There are advantages in purchasing an existing business or investing in a franchise:
• Goodwill is already established, as is the client and staff base.
• Information about the market potential is readily available.
• Much of the ground breaking has been accomplished.
• Site operation has been previously approved.
The disadvantages are:
• Changes (even for the better) may be difficult to implement.
• There may be problems with clients and staff accepting new management.
• Costs may be incurred in advertising if it is needed to replace lost clients and staff.
Learn everything you can about the business or franchise and get professional advice. Above all, remember to ask these questions:
(a) Why is the business being sold?
(b) What are the physical assets of the business?
(c) What are the sales figures?
(d) What are the costs?
(e) How long has the business been in operation?
8. Leasing Versus Purchasing
Whether or not you decide to purchase an existing franchise or company, equipment is an important factor to remember during the initial phase of your business. The equipment needed will determine the size and scope of your business start-up. Some businesses may already come complete with basic equipment. But even if it doesn’t, you won’t need to invest a lot of your start-up money in costly equipment. The nature of the home cleaning business is that it is simple and inexpensive to run. However, as your business progresses, prepare in advance to expand into the commercial cleaning market. You may need special cleaning equipment or company vehicles. Leasing expensive items certainly has its advantages. There is little capital outlay, the convenience of immediate possession, and tax savings. (Check with your accountant to find out what the tax advantages are.)
The following are pricey items that you might consider leasing:
• Office space
• Vehicle
• Telephone/cell phone/answering machine
• Computer and printer
• Heavy-duty equipment
On the other hand, leasing some types of equipment can be expensive. For the money you pay, you retain no value.
With leasing, you can try the equipment out for a while and assess whether it is necessary for the company. A service contract may be included in the lease. Over the long term, you’ll be able to decide which, owning or leasing, is the more attractive option.
3
Setting Goals And Financing
1. Your Mission Statement
Your mission statement proclaims your operating principles. It is a statement about your business and your goals.
The mission statement should reflect your personal objectives and the impact your business will have in the marketplace. It should be concise and readily understood by your market, your advertisers, your staff, and your friends and family.
Case study
Anytown is a medium-sized city of 300,000. It is an industrial base as well as the head office of several national companies. There is a university with a well-known medical school and six hospitals. The Cleaning Company Inc., located in Anytown, has the following mission statement and goals:
Mission statement: The Cleaning Company Inc. will offer the best home-care cleaning service in the area.
The Cleaning Company Inc. will offer quality cleaning services performed by well-trained, bonded workers to the residents of Anytown, Anywhere, at competitive prices, and will generate sales of $100,000 per annum, with a 40 percent net profit return.
Our customers are the estimated 5,000 homeowners in the area who have the disposable income and the need for a cleaning service.
We provide top-notch general cleaning services for our clients. Our goal is to make a profit and provide employment in the Anytown community. The Cleaning Company Inc. will employ ten cleaners on both a full-time and a part-time basis.
The Cleaning Company Inc. team is made up of both professionals and skilled employees. President and founder Pat Jones is a cleaning professional with 15 years of experience as both an independent cleaner and a contract worker. On the advisory board are Jane Legal, a practicing lawyer with ten years of experience in business and corporate law, and June Counter, a qualified accountant with ten years of experience as a consultant to small business.
Once you know the potential for your market, set goals for your company. Write down your goals for your company and your mission statement.
Figuring out how to reach those goals is the next step. You’ll need to know the following:
(a) Prices to be charged
(b) Range of services offered (i.e., from light housekeeping to heavy housecleaning)
(c) Location
(d) Style and “look” of company
(e) Type of clientele and how to attract them
(f) Training required
(g) Wages
(h) Expected sales level
(i) Anticipated growth and its effects
(j) Future planning to ensure that goals and objectives are met
Write down your goals and expectations.
2. Forecasting Your Needs
2.1 Analyzing your costs
An essential part of getting your business successfully launched is forecasting your sales and expenses. This is difficult in the beginning when you have no financial history to help you out but you must do it.
You have two goals for your forecasting: you want to know what your costs are and you want to know what you can expect to earn. Once you know the risks involved versus the potential for earnings, you can estimate what your profits should be. Estimating your costs and income tells you the following things:
(a) How much you need to start up your business
(b) Whether you can make a profit
(c) What equipment is necessary
(d) Whether your business has growth potential for the future
(e) Whether potential lenders should invest in your business
(f) What your risks will be
(g) How long your start-up funds will last
An accurate forecast must be based on what you already know. Analyze your existing resources and include the money on hand to put into your business, any loans or outside funds, your business capacity, how much you will charge, and how much it will cost you to provide your service.
You must also be able to predict how many clients you will have, how much business they will generate, and all the expenses for your business (including advertising, telephone, office supplies, and equipment).
Costs are subject to change and they will increase based on the growth of your business. Costs are also recoverable