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Clean Office Pros

Executive Summary

Introduction

Clean Office Pros is a new cleaning service specializing in office cleaning and serving the Kansas City, Missouri area. The business will sell office cleaning and related services to businesses with office spaces of any size. To that end, Clean Office Pros seeks funding for equipment and initial operations of the business.

The Company

Established in 2009, the business offers office cleaning, floor treatment, carpet cleaning, and window cleaning for businesses with office space in the Kansas City area. The business was founded by Paul Vinci and Reid Werbitt, cleaning industry professionals with decades of collective experience, who have pooled their resources to develop a new strategy for reaching and serving business clients. The business will operate out of a central office and storage facility and use the labor of trained cleaning crews to serve clients.

Services

Services offered will be based around basic office cleaning scheduled on a monthly basis, which will be offered with extreme care for the client’s privacy, security, and assets. Additional services will be sold to the same clients to deepen their relationship with Clean Office Pros. Organizational services will be introduced in after three years. Services will be environmentally friendly, both in the products used and in their methods of disposal.

The Market

The market currently consists of 40,000 small, medium, and large office businesses. Healthy growth is expected for this market, especially for small offices which will be the initial target market for the business. Focusing on small offices will establish the reputation of the company by working with a variety of clients and will force the streamlining of operations.

Financial Results

The business expects to reach $1 million in annual sales in its second year of operation and begin to pay dividends to investing partners in its first year. Net profit of $70,000 will be achieved in the first year and will double in the second year. Break even will be achieved quickly partially due to the fact that the management is experienced with sales, marketing, and operations, and that all cleaning crews will be paid only for hours worked, reducing the payroll risk for the business.

Janitorial services business plan, executive summary chart image

Objectives

Clean Office Pros seeks to establish itself as a leader in office cleaning in the Kansas City, MO area. Specific objectives we will seek to meet over the next two years include:

  • To build a substantial, regular client base of 100 clients on monthly cleaning plans, for a total of over 800,000 square feet of office cleaning each month.
  • To build operations infrastructure, including a central headquarters, 5 delivery vans, professional management, and documented processes for operations and cleaning practices.
  • To build healthy gross margins by establishing itself as a significant buyer and reducing vendor pricing on cleaning supplies and by training low-cost labor to be more productive.
  • To create a culture of productivity and resourcefulness for all staff by encouraging the best ideas and cleaning procedures to rise to the top and rewarding cleaning crew for their contributions.

Mission

Clean Office Pros seeks to ensure that businesses have a spotless office environment to support the work they do and forget their worries about office cleaning. The company values its employees to clean well and clean smart, listens to the needs of its client to do the job they need done, and responds to the demands of the environment.

Keys to Success

To become successful in the office cleaning business, Clean Office Pros must:

  • Foster an environment of employee empowerment from day one of operation to make sure cleaning crews clean well (thoroughly and carefully) while cleaning smart (efficiently)
  • Listen attentively to the needs of the client and communicate this information effectively to cleaning crews
  • Research and remain experts on the greenest cleaning practices and products
  • Remember that the cleaning must meet or exceed client expectations to be considered done
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Company Summary

Clean Office Pros is a office cleaning business located in Kansas City, MO. Established in 2009, the business offers office cleaning, floor treatment, carpet cleaning, and window cleaning for businesses with office space in the Kansas City area. The business was founded by Paul Vinci and Reid Werbitt, cleaning industry professionals with decades of collective experience, who have pooled their resources to develop a new strategy for reaching and serving business clients.

Company Ownership

Clean Office Pros is an S Corporation currently owned 51% by Paul Vinci and 49% by Reid Werbitt, the founders and directors of the company. Once additional investment has been contributed by angel investors, those investors will own 49% of the business, Paul Vinci will own 26% and Reid Werbitt will own 25%.

Start-up Summary

The startup expenses for the business reflect the legal permitting required in the state of Missouri, the legal agreements with additional investors and banks for financing, two month’s security deposit at an estimated $2,500 per month and one month’s rent for improvements to the office and storage facility, improvements including lighting fixtures, storage cabinets, and sinks, and office supplies and computer supplies for three workstations (two founders and one administrator).

Assets which must be purchased include office furniture and computers for the office, cleaning equipment including buffing machines, vacuums, and basic tools (mops, brooms, buckets, etc), and one delivery van.

Some of the larger pieces equipment can be purchased with seller-financing, such as the delivery van and buffing machines. Otherwise, it is most economical or required to pay for these expenses and assets in cash.

Janitorial services business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $2,000
Stationery $2,000
Insurance $3,000
Rent $7,500
Computer Systems $5,000
Office Supplies $2,000
Facility Leasehold Improvements $10,000
Other $2,000
Total Start-up Expenses $33,500
Start-up Assets
Cash Required $60,000
Other Current Assets $5,000
Long-term Assets $40,000
Total Assets $105,000
Total Requirements $138,500

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Services

Services to be offered by Clean Office Pros will focus specifically on office spaces and include:

  • Office cleaning (including garbage removal, dusting and cleaning of all surfaces, sweeping and mopping of floors, and cleaning of doors and walls as needed)
  • Furniture cleaning
  • Floor waxing
  • Floor stripping and sealing
  • Carpet cleaning
  • Window cleaning
  • Bathroom and kitchen area cleaning

In the future, Clean Office Pros will provide office organization and decluttering services through an interior designer. This service will be provided as an upsell to this foundation of services.

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Market Analysis Summary

The market for office cleaning in the Kansas City area includes small offices (1-5 employees), medium offices (6-20 employees) and large offices (21 employees and up). In the Kansas City area, businesses with offices are growing as the service sector increases, with a net of 3,000 new businesses established in 2008. Due to the economic renewal occurring in this community, this growth is expected to continue over the next two years. Small offices are targeted as well as large, although margins will be lower due to the increased amount spent on sales and travel relative to medium and large offices, because many small businesses will expand, giving Clean Office Pros a foothold in this market by the time competitors are willing to sell to them.

Market Segmentation

The market for Clean Office Pros is comprised of small offices, medium offices and large offices in the Kansas City area.

Small Offices: Either newly established ventures, or small businesses designed to remain small, few cleaning businesses seek to serve this market because of the cost in doing so. Therefore, business owners generally require employees to do their own cleaning, assuming they are saving money through this work. Clean Office Pros must show these businesses not only that they do not save money by having employees do this work, but that by having professional cleaners maintain their offices they will increase morale, productivity, and their appearance to customers, if customers/clients enter their office spaces.

Medium Offices: This group has a growing acceptance of the need for professional cleaning services and is concerned primarily about price.

Large Offices: This group accepts the need to outsource their office cleaning to professionals and is interested in working with vendors who can handle specific requests and take care to protect the information, security, and equipment within their office spaces.

Janitorial services business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Small Offices 9% 25,000 27,250 29,703 32,376 35,290 9.00%
Medium Offices 7% 10,000 10,700 11,449 12,250 13,108 7.00%
Large Offices 6% 5,000 5,300 5,618 5,955 6,312 6.00%
Total 8.14% 40,000 43,250 46,770 50,581 54,710 8.14%

Target Market Segment Strategy

Clean Office Pros will build its expertise from the ground up, by building a successful base of small-office clients, moving on to medium-office clients and then large-office clients. While larger clients will not be turned away as the business starts out, it is expected that they will be more likely to use Clean Office Pros services after its record of customer service and operational success is established by work with numerous smaller clients. Furthermore, by working with smaller clients first, the business will establish a foothold faster as they will not be competing directly with established cleaning companies at first, and will be able to work towards making this group more profitable through economies of scale and tight operations.

Clean Office Pros will not work for landlords, providing building janitorial services. Many firms specialize in this service already, and marketing janitorial services to buildings involves different promotional activities, operations, and cleaning skills, to a certain extent. By specializing in commercial office cleaning, Clean Office Pros will increase its ability to market to the many thousands of area businesses directly.

Service Business Analysis

The office cleaning industry includes many local companies as well as some national franchises. Services are purchased directly by business managers and owners for small businesses and by purchasing agents, office managers, and procurement specialists for larger businesses. Businesses desire ongoing relationships with cleaning vendors where they do not have to worry about the cleaning process, but will be concerned if they are paying higher than market rates. Businesses appreciate the ability of a company to quote monthly cleaning rates to make costs less variable, but also to handle special cleaning request as they arise. Cleaning vendors are sought out through internet searches, the yellow pages, and business referrals.

Financial analysts report that the commercial cleaning industry is recession resistant and highly stable. Commercial cleaning overall was an $80 billion industry in 2008 and is one of the fastest growing industries in the US, with projected growth to $150 billion per year by 2010.

Competition and Buying Patterns

The commercial cleaning industry is very fragmented with no one company owning more than 6% of the market. Franchises account for 10% of the market and local companies account for 90%. Top franchises include JAN-PRO Cleaning Systems, ServiceMaster Clean, MTOclean, the Cleaning Authority, and MARBLELIFE. Economies of scale for franchises are obtained through unified operations systems, national marketing campaigns, and somewhat through volume discounts from suppliers.

Customers seek out cleaning services based on a combination of reputation, price, and depth of services offered. While large offices value depth of services more so, smaller firms put a greater value on price.

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Strategy and Implementation Summary

Clean Office Pros has selected the following priorities for its rollout strategy:

  • To begin by targeting small offices to gain a foothold in the Kansas City office cleaning market.
  • To leverage the reputation and experience from work with small offices to increasingly seek medium and large office clients in the third year of operation.
  • To rapidly scale up organizational infrastructure, including cleaning crews, equipment, and vans.

Competitive Edge

Clean Office Pros will develop a competitive edge based on its utilization of the skills, ideas, and productivity of its employees. By encouraging and rewarding employee initiative and ingenuity to discover the best ways to clean well and smart, morale will be increased, making Clean Office Pros a more desirable place to work. The reputation of the firm as a great place to work will increase application rates and the strength of new hires, reducing the costs of turnover and training. Customer satisfaction will increase and costs will drop due to this focus on employee utilization.

Initial training by Reid Werbitt and Paul Vinci will be for cleaning crew heads. This will be ten hours of training in Clean Office Pros methods for experienced cleaning personnel. Cleaning crew heads will each provide ten hours of training, in turn, for new members of their cleaning crews when they are brought in to the business, based both on Clean Office Pros methods and basic cleaning skills (depending on the current skills of the crew member).

All client information about the cleaning will be transferred to a detailed job sheet which will be discussed with the cleaning crew head before reaching the job site. The cleaning crew head will go through a tour and inspection of the job site while the client is present to insure that the job sheet is complete and that all information about keys, security, and access is understood. Cleanings will always be run by a cleaning crew head and a crew of one to four members. After the crew have experience on a site, a cleaning crew head may move between a few job sites to supervise a greater number of jobs over one day.

Marketing Strategy

The marketing strategy for Clean Office Pros begins with its initial target market of small offices.

Promotional activities in the startup phase will include:

  • Local Trade Show Booths at Office Services and Entrepreneurial trade shows
  • Blogging, Newsletters, and Microblogging to establish Clean Office Pros as thought leaders in office cleaning
  • Prospecting by phone to cold and warm leads
  • Business networking to generate qualified leads
  • Coupons for free trials for new businesses passed on through the local Small Business Development Center and Chamber of Commerce

From the startup period onward, the following promotional activities will be important:

  • Search engine marketing through text ads around office cleaning keywords in the local area
  • Search engine optimization to improve organic search rankings
  • Yellow page listing
  • Local TV commercials

These ongoing promotional activities are reflected as marketing expenses on the Clean Office Pros Profit and Loss statement.

Sales Strategy

Sales will be managed by co-founder Reid Werbitt. Reid Werbitt expects about ten small business clients from his previous work at JAN-PRO to move to Clean Office Pros upon learning of their value proposition. This will account for a starting base of clients for the business.

The sales process will begin with a short phone conversation to go over the basics of the services offered and to qualify the customer as one interested in regular cleanings. An in-person meeting at the customer’s office will follow, after which a proposal for a monthly rate for cleaning will be given. A follow up with the client will occur after the first three regular cleanings to get additional feedback and to continue to adjust the directions to the cleaning crew.

Before inquiries begin to come in through advertising, Werbitt will prospect for sales through business networking, cold calls, and warm calls. Clean Office Pros expects 5% of cold calls, 20% of warm calls, and 30% of networking leads to yield regular customers.

As a partner in the business, Werbitt will be compensated through a base salary, dividends and appreciation of the company’s stock. After two years of operation, an additional salaried salesperson will be hired who will be compensated for sales through quarterly bonuses and Werbitt will remain sales manager.

Sales Forecast

Growth is expected to speed up rapidly over the first two years as small-office customers are sought out and sold to. After the first two years growth will slow as operations must be continually increased to allow for greater growth. However, the additional target market of medium and large offices will be accessed starting in the third year of operation. Sales will be driven by the basic office cleaning service. Based on the previous success of Reid Werbitt as a seller of commercial cleaning, these projections are reasonable, as Werbitt sold $2 million in cleaning services in his last full year at JAN-PRO. The additional services will be sold as add-ons to clients who purchase office cleaning. It is estimated that 50% of clients will purchase some additional services.

The forecast is also supported by the fact that, after the first year of operations, medium offices will be targeted as well, increasing the rate of growth as each sale will bring a higher square footage of space to clean.

Direct costs include the labor of cleaning crew members and the cleaning crew head, cleaning supplies and gasoline or other transit costs for crew and equipment. Cleaning Crew Head supervision of jobs is expected to cost 5% of sales and Cleaning Crew (Hourly) wages for the execution of cleanings is expected to cost 27.5% of sales.

To ensure that sales are profitable, Werbitt will not be compensated on commission by sales, but by profits, after a reasonable base salary. This will keep gross margins around the industry average of 68%.

Janitorial services business plan, strategy and implementation summary chart image

Janitorial services business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Office Cleaning (1000 Square Feet) 5,014 8,000 12,000
Window Cleaning (10 Windows) 807 1,000 1,250
Floor Treatments (100 Square Feet) 991 1,500 2,000
Carpet Cleaning (100 Square Feet) 1,304 1,000 1,250
Bathroom and Kitchen Cleaning (By Room) 528 500 600
Total Unit Sales 8,643 12,000 17,100
Unit Prices Year 1 Year 2 Year 3
Office Cleaning (1000 Square Feet) $100.00 $100.00 $100.00
Window Cleaning (10 Windows) $90.00 $90.00 $90.00
Floor Treatments (100 Square Feet) $11.00 $11.00 $11.00
Carpet Cleaning (100 Square Feet) $80.00 $80.00 $80.00
Bathroom and Kitchen Cleaning (By Room) $30.00 $30.00 $30.00
Sales
Office Cleaning (1000 Square Feet) $501,396 $800,000 $1,200,000
Window Cleaning (10 Windows) $72,595 $90,000 $112,500
Floor Treatments (100 Square Feet) $10,899 $16,500 $22,000
Carpet Cleaning (100 Square Feet) $104,325 $80,000 $100,000
Bathroom and Kitchen Cleaning (By Room) $15,839 $15,000 $18,000
Total Sales $705,053 $1,001,500 $1,452,500
Direct Unit Costs Year 1 Year 2 Year 3
Office Cleaning (1000 Square Feet) $35.00 $35.00 $35.00
Window Cleaning (10 Windows) $36.00 $36.00 $36.00
Floor Treatments (100 Square Feet) $4.40 $4.40 $4.40
Carpet Cleaning (100 Square Feet) $32.00 $32.00 $32.00
Bathroom and Kitchen Cleaning (By Room) $12.00 $12.00 $12.00
Direct Cost of Sales
Office Cleaning (1000 Square Feet) $175,488 $280,000 $420,000
Window Cleaning (10 Windows) $29,038 $36,000 $45,000
Floor Treatments (100 Square Feet) $4,360 $6,600 $8,800
Carpet Cleaning (100 Square Feet) $41,730 $32,000 $40,000
Bathroom and Kitchen Cleaning (By Room) $6,335 $6,000 $7,200
Subtotal Direct Cost of Sales $256,951 $360,600 $521,000

Milestones

Reid Werbitt will head the sales activities, including prospecting and networking to generate leads. Paul Vinci will manage the marketing and promotional activities including two trade shows (in January and February), the TV ad production (through a video production vendor), initial search engine optimization (through an SEO vendor), and the coupon campaign, which will cover three months of basic office cleaning for small-office clients.

Janitorial services business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Phone prospecting 11/1/2009 4/1/2010 $0 RW Sales
Business networking 11/1/2009 4/1/2010 $5,000 RW Sales
Entrepreneurship Trade Show 1/7/2010 1/9/2010 $10,000 PV Marketing
Office Services Trade Show 2/9/2009 2/11/2009 $8,000 PV Marketing
Coupon Campaign For Free Trial 11/1/2009 5/1/2009 $25,000 PV Marketing
Initial Search Engine Optimization 11/1/2009 2/1/2010 $10,000 PV Marketing
TV ad production 10/1/2009 11/15/2009 $20,000 PV Marketing
Name me 11/23/2009 12/23/2009 $0 ABC Department
Name me 11/23/2009 12/23/2009 $0 ABC Department
Name me 11/23/2009 12/23/2009 $0 ABC Department
Totals $78,000

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Management Summary

Paul Vinci and Reid Werbitt will be the initial managers of the company. Paul Vinci has ten years experience as store manager of a cleaning supply store, where he managed a staff of ten and was responsible for marketing, operations, and human resources. He will continue to manage those departments at Clean Office Pros and his title will be CEO.

Reid Werbitt will manage sales and be the lead salesperson for the early operations of the firm. He has ten years experience as an account executive for JAN-PRO, a commercial cleaning business. Werbitt’s title will be Chief of Sales.

Financial management will be through a part-time accountant during the early operations of the firm.

Personnel Plan

The business will begin with minimal salaried staff, with most work performed by the two founders. The founders will be compensated through reasonable base salaries and will receive compensation through dividends and the growth of the business.

In the first year, an accountant will serve the role of Chief Financial Officer (CFO). In the second year, this will become a part-time position which will grow into a full-time position in the third year.

The operations assistant will be a basic administrative assistant focusing on the fulfillment of cleaning services, scheduling, quality assurance procedures, and human resources needs.

Total staff full-time equivalent on this chart include cleaning crew who work on an hourly basis and have their payroll assigned as costs of sales. One Cleaning Crew Head will be hired at the outset of the company, an additional Crew Head will be hired in the second year and a third in the third year. Each will oversee crews of one to four members, and can also supplement their supervision responsibilities as members of crews under other supervisors. Cleaning crew members will grow from five in number at the outset of the business to 11 on average in the second year and 16 on average in the third year. All of these hourly staff will be hired when at least 20 hours per week of work is available, but their overtime will be limited. The business will hire additional employees rather than use significant overtime.

Cleaning crew will receive healthy base salaries as well as quarterly bonuses based on performance ratings from both their supervising cleaning crew head and clients. Crew heads will receive performance ratings from the company managers and clients to determine their quarterly bonuses.

Once the company reaches a sustainable level of profitability, the owners want to offer a health benefits plan for their employees, but this is not included within the plan’s estimated expenses at this time.

Personnel Plan
Year 1 Year 2 Year 3
CEO $48,000 $50,000 $52,000
Chief of Sales $48,000 $50,000 $52,000
Accountant/CFO $24,000 $40,000 $80,000
Operations Assistant $36,000 $40,000 $45,000
Total People 13 16 24
Total Payroll $156,000 $180,000 $229,000

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Financial Plan

Clean Office Pros will grow significantly, even over the first three years of operation, by taking advantage of the opportunity presented by its first target market, small offices, and leveraging its success there with medium and large offices. Growth of about $300,000 is expected in sales from the first year to second and over $400,000 from the second year to third.

Financing for this growth will come from the free cash flows generated by the healthy margins in this business once break-even volume has been achieved in the first year.

By the fifth year of operation, the business will be well positioned for a strategic sale to a commercial cleaning franchise (one of the competitors discussed earlier) interested in expanding its expertise with small businesses. At this point an exit will be possible for investors and the original owners.

Start-up Funding

Start-up funding will come in part from the financing of the initial purchases (delivery van, computer and cleaning equipment), and from credit card debt.

Beyond this debt financing, most start-up funding will be provided by the two founders and ;from additional angel investors. Once the additional investment has been contributed, the angel investors will own 49% of the business, Paul Vinci will own 26% and Reid Werbitt will own 25%.

Start-up Funding
Start-up Expenses to Fund $33,500
Start-up Assets to Fund $105,000
Total Funding Required $138,500
Assets
Non-cash Assets from Start-up $45,000
Cash Requirements from Start-up $60,000
Additional Cash Raised $0
Cash Balance on Starting Date $60,000
Total Assets $105,000
Liabilities and Capital
Liabilities
Current Borrowing $5,000
Long-term Liabilities $20,000
Accounts Payable (Outstanding Bills) $2,000
Other Current Liabilities (interest-free) $0
Total Liabilities $27,000
Capital
Planned Investment
Reid Werbitt $25,000
Paul Vinci $25,000
Additional Investors $61,500
Additional Investment Requirement $0
Total Planned Investment $111,500
Loss at Start-up (Start-up Expenses) ($33,500)
Total Capital $78,000
Total Capital and Liabilities $105,000
Total Funding $138,500

Break-even Analysis

Each cleaning service offered has a healthy margin and a break even will occur around 552 units sold per month. This represents 512,000 square feet of offices or around 600 small business clients (or 400 small business and 100 medium business clients). At this point, work will be both over night and on weekends, with an average of 16 clients cleaned per day by shift workers. Six crews will be needed to provide this amount of service.

Janitorial services business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 552
Monthly Revenue Break-even $45,012
Assumptions:
Average Per-Unit Revenue $81.58
Average Per-Unit Variable Cost $29.73
Estimated Monthly Fixed Cost $28,608

Projected Profit and Loss

Gross margins will remain relatively stable and grow slightly as better margin business (medium and large offices) is sought out and better prices are established with vendors for volume discounts. The first year will represent a net profit of $71,000 which will continue to grow.

Janitorial services business plan, financial plan chart image

Janitorial services business plan, financial plan chart image

Janitorial services business plan, financial plan chart image

Janitorial services business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $705,053 $1,001,500 $1,452,500
Direct Cost of Sales $256,951 $360,600 $521,000
Other Costs of Sales $0 $0 $0
Total Cost of Sales $256,951 $360,600 $521,000
Gross Margin $448,102 $640,900 $931,500
Gross Margin % 63.56% 63.99% 64.13%
Expenses
Payroll $156,000 $180,000 $229,000
Marketing/Promotion $79,000 $90,000 $110,000
Depreciation $18,400 $30,000 $35,000
Rent $30,000 $35,000 $50,000
Utilities $1,800 $2,400 $3,000
Insurance $3,000 $4,000 $5,000
Payroll Taxes $49,095 $63,060 $86,450
Other $6,000 $10,000 $15,000
Total Operating Expenses $343,295 $414,460 $533,450
Profit Before Interest and Taxes $104,807 $226,440 $398,050
EBITDA $123,207 $256,440 $433,050
Interest Expense $2,766 $4,809 $6,159
Taxes Incurred $30,612 $66,489 $117,567
Net Profit $71,429 $155,142 $274,324
Net Profit/Sales 10.13% 15.49% 18.89%

Projected Cash Flow

Cash flow before dividends will be positive in the first year. Five months of negative cash flow are required for marketing activities to take hold before they show a greater effect on sales. Dividends can be paid out beginning in month nine to investors.

Accounts receivable will be collected in 30 days, but 45 days average has been given to be conservative.

Investment will be continually made in additional cleaning equipment and delivery vans to enable more cleaning crew to work. Furthermore, by the end of the first year, the office will expand to allow for additional storage and staff.

Janitorial services business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $571,061 $945,162 $1,366,790
Subtotal Cash from Operations $571,061 $945,162 $1,366,790
Additional Cash Received
Sales Tax, VAT, HST/GST Received $56,404 $80,120 $116,200
New Current Borrowing $10,000 $17,000 $17,000
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $20,000 $20,000 $20,000
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $657,465 $1,062,282 $1,519,990
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $156,000 $180,000 $229,000
Bill Payments $405,528 $639,751 $891,342
Subtotal Spent on Operations $561,528 $819,751 $1,120,342
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $56,404 $80,120 $116,200
Principal Repayment of Current Borrowing $7,913 $15,000 $16,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $6,000 $8,000 $8,000
Purchase Other Current Assets $2,000 $15,000 $15,000
Purchase Long-term Assets $20,000 $20,000 $40,000
Dividends $20,000 $75,000 $200,000
Subtotal Cash Spent $673,845 $1,032,871 $1,515,542
Net Cash Flow ($16,380) $29,411 $4,448
Cash Balance $43,620 $73,031 $77,479

Projected Balance Sheet

The net worth of the business will grow significantly over the first three years of operation as the business will be primarily financed by its own earnings and not need to take on a great deal of new debt. The debt that is taken on will be financing for the purchases of new cleaning equipment and delivery vans, primarily.

Additional capital is not required over the first three years of operation as the free cash flows from the business will support the business.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $43,620 $73,031 $77,479
Accounts Receivable $133,992 $190,330 $276,041
Other Current Assets $7,000 $22,000 $37,000
Total Current Assets $184,612 $285,361 $390,519
Long-term Assets
Long-term Assets $60,000 $80,000 $120,000
Accumulated Depreciation $18,400 $48,400 $83,400
Total Long-term Assets $41,600 $31,600 $36,600
Total Assets $226,212 $316,961 $427,119
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $55,696 $52,303 $75,138
Current Borrowing $7,087 $9,087 $10,087
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $62,784 $61,391 $85,225
Long-term Liabilities $34,000 $46,000 $58,000
Total Liabilities $96,784 $107,391 $143,225
Paid-in Capital $111,500 $111,500 $111,500
Retained Earnings ($53,500) ($57,071) ($101,930)
Earnings $71,429 $155,142 $274,324
Total Capital $129,429 $209,570 $283,894
Total Liabilities and Capital $226,212 $316,961 $427,119
Net Worth $129,429 $209,570 $283,894

Business Ratios

This table shows ratios for the three years of the plan compared to the janitorial services businesses of similar revenues. Clean Office Pros expects to improve on industry profitability, as shown in this table, even with slightly higher spending on S G A and advertising as a percentage of sales. Gross margins will be slightly better than the comparable industry gross margins.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 42.05% 45.03% 0.77%
Percent of Total Assets
Accounts Receivable 59.23% 60.05% 64.63% 14.54%
Other Current Assets 3.09% 6.94% 8.66% 37.68%
Total Current Assets 81.61% 90.03% 91.43% 54.28%
Long-term Assets 18.39% 9.97% 8.57% 45.72%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 27.75% 19.37% 19.95% 28.46%
Long-term Liabilities 15.03% 14.51% 13.58% 71.54%
Total Liabilities 42.78% 33.88% 33.53% 100.00%
Net Worth 57.22% 66.12% 66.47% 0.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 63.56% 63.99% 64.13% 62.79%
Selling, General & Administrative Expenses 53.42% 48.50% 45.24% 17.10%
Advertising Expenses 11.20% 8.99% 7.57% 0.21%
Profit Before Interest and Taxes 14.87% 22.61% 27.40% 5.93%
Main Ratios
Current 2.94 4.65 4.58 1.35
Quick 2.94 4.65 4.58 1.28
Total Debt to Total Assets 42.78% 33.88% 33.53% 100.00%
Pre-tax Return on Net Worth 78.84% 105.75% 138.04% -6101891.37%
Pre-tax Return on Assets 45.11% 69.92% 91.75% 31.52%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 10.13% 15.49% 18.89% n.a
Return on Equity 55.19% 74.03% 96.63% n.a
Activity Ratios
Accounts Receivable Turnover 5.26 5.26 5.26 n.a
Collection Days 43 59 59 n.a
Accounts Payable Turnover 8.25 12.17 12.17 n.a
Payment Days 27 31 25 n.a
Total Asset Turnover 3.12 3.16 3.40 n.a
Debt Ratios
Debt to Net Worth 0.75 0.51 0.50 n.a
Current Liab. to Liab. 0.65 0.57 0.60 n.a
Liquidity Ratios
Net Working Capital $121,829 $223,970 $305,294 n.a
Interest Coverage 37.90 47.09 64.63 n.a
Additional Ratios
Assets to Sales 0.32 0.32 0.29 n.a
Current Debt/Total Assets 28% 19% 20% n.a
Acid Test 0.81 1.55 1.34 n.a
Sales/Net Worth 5.45 4.78 5.12 n.a
Dividend Payout 0.28 0.48 0.73 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Unit Sales
Office Cleaning (1000 Square Feet) 235 258 284 312 343 377 415 457 503 553 608 669
Window Cleaning (10 Windows) 38 41 45 50 55 61 67 74 81 89 98 108
Floor Treatments (100 Square Feet) 47 51 56 62 68 75 82 90 99 109 120 132
Carpet Cleaning (100 Square Feet) 61 67 74 81 89 98 108 119 131 144 158 174
Bathroom and Kitchen Cleaning (By Room) 25 27 30 33 36 40 44 48 53 58 64 70
Total Unit Sales 405 444 489 538 591 651 716 788 867 953 1,048 1,153
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Office Cleaning (1000 Square Feet) $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
Window Cleaning (10 Windows) $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00 $90.00
Floor Treatments (100 Square Feet) $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00
Carpet Cleaning (100 Square Feet) $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00
Bathroom and Kitchen Cleaning (By Room) $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00
Sales
Office Cleaning (1000 Square Feet) $23,496 $25,800 $28,400 $31,200 $34,300 $37,700 $41,500 $45,700 $50,300 $55,300 $60,800 $66,900
Window Cleaning (10 Windows) $3,385 $3,690 $4,050 $4,500 $4,950 $5,490 $6,030 $6,660 $7,290 $8,010 $8,820 $9,720
Floor Treatments (100 Square Feet) $515 $561 $616 $682 $748 $825 $902 $990 $1,089 $1,199 $1,320 $1,452
Carpet Cleaning (100 Square Feet) $4,885 $5,360 $5,920 $6,480 $7,120 $7,840 $8,640 $9,520 $10,480 $11,520 $12,640 $13,920
Bathroom and Kitchen Cleaning (By Room) $749 $810 $900 $990 $1,080 $1,200 $1,320 $1,440 $1,590 $1,740 $1,920 $2,100
Total Sales $33,029 $36,221 $39,886 $43,852 $48,198 $53,055 $58,392 $64,310 $70,749 $77,769 $85,500 $94,092
Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Office Cleaning (1000 Square Feet) 35.00% $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00
Window Cleaning (10 Windows) 40.00% $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00 $36.00
Floor Treatments (100 Square Feet) 40.00% $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40 $4.40
Carpet Cleaning (100 Square Feet) 40.00% $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00 $32.00
Bathroom and Kitchen Cleaning (By Room) 40.00% $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00
Direct Cost of Sales
Office Cleaning (1000 Square Feet) $8,223 $9,030 $9,940 $10,920 $12,005 $13,195 $14,525 $15,995 $17,605 $19,355 $21,280 $23,415
Window Cleaning (10 Windows) $1,354 $1,476 $1,620 $1,800 $1,980 $2,196 $2,412 $2,664 $2,916 $3,204 $3,528 $3,888
Floor Treatments (100 Square Feet) $206 $224 $246 $273 $299 $330 $361 $396 $436 $480 $528 $581
Carpet Cleaning (100 Square Feet) $1,954 $2,144 $2,368 $2,592 $2,848 $3,136 $3,456 $3,808 $4,192 $4,608 $5,056 $5,568
Bathroom and Kitchen Cleaning (By Room) $299 $324 $360 $396 $432 $480 $528 $576 $636 $696 $768 $840
Subtotal Direct Cost of Sales $12,037 $13,198 $14,534 $15,981 $17,564 $19,337 $21,282 $23,439 $25,785 $28,343 $31,160 $34,292
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
CEO $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Chief of Sales $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Accountant/CFO $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Operations Assistant $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Total People 10 10 10 10 11 11 11 12 12 12 13 13
Total Payroll $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $33,029 $36,221 $39,886 $43,852 $48,198 $53,055 $58,392 $64,310 $70,749 $77,769 $85,500 $94,092
Direct Cost of Sales $12,037 $13,198 $14,534 $15,981 $17,564 $19,337 $21,282 $23,439 $25,785 $28,343 $31,160 $34,292
Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $12,037 $13,198 $14,534 $15,981 $17,564 $19,337 $21,282 $23,439 $25,785 $28,343 $31,160 $34,292
Gross Margin $20,992 $23,023 $25,352 $27,871 $30,634 $33,718 $37,110 $40,871 $44,964 $49,426 $54,340 $59,800
Gross Margin % 63.56% 63.56% 63.56% 63.56% 63.56% 63.55% 63.55% 63.55% 63.55% 63.56% 63.56% 63.56%
Expenses
Payroll $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000
Marketing/Promotion $10,000 $10,000 $8,000 $8,000 $8,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Depreciation $1,200 $1,200 $1,200 $1,200 $1,200 $1,600 $1,600 $1,600 $1,600 $2,000 $2,000 $2,000
Rent $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Utilities $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Insurance $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Payroll Taxes 15% $3,154 $3,270 $3,403 $3,548 $3,706 $3,884 $4,078 $4,294 $4,528 $4,784 $5,066 $5,379
Other $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Total Operating Expenses $30,754 $30,870 $29,003 $29,148 $29,306 $26,884 $27,078 $27,294 $27,528 $28,184 $28,466 $28,779
Profit Before Interest and Taxes ($9,761) ($7,847) ($3,652) ($1,277) $1,327 $6,834 $10,032 $13,577 $17,436 $21,242 $25,874 $31,021
EBITDA ($8,561) ($6,647) ($2,452) ($77) $2,527 $8,434 $11,632 $15,177 $19,036 $23,242 $27,874 $33,021
Interest Expense $194 $179 $165 $150 $146 $180 $172 $165 $365 $358 $350 $342
Taxes Incurred ($2,987) ($2,408) ($1,145) ($428) $354 $1,996 $2,958 $4,024 $5,121 $6,265 $7,657 $9,204
Net Profit ($6,969) ($5,618) ($2,672) ($999) $827 $4,658 $6,902 $9,389 $11,949 $14,619 $17,867 $21,475
Net Profit/Sales -21.10% -15.51% -6.70% -2.28% 1.72% 8.78% 11.82% 14.60% 16.89% 18.80% 20.90% 22.82%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash from Receivables $0 $17,616 $34,731 $38,176 $42,001 $46,170 $50,788 $55,901 $61,548 $67,744 $74,493 $81,892
Subtotal Cash from Operations $0 $17,616 $34,731 $38,176 $42,001 $46,170 $50,788 $55,901 $61,548 $67,744 $74,493 $81,892
Additional Cash Received
Sales Tax, VAT, HST/GST Received 8.00% $2,642 $2,898 $3,191 $3,508 $3,856 $4,244 $4,671 $5,145 $5,660 $6,222 $6,840 $7,527
New Current Borrowing $0 $0 $0 $0 $0 $5,000 $0 $0 $5,000 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $20,000 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $2,642 $20,513 $37,922 $41,684 $45,857 $55,414 $55,460 $61,046 $92,208 $73,966 $81,333 $89,420
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000
Bill Payments $2,860 $25,859 $27,663 $28,434 $30,735 $33,192 $33,900 $37,005 $40,451 $44,331 $48,299 $52,799
Subtotal Spent on Operations $15,860 $38,859 $40,663 $41,434 $43,735 $46,192 $46,900 $50,005 $53,451 $57,331 $61,299 $65,799
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $2,642 $2,898 $3,191 $3,508 $3,856 $4,244 $4,671 $5,145 $5,660 $6,222 $6,840 $7,527
Principal Repayment of Current Borrowing $1,249 $1,249 $1,249 $1,249 $0 $417 $417 $417 $417 $417 $417 $417
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Purchase Other Current Assets $0 $0 $0 $0 $0 $1,000 $0 $0 $1,000 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $20,000 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $5,000 $5,000 $5,000
Subtotal Cash Spent $20,251 $43,506 $45,603 $46,691 $48,091 $52,353 $52,488 $56,066 $86,027 $69,469 $74,056 $79,243
Net Cash Flow ($17,609) ($22,993) ($7,681) ($5,007) ($2,234) $3,061 $2,972 $4,980 $6,181 $4,496 $7,277 $10,176
Cash Balance $42,391 $19,398 $11,717 $6,710 $4,477 $7,538 $10,510 $15,490 $21,671 $26,167 $33,444 $43,620

Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $60,000 $42,391 $19,398 $11,717 $6,710 $4,477 $7,538 $10,510 $15,490 $21,671 $26,167 $33,444 $43,620
Accounts Receivable $0 $33,029 $51,635 $56,789 $62,465 $68,662 $75,547 $83,151 $91,560 $100,760 $110,785 $121,792 $133,992
Other Current Assets $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $6,000 $6,000 $6,000 $7,000 $7,000 $7,000 $7,000
Total Current Assets $65,000 $80,420 $76,033 $73,507 $74,176 $78,139 $89,085 $99,661 $113,049 $129,431 $143,952 $162,236 $184,612
Long-term Assets
Long-term Assets $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $60,000 $60,000 $60,000 $60,000
Accumulated Depreciation $0 $1,200 $2,400 $3,600 $4,800 $6,000 $7,600 $9,200 $10,800 $12,400 $14,400 $16,400 $18,400
Total Long-term Assets $40,000 $38,800 $37,600 $36,400 $35,200 $34,000 $32,400 $30,800 $29,200 $47,600 $45,600 $43,600 $41,600
Total Assets $105,000 $119,220 $113,633 $109,907 $109,376 $112,139 $121,485 $130,461 $142,249 $177,031 $189,552 $205,836 $226,212
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $2,000 $24,938 $26,718 $27,412 $29,629 $32,065 $32,670 $35,660 $38,977 $42,726 $46,545 $50,879 $55,696
Current Borrowing $5,000 $3,751 $2,502 $1,253 $4 $4 $4,587 $4,171 $3,754 $8,337 $7,921 $7,504 $7,087
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $7,000 $28,689 $29,220 $28,665 $29,633 $32,069 $37,258 $39,831 $42,731 $51,064 $54,466 $58,383 $62,784
Long-term Liabilities $20,000 $19,500 $19,000 $18,500 $18,000 $17,500 $17,000 $16,500 $16,000 $35,500 $35,000 $34,500 $34,000
Total Liabilities $27,000 $48,189 $48,220 $47,165 $47,633 $49,569 $54,258 $56,331 $58,731 $86,564 $89,466 $92,883 $96,784
Paid-in Capital $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500 $111,500
Retained Earnings ($33,500) ($33,500) ($33,500) ($33,500) ($33,500) ($33,500) ($33,500) ($33,500) ($33,500) ($38,500) ($43,500) ($48,500) ($53,500)
Earnings $0 ($6,969) ($12,587) ($15,259) ($16,257) ($15,430) ($10,772) ($3,871) $5,518 $17,468 $32,087 $49,954 $71,429
Total Capital $78,000 $71,031 $65,413 $62,741 $61,743 $62,570 $67,228 $74,129 $83,518 $90,468 $100,087 $112,954 $129,429
Total Liabilities and Capital $105,000 $119,220 $113,633 $109,907 $109,376 $112,139 $121,485 $130,461 $142,249 $177,031 $189,552 $205,836 $226,212
Net Worth $78,000 $71,031 $65,413 $62,741 $61,743 $62,570 $67,228 $74,129 $83,518 $90,468 $100,087 $112,954 $129,429

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