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Know your numbers part 2
Being a people pleaser can sink your business, fast
Logan Robison
November 06, 2024
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Running a cleaning business is a constant balancing act. With small daily decisions adding up to big impacts on your bottom line. Many owners, like yours truly 🙋 , are natural people-pleasers. We want to keep everyone happy, especially our cleaners and clients.
But here’s the truth: the P&L (profit and loss statement) doesn’t care about people-pleasing. It cares about MONEY.
And my P&L has been telling me some hard truths lately. For every dollar my business brings in, only 20 cents actually stays. You might think “what’s wrong with that? 20% net margins are great.”
I’ll tell you what’s wrong with that, there’s not enough money to grow and scale. We currently don’t spend any money on marketing. If our profits keep getting squeezed, scaling past $500K/yr will be a serious challenge.
Where does the money go?
For us, it’s primarily labor costs. Around 55 cents of every dollar goes to production. Ideally, this would be reversed: 45% to labor leaving 55% for reinvestment in growth.
Why the current imbalance? We pay our cleaners well. With competitive hourly wages, bonuses, and regular quality checks we’re the best in the area. While this helps build a strong team, it’s unsustainable without raising prices on customers. And in the end, it’s the business that gets squeezed.
What are we going to do about it?
To change course, we’re starting with a job costing exercise. We’re mapping out the revenue and costs for each property we service. If a property’s margin is below target, we’re taking action, whether that’s raising prices or reassessing cleaner pay.
If you’re feeling the squeeze, consider a similar approach. For guidance, reach out to Ben, our bookkeeper, who’s helped us uncover these insights. Together, we’re working toward a healthier, more sustainable business with net profits in the 25-30% range.
Until next time,
Logan
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