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Cleaning Business Financing & Budget Allocation

CHAPTER 7-: This is the seventh chapter of “The Complete Guide to Starting a Cleaning Business.” Depending on the part of the world where you live in, the start – up capital required to set – up a commercial cleaning business falls within range except for few variations; the cost of renting or leasing an office facility, tax and insurance et al. So, if you intend starting your own commercial cleaning and you want to have an idea of the total amount that you would need to set – up the business, then you need to read through this article.

If you follow due process before starting any business, it means that you would have done your own feasibility studies and market survey. With feasibility studies and market survey, you will be able to get an estimate of all you would need to start your business. You will have information on all the equipment that you would need, the current market value of the equipments, the different rate of office rent / lease in different locations and the amount required to register a business in your country and other fees that you are expected to pay.

Basically, we are going to look into key factors that are unique to cleaning businesses all over the globe and try as much as possible to give an estimated cost of the item listed in US Dollars. Now let us consider how much it really cost to start a cleaning business;

How Much Does It Cost to Start a Cleaning Business?

1. Cost of Registering Your Business

If you are starting any business, the first expense that you will incur is the cost of registering the business. If you intend starting your business in the United States of America for instance, then you would need between 100USD to 400 USD to incorporate your business as a Limited Liability Company (LLC). But if you want to just register your business in the office of the local County clerk, you will pay less then 100USD. If you do not live in the United States of America, you can visit the nearest office of the corporate affairs commissions in your country to make enquires of the cost of registering or incorporating a business. You can as well search it out on the internet.

2. Cost of Renting / Leasing an Office Facility

The price of renting or leasing office space / facility varies from locations to locations even within the same country and states. So, what you are expected to do if you want to get an estimate of the amount required for you to secure an office facility, is to contact a realtor in the area you intend securing an office facility. Ask them questions, since they are in the best position to give you the amount it will cost you to rent / lease an office facility in any location of your choice. But on the average, it will cost you about 3000USD for an annual rent of a decent office facility. Please note that it could be less and it could also be more.

3. Cost of purchasing basic office Equipments

Another cost that you must consider if you want to start a cleaning business is the cost of the office equipment. At lease you will need office table, office chairs (3 or more), computer, printer, fax machine, AC, window blind, file cabin, telephone, fax machine, and internet device (connection) et al. It is easier to get the prices of these items from the physical market or an online market. Please note that you don’t have to purchase brand new office equipments before you can get started, in order to cut your start-up cost, you can buy fairly used office equipment; they are cheaper. The estimate of what you would need to purchase these equipments should be about 1,500USD. It could be more and it could less.

4. Cost of Purchasing Cleaning Equipments and Chemical Supply

The cost of purchasing your cleaning equipment and your chemical supply are major expenses that you would need to incur as you set to launch your cleaning business. You would need vacuum cleaners, wet vacuum cleaning machine, floor cleaning machines, mops and brushes et al. You can as well get the fairly used type of equipment and you can also lease or rent them when you want to carry out any cleaning job. You would also need supply of cleaning chemicals. So, you should look towards budgeting about 2,000USD for these equipments. Please note that it could be less and it could be more.

5. Cost of Promoting Your Business

Lastly, another cost that you will incur if you want to start your cleaning business is the cost of promoting your business. Part of what you need to do to promote your cleaning business is to print your business card, print handbills and also advertise on both print and electronic media. There is no hard and fast rule about how to go about it; you can work with the amount you have budgeted. You can decide to work with 500USD or more, the choice is yours. The bottom line is that you must include the cost of promoting your business as part of your start – up cost.

Over and above, with an estimate of $8,000USD you can start a cleaning business. Please note that the amount stated in this article is not cast in stone, it could be far less than what is obtainable in your country or city and it could be far more that is obtainable in your country or city. This just to give you an idea of the amount needed to start a cleaning business.

Cleaning Business Financing & Budget Allocation

All your marketing skills and your discipline with regards to following the rules and regulations of running a business will yield little dividend if you forget to construct a business plan based on budget allocation. The term budget should not be too alien for you. It is often used alongside the phrase cutting corners.

That is where the general perception about the word budget or budgeting stems from. Cutting corners or reducing costs is not the only purpose of allocating a budget. If anything, budget allocation is the primary tool for achieving efficiency in your business. If you cannot maintain efficacy in your business operations, then your cleaning business will be off to a sour start. To prevent your resources from being inefficiently used, you must prepare a flawless business plan and work hard on allocating the precious funds you have in hand.

As a novice entrepreneur, it can be quite difficult for you to keep up with the day to day operations of your cleaning business. Even though the cleaning business is based on service provision, it is much different from other such businesses. Employing good cleaners is simply a small part of your job description as the owner of a cleaning service business. You need to procure a massive amount of tools, equipments and products that will aid your workers to fulfil their tasks as per the requirements of the clientele. In other words, there are plenty of resources that you need to be concerned about when running a cleaning business.

All of this and more can make you lose your focus on the bigger picture. This is why you need to set aside a specific time for planning to create and manage budgets. A business that is not moulded by a budget is destined to run out of steam sooner or later. You cannot simply rely on your gut instincts throughout your career as an entrepreneur. Not having a plan is a motto or mantra that befits a super villain in a super hero movie. As an entrepreneur, you must be conscious about each and every single one your steps or decisions in the future.

Planning ahead is imperative to sustaining a business. If you are not aware of the direction that your business will take 3 months, 6 months or even a year from now, then you have failed your company and your employees as an owner and an executive. Being an entrepreneur bestows great honour upon your shoulders, and you know how the saying goes; with great honour, comes great responsibility. Making a business plan and allocating your funds on the basis of a budget is one your chief responsibilities as an entrepreneur. As mentioned before, this responsibility becomes even bigger when you are in charge of a cleaning service business, which is not exactly the most uncomplicated trade in the world.

The word budget allocation may give the idea that budgeting is all about deciding how much money will be spent in a particular sector of the business. Unfortunately, it is not as simple as it sounds. There is much more to budgeting than simply dividing your funds as per the need of your business areas. Preparing business plans, reviewing it, regularly monitoring finance and performance can all come under the fold of budgeting. This is where the new business owners get their footing wrong. They often do not feel the need to budget and run their operations in a relaxed and cumbersome way.

Remember the example of the hotdog stand used before? You can afford to drive your business in autopilot if you are running a hotdog stand, but when you are trying to earn a living by establishing a cleaning service company, you need to fold your sleeves and stay engaged with budgeting at all times. Funding your plans is the simplest way of planning your business future.

It is as important to securing the survival of your business as acquiring insurance is, and by now you must know how significant the latter is. If you want to control your cash flow effectively, then budgeting is the technique that you need to learn and master. As a matter of fact, budgeting allows you to invest in new opportunities at just the right time before the opportunity slips away or is gobbled up by a hungrier competitor.

In a growing business, it will be extremely difficult for you to keep an eye on each and every single area of your organization. This is where the need to split up your budget arises. The budget must be divided into separate segments such as production, sales and marketing. As the owner of a cleaning service company, the word production may not be of great relevance to you. It is true that you are not directly manufacturing goods that are being sold off as commodities. However, you are producing cleaning services. Each time you hire and train an employee to be a wonderful addition to your efficient cleaning staff, your company adds to its production of cleaning services.

As the business expands, you will soon realize that your funds are being spread out in numerous directions. Keeping track of these funds become awfully difficult. From purchasing mops, to stain removers, to dust removers to cleaning gloves and dust protections, the variety of products where you will be required to invest your money is quite literally endless. Under such circumstances, it is very easy for a business owner to let his expenditure spiral upwards and out of control.

The main motive of a business is to keep the earnings above the expenditure. If things are going the other way around for your cleaning business, you will find yourself filing for bankruptcy within a few months. Hence the importance of budgeting cannot be neglected. The need for a budget can be summed in the form of the following 4 basic objectives. These are:

  • Exercising control and authority over your finances
  • Ensuring that your current projects will continue to be funded
  • Allowing yourself to make financial decisions and meet your goals with little hesitation.
  • Allowing yourself to have sufficient funds to initiate your future planned projects

The benefits of creating and maintaining a budget should be quite evident to you by now. In the case you still have lingering doubts, there are 8 reasons why following a budget can give your cleaning service business a gigantic boost.

Why Create a Budget Plan?
  • With a budget in place, you can manage your money much more efficiently
  • Resources will be allocated to projects appropriate to their use when you create a budget
  • A budget helps you to monitor the performance of your employees and the overall business
  • You will find it much easier to meet your goals and objectives with a budget in place
  • Your decision making will be much more prolific once you follow a well planned budget
  • A budget allows you to be aware of oncoming problems. Cash flow difficulty is an example of a problem that can be solved or prevented by a functional budget.
  • Planning for the future becomes much easier when your budget dictates your operations
  • Given the fact that the staff have monumental importance in a cleaning business, the budget will allow them to stay motivated and focused even during the most difficult times.

Creating a Budget Plan for your Cleaning Business

It is a well established fact that creating and monitoring a budget is the same as planting seeds of success for your business. If you want your business to remain stable and profitable for long periods of time, then you must rely on a well planned budget. The thing about budgets is that they aren’t exactly the simplest things in the world to create, but it also does not require a doctorate degree in business or economics to come up with a budget. As long as you are putting in your maximum concentration when creating the budget for your cleaning business, you will be able to overcome this financial hurdle with relative ease.

You need to ask yourself three very important questions when formulating a budget for your cleaning business. These are:

  1. What is the estimated number of sales that you are aiming for during the budget period? –
    Try to come up with a realistic assumption. You should neither underestimate your ability nor should you overestimate out of unjustified ambition.
  2. What will be the direct cost of your company’s sales? – This will include the cost of the materials, the components or the subcontractors that you will need to provide cleaning services to your clientele on a regular basis.
  3. What will be the fixed costs or overheads of your cleaning service operations?

When drawing a budget, you need to follow certain key steps to make sure that you are not deviating from the track. The most important thing about drawing a budget is keeping it as realistic as you possibly can. Often, new entrepreneurs see the notion of being realistic as a stumbling block to their business expansion and growth.

In their inexperienced eyes, setting goals for your company only limits the distance that you can reach at the end of a term period. There is nothing wrong with being a glory hunter and ambitious entrepreneur. In fact, as the owner of a cleaning business, your primary focus should be on making your business as big as you possibly can. However, in the process of doing so, do not get caught up with wild fantasies and impossible objectives.

For example, it is completely acceptable for you to expect your cleaning company to attract a considerable number of clients inside your neighbourhood within the first few months of your operations. What is not acceptable is for you to hope that your cleaning company will enjoy monopoly power in the entire city in a matter of few weeks. These unrealistic assumptions will put spike strips on your road to success and cause your business to come tumbling down.

You may find the need to resort to historical records of other cleaning service companies to come up with a realistic budget that is in line with your goals and your ambitions. Looking at how other people created their budget and applied it to streamline their business will help you attain a much clearer idea of how you can marshal your resources to bring in maximum reward for your business.

You must also sharpen your skills in finance, and figure out a way to work out the relationship between variable costs and sales. The next step is to use your sales forecast to come up with a projection or a prediction for the variable costs. Here is a simple example to help you understand this concept better.

If the per unit cost drops by 10 percent for every individual 20 percent of sales, how will that affect your unit cost if the rise of sales is observed to be 40 percent?

Solving mathematical problems like these are a stable component of devising a well planned budget. It is also necessary for your budget to contain sufficient information that will allow you to keep track of the key drivers in your cleaning service business such as sales, working capital and costs. Cleaning services companies are often not deemed as organizations that are reliant on hi-tech solutions, but that does not change the fact that using accounting software may just make your budgeting a whole lot easier and simpler.

The last and the most underrated (and often ignored) step of creating a budget is making use of the right people in the right ways. Budgeting is certainly not a one man job, even if you believe that you are most skilled and charismatic entrepreneur in town. You need your staff to share a major chunk of the responsibility when coming up with a well planned budget.

Ask your staff who are endowed with financial obligations to supply you with estimates of figures related to sales targets, cleaning service costs and project control specifics. Leave them with the duty of collecting and assessing the data. The direction in which you will take your company once this data is analyzed is in your hands. You are after all the captain of your company’s maiden voyage.

Even after the completion of the budget, your financial obligations regarding allocating resources will not come to an end. To make sure that the well planned budget serves as an effective tool for enhancing the growth of your cleaning service business, make sure you review it and revise it on a regular basis. Half yearly budget revision is a standard protocol in most successful cleaning service companies.

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