No Hourly Budget Leads To Feeling Financially At Risk

The company feels financially at risk, vulnerable when the hourly budget is unclear. Invoices are going out even when buildings are getting clean. That gap starts when labor hours exceed three hours per night.

The hourly budget is three hours per night in the example. It comes from establishing the payroll for the night. The number must match the work to be done.

Folks might start working three and a half or four hours a night. The company does not make any adjustment to the budget or the price. That happens when job requirements change without notice.

Check pricing a job at the time of bidding a job. Confirm the available payroll and the budget per night. Compare the hours to the revenue for that job.

Hi there. Welcome back. Dan again at CleanGuru.

You might say to yourself, “My cleaning company feels busy. Why do I not feel solid? Why do I feel financially at risk, vulnerable?” It’s a good question, and it’s common. One of the first big fears you have is, how can I start getting steady monthly business coming in versus once in a while getting a job?

But today we’re talking about you getting a lot of work. The schedule’s full, buildings are getting clean, invoices are going out. Why do you still feel financially rocky and nervous? It’s a very common thing.

A lot of times, it’s not that you’re not working. Your folks are. But the busy part is people are working. What’s not working is the math underneath the business. Maybe the math wasn’t right from the very beginning, or maybe the math got bad over time. It eroded. Either way, the good news is it can be fixed, but we need to look at it to take away that fear and that problem.

From the very beginning, we’ve talked about this: we need to really study, at the time of bidding a job or pricing a job when you already have a contract, what is the work to be done? How long should it take to do? What kind of labor hours do I have available to make sure, based on this revenue, here’s the profit we’re going to make?

Here’s the payroll. Here’s the labor. So what does it get down to for the nightly budget? It’s establishing the payroll for the night. What are we going to call that? Let’s call that the hourly budget.

If the hourly budget is three hours per night, what can happen? What can go wrong? Over time, folks might start working three and a half or four hours a night, and we don’t make any adjustment to the budget or the price. Or maybe the building owner, the property owner, people start asking for more to be done. So the job requirements change. You may or may not know about those job requirements changing. Either way, the budget may not have been changed, and the price may not have been changed.

Then, over time, you get this feeling: we’re spinning our wheels. What are we doing?

Again, the best companies have all gone through this too at one point, because you want to say yes to any new jobs that are called in. You want to, and that’s how you grow. So it’s real natural for you to keep your eye off the ball when you’re doing this. But to get our eye back on the ball, which is profitability, we need to revisit the math underneath the work.

Take the time to find out, if you haven’t, what is the available payroll, the budget per night. Have I set that? Have I trained to that? And am I watching, on a daily and weekly basis, where the actual hours are coming in versus the budget to maintain that profitability for that job? Then, for all of your jobs being done the same way, that can turn around that feeling of worry.

Till next time, remember: you can do this. You really can.