I know…just the word formula scares people and gets them running for the hills. It sure did for me when I was in school.
For some reason just the word “formula” conjures up an image of your high school math teacher writing a hideously difficult math problem on the board.
One that you knew you wouldn’t solve even if you had all day to try to solve it. I assure you this formula I speak of today is an easy one to grasp. In fact it’s much easier than any of those your math teacher tried to get you to learn. Ready? It goes like this…
Profit = Revenue – Expense
Wow…pretty easy to get that one isn’t it? I want to mention this “formula” because so many people miss the boat on this one. I’m sure on a certain level most people grasp the concept but in reality far too many lose sight of this simple math problem when running their business.
Now the reason why I bring this up is because when you “forget” the formula you are also forgetting the main reason why you started your business in the first place. To make money. Now why is that?
One of the main reasons why folks don’t make a lot of money when starting their business (not just the cleaning business but ANY business) is because they bog themselves down with unneeded expenses.
I see this problem all the time. It’s really sad because this simple miscalculation can mean success or failure. It’s one mistake you just can’t afford to make, especially in the beginning stages of your career when EVERY DOLLAR COUNTS.
Controlling your expenses is a fundamental aspect of running a business. To create a baseball analogy, it would be equivalent to fielding ground balls if you were a shortstop.
Even the best hitting shortstops career would come to a screeching halt if he couldn’t field a baseball hit to him. The same is true in business. Even if you become a master at getting money to come in the door, if you can’t control the money going out the door you are going to have a short career. It’s that simple.
At the end of the day every dollar you spend unnecessarily is one you will have to re-earn. Not to mention that it could create a serious cash flow problem for you. This means you need to acquire accounts as cost effectively as possible AND not waste money in the process.
Obviously many people have a problem with this approach. I know this because I talk to folks all the time who are more interested in spending money than making it. They equate how much they spend with how much they’ll earn in a sense, which simply doesn’t pan out.
The ways people over spend on items is endless and no list of mine could possibly cover each one of them. That won’t stop me from mentioning a few though, so here I go.
Cell phones – You just need basic service, not all the do-dads that add an extra $30 plus per month for each phone or even more in some cases. You may think that the $30.00 is not worth losing sleep over but a few bucks here and a few bucks there add up faster than a bunch of rabbits with some spare time. Before you know it all those little costs start turning in to hundreds of dollars per month. The point is be careful.
Equipment that you are not ready for –Why spend hundreds, and in some cases thousands on an item you don’t fully know how to put to use. The only way this works is if you stumble across a customer job that requires a piece of equipment that you don’t have AND you can factor the purchase of the equipment into the cost of the bid. You can’t lose that way but otherwise just wait until you are ready to expand, your cash flow will thank you.
Fancy bidding software – Yes…there are some pretty cool tools out there to help you bid. Some of them will set you back quite a few bucks. But before you go out and break open the piggybank and get your copy you need to keep in mind that they all require you to know how the process works to a degree.
Translation: You need to know how to bid without the software BEFORE the software has any value to you. No matter what others may tell you, there is no software out there that makes bidding a 30 second process for beginners new to the cleaning business. You need to learn how to bid without the software first THEN buy it if you feel you need it, not the other way around.
Fancy office equipment– It sure helps to have all the latest and greatest computers, printers, faxes, desks, files cabinets and phone systems BUT you will do just fine without them. The time will come when you can break out the American Express Card and charge it, but for the time being make do with what you have as best as possible. At the end of the day all you need is business cards, flyers, some sales letters, a BIG SMILE and a “can do” attitude. The rest is just window dressings.
Success in the cleaning business doesn’t really require all the “latest and greatest” do dads that are out there. The goal is just to keep your expenses as low as possible and remember that only profits will keep your business operating over the long haul. By keeping an eye on what you spend you’ll increase your bottom line and make it easier to be a success in this business.
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