In this post, we’re going to talk about some common financial mistakes that a successful cleaning company cannot afford.
Consider it your not-to-do list.
Here’s a harrowing statistic: 20% of small businesses don’t last one year. And half don’t make it to the five-year mark. A lot of these failures come from money mistakes.
We’re sharing five financial reasons why cleaning companies fail—and how you can avoid these mistakes.
Mistake #1: Making large and unnecessary purchases that your business can’t yet afford.
It’s so tempting to invest in a top-of-the-line vacuum cleaner or a new carpet shampooer. But small business owners who make too many lavish purchases pay a steep price. New businesses don’t always make much money initially, and a fancy gadget won’t help if the company can’t afford monthly payments. If the business folds, the (now former) business owner still has to make payments on that fancy gadget while it collects dust.
Thankfully, you don’t need a top-of-the-line vacuum cleaner to make your customers happy. Modestly priced equipment will do the job just fine, and they won’t threaten your ability to make payroll. Of course, you can invest in nicer stuff down the line if you decide the investment is suitable for your cleaning company. But until then, stick with the affordable options and admire the fancy things from afar.
Mistake #2: Neglecting business insurance has ended many a successful cleaning company.
Mistakes happen. A cleaner might accidentally spill something on a client’s new sofa or whack the expensive TV with a broom handle. Maybe a vase gets knocked over, or the vacuum cleaner scoops up an earring. A business owner who doesn’t bother researching and buying business insurance has to replace those items out of pocket. Too many incidents like this can empty the coffers quickly.
There’s no big secret here: Don’t put off buying business insurance. We’re all human, which is why we have insurance for our cars, homes, bodies, teeth, and entire lives. Your business needs it too. That way, your business is protected from inevitable human error.
Mistake #3: Mixing personal finances with business finances.
In the early days, it’s easy to accept payments through Venmo and pay for things with a personal credit card. And while this can work for a short time, it’s not a sustainable way to manage business finances. Once things get too intermingled, it can be almost irreparable. This can lead to taxes and cash flow problems and make the business vulnerable to audits.
Block off time, in the beginning, to do a little research and find the proper business account for you. In addition, be sure to apply for a business credit card, even if it’s just a small one to start. When you keep your finances separate from the beginning, it’s much easier to stay on budget in both areas. You’re also less likely to encounter sticky situations with your taxes.
Mistake #4: Not keeping a budget or tracking expenses effectively.
It’s incredible how quickly a handful of careless purchases can add up. Some business owners don’t bother with the budgeting process—and are surprised to find themselves unable to make payroll. Neglecting to keep careful records and impulsive spending can spell disaster for a small business.
Invest in simple accounting software so you can see what’s happening with your cleaning company’s money. It would be best if you had a clear plan at all times for what you’re going to spend and why. You can handle lean seasons just fine and reach financial sustainability if you stick to it.
You should also keep close track of revenue and have a clear system for collecting payment. If you’re not bringing in any money, you’re not going to make it. Software like Launch27 makes it easy to collect online payments from customers automatically. That way, you don’t have to rely on your memory or worry about a missed payment.
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If you can avoid these common mistakes, you can avoid becoming another failed small business statistic. And you can enjoy a successful cleaning company well past the five or even ten-year mark with sound money management.
So, find the right tools for you, make a plan, and watch your business grow.