Writing a business marketing plan is always the first step to achieving your business goals. It’s important to create a well-researched marketing plan because it will surely lead you to a profitable and successful sale.If you’re planning to put up your own cleaning business, it’s imperative that you have your own marketing plan even if you’re catering to a niche market. This will assist and guide you in your daily decision-making which in turn, will be your key to success.Let me give you some tips on how to start your business marketing plan to keep your commercial cleaning business thriving despite our sluggish economy:Tip 1: Planning on how to allocate your capital is one of the factors you need to consider when creating a business plan.On the one hand, spending on expensive but quality cleaning materials and equipment might lead to slower return on investments. On the other hand, if you scrimp on equipment and cleaning materials, the quality of your service would most likely suffer. You obviously have two choices: cheap equipment but faster ROI or expensive equipment but slower ROI. The key here is to find a balance between cost-optimality and quality service.Tip 2: Setting a price can make or break your cleaning business. Is your cleaning service priced too high or too low?Your business marketing plan should also be based on the law of supply and demand. If your business is located in an area wherein there is pretty much non-existent cleaning business, then you could price it accordingly to position yourself into your customers’ mind as the market leader. However, be sure to provide quality service so that your customers’ will get their money’s worth. If your cleaning business is located in a highly competitive neighborhood, then you have to lower your prices accordingly. Always keep this in mind whenever you’re studying the pricing strategy: your markup should be within the reasonable value which leads me to…Tip 3: Know your competition. Are there are a lot of cleaning services sprouting left and right in your neighborhood? Do you still want to take the risk strong amidst the strong competition? If yes, try to set yourself apart from the rest of the pack. Offer complementary products that your competitors haven’t thought of yet.Tip 4: Set a deadline. When is your target launch? When do you expect to break even or recoup your investment?Setting a deadline will drive and motivate you to be consistent. This will also keep track of your progress as well as help you spot your strengths and weaknesses.More often than not, these factors are often taken for granted. What makes a business marketing plan effective is when you exhaust all possible scenarios. Once you’ve come up with the best AND worst possible scenarios for your cleaning business, then it’s time to put your plan into action!
Q. How is a Business Broker different from a Real Estate Agent?A. Real estate agents do a fantastic job at selling properties but don’t generally have the training, knowledge, expertise or skills required to negotiate and fully understand the financial and legal aspects of selling businesses. The whole procedure from start to finish is much more complex, even in the simplest of businesses. A Business Broker will understand the legalities of a contract and the ramifications to both parties if not followed through correctly with precision and accuracy. Also, the market is constantly changing and by choosing to use a qualified business broker, you can be rest assured that your business will be appraised accordingly for today’s market, an essential component to consider as an overpriced business will simply not sell and to under-price your business will cost you valuable dollars!Q. How do I know if my business is saleable?A. Your Business Broker should offer all the help and advice that is needed to get your business ready for sale. By providing them with the information requested and answering a few questions, you should be given a written appraisal in a relatively short timeframe outlining the basis on which the appraisal has been completed. Most businesses are in fact saleable it’s just a case of determining the correct sale price in the current market. An overpriced business will not sell and of course by selling your business below the market value you will be doing yourself an injustice.Q. What is consider when appraising my business?A. There are many factors considered when appraising your businessNet profit (before & after adjustments)
Gross Profit %
Turnover Fluctuations in all the above
Age of the business
Location of the Business
Role of the owner
Barriers to entry
Potential for growthThese are a few but not all the factors considered. All businesses are different and each one is assessed individually.Q. Can you give me a ‘ball park figure’ if I don’t supply written information to you?A. No, this would be a disservice, the appraisal could be severely over or under valued without all information considered. One tiny difference in the information supplied could mean thousands of dollars in the value of your business.Q. What is the ROI?A. The ROI stands for RETURN ON INVESTMENT. This is the way that most, although not all businesses are valued here in WA. Essentially it means the percentage of the purchase price (if run at the same sort of profit) that the buyer would expect to get as a return each year exclusive of his personal drawings. For example if he were to buy a business at a 50% ROI that would mean he would be likely to get 50% of his initial purchase price back in the first year effectively taking two years to get it all back. The reasoning behind the ROI difference is the risk attached to each particular business. The heavier the risk – the higher the ROI therefore the purchase price is lower in relation to the net profit. Because it is % based, you will see as the figures get higher, the monetary difference is huge.Remember…the stronger the business, the lower the ROI and the riskier the business, the higher the ROI!For example if we take a retail business, 7 days per week, short lease, lots of staff, reliant on location:Net profit $100,000ROI 70%Sale Price $142,857Wholesale business, 5 days per week, long lease, easy product lines, barriers to entry and low staffNet Profit $100,000ROI 30%Sale Price $333.333The reasoning behind the ROI difference is the risk attached to each particular business. The heavier the risk – the higher the ROI therefore the purchase price is lower in relation to the net profit. Because it is % based, you will see as the figures get higher, the monetary difference is huge. There are many points considered when arriving at the ROI to be used in our calculations, they are pretty much the same as how a business is valued (see above)Q. How does the breakdown work?A. Once you have been presented with your written appraisal, you will see that the suggested selling price is inclusive of all the Plant, equipment and also stock. The value of the plant & equipment is decided on and the stock value is taken as an average over the yearFor example Let’s say the sale price is $1,000,000 Stock $180,000 P&E $300,000 Total $480,000 Then the goodwill would be $520,000Q. What are add backs or add ons?A. When you look at your profit & loss statement in your accounts, at the bottom you will see your net profit. This is the end result and what you are left with after all the expenses of the business have been paid. As part of the expenses, many (but not all) business owners may choose to run several private expenses through their accounts and the final figure may not be a true representation of the business, therefore adjustments must be made to show exactly what profit the business is in fact making.For example: The net profit as per accounts shows $150,000 Within the expenses there may be an expense of $20,000 for accountancy but the business owner may have several investments that his accountant takes care of on his behalf and the entire bill is paid through the business whereas realistically, the normal cost for the accounting in this particular business should cost approx. $4,000 therefore we would do an add back of $16,000. This would then effectively increase the net profit to $166,000.On the other side of the coin, the current owner may own the property he is operating the business from and not pay himself a rent for the property. This has the opposite effect and effectively artificially increases the net profit therefore we must do an add on (or a negative add back).For example: The net profit as per accounts shows $150,000. Within the expenses there is no expense for any rent allowance. Therefore you must ascertain what the fair market rent would be to an incoming purchaser and make an adjustment accordingly. So, if the rent for the property were to be set at $60,000 per annum inclusive of outgoings then this must be deducted from the net profit effectively reducing the actual net profit to a new owner down to $90,000There are many different add backs and add ons all with different reasoning behind them. It is essential that all adjustments are provable during the course of the due diligence as the net profit of the business is one of the major factors in the valuation method right from the start.Q. What if the stock value is different than we have included at stock take?A. The stock can obviously vary throughout the year therefore quite often there will be an adjustment at settlement. The purchaser has no legal obligation to take any additional stock however it may be that an order has just arrived and pushed the levels higher and in most cases the purchaser will need it anyway and an agreement shall be arrived at between both parties as to how this additional stock shall be paid for. If the stock is lower than as agreed on in the contract of sale, then the amount shall be deducted from the price. You would be advised that the stock level be kept as close as possible to the agreed amount in the contract of sale as much as possible.Q. Can I use management accounts (i.e. MYOB) for the appraisal?A. You can use the management figures initially but you’d be better advised to use audited figures prepared by your accountant. The reason for this is to ensure that you are using the same figures that a buyer will be using when conducting a due diligence. Management figures can often be incorrect and adjustments are still yet to be made. The last thing you want to happen is to set any doubt in a buyer’s mind as to the legitimacy of the accounts.Q. Can you sell the freehold along with my business?A. Yes you can list it at the same time. It often works very well. In some cases, the buyers are adamant that they will only buy the business if they can get the freehold at the same time.Q. What is a due diligence?A. A due diligence is carried out by the buyer as a condition of the contract of sale to satisfy them that the information we have provided to them is a true representation of the business they are buying. It can vary in timeframes according to the size and complexities of each business. It is generally conducted by their accountant although it can be carried out by the buyer themselves, bookkeepers or financial advisors etc…Q. How can I be assured of confidentiality?A. All potential purchasers should be made to sign a Confidentiality Disclosure Agreement (CDA) prior to receiving any information on your business.Q. What about Work In Progress?A. Not all businesses will have work in progress but for those who do, a formula must be agreed on as part of the due diligence process to decide the best way to calculate the work in progress which is acceptable and fair to both parties and this shall be paid in addition to the agreed selling price.Q. If my business isn’t ready for sale, what will happen?A. Depending on the reason, you will be advised the best steps to take to help you to achieve the maximum selling price for your business later down the line. It may be a few months or it may be in a couple of years.Q. How important is it to have accurate information?A. Accurate information is vital. It is extremely important In all business sales, it is imperative that the procedure is followed through correctly to not only avoid the sale falling from through but to reduce the chance of the purchaser coming back to you down the line and starting any sort of litigation proceedings. This is why you should produce a full written document outlining all that the business entailed, the roles of the owner and the staff members, the products and services, past history, suppliers, stock, plant and equipment, target market, positioning and strategy, barriers to entry, differentiation and competitive advantage, lease details, what was to be included in the sale, the owners obligations both pre and post sale and also how the sale would be documented. Of course there is also the financial side of the business and the necessary financial statements should also be provided with an emphasis on confidentiality between all parties maintained at all times.Q. What are your top tips for preparing my business for sale?A. It is wise to consider all the above information when you first start thinking about selling but basically, right from inception, you should consider at least the following:-Meet with your business broker to ascertain the current value of your business and get tips on whether the business needs to make any changes prior to going onto the market.
Ensure you have clean, precise and accurate financials.
Try to keep add backs to a minimum as a healthy “operating profit” is good to see.
Have your systems and procedures well documented.
Try to keep the business as un reliant on the owner as possible.
Ensure the premises are clean and presentable. If possible, try to have a reasonable length lease in place (if leased premises).
Ideally just one working owner is advisable if possible.
A well documented report outlining exactly what is being offered for sale will eventually be prepared by your broker with information provided by you so ensure this is all correct.
Obtain a justified business appraisal that has been priced accordingly in the current market
Ensure you understand and agree with explanations of any add backs, or add ons, it is generally a good idea to let your accountant have a look over these too.
Any business that shows a gradual increase in turnover and profits each year is going to be desirable to potential purchasers, if we have a decline in either turnover, profits or both we need to have an explanation as to why this is, sometime it may be that this industry is in a general decline and probably one that will be hard to sell purely due to that point.
With 46% of small businesses failing within the first 5 years, they simply cannot afford to operate “small” any longer. Big businesses, aka Fortune 500 companies, understand the value of setting up a business with predictable, manageable systems and having the necessary framework in place to ensure profitable and productive results.The 7 Big Business Tools:There are 7 tools that all big businesses use within their organizations to ensure higher profits, higher quality, and increased customer satisfaction. Applying these tools to your small business will increase your chances of staying in business longer and give you more control of its operations, profitability, and get you out of a “small” business mentality.1. Organizational ChartsOrganizational charts outline the functions that are required for a business to run on a day-to-day basis, as well as the person responsible for that function. This tool determines the “Who” of the business. Organizational charts also drive accountability for each area of the business and outline clear responsibilities.Big businesses have figured out that while it is important to have people lead each of the functions, it is even more important to make sure the skill level and competencies of that person match the role. As a majority of small businesses typically have a small staff, roles are often filled by whoever is available. This mistake could lead to inefficiency and prevent the business from operating at its peak level. Completing an organizational chart will help identify the gaps that exist in the skill set of current employees and should be developed even when there is only one person in the business. This activity will allow for future growth as the business is expanded to include more and more employees.Remember: The more times one name appears in an organizational chart, the less productive and effective it will be!2. Operations Manuals/ ProceduresOperations manuals and procedures document the tasks that are to be done within the business. Use this tool to capture the “What” of your business. This will serve as a step-by-step guide on how to complete each task and give clear expectations of how your business is to run. This documentation can also serve as a training aid for new employees, allowing them to ramp up faster, and reduce the amount of time you have to spend training. This tool will reduce the variability in output and quality that can occur when employees are allowed to do it their own way, in effect making it their business.If there are no employees within your business, use procedures to help you become more efficient by performing tasks the same way, every time. You will also reduce wasted time remembering how you completed a task previously.Be sure to review your operations manuals and procedures periodically for relevancy and areas of improvement. Have you found another way of doing things more efficiently? Does the task take a significant amount of time? Look for steps that may be duplicated, can be removed, or take a lot of time to complete. Conducting this review will lead to continuous improvement within your business.3. Business SystemsGiven the complexity in most big businesses, they always have systems in place to make sure their operations are set up to flow smoothly and reduce the chaos that can occur when there are so many functions and employees. Small businesses can take advantage of the benefits of having a systemized business as well. Systems are no more than how the tasks and functions interrelate to deliver a completed product or service. Having a system in place allows you to produce the same quality results every time, which in turn leads to increased customer satisfaction. You can describe this as the “How” of your business.For businesses with only one person (the owner), set up business systems that automate some of the key tasks. This will give you more freedom to work your on business and strategize, rather than in your business doing a lot of the mundane tasks. You will find that you will have more time to grow your business when most tasks are systemized. Business systems produce a highly organized business and can also be used as an effective management tool for owners since feedback can be gained about your business performance when things don’t work as expected.4. Process and System Audits Auditing your processes and systems asks the question “Are we doing what we say we are going to do?”. When you have taken the time to document the key tasks in your business, it makes sense to periodically review whether or not the procedures are being followed. If they are not, then find out why. Auditing allows you to qualitatively measure how well your business is performing.Take it one step further, and check for the effectiveness of the system, not only the compliance to it. An easy way to do this is to look at your customer satisfaction measures, the number of errors or defects you are getting, and how easy it is to follow your process. Often times, while all of the procedures are being followed, they may not be producing the results that are intended, so auditing can help you uncover these issues.Use auditing within your organization to drive accountability, and make following the process a habit. Not only will you improve the efficiency of your business system, but you will continue to make your business better, meet your customer expectations, and consistently meet business goals.5. Key Metrics and ReportingMetrics are the key data that you need to make business decisions. As the old adage implies, “you cannot manage what does not get measured”. Your key metrics are a snapshot of how well you business is performing. Use these measures to quantitatively assess your output.An easy way to determine what your key metrics should be is to ask: What do my customers want? What is important to them? The answers to these questions will be become the standards by which you measure your business. Other metrics can include weekly sales goals, revenue goals, or the number of calls made to prospective clients.After key metrics are determined, institute a regular reporting of the results and look for trends upward or downward that need correction. Use dashboards that can be set up easily in an Excel spreadsheet program for quick access to the data and results. Also, be sure to tie the metrics to the functions in your business to increase accountability for the results.In addition, consider using your metrics and reports as a communication tool to clients and prospective clients. Show how you differ from your competition, and what you can do for them relating to customer service levels, response time, or any other measure most important to that audience.6. Six Sigma Process ImprovementA highly utilized efficiency tool used in Fortune 500 companies, Six Sigma is a data-driven methodology for reducing the number of defects within a business system. It will demonstrate quantitatively how well a process is performing and focus on variation (what the customer sees and feels) reduction.Big businesses use Six Sigma to reduce lead time, excess labor costs, and processing times, saving them millions of dollars annually. Small businesses can also realize the benefits of applying this process improvement tool in the same way. Use of the tool increases customer and client loyalty as they know what they are going to get every time.Find out more about Six Sigma and its benefits here at the iSixSigma website: http://www.isixsigma.com/.7. Problem Solving ToolsThere are different ways to address the issues that inevitably occur in businesses. Have a toolbox of problem-solving methodologies to solve the different problems that occur. This will allow for rational and data-driven decision-making, and help you get to the root cause of the issue. It is widely understood that if you solve the problem well, and eliminate the root cause of a problem, the problem will not re-occur.Some commonly used problem-solving tools include:Brainstorming
Root Cause Analysis
Cause and Effect Analysis
SWOT (Strengths, Weaknesses, Opportunities, Threats) AnalysisAll businesses have problems, and that is actually a good thing! Look at problems as opportunities to improve, and as simply the difference between the current state and your business goals. Become familiar with the various tools available, and train your team to apply the tools as well. This will increase your confidence in the decisions being made in the business, and ultimately free a business owner from having to be involved in every business decision being made.These 7 tools all work together to ensure a highly organized, productive business. Use these “Big Business” tools to increase productivity, profitability, and your chances for small business success. No longer think that your small business is not quite ready for this framework, and begin to operate your “small” business like it is “big”.