Carpet and Upholstery Cleaning Services

Like New Carpet Cleaning will add at least one new local base each year, consisting of parking for the company van and storage for cleaning equipment and supplies. This future growth will be financed by cash generated from existing locations and debt to finance vehicle and cleaning equipment purchases.

Start-up Funding

Start-up funding will be provided by a combination of owner investment and investor funding, with a small amount of debt. The owners will contribute $20,000 of initial funding to develop a prototype of the website. Investors will contribute $57,500 for a 30% share of the company.

Break-even Analysis

The business will benefit from a low monthly break-even point due to the assignment of most costs directly to the cleaning service (gasoline, cleaning crew labor, and cleaning products) and the low payroll that is achieved by leveraging Like New’s website, which will reduce administrative costs.

Projected Profit and Loss

The business will experience modest profits for its first three years of operation. This is due to the fact that the operations of the organization will be built to scale up over a larger geographic region. In the fourth and fifth years of operation, this will begin to pay off with healthy profits.This will prove the viability of the business model for a franchise or statewide expansion.

Direct labor is estimated at 35% of sales revenue (the actual cleaning representing about a 280% markup of the labor). Direct labor is included in the cost of sales.

Projected Cash Flow

In the first year, cash flow will be supported by start-up funding and full payment by customers in advance Company vans will be purchased with auto loans. When the business expands to new offices across the county, additional vans and cleaning equipment must be purchased. These will be financed through debt, including a company credit line.

Projected Balance Sheet

The net worth of the business will show healthy growth, even while liabilities will increase due to the growth of the business and the need to purchase additional assets. Liabilities will initially decrease in the second year as accounts payable from the first large expansion are paid off. After that point, growth will be more even. A cash balance will be built up with the plan of financing expansion of the business.

Business Ratios

The business will have higher SGA expenses as a ratio of sales compared to the carpet and upholstery cleaning industry as it requires a more professional, senior-level staff during its first years of operation. These years are key to establishing the systems and procedures which can be scaled for expansion. SGA as a percentage of sales will drop to lower than the industry average after this expansion due to the reduction in staff and office overhead allowed by its Web-based sales model. Savings from this will be put into advertising to support the rapid growth of the business.

Long-term Plan

The business’s financial strategy is to grow rapidly to the point where its investment in its website and infrastructure can be shown to provide much greater revenue than that of the competition’s more traditional approach of working with salaried salespeople. At this point, the business will present a viable model for a second round of equity financing to move towards a regional and then statewide franchise. At this point there will be the potential for initial investors to cash out of the business.