Avoiding the “Road In-Between”
Why is everybody else doing great and I’m such a loser?” is a common lament in this industry. Frankly, few carpet cleaners ever achieve that beautiful but elusive goal, “success.” It’s been well said that success is a journey, not a destination. But at least on your life journey you have the opportunity to choose which road you travel on. Yet most carpet cleaners never make a conscious choice on how and where they want their life (and their business) to go.
There are many business roads for us to choose in the cleaning industry. Should I go into a partnership? (Please, please do both yourself and your prospective partner a favor and don’t!) Should I buy a truckmount or not? And perhaps most important, should I build a business based on employees, or stay small as an owner-operator? It all depends!
Simply put, you can choose the “big company/lots of employees road” and make more money, enjoy more security and potentially build a great organization that will sell for big bucks to fund your retirement. Of course, building a business should be about more than just piling up tons of money. And yes, the big company route can be extremely gratifying emotionally. It is a true joy to build a team of quality people that will help you find success as you also help them achieve their dreams.
You can choose the “small owner-operator road” and enjoy the freedom and lack of worries that not having employees gives you. Many carpet cleaners rank a worry-free, low-stress lifestyle far above achieving a huge net worth. And this “less is more” lifestyle approach can’t be faulted. (For an analysis of these two very different routes to success, check out last month’s “To Your Success” column, “Hiring Employees: The Good, The Bad and The Ugly.”) But here’s the problem: All too often, carpet cleaners wind up on the dangerous and frustrating “road in-between.”
The “road in-between” is where you hire employees but continue to run your business in the carefree (some might say careless!) manner of an owner-operator. This is a difficult and potentially financially devastating place to be. This dangerous state of affairs is known as being “too big but too small.”
For a big company to truly run smoothly and successfully it must achieve what I call critical mass. This is where an organization has the resources (people, money, time, etc.) to build the systems and procedures that allow it to almost effortlessly surmount the inevitable daily problems of business. In addition, a critical mass company will “do it right” by following all applicable government hiring laws and regulations. Critical mass means the organization creates its own impetus and becomes a business perpetual motion machine. What does this self-sustaining momentum mean to the owner? A life of relative ease and financial security.
However, when most carpet cleaners try to expand by hiring employees, they continue to run their company as if they are still an owner/operator. Remember, it is not wrong to expand and build a large business. But you must change your management style and way of doing business. Here’s a few ways to avoid the road in-between:
Stay legal on taxes. No one likes taxes. But as an owner-operator, taxes are fairly straightforward. However, as an employer, the tax percentage passed through to you increases considerably. In addition you have substantial additional overhead with workers’ compensation and other “bites.” You will need to increase your prices considerably just to cover the tax overhead. One way to cut the paperwork, but probably not the expense, is to investigate employee leasing (Do NOT go down the “sub-contractor road” when you are in fact hiring an employee. This one will come back to haunt you.).
Be VERY careful on hiring practices. The U.S. government has literally thousands of regulations on hiring and discriminating against employees (No doubt your state government has thoughtfully piled on thousands more.). Some of these rules are fair and needed. But many regulations are frustrating, and can be very dangerous if you are unaware of them. All it takes is a) an innocent remark or question on your part, b) an unhappy rejected applicant, and c) a “gunslinger lawyer” to make your life a financial and emotional hell.
Recognize the true cost of an employee. The hourly wage you pay a worker is just the tip of the iceberg of your employee overhead. The two points above, combined with the inevitable inefficiency of a not-supremely-motivated employee means that your cost per hour rises dramatically in a larger business. Most carpet cleaners on the “road in-between” do not even have a clue on their hourly break-even point. Which leads to the next reminder…
Your hourly gross must increase substantially. How you achieve this income increase is up to you. But logically you must either a) increase prices, or b) increase efficiency and production. But most “in-between” carpet cleaners just carry on as they did as a low overhead owner-operator, never grasping that they often are losing money on many jobs.
How will you “feed the monster?” When you hire employees, the pressure gets upped considerably. As an owner-operator, if Mrs. Jones cancels at the last minute and your whole day opens up, it’s a time of rejoicing. The ski runs beckon or you take the kids to the lake. No problem. But ethically, if not legally, you have made commitments to your employees. They need money to provide for their families. How are you going to keep this income stream coming in 50 weeks a year?
Training for consistent performance. When you are the company, quality and consistency is easy. But the more employees you put on the road the harder it is to keep your customers happy. “Road in-between” cleaners just hire warm bodies, put them in a uniform (hopefully) and say, “Go get ‘em, Tiger!”
The cleaning industry offers a wonderful chance for freedom, happiness, success and (dare I say it?) wealth and riches. All these opportunities can be yours whether you hire employees or stay small as an owner-operator. But please, avoid the misery of traveling “the road in-between” by making a conscious decision on both the size and the future of your business.