels. Not because they couldn’t do the job, but because their experience and background may not match what it will take to make this a profitable and easily managed opportunity. We don’t see the forest for the trees and forget to ask the hard questions like:
- What will my payroll be and how long will I have to cover payroll before I get my first check? Could be 4-6 weeks.
- Will I need new equipment for the start up and what will it cost?
Do I have the properly trained staff in place? If not where will I find them?
4. Can I manage this account without negatively impacting the rest of my business?
And finally does this account fit into the group that I am targeting to grow my business? By identifying and profiling your target customers and sticking with your target, you will realize faster growth and profits. No one who is in business wants to turn down opportunities. But that said, it’s the smart business owners who know when to say “NO” knowing that to take on jobs for which they are not prepared can cost them their business. Not every, bright, shinny object is one you should chase. Be selective, be prepared and be profitable!