Episode 54: Business Strategy: Why Planning for Success is Key (+ Cleaning Business Projections Update!)

Episode 54: Business Strategy: Why Planning for Success is Key (+ Cleaning Business Projections Update!)

Brandon Schoen:
And I think that's really important to note too, is a lot of times you don't know what you're doing. In fact, even if you've been in business for awhile, you still have to be humble enough to be willing, to learn coachable and trainable and teachable. And when you start taking action on stuff, you have to be able to adapt quickly and be able to maneuver around, oh, we didn't expect that challenge or this isn't going to work at all. Or like you said, right there, the customer will appreciate way more having a free clean than 10% off. That's like chump change. But they love the fact that we do the free clean. Then we get quite a few referrals from that. So that's a good pivot I would say that we did on that.

Announcer:
Grow your cleaning business, make more money, have more time. This is the Profit Cleaners podcast with your host Brandon Condrey and Brandon Schoen.

Brandon Schoen:
Hey, everybody welcome to another episode of the Profit Cleaners. You are in the house learning from the top 1% of cleaning business owners from around the world. And we have a very special episode for you today. I am Brandon Schoen, your host, and I'm joined by my cohost.

Brandon Condrey:
Brandon Condrey that's me!

Brandon Schoen:
And we are actually doing this on a different format today, guys, we're on a live zoom behind the scenes casts that we're going to show you guys behind the scenes of numbers, going back all the way to the beginning. When we started this show almost a year and a half ago, when we posted our business plan, we've been having a lot of people ask, how are you guys doing as far as profits and your business plan. And you guys said you had all these projections in the beginning. How far off are you from those projections? And yeah, we wanted to dive into those numbers with you today, show you a high-level overview of where we've come. And really just in general guys, like why do you have projections? Why do you have number goals? And I would say the biggest reason is to give you a reason why to drive forward. And Brandon and I started this business. We were not paying ourselves hardly anything, even zero in the very beginning, because we were putting all the money back in. But we want to show you guys why it's so important to have a business plan. What's important to have projections. And then looking back, it's going to be really fun to see where we've come. If we've hit those goals, why or why not and how you can improve. And we'll go from there. So let's dive in Brandon, let's tell them about this projection. We're like three or four years later now. Right?

Brandon Condrey:
And we did have a previous episode on this. I think it was episode seven where we talked about our business plan and then someone had asked us to compare, what were we actually, how far off were we? So I'll tell you why we wrote the business plan. Generally speaking, it's a good idea to have a business plan. I think that is a good document to run off of, but really we wrote it because I was trying to solicit funds from some investors. And so we needed to show them that we had thought about these things and here's what we were going to do with your money. So we did that. If you've, I think the business plan is readily available on the website. You can check it out there, but we're just going to go through it. And I've highlighted a couple things in there. There's some funny things that we did in here, which are pretty interesting. So we had estimated in year one, we would get $230,000 with a net profit of 29%. Looking back on it now that was very ambitious. So a little too ambitious, maybe yet. So we said, we also said it here that our business coach in Denver that's Corby, he suggested that we can reach $2 million in sales within two to three years. And we'll get to that part in a minute. But what we had told people that we were going to do in fiscal year 2018. So that would have been our first full year. We anticipated 200,000 plus in revenue that year, we actually did something like half a million. So we were double what our projection was in terms of revenue, but we were not profitable. So our expenses were way off. So even though we were double our revenue, that means we were also like two and a half X, what we thought our expenses were. So we had a very small loss that year. I don't have like, the sheets pulled up, but it was, I don't think it was like $10,000. It was a little bit, it was like floating in the middle, but that was without us, like really paying ourselves. We were paying ourselves maybe 500 bucks a month, I think back then, right. That one was a little hardcore.

Brandon Schoen:
Yeah, that was a little hardcore. And I wouldn't say like, in the very beginning we learned in this market, we did not know what was going to work, what wasn't. And we were just in the marketing terms, throwing spaghetti at the wall, seeing what would work, what would stick. And I think that being said, we are a little bit more inefficient with our marketing, spend our focus, where we were trying to get leads. We were just all over the place. So that's what I would gauge that from too. And also we just were, you and I were just running all over the place, like crazy. We didn't have people helping us manage our budget and expenses. And I remember even in the early days, you and I have a meeting and you were like, what is this expense? And I was like, oh, I'm testing home advisor, I'm testing this. And you're like, so, you know, we really were testing stuff that even nowadays, we'd not even using some of those platforms anymore to test. And so we're reducing that, getting more efficient, but yeah, let's keep going.

Brandon Condrey:
And the other issue of that year two, is that we had not yet done a price increase. We were also throwing spaghetti at the wall in terms of pricing, because we were trying to figure out what the market was. So that's why we definitely recommend to you guys, as you're starting, that you do a lot of research on what the competitor's pricing right now. So you can come in at the market. We were well below when we did our first price increase. So that was definitely why expenses were probably a little bit high.

Brandon Schoen:
Yeah. And that's also a great strategy. I mean, there's different ways to do pricing, but we chose to go in as a little bit under the market, even though we didn't quite know where the market was, but we were definitely more competitive so that we could get that customer acquisition. We can get a lot more people in the door and then later on, prove ourselves and raise those prices, which is what we've done now. And now we're sitting in a lot better profit margins, but yeah, we'll keep going from there.

Brandon Condrey:
Well, we had on this projection was that 2018, we would do 200 and some change, 230, 2019, we would do, it looked like two 70ish and 2020 we'd do 320. The good news is we blew those numbers out of the water through the roof. So 2018 was just under half a million, 2019 was just shy of a millions. We effectively doubled. We were at 900 and some change that year 2020, as we all know through every business for a loop. So when we wrote this business plan, we didn't have in there, oh, by the way, there's going to be a world altering pandemic in 2020 that will adjust to, so we didn't know that was coming. So we had forecasts 330. It looks like for 2020, we actually did 1.1 million. So we were like triple what our projection was. But again, none of those years were profitable. 2020 we were on a really good projection for 2020 when we were looking at it in 2019 before the pandemic and the pandemic just threw everything for a loop. We took a huge loss in 2020. It was almost a quarter million dollars as far as an accounting procedure is concerned, but we had loans to offset that. So we had a PPP loan. We had grants from the state. So those offset the loss, we didn't have like negative 200 grand in our bank accounts, but also all these expenses were a lot higher. So in 2018 expenses, 150, 2019 220, 2020 220 again, we'd said there was going to stay flat. So the expenses on all of those years, because we weren't profitable, we're obviously more than we were making. So it was more than we brought in. And I'll tell you that starting a business and running it like this bootstrap style from the beginning, I had a biology degree, Brandon had a business degree, but we'd never run a business to this scale. You learn a lot, you learn a lot about what we thought it was going to be like in the beginning and what we actually got to.

Brandon Schoen:
Yeah, absolutely. And also because we were so fanatically testing stuff in the beginning and just seeing what was working, we really were putting everything back in the business and probably investing more back in the marketing and the customer acquisition and the branding, all that stuff to cars and things that people don't normally do in the beginning when all in, and you don't have to do that. But I think that's attributed to a lot of our growth where it might've taken, like for example, Corby 10 or 20 years to get where he's at, we're now at that level. And just a few years, three or four years. And that's why is because we were so aggressive and that's why our expenses were higher, but we were willing to take the hit and do that so that we could grow faster and get to this point. But yeah, I think that's a good point out for sure.

Brandon Condrey:
I remember in the beginning we had an issue with our laundry. We were using a washer and dryer that was given to us. It was 20 years old and it was a real piece of junk. And we were looking at, do we need to upgrade this system to something? And I remember Corby telling us, like, just set yourself up for success. So that was one of the things that we spent a boatload of money on in the beginning, when we had like two teams, we spent, I don't know, $5,000 on washers and dryers, five sets of them. And then we had to spend $8,000 to make the building have five receptacles for plumbing and electrical. So the stuff that we were doing in the beginning was quite aggressive. So we were setting ourselves up for success because we were spending all of that money. We were bringing in on improving it so that we could keep going really, really fast. So Corby had said we could get $2 million in two or three years. We started in the middle of 2017. We had like a six month practice from, but if you count 2018 is the full year. So 2018, 2019, 2020, we are in the fourth full year and we are flirting with 2 million bucks. So it's going to come very, very close. We're recording this in the middle of October, we still have two and a half months left of the year. We're going to come dangerously close to 2 million bucks. So that happened in four years instead of three. But again, with a pandemic hit in there, just for fun, just to tweak things a little bit. I moved on from those financials to our marketing plan. So there was this one sentence in here that I thought was worth reading, which was like, we believe our biggest marketing driver will be word of mouth advertising between satisfied customers in their personal network. And then we can go on to say that we come up with this referral plan where one referral gets 10% off and two gets 20. And at five you have a free clean. All of this got scrapped. Obviously we have a very robust marketing and advertising plan across many digital platforms, which is what you guys can learn in the 10X course. But our referral right away, we just realized that right, a clean cost of $150, you refer to customer, you get 10, 10% off. That's $15. That's not exciting to anybody. So we very quickly just changed it to, if you refer us a recurring customer, we'll just give you a free clean, because a recurring customers were thousands of dollars to us. So why not give you the 150 bucks? So we nixed that plan right away. I think one of the good quotes that you hear from time to time, as you know, no plan survives first contact with the enemy. This is definitely one of those situations where yeah, we had it all planned out. We're going to do this, that, and the other thing. And then you get in there and you start doing it. And you're like, well, we clearly had no idea what we were doing, even though we had a fairly good idea.

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Brandon Schoen:
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Brandon Schoen:
And I think that's really important to note too, is a lot of times you don't know what you're doing. In fact, even if you're, you've been in business for awhile, you still have to be humble enough to be like willing to learn I'm coachable and trainable and teachable. And when you start taking action on stuff, you have to be able to adapt quickly and be able to maneuver around, oh, we didn't expect that challenge or this isn't going to work at all. Or like you said, right there, the customer will appreciate way more having a free clean than 10% off. That's like chump change. But they love the fact that we do the free clean. Then we get quite a few referrals from that. So that's a good pivot. I would say that we did on that.

Brandon Condrey:
There is a section in here where we covered technology that we would use over the course of it. And this is actually pretty close to where we ended up at. So we said, we're going to use service autopilot. We switched to service fusion, but it's the same setup, scheduling and billing and CRM get response for email. I think we still use get response from time to time. We may have switched that up to a different service, but the overall concept is the same for email marketing.

Brandon Schoen:
We were using then convert kit. Now we're you MailChimp just make everything simpler. It's a much more new.

Brandon Condrey:
We had WordPress for our website. We still use WordPress. It's a custom theme now, but it's still a WordPress website. Facebook ads in here. We talked about that. We use those Google. Yep. Talk about that hootsuite. We still use that that's for social media deployment of posts, QuickBooks online and Paychex. We ended up going a different way with QuickBooks, but now we're back on it. And we use Paylocity instead of Paychex, Asana and slack. I still want to get us on slack. We've never used that, but we do use monday.com, which is basically a different version of Asana and Xavier. We use APR quite a bit for backend. So it was good to know that some of this stuff was exactly where we thought it was going to be. I do like in here that we said we would buy a used Nissan versa for six to $8,000. Now we're paying something like 15 grand for one of those cars because Nissan discontinued them and they are very hard to find. And we're in the middle of a car shortage in general because of supply shock around the world.

Brandon Schoen:
We're actually looking at switching over the vehicles and still somehow trying to maintain the branding the same look, but look into that more.

Brandon Condrey:
Yep. We had some milestones in here. We were going to build a customer list and hire a team. All these things happen. But in the beginning we were trying to launch neighborhood by neighborhood and keep it very siloed so that we could really own a whole neighborhood. And then we moved, but we exploded. The word of mouth thing blew up. The advertising blew up. We just couldn't. So we were trying to manage it in one neighborhood to keep everybody happy. And then it became like, well, just kidding. We do the entire Metro area.

Brandon Schoen:
Which is also why we were a lot less efficient in the beginning because we were literally teams are driving like 30, 40 minutes sometimes out to Placitas and then back to Albuquerque and then to Bernanillo, which are cities that are Albuquerque is a pretty big, small city, big, small town. So now I want to say it was like a year or two in Brandon. You had the districting, which kept the teams in certain areas of town, just smaller neighborhoods. So we didn't have to drive as much on that contributed to a lot more efficiency and profit margins as well.

Brandon Condrey:
Yeah. So we also have this revenue by month forecast that we had in here, where we were going to in June of 2017, we were going to do $12,000 in revenue. And then a year later in may of 2018, we were going to do 25K and this, this nice linear growth pattern. I think we were way off. So for 2017 we had six months. And in total we did something like 70,000. So we were doing a little over $10,000 a month for 2017. So the first month we were probably on par for that, but the rest were way off. And then in 2018 we did do 500,000 in gross revenue. So, you know, having 25K per month was maybe not that far off, if I'm going to do my math real quick here. So we definitely were doing more than 25K per month. So 25K times 12 is 300,000. So we did 500. So those were not that far off. I think where our real blind spot was, was expenses. So these are things, it's all of it. I mean, it's everything except for revenue, but it was payroll. I remember being a big problem in the beginning because they were working more hours than I thought we were going to. So that was an efficiency of cleaning thing was a problem. We were paying overtime, which was a problem. There were lots of in the beginning,

but we've got that all dialed in pretty well. These days, The bonus report, which we're going to be launching soon in the cleaning systems course. But all of that stuff that we worked on with Corby, our mentor was efficiencies and the cleaning, the process, making sure they were in and out in a specific amount of time. So it's a thorough clean,

but super fast. And then that bonus report, we were incentivizing that speed and efficiency, which really helped our profit margins a lot as well, because you'll, you can stray away a lot from those efficiencies if you're not tracking and measuring those deliverables. Yeah. So the other thing that is in the business plan many, many times is this phrase that live plan used called direct costs.

That's basically cost of goods sold. So cost of goods sold is things like rags and cleaner and stuff. And we had that like priced way, way high. And in reality, it was not that bad at all. Cost of goods sold is very, very minimal. So costs of goods sold. I think for us as like, I don't know,

you're looking at $10,000 over a year on a $2 million business because there's not that much stuff that we buy to make it run. It's mostly people, you need people, you need a good people, need you to pay them. Well, that's where all of the efforts. Yeah. And I remember in the beginning, Corby telling us that he was like,

Hey, the equipment supplies, it doesn't cost anything. He's like, it's labor. That's your biggest cost with any service business? That's the situation. Yeah. So I think that's it for the most part. I mean, we've got some cashflow statements down here that are way off, because again, we weren't profitable in those years. And then we have some balance sheets,

which are also way off and that's mostly because of the pandemic. So the pandemic we did incur some really long-term loans that were government programs. So we had $150,000 from the state of New Mexico. That's over 20 years at 1.6%. And then we're working on a disaster loan. That's going to boost that up a little bit more. So all told, we'll have something like $630,000 in long-term loans.

But part of that is going to be the PPP loan, which was forgiven. So the pandemic really, I think tweaked a lot of people's balance sheets and financial statements in general. Yeah. CFO, John was actually recently telling us, cause he works with lots of different businesses and he said, oh, this is everyone's balance sheet right now. Like everyone's got a little extra debt on there from these loans and all this stuff that happened in 2020.

So that's expensive. Yeah. He's thinks this is the new normal basically as far as this is what balance sheets and will look like for everybody. We also have at the very end of this, which we've told you guys about before too, is this neighborhood mapping thing. And we had identified these five neighborhoods that we were going to launch in and this again,

got blown up because it just spread too fast. But on here we have Tonawanda, which has a country club, high desert prospectors Ridge, Sandia Heights, Albuquerque acres, prospectors Ridge was the neighborhood, the Brandon I live in and we were very good there. High desert, also very good Tana, one, not so much that ended up, it's a very wealthy enclave of Albuquerque and think a lot of people in there just employ housekeeper.

Like they have an employee that comes like every day to their house. And so that we didn't make a lot of inroads in there. We do have a fair amount and cookie acres, but again, that's a situation where you may have a 2000 square foot house next to eight, 12,000 square foot house. And they have like a staff that is running that house and then Sandia Heights also not a big neighborhood for us.

So in the end, because of all the data we gathered, our biggest customers are between 1600 and 3000 square feet. And they're just not in those neighborhoods. We identified the neighborhoods that we have on this list are very big neighborhoods where huge houses are. This is the cream of the crop, so to speak. But the neighborhood we were in prospectors Ridge and pepper tree,

those are the 1600, 3000 square foot houses. And that's why we performed there. Like that's our niche, that's where things were. Yeah. So that's really interesting. I think in the beginning we were kind of target only like the higher level, higher income, like luxury type people. That actually what it turned out to be is those people typically do have housekeepers or own in-house people.

And like you said, Brandon, it's more, I don't know, like the normal average house family, like around 2000 square feet, 2,500 square feet, the families with kids and dogs and the people that we target. They're not really always in those high-end neighborhood, but that's really the target market that we're shooting for now that we see that. Yeah.

So yeah. Super interesting to look back on it, things changed a little bit. 2021 is going to be our first on the books profitable year. And again, I think had 2020 not happened, had the pandemic not happened. Our 2020 year would have looked a lot different, but I think we rolled with it. That was what we taught you.

A lot of, like when we launched the podcast, it was in the middle of all the chaos. And a lot of our first few episodes were how to deal with things during the pandemic and make sure that you're communicating confidence to your customers and things like that in the flow. The pandemic is it's still here, but it's waning. It's a strange time,

but you got to move on and think about next year. Think about your next biggest year. And that's, that's where we're at. So we are going to hit $2 million this year. I'm just going to say it, we're going to do it. And then next year three, why not? Like we're on these trajectories to make these things happen. And I want you guys to be there too.

So hopefully this was valuable for you guys to see the, this retrospective on the business plan. And it's funny to look back and think looking back on it. Now we were shooting kind of small to hit a quarter million dollars that first year. And it was double that, which is pretty cool. We've pretty much doubled every year. We're doubling that might slow down a little bit more as you're getting to this level,

but really guys, I mean, you might not have the situation we add Brandon and I were splitting our salaries. You might be the sole owner of your business, so you can get to profitability and paying yourself a lot more, a lot faster, but also just in general, a lot of businesses, you're not going to be profitable year one, even a lot of businesses take five or 10 years.

I think Amazon Jeff Bezos, it took them like 10 or 15 years before he was even profitable. So like think longterm just because you're not profitable right away. It's actually healthy to be growing and technically not profitable, but you're making money. It's not like you're negative, but you write off a lot of expenses. And really Brandon, like just our last meeting with our CFO of the last few times,

the last few weeks, we're hitting, starting to hit a lot more efficiencies and profit margins. I think it was 17% the other week, 12% the other week. So we're shooting for that 20% profit margin somewhere around there. Maybe we can get further than that. But I think we're starting to really, At some point, as we get to tweak the EOS things and these efficiencies,

but having a month where we had 17% when we were looking at months that were in the negative for three years before, that is huge. So, so that's it guys. Let us know if you have any questions. I hope you enjoyed it and we'll see you on these courses so you can learn some more. Yeah. If you guys want to start really taking action and growing your business,

check out our 10 X course. And again, guys, just keep doubling down, take an action on your businesses and we'll see you guys in the next episode. Keep it clean, Keep it clean. Thanks for joining us today. To get more info, including show notes, updates, trainings, and super cool free stuff. Head over to Profit Cleaners dot com and remember keep it clean.

Announcer:
Thanks for joining us today. To get more info, including show notes, updates, trainings, and super cool free stuff. Head over to Profitcleaners.com and remember keep it clean.